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Author Topic: Licensor indemnifies Licensee for infringing someone else’s patents?  (Read 781 times)

Tybalt

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Here’s a really odd provision in a patent license agreement which the Licensee refuses to concede. Would a court even enforce Licensor’s indemnification of Licensee’s products?

Licensor agrees to hold harmless, defend and indemnify Licensee from and against any Liabilities suffered or incurred by Licensee arising out of, or in connection with:
any claim alleging that use by Licensee, its Affiliates or Sublicenses of any Patent Rights in accordance with this Agreement infringes any rights, including Intellectual Property Rights or moral rights, of any person; and
claims or demands brought by third parties against Licensee on account of any injury or death of persons, damage to tangible property or other Liability solely and directly as a result of a Licensed Product manufactured in accordance with this Agreement.
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Toot Aps Esroh

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It's not really an unusual provision.  Depends on the situation.  I've agreed to such where we were the licensor and developed the patented product soup-to-nuts but wanted someone else to market it because it fit their commercial channels better (we also manufactured on behalf of the licensee, although this was not the deciding factor in the indemnification).   

OTOH, if what is being licensed is just some adjunct to the product (say, a patented chemical that will go into some plastic product the licensee will be selling), it doesn't make a lot of sense to have a sweeping indemnification.

Is there a section following the one you cited having limitations on total liability for the indemnification the licensee wants?  In the case mentioned above, we would not be out more than we'd received from the licensee.

More frequently instead of seeing infringement in the indemnification section, it's set off in third party obligations section, where the licensee is permitted to offset royalties up to X% (25-50, usually) if licensee ends up having to pay someone else patent royalties on a patent directly related to the current licensor's tech.  That way the licensor isn't going to be on the hook for outlandish amounts, but the licensee gets the benefit of his bargain by being able to offset at least a portion of potential third party costs.

[ETA] This also provides an incentive for the licensee to bargain hard as against a 3rd party when it comes to royalty rate - he does not want it to be greater than the amount he can offset.

Here's a fairly good blog post about watchouts when it comes to agreeing to indemnification.  Note the summary: "In some instances, whether or not the licensor offers patent indemnification comes down to sheer bargaining power: a top-tier university with a potentially highly desirable new technology (such as a new, promising compound) may be able to get away with just saying "no", or a small engineering company dealing with a huge OEM may have no choice but to agree to a broad, unlimited indemnity.  But in most instances, where the bargaining power isn't so overwhelming, the parties will seek a "middle-ground" solution."

http://licensing-lawyer.com/blog1.php/patent-indemnification-another-really-hard
« Last Edit: 02-22-18 at 02:15 pm by Toot Aps Esroh »
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