Cloud services agreements often tie fees to usage metrics, such as authorized users, licensed seats, or transaction volumes. But what happens when a customer exceeds those limits? The answer should be an additional charge, not a contractual breach or an allegation of copyright infringement.
The Risk: Exceeding a Limit May Mean Exceeding the License
Usage metrics do not always function merely as pricing mechanisms. Providers may also use them to define the scope of the customer’s license or other permitted use. If an agreement authorizes only a specified number of users, adding users beyond that limit would place the customer in breach of the agreement and outside its license rights.
Depending on other mitigating provisions in the agreement and applicable law, that excess use would support not only a breach-of-contract claim, but also a copyright infringement claim. However, providers generally just want to be paid for additional usage, not litigate breach or infringement claims against their customers. Nevertheless, customers should not rely on commercial expectations alone. A breach or copyright infringement allegation can create exposure and negotiating leverage disproportionate to the unpaid fees, particularly if the agreement treats infringement differently under its liability limitations.
The Solution: Make Excess Usage a Payment Obligation
Customers should negotiate express language establishing that usage above an agreed metric:
- Does not constitute a breach of the agreement.
- Does not give rise to a copyright infringement claim.
- Entitles the provider, as its sole and exclusive remedy, to collect the applicable excess-usage fees.
Agree on the Price Before the Overage Occurs
Ideally, excess usage should be charged at the agreement’s existing unit rates, prorated where appropriate for the period of additional use. For example, if the agreed fee is $100 per user for a particular period, 10 additional users for that same period should cost $1,000. Some providers, however, will insist on an overage premium. If so, customers should negotiate that premium in advance rather than leaving overage charges subject to then-current list prices or the provider’s discretion.
