10 Tips for Drafting Indemnification Provisions

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One encounters indemnification provisions so often in so many diverse agreements that it’s almost tempting to regard them as routine boilerplate. To do so would be a big mistake. For reference only, below is a basic indemnity provision.

Seller agrees to defend, indemnify and hold Buyer harmless from all claims, actions, losses, damages and attorney fees arising from any breach of this Agreement or any allegation that the Products infringe the intellectual property rights of any third party.

And, here are just a few points to consider.

1. Definition of Losses. Does the provision expressly refer to fines, penalties, punitive damages, consequential damages and attorney fees? Indemnity provisions tend to be strictly construed against the indemnitee. Depending on which party you represent, try to include – or exclude – as much as possible.

2. Trigger Event. Regardless of whether liability arises due to breach of warranty, IP infringement or something else, does the obligation arise upon a mere allegation, the filing of an action, or does it require a finding of infringement or wrongdoing? Continue reading →

Defending Patent Licensing Demands (Part II of III)

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II. Search for Solutions

In Part I of this series, we discussed how to evaluate and respond to a licensing demand, acknowledging the demand but requesting further information. Often that will be the end of the matter. This post will discuss what to do when the demanding party persists.

Try to pass the buck, if possible. If use of the patents arises from compliance with a customer’s requirements or specifications, talk with your business unit about requesting the customer to license the patents directly or reimburse your company for the cost of licensing.

If the patents relate to parts your company purchased, send each supplier a demand to either license the patents or defend and indemnify. Even if you have no signed agreements with the suppliers containing indemnification provisions, it still may be worth a try. Many jurisdictions recognize an implied warranty of non-infringement in connection with sales of goods, such as those found at UCC, Section 2-312(3) and UNCISG, Article 42. Ask your business unit to help exert pressure on the suppliers. And, consider switching to licensed suppliers if possible. Continue reading →

Defending Patent Licensing Demands (Part I of III)

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I. Evaluate and Respond to the Demand

According to a 2011 patent litigation study, the median patent infringement award in U.S. courts over the past 16 years was $5.1 million – and that doesn’t include attorney fees. Fortunately, most demands can be disposed of by in-house counsel, without licensing or litigation. This is the first of three posts discussing basic strategies for companies to resolve licensing demands internally at little or no cost.

The first step is to evaluate the severity of the demand. Examine the demand letter. Does it target your company specifically or appear to be part of a mass-mailing? Is it addressed to a named individual or “Dear General Counsel”? Does it identify specific products or refer broadly to a vague category of products? Is it phrased as a cordial invitation to “license early” or a firm notice of infringement?

Perform a Google search on the patent owner and patents. Are they well-known and feared or small and obscure? Have they been involved in prior litigation and licensing with major companies or is your company the first target? Are the patents registered where your company has substantial manufacturing or sales or not? Continue reading →