Indemnification clauses are also referred to as indemnification agreements, the hold harmless clauses or indemnity agreements. These are the common agreements which involve the transfer of shifting of risks from one party to another. You will have one of the parties which are willing to shift certain risks. In indemnification clauses or agreements, the risks being shifted is mainly associated with trademark infringement, patent infringement, copyright infringement, software issues, intellectual property related risks and trade secret misappropriation.
An indemnity clause might also include some obligations to “hold harmless” or to “defend” the other party which is involved. Indemnity clauses related to intellectual property are considered to be very dangerous to the vendors since the cost incurred in defending typical claim can exceed the vendor’s payment under the agreement.
Representations and warranties-IP indemnity
An intellectual property indemnification clause might include warranties and representation provisions. These are mainly meant for triggering the indemnification obligations. For instance, licensors or software purchasers might require a warranty or a representation provision. This will ensure that the software delivered is free from all the claims or infringements which are likely to be made by a third-party. In general, these provisions are made to protect the licensor /purchaser against the claims made by a third party for trade secret misappropriation or copyright infringement.
Limits on liability- intellectual property indemnity
The potential liability for indemnity obligations or clause particularly the one involving intellectual property indemnity claims might be very high. This is why many vendors are attempted to cap or limit their liability. This clause can expressly be applied to limit or cap the indemnification clauses. For instance, when you have an agreement which provides a £ 55,000 fee to your vendor for developing and delivering a software solution, your vendor could be liable if it will be necessary to defend the third-party’s copyright infringement claim.
There are some instances when the limitation of the liability clause limits the total viability of the vendor to the payment received under the binding agreement. Such a limitation will apply to the indemnity clause, and the liability of the vendor will be capped at £ 55,000 even if the claim’s litigation could cost £ 1000,000 s. You will find many buyers with leverage demanding uncapped or unlimited intellectual property indemnification. With this kind of an indemnification, both the vendor and the buyer can agree to cap the indemnification liability