April 2014

What to Know About the ‘Combination Exception’ to Infringement Indemnities.

As a software licensing attorney I run into the issue of infringement indemnities all the time. These risk shifting contractual clauses can be very confusing for clients, so I thought I would explain (with a real live case and a graphic) what is called the ‘combination claim exception.’

Contractual indemnities are in essence insurance policies, and the customer is asking for insurance if your software infringes (violates someone else’s IP rights). They expect that you will  defend them (sometimes they even want to hire their own attorneys and send you the bill)  in an infringement suit and pay any resulting judgment.  This is a very common request from large customers.

However, there are typical exceptions to a software company’s indemnity obligation (i.e. risks that software companies should not be on the hook for). One of the most important exceptions is known as the ‘combination claim’ exception. The theory behind this exception is that your indemnity should only cover your software, and not your software + some other technology (either customer or third party). Look at it this way: Are you being compensated sufficiently in the transaction to pay for infringement insurance on how your customer uses your software or only on your software?  Let’s take a look at a real world case from 2014.

The Facts:  Intervoice’s software was deployed on premises at AFLAC and then AFLAC was sued for patent infringement. However, supposedly the Intervoice …

 
What to remember about Saas Reseller Agreement and SaaS OEM Agreement Models!
There are essentially 3 different SaaS channel models: referral, reseller and OEM, which are documented in a referral agreement, SaaS reseller agreement and SaaS oem agreement. I discuss these three reseller models a lot with clients, so I thought this topic deserved a brief outline of the differences between the models (here is another post on the types of SaaS reseller agreement models).

Referral Agreements.

SaaS referral agreements are essentially models where the referring company ‘refers’ or introduces new leads to the SaaS vendor.

If a SaaS vendor closes a deal with the new lead, then the SaaS vendor pays the referring party a % of the deal for a certain period of time (usually 1-2 years; the duration really depends on the vendor’s business model and the sales contribution of the referring party). The SaaS vendor sets the price and the referring party does not.  In these deals you have to think about issues like tail payments (if you terminate the referral agreement early, often the referring party would like some kind of continuing payment) and exceptions to the referral fee obligation (like active or known deals, etc). Some people also call this agreement an ‘affiliate agreement’ which is fine, but I think a referral agreement is a more accurate description.

Reseller Agreements.

SaaS reseller agreements are for situations when the reseller will resell the SaaS vendor’s service AND …