Questions

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.

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


Answered 9 years ago

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