Intellectual property rights are a critical element of modern business agreements and the question of IP infringement claims is a financially serious one. You might have heard of how IP infringement indemnity can assist businesses to deal with another party's intellectual property rights being infringed.
IP infringement indemnity is an important yet complicated topic for businesses to consider. To help you gain a firmer understanding of the subject, IP Guardian has put together this primer on IP infringement indemnitiesin commercial transactions. Read on to discover everything you need to know about this crucial issue.
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An indemnity is a promise by one party to compensate the other for a defined loss during a contract's performance. It is a way of apportioning risk between contracting parties, and provides a contractual right for compensation corresponding to a specific loss. If one party agrees to indemnify the other for a particular kind of loss, if that loss comes to pass, they must reimburse them.
IP infringement indemnities are provisions in agreements were parties shift risk of loss in case of IP infringement. Typically, IP infringement indemnity agreements obligate one party to compensate the other for damages or losses the liability clause covers. This can even extend to being obliged to defend the other party in any subsequent legal disputes involving a third party claim of IP infringement.
Given the considerable expense litigation incurs, an IP infringement indemnification clause or agreement can offer significant protection to an indemnified party, mitigating risk and liability should IP infringement issues arise.
The IP indemnity obligations will vary based on factors such as:
A common IP indemnity example is an indemnified seller of IP-infringing goods shifting the task of defending the litigation to the supplier of the goods.Some other types of agreements that might include IP indemnification clauses:
In Australia, the legal principle of caveat emptor — "buyer beware" — applies whenever a buyer makes a purchase, and means that the law does not afford protection against faults or losses, including IP infringement. Consequently, buyers often seek protection through the use of a warranty or indemnity, while sellers seek to protect themselves by restricting the scope of this warranty or indemnity.
IP warranties and IP indemnities are subtly different. A warranty is a contractual assurance from a seller about a product or service. If the warranty is breached, the buyer can make a warranty claim and receive damages for the breach. A serious enough breach may allow the buyer to terminate the contract. An indemnity, on the other hand, is a legally enforceable promise to compensate the buyer for a specific type of loss. A breach of contract does not need to have occurred (as in a third-party IP infringement indemnity clause), as long as the loss is described in the IP indemnity clause itself.
A well-crafted intellectual property indemnity provision aids in allocating the risk of litigation for an IP infringement claim. Arranging effective IP indemnification from the outset of a commercial transaction will protect your business, whether as a buyer or seller.
When it comes to drafting indemnification agreements, particular care must be paid to the type of IP rights and precise circumstances that render a party liable. In the absence of clear indemnity terms, parties can become mired in indemnity disputes or even IP indemnification litigation.
For that reason, comprehensive and careful IP indemnity agreements are vital. Businesses must ensure they employ experienced and knowledgeable IP lawyers to draft, review and revise these agreements.
For further advice about indemnity for IP infringement, contact us today to speak with one of our expert intellectual property lawyers. We provide quality and affordable advice including a free consultation and fixed-fee pricing.
Registered Patent and Trade Mark Attorney with significant experience obtaining all forms of registered intellectual property. I hold a Bachelor of Science in Engineering, a Masters of Business Administration and a Masters of Intellectual Property. I’m passionate about showing my clients how they can protect their brands through trademark registrations.
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IP Guardian helps protect words, symbols, letters, numbers, names, signatures, phrases, sounds, shapes and smells. Yes, I said smells.
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