Lots of agreements involving technology have both an express warranty of non-infringement, as well as a third party indemnity against non-infringement. For instance, if you’re licensing a piece of your company’s software to a third party, the third party might ask for both a warranty of non-infringement, as well as a third party indemnity obligation. Sounds innocuous enough, right? An easy give in the negotiation? Maybe not.
Think about what could happen if someone comes out of the woodwork and asserts an infringement claim against your client. They’ll most certainly tender the claim to you for indemnification. However, if you have an IP warranty as well, they could conceivably also assert a breach of warranty claim against you for breach of the non-infringement warranty. This could allow the other side to “double dip” on damages, seeking both indemnification and direct damages.
“Good information,” you say. “No more warranties, just indemnification.” Not necessarily. An IP warranty does something that the indemnity does not…for certain types of IP claims, it can give the recipient of the warranty an “innocent infringer” defense to a claim of infringement, as they would allege that their allegedly infringing behavior was in reliance on the warranty. So, what you can do is give the warranty (it should be a “to the best of its knowledge” warranty ideally), but specifically state that the sole and exclusive remedy for breach of the IP warranty is indemnification pursuant to the IP infringement indemnity elsewhere in the agreement. This gives your client the best of both worlds, while ensuring you’re protecting your client.
On the flip side, if you’re licensing software, you always want to request both an IP warranty and an IP indemnity, and if the other side gives you trouble, just explain why the warranty is needed in addition to an indemnity, and offer the exclusive remedy language to placate any “double dipping” concerns they may have.