This contract tip is about how the Uniform Commercial Code (UCC) imposes an IP infringement indemnity on customers?
Yes, you read that right. On customers.
Section 2-312(3) of the UCC says a buyer who furnishes specifications to the seller must hold the seller harmless against any [rightful claim of any third person by way of infringement or the like] that arises out of compliance with the specifications.
This statutory language lacks key concepts in a typical B2B contract indemnification provision. It doesn't have the limits, exclusions, and procedures the indemnifying party wants to see. Plus this provision uses hold harmless language, which is broader than indemnify in some jurisdictions.
The good news for buyers is that this hold harmless obligation applies only if the parties don't agree otherwise.
Buyers can protect themselves by addressing these concepts in the indemnification provision. They may also want to include language clarifying that the indemnity section contains only indemnities between the parties. That wording would signal the court about the parties' intent.
What other ways can buyers minimize this risk?
