From: mwr@eng.tridom.com (Mark Reardon)
Subject: Re: What to do about indemnification clause?
Reply-To: mwr@eng.tridom.com (Mark Reardon)
Organization: AT&T Tridom; Marietta, Georgia
Date: Thu, 19 Nov 1992 17:31:31 GMT

In article <721623613snx@crynwr.com>, nelson@crynwr.com (Russell Nelson) writes:
|> I don't like the following indemnification clause in a contract I'm
|> looking at:
|> 
|> 	Seller agrees to defend, indemnify and hold Buyer harmless
|> 	from and against any and all liabilities, claims, penalties,
|> 	forfeitures, suits, and the associated costs and expenses ...
|> 	caused, in whole or in part, by ... any negligent or willful
|> 	acts, errors or omissions by Seller ...
|> 
|> This means (IANAL) that if I use a technique in my software that
|> later turns out to be patented, *I* get stuck paying the patent
|> license.  This sucks.  I'm thinking that I should bill them for a
|> patent search plus some kind of insurance against patent violations.
|> Any ideas on this?

This is a standard clause in most contracts now days.  I am not a
lawyer either so I discussed this with one.  He stated that it is
more scare than reality.  The key words are negligent and willful.
he said that as long as I was prudent and truely intended to create
software for the customer that was perform as specified I was pretty
safe.  He also suggested that I keep records of my efforts (a journal)
that would show that I hadn't just copied someone elses work and sold
it.  Lastly, he explained that this was standard in most contracts and
that he would not allow any company he represented to enter a contract
without this clause.

You have to decide if you can live with the clause.  If not, strike 
it and see if the company will accept the new contract.  Most won't
nor will they pay for your patent search or insurance.  After all,
you will just make yourself more expensive than the next consultant.

One last point.  Even if this clause is not in the contract and
you do violate a patent or willfully omit critical information,
you can still be held liable.  Think about it.  There are three 
parties involved.  The patent holder, the company selling the
violating product, and the consultant.  The agreement above is
not binding upon the patent holder and they will most likely sue
both of the other parties.  The company will most likely also sue
the consultant because when they payed for the consultants expertise
it was reasonable to assume that (s)he would sell them something they
could use.  Even without the clause above most courts would consider
the consultant as an expert should have known that what was sold
did not belong to the consultant.

|> 
|> -russ <nelson@crynwr.com> What canst *thou* say?
|> Crynwr Software           Crynwr Software sells packet driver support.
|> 11 Grant St.              315-268-1925 Voice  |  LPF member - ask me about
|> Potsdam, NY 13676         315-268-9201 FAX    |  the harm software patents do.

-- 
Mark

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| Mark Reardon           |  AT&T Tridom                             |
| mwr@eng.tridom.com     |  840 Franklin Court                      |
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