Legal Question in Intellectual Property in New Jersey
What does the following mean in simple terms or how does it apply?: Indemnity. LICENSOR shall at all times indemnify and save LICENSEE harmless from and against any and all damages, costs, expenses, losses, liabilities, fines, and/or penalties of every kind and nature, which arise out of or in any way relate to the Patent Licensed Rights and/or Products, including without limitation by reason of specification, the reasonable legal fees and disbursements, costs and expenses paid and/or incurred by LICENSEE, in connection with any action or proceeding brought by or against LICENSEE, including, but not limited to any and all infringement claim(s), personal injury claim(s), product liability claim(s), and/or wrongful death claim(s) related to the Licensed Patent Rights and/or Products. The provisions of this Paragraph A1" of this ARTICLE XII shall survive the expiration or earlier termination of this Agreement.
1 Answer from Attorneys
At its most basic level, this is a simple standard indemnification clause that 99% of the time is included in license agreements relating to intellectual property.
It appears from this clause that the licensor is the owner of a patent to a certain invention and/or technology, which in turn is being used in connection with the manufacture and/or sale of products that incorporate the patented technology. Further, the licensor has given permission to the licensee to use the patented technology or the patented invention in connection with products that incorporate the technology and which are being sold by the licensee.
According to this clause, if the licensee who sells the products with the patented technology, gets sued for anything, including patent infringement, personal injury, product liabiltiy and wrongful death, and the law suit relates in some way to the patent or the products that incorporate the invention protected by the patent, then the Licensor is responsible for all of the costs associated with the lawsuit brought against the Licensee. Such costs include attorneys' fees and any damages assessed against the licensee.
Finally, in the event that the License Agreement is terminated, this clause survives termination. This means that the licensor could still be liable for quite a while after his or her relationship has ended with the licensee.
This is an extremely broad clause and very pro-licensee. The attorney reviewing this contract and working for the licensor should try to limit it, by adding language that clearly states that if the injury arises out of negligence of the licensee, as for example its failure to provide notice, or to follow procedure, then the Licensor does not have to indemnify the licensee, even if the lawsuit relates to the patented technology.
In addition, if the Licensor is to indemnify the licensee, the Licensor should get insurance for that possibilty. However, patent infringement insurance is very expensive. Consequently, the expense for such insurance should be figured and amortized into the royalty that the Licensee will be paying the Licensor for the license of the patent.
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