Indemnification: IP Infringement
Commercial Contract
Table of Contents:
Supplier’s Obligations Regarding Infringement Claims
Exceptions
Indemnification: IP Infringement
Supplier’s Obligations Regarding Infringement Claims
In the following exemplars, the parties agree that, in connection with a claim of infringement of IP rights, in return for the customer giving the supplier prompt notice of such claim, control over the defense against such claim, and reasonable cooperation, the supplier will at its expense procure for the customer a license under such IP rights or provide a non-infringing substitute. If those remedies are not available, the supplier can terminate the agreement to avoid further (and potentially willful) infringement and/or issue to the customer a refund of pre-paid payments:
Exemplar C38B-1
Supplier will indemnify, defend and hold Customer, its affiliates, officers, directors, consultants and employees harmless from any and all amounts actually paid to unaffiliated third parties in connection with claims, liabilities, damages and/or costs (including but not limited to, reasonable attorneys’ fees) relating to any claim that the Service, as provided by SUPPLIER to Customer under this Agreement and used within the scope of this Agreement, infringes or misappropriates any U.S. patent or copyright of such third parties (each, an “Infringement Claim”), provided that Customer: (a) promptly notifies SUPPLIER in writing of the Infringement Claim (provided that any failure to provide prompt notification shall not relieve SUPPLIER of its indemnification obligations unless such failure results in material prejudice to SUPPLIER); (b) grants SUPPLIER the option to assume sole control of the defense and settlement of the Infringement Claim; and (c) provides SUPPLIER, at SUPPLIER’s expense, with all assistance, information and authority reasonably required for the defense and settlement of the Infringement Claim. In the event of any such Infringement Claim, SUPPLIER may, at its option: (i) obtain a license to permit Customer the ability to continue using the Service; (ii) modify or replace the relevant portion(s) of the Service with a non-infringing alternative having substantially equivalent performance within a reasonable period of time; or (iii) terminate this Agreement by providing notice to Customer, and provide Customer with a pro rata refund of any unearned fees which have been prepaid by Customer hereunder.
Exemplar C38B-2
In the event a third party brings an action against Customer alleging infringement of a United States patent or copyright based on Customer’s use of the Services or Deliverables provided by Supplier hereunder, Supplier shall, at its own expense and in its sole discretion, settle the claim or defend Customer in such proceeding, and Supplier will pay all settlements, costs, damages and legal fees and expenses finally awarded, provided that Customer shall promptly notify Supplier in writing of the proceeding, provide Supplier with a copy of all information received by Customer with respect to the proceeding, cooperate with Supplier in defending or settling the proceeding, and allow Supplier sole control of the defense and settlement of the proceeding, including the selection of attorneys. Customer may observe the proceeding at its own expense. Supplier will not be responsible for any compromise made or expense incurred without its consent. If use of any of the Services or Deliverables is, or in Supplier’ reasonable opinion is likely to be, the subject of an action specified in this Section, Supplier may, at its sole option and at no additional charge: (i) procure for Customer the right to continue using such Service or Deliverable; (ii) replace or modify such Services or Deliverables so that it is non-infringing and substantially equivalent in function to the original Service or Deliverable; or (iii) if options (i) and (ii) above are not accomplished despite Supplier’ reasonable efforts, terminate Customer’s rights and Supplier’ obligations hereunder with respect to such Service or Deliverable and refund the unamortized portion of the license fees paid for such Service or Deliverable, based upon a straight-line depreciation over the term of the license commencing as of the date Customer received such Service or Deliverable.
Exceptions
As demonstrated in the following exemplars, the user or customer risks forfeiture of any indemnification protection by the supplier if the infringement arises from certain acts or omissions of the user or customer:
Exemplar C38B-3
CONTRACTOR shall defend OEM against claims brought against OEM to the extent such claim is brought by a third party owner of the intellectual property giving rise to the claim and (ii) alleges that the use of the Cloud Service in accordance with the terms and conditions of this Agreement and the applicable Order Forms, constitutes a direct infringement or misappropriation of a patent claim(s), copyright, or trade secret rights. This obligation of CONTRACTOR shall not apply if the alleged infringement or misappropriation results from use of the Cloud Service in conjunction with any other software or service (including OEM Service) if such claim could have been avoided without such use, or unlicensed activities or use of the Cloud Service in violation of this Agreement or to free (no fee) or trial licenses of the Cloud Service. This obligation of CONTRACTOR also shall not apply if OEM fails to timely notify CONTRACTOR in writing of any such claim, however OEM’s failure to provide or delay in providing such notice shall not relieve CONTRACTOR of its obligations under this Section except to the extent CONTRACTOR is prejudiced by OEM’s failure to provide or delay in providing such notice.
Exemplar C38B-4
Notwithstanding the foregoing, SUPPLIER will have no liability for any Infringement Claim to the extent that it results from or relates to: (1) modifications to the Service made by a party other than SUPPLIER or its agents; (2) the combination, operation or use of the Service with equipment, devices, data or software not provided by SUPPLIER; (3) Customer’s failure to use updated or modified versions of the Service provided by SUPPLIER to avoid a claim; (4) SUPPLIER’s compliance with any specifications or requirements provided by Customer; (5) Customer’s use of the Service other than in accordance with this Agreement; or (6) third party, or open source software. The indemnification obligations set forth in this section are SUPPLIER’s sole and exclusive obligations (and Customer’s sole and exclusive remedies), with respect to infringement or misappropriation of intellectual property rights.
Exemplar C38B-5
Supplier will have no liability for any infringement or misappropriation action or claim of any kind to the extent that it results from: (a) modifications to the Service or Deliverable made by a party other than Supplier, if the infringement or misappropriation would not have occurred but for such modifications; (b) the combination, operation or use of the Services or Deliverable with equipment, devices, software, systems or data not supplied by Supplier, if the infringement or misappropriation would not have occurred but for such combination, operation or use; (c) Customer’s failure to use the updated or modified Service or Deliverable provided by Supplier to avoid infringement or misappropriation; (d) Supplier’ compliance with any designs or specifications provided by Customer; and or (e) Customer’s use of the Service or Deliverable other than as authorized by this Agreement. THE PROVISIONS OF THIS SECTION SET FORTH SUPPLIER’ SOLE AND EXCLUSIVE OBLIGATIONS, AND CUSTOMER’S SOLE AND EXCLUSIVE REMEDIES, WITH RESPECT TO INFRINGEMENT OR MISAPPROPRIATION OF INTELLECTUAL PROPERTY RIGHTS OF ANY KIND. EXCEPT AS SET FORTH ABOVE, SUPPLIER AND ITS SUPPLIERS DISCLAIM ALL IMPLIED OBLIGATIONS WITH RESPECT TO INTELLECTUAL PROPERTY INDEMNIFICATION.
By contrast, the parties make clear that the mere foreseeable combination of the service or solution with other products and solutions will not obviate the provider’s indemnification obligation:
Exemplar C38B-6
Supplier shall defend, indemnify and hold Buyer and its affiliated and subsidiary companies and their respective officers, directors, employees, agents, contractors, successors, and assigns harmless from and against any and all Losses arising from or in connection with Claims based on or arising from any allegations that the Software provided or Services performed by Supplier or its agents, or any part thereof hereunder (each, an “Infringing Item”), infringes upon or misappropriates the copyright, patent, trademark, trade secret or other intellectual property rights of a third party. Supplier obligations to Buyer hereunder shall not in any way be diminished to the extent such Claim is based, in whole or in part, upon the combination of any Infringing Item furnished by Supplier hereunder with any other service, product or program not furnished, recommended or approved by Supplier, or upon any modification not made, recommended or approved by Supplier, provided that such Infringing Item is being used by Buyer for its intended purpose or such modification is made in connection with use of the Infringing Item for its intended purpose.
For an additional discussion on restrictions and exceptions to a provider’s obligation to indemnify a customer against IP infringement claims, please see the sub-sections entitled “Patent Infringement Exclusions” and “But-For Causation” in the “Indemnification: Exceptions and Exclusion” section.