The mitigation paragraph inside an IP indemnification clause is one of the most under-negotiated sections in a typical commercial contract. It lays out what the vendor will do if a third party alleges infringement of intellectual property used in the product, usually some combination of procuring a license, modifying or replacing the product, and terminating with a refund. Most lawyers gloss over it. That works fine until an infringement claim hits a high-stakes deal and the remedies turn out to be toothless.
Laura Frederick of How to Contract hosted Jennifer McGrew, a Partner in the Technology Transactions practice at Wilson Sonsini, and Gabe Meister, a technology transactions attorney at Meister and Steiner with 16 years at Morrison Foerster's TTG and four years in-house. Jennifer took the vendor side, Gabe took the customer side, and the format let them stress test each piece of the provision from both directions. Their combined experience across SaaS, hardware, services, and mission-critical platforms surfaced traps that do not show up when this section gets reviewed in isolation.
The conversation covered the trigger language at the top of the provision, each remedy in the waterfall (procure a license, modify or replace, terminate and refund), and the sole and exclusive remedy clause that can quietly displace every other remedy in the contract. The throughline was operational. None of this language matters until something goes wrong, and most of what looks acceptable on the page falls apart in practice.
Here are our top ten takeaways from the speakers' comments during the webinar:
The mitigation paragraph is not boilerplate. It looks like boilerplate because every contract has one and they all look similar. They are not similar in effect. The waterfall of remedies, the trigger language, and the sole and exclusive remedy clause together determine what actually happens when an infringement claim hits. Treat this section the way you would treat the limitation of liability or the indemnification scope, not the way you would treat the notices clause.
The trigger controls everything downstream. Whoever decides when the trigger fires controls the optionality in the rest of the section. If the vendor has sole discretion and a broad standard, the customer is waiting on the vendor's timetable. If the customer can force the trigger on a reasonable standard, the customer can move the deal forward. We negotiate the rest of the waterfall first because it looks more substantive, but the trigger is where the leverage actually sits.
Allegation versus claim is a real distinction. An allegation can be a letter from a troll. A claim is a formal proceeding. If the trigger language uses one or the other, that matters for how easy it is to invoke the remedies. Customers usually want a broader trigger so they can demand action on a credible threat. Vendors usually want a narrower trigger so they can wait for something formal. The right answer depends on which side is more exposed in the deal.
"Procure a license" is rarely as simple as it reads. A vendor procuring a license from a third party can come with use restrictions that shrink the customer's rights. The vendor may not be able to procure one at all. The price may be unreasonable for the deal size or remaining term. And "the right to continue using the product" can be read narrowly to mean the product without the infringing feature, which is not what the customer paid for. We should pressure test this remedy against the product definition and the customer's actual use case, not just sign off on the language.
"Functionally equivalent" needs a referee. The remedy "modify or replace with a functionally equivalent non-infringing substitute" does not say who decides what equivalent means. A good faith standard with reasonable customer approval rights is the practical compromise. Without it, the vendor decides, and the customer ends up with something that is technically equivalent and operationally useless.
Hardware changes the entire conversation. Software remedies can often be implemented overnight. Hardware remedies require recalls, shipping, truck rolls, and physical labor. Replacement products can also restart warranty periods if the warranty language is not drafted to handle it. If the deal involves anything physical or anything mission-critical with heavy implementation, modify-or-replace is much more expensive than it looks on the page.
The refund formula has to match the deal. Prepaid fees for the unused term works for subscription pricing. It does not work for consumption pricing, milestone pricing, tiered pricing, or physical goods. If the deal is not a clean subscription, the standard refund language is wrong, and "prepaid fees" needs to be replaced with a formula that actually reflects what the customer paid and what the vendor still owes.
The refund does not cover transition. A refund of unused fees does not pay for finding a replacement product, installing it, migrating data, or getting the original vendor to cooperate with the new one. If sole and exclusive remedy language is in play, the customer may be giving up the right to recover any of those costs. Negotiate transition services into the remedy itself or carve them out of the sole and exclusive language. Do not assume separate provisions in the agreement will survive the displacement.
Sole and exclusive remedy displaces, it does not just cap. This is the part most lawyers underweight. Sole and exclusive remedy language wipes out every other remedy in the agreement that could be triggered by the same event, including ones the parties expressly negotiated like an IP warranty or liquidated damages. Map every other remedy in the agreement that touches IP infringement before agreeing to sole and exclusive language, and either narrow what it applies to or carve out the remedies you want to preserve.
The provision is operational, not magical. Lawyers treat IP infringement remedies as if the words are some hardcoded formula that nobody should touch. They are not. They are an operational rulebook for what happens in a specific scenario. As Gabe put it, just go in and ask what you actually want to happen. The fear of touching the language is what produces the bad outcomes in the first place.
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