Hi, We are a small sofware company and we have product for internal use. In the contract we license the software "As is" and provide no warranties. A major company wants to purchase several licenses for internal use, but they want us to warranty that if someone sue them for the use of our software, we have to pay for the litigation costs (which can be 500K). It is very unlikely that someone sue this company for the use of this software internally, but signing this clause makes me very nervous. Any ideas of what I can do in this case? I was reading and other programs like Adobe, word, they do not provide any guarantees on patent infringement. thanks.
I am a patent attorney generally on the patent owner's side.
Signing such a clause should make you nervous. You don't want to be responsible for the major company's infringement. The major company is likely getting more benefit out of using your software than your company is making by selling licenses.
The previous gentleman's answer is incorrect. Anyone can be sued for patent infringement if they make, sell, or *use* the claimed invention. It depends on the claims in the asserted patent. Based on experience, it's much more likely that the larger entity would be sued for infringement.
A patent infringement case could cost anywhere between $350k-$5M+ USD.
In order to properly answer your question, I would need to know why you feel it's "very unlikely" that someone would sue the major company for using your software.
If the major company won't back down on this provision, the best thing you can do is determine if you need IP (defense) insurance. If a patent attorney determines that it is necessary, raise the price of your license and get IP insurance.