Intellectual Property Indemnity – Generally
If one party wishes to transfer certain risk to an additional party, indemnity clauses are commonly used. They may also be known as indemnification agreements or hold harmless clauses. The potential risk with indemnification clauses for intellectual property are typically patent infringement and trademark infringement. Copyright violation, misappropriation of trade secrets software problems, and other risks related to IP. An indemnity clause could only cover indemnification, but it may include the obligation to “defend” or “hold harmless” other parties. Vendors must be cautious about IP indemnity clauses. The cost of the defense of the typical IP claim could easily be more than the amount the vendor has to pay.
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Limits of Liability – Intellectual Property Insurance
Vendors often attempt to limit or minimize their liability due to of the potential for liability for indemnification obligations particularly in IP indemnity claims. This is accomplished by incorporating a limitation clause in the contract that restricts or restricts the liability. If the vendor receives $50,000 to create and provide software solutions, it may be held accountable for more, if it needs to defend against copyright infringement claims. If the clause on limitation of liability restricts the liability of the vendor to only actual amounts received in accordance with the agreement and the limitation is applicable also to the indemnification clause, then the liability of the vendor could be limited at $50,000, despite the fact that litigation over the claim could be as high as the amount of $100,000. A lot of buyers who leverage will need unlimited or uncapped intellectual property indemnification. The buyer and the vendor can decide to limit their liability to the amount of payments.
IP Indemnity – Representations and Warranties
clauses frequently include representation and warranties provisions, which provide a trigger for indemnification obligations. Licensors and purchasers of software often require representations and warranties in order to make sure that the software they purchase is not subject to third-party claims, and that third-party materials or materials that are not with the author’s permission aren’t integrated into the software. These clauses are intended to shield the purchaser/licensor from third-party claims of copyright infringement as well as trade secret theft. The buyer/licensor could try to make the developer defend the claim, and possibly paying compensation or settlement.
Darin M. Klemchuk is an intellectual property (IP) lawyer, trial lawyer, has extensive experience in enforcing copyright, trademark and trade secrets rights. Klemchuk LLP is a Texas-based technology and intellectual property law firm. Find out more on Mr. Klemchuk at his website.