IP indemnities are often uncapped
In technology agreements, IP infringement indemnities are commonly uncapped as a matter of market practice - a significant exception to the general liability cap. The wording matters: an indemnity is a debt obligation requiring only proof of loss (without the foreseeability or mitigation requirements of a damages claim), and the US-imported indemnify, defend and hold harmless formulation is broader still.
Standard carve-outs exclude liability for the client's own modifications, combination with unapproved products, use outside specification, or deliverables built to the client's own specification. The remedial hierarchy typically lets the indemnifier procure a licence, modify the deliverable to be non-infringing, or - as a last resort - refund. In cross-border deals, the indemnity should cover infringement claims in every jurisdiction where the client will use the deliverables, under any applicable law.
A 'perpetual' licence may still be terminable
Do not assume perpetual means interminable. In BMS Computer Solutions Ltd v AB Agri Ltd [2010] EWHC 464 (Ch), the court held that perpetual has shades of meaning: here it meant a licence of indefinite duration that remained subject to the contract's termination provisions, so the licence ended when the related agreement was terminated.
Only perpetual and irrevocable language, with no conflicting termination clause, creates a genuinely non-terminable licence. If you want a licence to survive, say so explicitly and make sure no termination provision cuts across it.
Sub-licences and insolvency
Sub-licence survival cannot be assumed either way. The usual expectation is that a sub-licence falls away when the head licence ends - but VLM Holdings Ltd v Ravensworth Digital Services Ltd [2013] EWHC 228 (Ch) shows a sub-licence can survive termination of the head licence in the right circumstances. So whether sub-licences survive must be addressed expressly, from both the licensor's and the sub-licensee's perspective.
Insolvency adds another layer: a licence does not automatically terminate on insolvency at common law, and the Corporate Insolvency and Governance Act 2020 may override express termination-on-insolvency (ipso facto) clauses for contracts with a UK connection. For cross-border deals the relevant jurisdiction's insolvency regime governs - another reason to address licence survival on insolvency expressly rather than relying on defaults.
Moral rights are a cross-border variable
Moral rights - principally the rights of attribution and integrity - vary sharply across jurisdictions. Under English law they can be waived (sections 87 and 94 of the CDPA 1988). Under French law, moral rights (droit moral) are inalienable and perpetual and cannot be waived at all; German law is similar; and the US recognises moral rights only for certain visual art (the Visual Artists Rights Act 1990), with waiver by written instrument.
So a moral-rights waiver that works in England may be ineffective elsewhere. Include a waiver for the jurisdictions where waiver is permitted, and add a to the maximum extent permitted by applicable law qualifier so the clause is cut down rather than struck out where waiver is restricted.
Putting the cross-cutting pieces together
These provisions should be drafted as a set, not in isolation. Decide whether the IP indemnity sits inside or outside the liability cap (often outside); make licence survival and irrevocability explicit and consistent with the termination clause; address sub-licence and insolvency survival expressly; and waive moral rights to the maximum extent permitted, jurisdiction by jurisdiction.
The common failure is an IP clause that allocates ownership well but ignores how indemnities, licence termination, and moral rights interact with the rest of the contract - leaving the protection incomplete exactly where it is tested.
Use at the desk
Practical checklist
- Decide whether the IP indemnity is inside or outside the liability cap (often outside) and draft the carve-outs and remedies.
- Do not assume 'perpetual' means interminable - use 'perpetual and irrevocable' with no conflicting termination clause (BMS v AB Agri [2010] EWHC 464 (Ch)).
- Address sub-licence survival expressly - it is not automatic either way (VLM v Ravensworth [2013] EWHC 228 (Ch)).
- Address licence survival on insolvency expressly (Corporate Insolvency and Governance Act 2020 may override ipso facto clauses).
- Waive moral rights only where permitted, with a 'maximum extent permitted by applicable law' qualifier (ss.87/94 CDPA; droit moral is inalienable).
- Draft the IP indemnity, licence, and moral-rights provisions as a coordinated set with the cap and termination clauses.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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