Territorial Restrictions on Intellectual Property Indemnification

Pay attention to any territorial restrictions in the intellectual property indemnification obligation.

Intellectual property indemnities identify the types of claims covered. If a claim falls out of scope, the indemnifying party doesn't have to do anything about the claim. If you are the indemnifying party, you prefer wording to shift more claims out of the indemnification scope.

One way to do that for an IP indemnity is to limit the claims to only those related to a particular jurisdiction. 

The party more likely to do the indemnifying – typically the vendor – will want it narrow: “Seller will indemnify…claims that the Product or use of it infringes a U.S. patent or copyright issued as of the Effective Date.”

The party more likely to be indemnified – typically the customer – will want it broad: “Seller will indemnify…claims that the Product or use of it infringes any Intellectual Property Right.” The customer will also want to include in that definition of IPR any intellectual property right anywhere in the world.

There is no right answer here. Which approach you use depends on the risk each party is willing to accept, which is usually influenced by the norms for their industry.

Vendors need to think about the competitive landscape for that type of product, the value of the deal, and whether it is willing to step in to defend a lawsuit anywhere in the world. Customers need to decide if they are willing to buy a product if the vendor refuses to do that.