Written Agreements for MLSs Providing Data to VOW Operators
The VOW policy NAR has adopted as a result of the settlement of its litigation with the Department of Justice requires NAR-affiliated MLSs to provide VOW data feeds to brokers and their technology/marketing partners (called “AVPs” in the policy). But it also provides that MLSs may impose a license agreement on MLS Participants (which generally includes brokers and salespeople for purposes of the VOW policy) obtaining a VOW data feed. The policy provides:
“An MLS may require Participants and AVPs to execute license or similar agreements sufficient to ensure that Participants and AVPs understand and agree that data provided by the MLS may be used only to establish and operate a VOW on behalf of the Participant and not for any other purpose.” (Policy III.10.g.)
A license agreement is really just an agreement where the MLS gives permission (a ‘license’) to another party (in this case the broker and its partners) to do something with MLS data. We advise our MLS clients never to provide access to their MLS data to anyone who is not subject to a written license agreement.
In this post, I’d like to identify some things that we are advising our clients to do, and not to do, in their VOW license agreements. This is not intended as legal advice for readers of this post, however. Many particular factors can influence specific provisions your organization should or should not include. So, if you need legal advice, hire an attorney!
Things MLSs should do in their VOW license agreements
We have a model “participant data access agreement” that we have developed for MLS clients of our firm. It represents the culmination of our nearly ten years of experience dealing with IDX data licenses, broker back-office data licenses, aggregator licenses, etc. Here is an outline of some of the characteristics of our model agreement that we think are important for MLSs in the new VOW context.
1. Parity. We recommend that our clients use the same ‘participant data access agreement’ for brokers gaining access to IDX data, VOW data, and ‘back-office’ application data. By imposing the same contractual conditions on brokers making all these uses, MLSs should be able to avoid any claims that they are treating ‘traditional brokers’ more favorably than ‘VOW brokers.” (Note that I do not agree that those two categories are mutually exclusive based on what happens in the industry. I’ve discussed that further on our VOW Clearinghouse site.) Another advantage of using a single agreement for all these purposes is that it’s easier to maintain than multiple agreements with minor differences.
2. Parties. Our model agreement makes the MLS, the principal broker, the technology/marketing partner/consultant/IDX site builder/AVP, and any salespeople (or non-principal brokers) parties. Anyone who will use the data is bound by the agreement, and to a great extent they are responsible for each other’s performance.
3. MLS rules trump. The agreement should say that any use of listings of other brokers is subject to the MLS’s rules and policies, and that those rules and policies trump the agreement. Thus it’s easy for the MLS to ‘amend’ the agreement by changing its rules and providing notice to brokers and their technology partners. (Note to lawyers: you may want to refer to the MLS rules in the ‘integration clause’ in your agreement, if you have one.)
4. Domains specified. We recommend that the agreement require that the broker to specify in advance the second- and third-level domains where the licensee will display MLS data. Knowing the second and third-level domains is critical for the MLS in its rule enforcement and data protection activities.
5. Broker and consultant subject to MLS rules. Make sure the agreement permits the MLS to adjudicate disputes about the rules, whether they involve wrongful conduct by the broker or by an AVP, using the MLS’s rule procedures. This is important because the VOW policy provides that an AVP’s access to listing data is derivative of the brokers with which it works (see Section III.10), and because MLSs generally cannot disconnect an AVPs access unless it has violated the policies to which the brokers are subject (see Section III.10.i).
6. Limit MLS’s duties. The MLS’s duties should be defined narrowly. Usually, they entail the MLS (a) providing the data; and (b) providing notice about changes to the data and the rules.
7. Make broker a surety. A ‘surety’ is someone who is responsible for the performance of another person under a contract. We recommend that MLS make the brokerage a surety for the technology partners (AVPs, IDX site builders, agents) that it exposes MLS data to. This encourages brokers to pick their partners carefully and supervise them well. But it does not ensure that brokers will do either of those things.
8. Provide for a ‘short fuse.’ Allow any party to the agreement to terminate the agreement without cause on relatively short notice (perhaps 30 days). This ensures that the MLS can replace the license agreement with a different one or get out of the agreement if it has unexpected consequences. Note that MLS probably cannot terminate the VOW agreement without cause unless it offers the broker an alternative agreement to keep receiving a VOW data feed; MLS would otherwise run afoul of the VOW policy.
9. Exclude warranties by MLS. There are not many warranties MLSs will want to make about MLS data. The agreement should exclude all warranties, to the extent possible, including the warranty of non-infringement.
10. Limit MLS’s liability. We generally recommend that MLSs impose a damages cap. The exact approach and amount vary according to MLS philosophy and state law.
A license agreement is not necessarily complete just because it addresses these issues.
Things MLSs should not do in their license agreements
The biggest problem with license agreements by MLSs is that they often get too specific. Here are some things we advise clients not to do with their license agreements.
1. Don’t get specific about rules. The agreement should ‘point to’ the MLS rules and say that they govern the agreement. Do not copy provisions of the rules into the agreement; that only creates a risk of ambiguity if there are later revisions.
2. Don’t get specific about data feed characteristics. Let the license agreement say that MLS will provide a data feed of the type it typically provides to other brokers and that MLS may change the data feed on notice to the broker. Being too specific about the data feed can tie the MLS’s hands or require that it amend the agreement in order to change the data feed.
3. Don’t get specific about fees. We suggest that our clients refer to a ‘schedule of fees’ in the agreement, which is the same for all brokers receiving data feeds, and note that the MLS can change the schedule of fees on notice to the broker. Being too specific about fees can tie the MLS’s hands or require that it amend the agreement in order to change the fees.
4. Don’t impose requirements or limitations not permitted by the VOW (or IDX) policy. Under the VOW policy, MLS may not adopt rules that conflict with the policy or that impose further restrictions on VOWs than are expressly permitted in the policy. (Policy I.5.) According to the policy: "Except as provided in generally applicable rules or policies (such as the REALTOR® Code of Ethics), an MLS may not restrict the format of data display on a VOW or regulate the appearance of VOWs." (Policy III.9.) NAR has similar restrictive language in its IDX policy.
This is not an exhaustive list of things MLSs should avoid in their license agreements.
By no means is this a complete discussion of issues that a license agreement must address. But I hope it will provide a helpful start. The key is for the MLS to limit its liability, retain flexibility, and enhance its enforcement capabilities.
Note: Please do not ask us to provide a copy of our model agreement to you. If you wish to engage our firm to prepare a customized version of our model and advise you regarding its use, we’d be happy to help. You may be able to obtain a copy of a contract we’ve drafted from one of our clients, but we take no responsibility for your use of an agreement that we have drafted for another party. (Sorry for the ‘disclaimerese,’ but we have malpractice insurance premiums to consider.)
Negotiating Tip 114: Retreat Negotiations
March 29, 2019
Negotiating Tip 113: Activating Our Opponent
March 28, 2019
Negotiating Tip 112: Misconceptions
March 27, 2019
2020 Real Town The Real Estate Network