Ronan LevyCo-Founder at MayfairSeven.com
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Entrepreneur, lawyer and catalyst. Co-Founder of MayfairSeven.com, Abelegal.com, TorontoGold.com, CanvasRx and ClickGreener.com (acquired in 2008). Lawyer to many promising startups.



Recent Answers


This kind of provision is quite common in software license agreements. Usually, it is not so broad as to cover "if they get sued" for using your software. Rather, the indemnity (the legal term for this kind of provision) typically arises if they get sued because your software infringes the intellectual property rights of a third party.

Here is some sample language that one of my clients uses:

LICENSOR hereby agrees to indemnify and hold Client harmless from and against any and all damages resulting from, relating to or arising out of any claim that the Software infringes a patent, copyright, trademark or other intellectual property right of a third party.

(b) Notwithstanding Section 10(a), LICENSOR shall have no liability hereunder and will be indemnified by Client for any claim of infringement based on: (a) the combination, operation or use of the Software with any software, hardware, Client materials or other materials or networks not furnished or certified in writing by LICENSOR, if such infringement would have been avoided without the presence of such software, hardware, materials or networks; or (b) any content or any services, materials or other work product fulfilled by LICENSOR according to the specifications, instructions or requirements supplied by Client.

(c) If all or a part of the Software is, in LICENSOR’s opinion, likely to or does become the subject of a claim of infringement of the rights of a third party, LICENSOR, at its option, may: (i) modify or replace it to make it non-infringing; (ii) use its best endeavors to procure the right to permit Client’s continued usage of the Software; or (iii) if neither of the foregoing options are commercially reasonable, terminate this Agreement upon notice to Client, with a pro rata refund of any prepaid but unearned/unamortized Fees.

Looking at Adobe won't necessarily give you a sense of what is the commercial norm in these circumstances, as Adobe has a lot more bargaining power than most software developers. However, most software providers who supply to enterprise level clients usually offer some warranty or indemnity around infringement.

Happy to discuss further if helpful!

Ronan


I'm not an expert on German law, so please take everything with a grain of salt.

This is never an easy issue because there aren't many persuasive arguments on either side. What usually ends up happening is that the parties defer to a neutral jurisdiction, typically New York law/New York courts or English Law/London courts. The reason being that most major companies worldwide usually have some nexus to either New York or London, so it's something they can agree to.

Your best argument for requesting US law is that you are a US company, and the fact that most German companies are still sometimes subject to US law. (Many online companies offer only US terms and conditions, so German companies just have to agree to it sometimes.)

I would avoid at all costs agreeing to German law or jurisdiction. Civil law (Europe) is very different than common law (England, US, Canada, Australia etc.) both in terms of the law and procedures. If they won't agree to New York, then push England. If that fails, then delete the governing law provision altogether and you can fight it out if and when a situation in which matters arises.

To answer your second question, if you agree to German law and a judgment is rendered against you: (1) having a German judgment against you if you don't have any assets in Germany is a bit useless, as there is nothing to seize if you refuse to pay. They can seek to have the judgment recognized in US courts. This is an expensive process and most companies won't go through the effort because effectively they have to relitigate the matter in the US to get the enforcement order. However, they can do so if they are so inclined. (2) If a judgment is rendered against your company, then my presumption is that as a director or officer, you can encounter issues in Germany if you ever try to enter. This is where I'm least knowledgeable but I'd guess that if a judgement of a court is ignored, then eventually the directors and officers can be subject to criminal proceedings for contempt. If that happens, you could be arrested in Germany if you ever try to enter. I'm just guessing at that last part, but you don't want to go down that road, even if I'm entirely wrong.

Ronan


A lot will depend on your negotiating leverage. Where there's leverage, there's opportunity. But your leverage is going to largely depend on what your license agreement says, and the form of the transaction between Company B and Company C.

For instance, if Company C buys Company B's assets (as opposed to shares), and your license agreement includes an assignment clause that does not allow for assignment without your consent, you have a lot of leverage to impose terms because technically they can't transfer the agreement to Company C without your permission.

If you'd like, I'd be happy to look at your agreement and let you know my thoughts.

Ronan


Actually, the requirement is in respect of Canadjan 'resident' directors. You don't need to be a Canadian citizen to satisfy the requirement, only resident.

As for what to offer (if you're not a resident either), directors + officers insurance at a minimum. In addition, depending on the stage and size of the company, you can offer payment for attending meetings or options. It really depends on how involved you want them to be and how much they want for the service. There are also service providers that will supply a nominee board member for a price. I haven't looked at what those prices are recently but I'm sure they are quite reasonable.


It is a very rare occurrence that an infringement goes from infringement straight into litigation. There is always a dance that goes with it, usually starting from the side of the infringed party. From there discussions take place, and usually resolution is achieved. If you have a hammer knowing that you can invalidate their patent by showing prior art, then I'd probably just operate under the radar and hope it goes unnoticed by them. In truth, there's probably a good chance that their patent won't actually get registered due to the prior art so it may be a non-issue in the first place.


As long as you have a limitation of liability provision, an exclusion of warranties provision, a governing law/jurisdiction provision and the right to update/amend/revise the TOS at anytime, you're probably pretty safe until such time as you can afford a lawyer to draft a proper TOS.

That said, it shouldn't cost $000s to have a lawyer prepare a TOS. I work with many startups in Canada and, unless it is a particularly novel business model or idea, I typically quote $750 (+tax) to draft the TOS. If you're getting quoted fees significantly higher than that, you should shop around.


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