
Indemnification
NDA
Table of Contents:
Indemnification for Breach
Product/Sample Indemnification
Indemnification
There are many reasons why parties may resist including indemnification clauses in an NDA. For example, such clauses are generally considered outside the scope of a standard NDA. As reflected by the following exemplars, their inclusion in an NDA is often in the form that imposes one-sided liability, which reflects an imbalance in the negotiating power between the parties. A party confronted with such clauses can propose to delete them and rely instead on standard remedies for breach of any confidentiality obligations (damages and injunctive relief) rather than indemnification.
A more extensive discussion regarding indemnification clauses within the broader context of general commercial contracts can be found starting at the section entitled “Indemnification: Basic Terms”.
Indemnification for Breach
The following exemplar imposes indemnification liability on the recipient of confidential information for any breaches of that party’s confidentiality obligations under the NDA, which can be limited to third-party claims only:
Exemplar N13-1
Company shall indemnify Contractor for and against all damages, losses, claims, costs (including reasonable attorneys’ fees), expenses and liabilities, suffered or incurred [by any third party] as a direct result of Company failing (whether intentionally or not) to fully comply with its covenants and obligations under this Agreement, including by virtue of any act of Company or any Related Party of Company.
Note that the foregoing exemplar also expressly specifies that attorneys’ fees are included within the scope of indemnification, since failure to do so may in certain jurisdictions result in forfeiture of such indemnification coverage.
Product/Sample Indemnification
The following exemplar imposes indemnification liability on a seller with respect to claims arising from the seller’s disclosed information issued in the form of a product or product sample provided by the seller (see the section entitled “Close Examination” for further discussion of confidentiality issues relating to product samples):
Exemplar N13-2
Vendor will defend, indemnify and hold harmless Customer, its subsidiaries, affiliates and franchisees from any claim, damage, suit, loss or expense (including reasonable attorneys’ fees) arising out of the testing, purchase, use, consumption, sale or resale of Vendor Information supplied, developed, designed, or modified hereunder, including but not limited to claims of negligence, breach, warranty, product liability, patent infringement or interference with intellectual property rights. Notwithstanding the foregoing, Vendor will not have an indemnification obligation hereunder, to the extent claims, damage, losses or related expenses are caused by the actions or omissions of Customer or its employees or by any third party with whom Vendor is forced to work by Customer.