Understanding IP Infringement Indemnity Exceptions

When it comes to protecting intellectual property (IP) rights, indemnification clauses play a crucial role in contracts. These clauses outline the responsibilities of the parties involved in case of an infringement claim. However, there are certain exceptions to IP infringement indemnity that can limit the extent of liability for the indemnifying party.

Exceptions to Intellectual Property Infringement Sample Clauses

One example of exceptions to IP infringement indemnity can be found in the sample clauses provided by Law Insider. According to their sample clause, the indemnifying party shall not be responsible for a violation or infringement of third-party IP rights to the extent caused by certain factors.

Factors that Can Limit IP Infringement Indemnity

The sample clause highlights several factors that can limit the IP infringement indemnity obligations of the indemnifying party:

• The use of any goods, software, or platform in violation of the terms of the agreement or the seller's terms of use.
• Any alteration or modification of the goods, software, or platform by a person other than the seller or its authorized agent.
• The combination, operation, or use of the goods, software, or platform with equipment or software not supplied, recommended, or approved by the seller.
• Compliance with information, directions, specifications, or materials provided by the master distributor or other sub-distributor or reseller.

In these cases, the indemnifying party is not obligated to provide indemnification for infringement actions or claims that arise from the specified exceptions.

Examples of Intellectual Property Indemnification Clauses

Afterpattern provides examples of intellectual property indemnification clauses in contracts. Their example clause outlines the indemnification obligations of the seller towards the master distributor in case of any third-party claims alleging infringement of IP rights.

The clause specifies that the seller shall defend, hold harmless, and indemnify the master distributor from all losses arising out of any third-party claim. However, it also includes exceptions to the indemnification obligations:

1. The use of goods, software, or platform in violation of the agreement or the seller's terms of use.
2. Any alteration or modification of the goods, software, or platform by a person other than the seller or its authorized agent, resulting in losses that would not have occurred without such unauthorized alteration or modification.
3. The combination, operation, or use of the goods, software, or platform with equipment or software not supplied, recommended, or approved by the seller, resulting in losses that would not have occurred without such unsanctioned use.
4. Compliance with information, directions, specifications, or materials provided by the master distributor or other sub-distributor or reseller.

In addition to these exceptions, the seller has the option to exercise certain actions to address the claim, such as obtaining rights for the continued use and sale of the goods, modifying the goods to be non-infringing, replacing the goods with non-infringing ones, or accepting the cancellation and return of infringing goods.

IP Indemnification Clause Samples

Another example of an IP indemnification clause can be found in Afterpattern's sample clauses. This clause focuses on the indemnification obligations of the supplier towards S&W and its protected parties.

According to the clause, the supplier shall indemnify, defend, and hold harmless S&W from all claims alleging infringement of IP rights. However, there are exceptions to this indemnification obligation:

1. The claims related to the use of S&W's trademarks.
2. The claims resulting from the supplier's compliance with specifications or design supplied by S&W.

If the products become subject to a third-party claim that qualifies for indemnification coverage, the supplier must notify S&W in writing to cease using all or a part of the products. In such cases, S&W must immediately cease all use of the products, and the supplier must make efforts to provide non-infringing substitute products.

Understanding IP Indemnities in Commercial Agreements

IP indemnities in commercial agreements are important for risk allocation and protecting the parties involved. The indemnifying party assumes the obligation to indemnify the other party against any losses or damages resulting from IP infringement claims.

What is an Indemnity?

An indemnity is a legal obligation to compensate another party for any losses or damages they may suffer. In the context of IP infringement, an indemnity provides protection against claims of IP infringement and the associated costs of defense and damages.

Risk Allocation

IP indemnification clauses allocate the risk of potential IP infringement between the parties involved in a contract. The indemnifying party assumes the risk and responsibility for any claims arising from IP infringement, providing the indemnified party with financial protection.

Difference between a Warranty Claim and an Indemnity Claim

It is important to understand the difference between a warranty claim and an indemnity claim. A warranty claim typically relates to the quality or performance of a product or service, while an indemnity claim specifically addresses IP infringement.

Anatomy of an Indemnity

An indemnity clause typically includes:

• The obligation to indemnify the other party against any losses or damages resulting from IP infringement claims.
• The exceptions or limitations to the indemnity obligation.
• The actions the indemnifying party can take to address the claim.

What is the Obligation?

The obligation in an IP indemnity clause is for the indemnifying party to compensate the other party for any losses or damages resulting from IP infringement claims. This includes the costs of defense, settlement, or damages awarded.

What is Being Indemnified?

The indemnified party is being protected against any losses or damages resulting from IP infringement claims. This can include legal fees, settlement costs, or damages awarded by a court.

Under What Circumstances Does the Obligation to Indemnify Arise?

The obligation to indemnify arises when there is a valid claim of IP infringement against the indemnified party. This can be triggered by a third-party claim or by the discovery of potential infringement.

Additional Protections for Indemnifying Party

IP indemnification clauses may include additional protections for the indemnifying party, such as the right to control the defense or settlement of a claim and the requirement for the indemnified party to cooperate in the defense.

Common Pitfalls

When drafting IP indemnification clauses, it is important to avoid common pitfalls, such as vague language, overly broad indemnity obligations, or exclusions that may limit the effectiveness of the indemnity.

Limitation of Liability

It is common for IP indemnification clauses to include a limitation of liability provision, which sets a cap on the amount the indemnifying party is liable to pay in case of a claim. This helps manage the potential financial risk for the indemnifying party.

Conclusion

Understanding IP infringement indemnity exceptions is crucial for protecting intellectual property rights and managing the risk associated with IP infringement claims. Indemnification clauses in contracts provide a framework for allocating responsibility and providing financial protection in case of infringement. However, it is important to carefully consider the exceptions and limitations to the indemnity obligations to ensure fair and balanced protection for all parties involved.