Tell Your Customer to Backup Their Data

Short answer: telling your customers to back up their data, in the contract, in the product, and in your documentation, is a cheap and genuinely effective legal defense. A Utah Supreme Court case shows that those customer data backup warnings, combined with a disclaimer of indirect damages, can get a data-loss claim against a software vendor thrown out.

The Utah Supreme Court ruled in June 2012, in Blaisdell v. Dentrix Dental Systems, Inc., that when a software vendor is sued for software-caused destruction of customer data, it really matters whether the vendor had told the customer to back up its data.

The Background.

A dental practice was upgrading its practice-management software, and during the process all of its patient data was lost. The dentist sued the vendor for the losses, including tort claims. The trial court threw the case out on summary judgment, the dentist appealed all the way to the Utah Supreme Court, and the court affirmed for the vendor, holding the contract’s risk-allocation provisions enforceable. Here is why it went the vendor’s way.

1. Telling the Customer to Back Up Helps a Lot.

The vendor had told customers to back up their data. It mattered even more here because the dentist claimed it had backed up, but in fact had not. A clear, repeated “back up your data” warning shifts responsibility back onto the customer who ignores it.

2. Disclaimers of Indirect Damages Work.

The vendor’s EULA said it was not liable for indirect damages, and the court honored it, limiting exposure to the license fees paid. This is the limitation-of-liability machinery doing exactly its job (more on how to build it in What Does Your SaaS Agreement Liability Model Look Like?).

3. General Warnings Get You Credit.

When you warn a customer of a risk, here the risk of not backing up, courts give you credit for the effort. Warnings and disclaimers reinforce each other: the warning shows the customer knew the risk, and the disclaimer caps what you owe if the risk lands. Regulators think the same way about data hygiene generally; the FTC’s data security guidance for businesses treats planning for data loss as a basic of doing business.

Customer Data Backup FAQs.

Does this apply to SaaS, where the vendor hosts the data? Yes, with a twist. In SaaS you usually take on some backup responsibility yourself, so the contract should say exactly what you back up, how often, and what the customer remains responsible for (exports, local copies, third-party integrations). Allocate it explicitly either way.

Where should the backup warning live? Everywhere it can do good: the EULA or cloud services agreement, onboarding and upgrade flows, the user guide, release notes for risky updates, and support scripts. Repetition is what makes it persuasive in court.

Is a warning enough by itself? No. The warning worked in Blaisdell because it sat next to a disclaimer of indirect damages and a liability cap. The three pieces work as a system.

The Drafting Takeaway.

Put the back-up instruction everywhere it can do good. It costs nothing, and paired with a solid disclaimer and liability cap it is one of the cheapest risk reducers a software vendor has. This is also why a well-placed disclaimer matters so much in the first place (see Why You Need a Disclaimer in Your SaaS Agreement). I hope this helps.

Frequently Asked Questions.

What exactly should the backup clause say? Put the responsibility in writing: the customer is responsible for maintaining its own backups, and the vendor is not liable for lost data the customer failed to back up. If you host the data, state what you back up and how often, and what the customer still must do.

Does a backup warning replace a liability cap? No. The warning and the cap do different jobs. The warning shifts responsibility to the customer who ignored it, and the cap limits what you owe if a loss still happens. Keep both, plus a disclaimer of indirect damages.

For the foundational distinction that drives every data-loss dispute, see SaaS Indemnity vs. Breach of Contract: What’s the Difference?

Resources:

• Blaisdell v. Dentrix Dental Systems (Utah 2012)
• What Does Your SaaS Agreement Liability Model Look Like?
• Why You Need a Disclaimer in Your SaaS Agreement

Disclaimer:

This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.