This contract tip is about warranties of non-infringement.
In the simplest form, the vendor promises the customer that the products sold or licensed do not infringe a third party's intellectual property rights.
How you draft and negotiate these provisions depends heavily on whether you are the vendor or customer.
Here are 5 th things to think about:
1. Should you include one?
Vendors prefer not to make any warranty, while customers want them. Don't forget that the Uniform Commercial Code 2-312(3) includes an implied non-infringement warranty if the vendor is a merchant of that type of good.
2. What uses or products are covered?
Vendors should narrow the items covered by the warranty, while customers want it to include everything. And don't forget to include use of the product, which can be a separate infringing act from the stand-alone product.
3. What is the scope of your warranty?
Vendors want to narrow scope, limit to already-registered IP in a territory, and maybe even add a knowledge qualifier. Customers want everything included.
4. What time period does it cover?
Check to see when the warranty applies. Vendors prefer just as of the effective date but customers want it to be as long as possible.
5. How does the warranty interact with the intellectual property (IP) indemnity? Vendors may limit their IP obligations to just an indemnity. If the customer insists on a warranty, some vendors look to make the indemnity the exclusive remedy for breach.
Do you see these kinds of issues in your contracts?
