This week’s musings on tech contracts…
Some IP indemnities exclude claims about intellectual property registered after the contract’s effective date. The vendor argues that it shouldn’t be responsible for IP it couldn’t have known about when it signed the contract. “If we couldn’t have known, we’re not at fault if our product infringes.” That argument doesn’t make sense, and customers should resist the exception. Vendors, for their part, should question whether they really need the clause – and if so, try a better justification.
Here’s typical language: “Indemnified Claims do not include claims, suits, or proceedings alleging infringement of intellectual property rights that were not registered before the Effective Date.”
Trade Secrets and Copyrights
The exception focuses on patents, but let’s look first at its impact on trade secrets and copyrights. Trade secrets aren’t registered. So it’s hard to guess the impact of an exception for IP “not registered before the Effective Date.” And while copyrights can be registered, most are not in the U.S. and other jurisdiction – particularly software copyrights. So again it’s hard to predict the exception’s impact. In theory, it could exclude most indemnities against copyright claims.
Also, the vendor can’t misappropriate or infringe a trade secret or copyright that didn’t exist when it created its product. You can’t steal a secret – or copy code – that doesn’t yet exist. So for those forms of IP, the clause just doesn’t make sense.
Patents
The exception does work for its key target: patents. A tech provider can infringe a patent granted after it created its product. (It’s not likely, though. The vendor’s product would probably qualify as prior art, invalidating the third party plaintiff’s patent.)
That, however, doesn’t mean the clause makes sense.
The registered-after-the-effective-date exception arises out of a misunderstanding. Patent and other IP indemnities do not punish IP infringement. They don’t even to give the customer a remedy for infringement by the vendor’s product. (That’s the IP warranty’s job.) So the clause’s justification – the vendor wouldn’t be to blame – just doesn’t matter.
The IP Indemnity’s Purpose
The tech industry uses the IP indemnity to shift a burden from the customer to the vendor: the burden of IP risk related to the product. It’s the vendor’s software or hardware, so contracting parties generally agree that the vendor should handle claims that it infringes patents or other IP.
What difference does it make, then, when the third party plaintiff filed the allegedly infringed patent (or copyright)? What difference does it make whether the provider did anything wrong, like patent infringement, when it created its product? It’s still the vendor’s product, not the customer’s.
The Universal Justification
That doesn’t mean the vendor has no justification for the exception. It can justify any limit on its obligations with, “not at this price.” In other words, for the money on the table, we won’t accept this, that, or the other risk.
Obviously, that argument draws an arbitrary line when applied to the registered-after-the-effective-date exception. Why exclude that particular risk? And in contract negotiations, no one wants to hear arbitrary rules from the other side. That’s probably why few contracts include the exception.
Reconsider it — and focus on typical exceptions
Vendors should ask themselves if they really need the registered-after-the-effective-date exception. How likely are those claims? And would you really refuse to protect your customer … because of the date the third party plaintiff filed its patent?
Generally, the vendor does better focusing on the more typical exceptions to IP indemnities. For those exceptions, see the examples in section II-L.2 of our clause library.
We cover indemnities – including IP indemnities – in greater detail in our trainings, including:
- The Indeminar: Indemnities in IT Contracts.
- The Tech Contracts Master Class, course 3 (Key Liability Terms)
[This post was updated on October 9, 2025.]
THIS ARTICLE IS NOT LEGAL ADVICE. IT IS GENERAL IN NATURE AND MAY NOT BE SUFFICIENT FOR A SPECIFIC CONTRACTUAL, TECHNOLOGICAL, OR LEGAL PROBLEM OR DISPUTE, AND IT IS NOT PROVIDED WITH ANY GUARANTEE, WARRANTY, OR REPRESENTATION. LEGAL SITUATIONS VARY, SO BEFORE ACTING ON ANY SUGGESTION IN THIS ARTICLE, YOU SHOULD CONSULT A QUALIFIED ATTORNEY REGARDING YOUR SPECIFIC MATTER OR NEED.
[Updated October 27, 2025]
© 2024, 2025 by Tech Contracts Academy, LLC. All rights reserved. Thank you to Pixabay.com for great, free stock photos!