In most cases, the licensee does not need an “open source indemnity.” It doesn’t need terms specifically addressing copyleft open source software because the typical IP indemnity already does the trick. In other words, if someone sues the licensee for redistributing the vendor’s copyleft software without using the open source model, the usual IP indemnity should protect the licensee. It should require that the vendor defend the suit and pay any settlements or judgments. That’s because a copyleft suit would in most cases be an IP suit, covered by an IP indemnity.
Typical IP Indemnity
Here’s a typical IP indemnity, based on the one in The Tech Contracts Handbook: “Vendor shall defend, indemnify, and hold harmless Licensee against any third party claim, suit, or proceeding arising out of, related to, or alleging infringement of any patent, copyright, trade secret, or other intellectual property right by the Software.” A copyleft suit against our licensee/distributor would claim infringement of copyright, so that indemnity would protect the licensee. (BTW, much more text goes into an indemnity clause. See the sample language in the Clauses library under II.J: Indemnity — and see The Tech Contracts Handbook, Chapter II.J.)
Open Source (Copyleft) Indemnity
It may be far-fetched, but it’s possible to imagine a copyleft claim that the indemnity above would not cover. The licensee might be sued for breach of contract for its failure to comply with a copyleft license (for failure to distribute its own product as OSS). That suit probably wouldn’t succeed, since we’re talking about a licensee that got copyleft software from its vendor and didn’t know about it. You can infringe copyright without knowing about it, but you can’t execute a contract in total ignorance. Still, the licensee could face some claim that its staff clicked a button as part of installing the vendor’s software or in some other way “signed” a contract that included copyleft terms. So it might be worthwhile for the licensee to go beyond the typical IP indemnity.
The licensee could address copyleft contract claims — could require that the vendor defend them — through an “open source indemnity.” In other words, it could draft a copyleft-specific indemnity: “Vendor shall defend, indemnify, and hold harmless Licensee against any third party claim, suit, or proceeding arising out of, related to, or alleging a restriction on Licensee’s right to distribute the Licensed Program, or any modification thereof: (a) for a fee, (b) with or without source code or source code rights, or (c) with such restrictions as Licensee sees fit to place on its customers’ modification or distribution rights.”
Limits of Open Source Indemnities
Keep in mind that indemnities like the ones above usually only address litigation and the damages claimed by the plaintiff: settlements and judgments. What if the vendor defends the case, loses, and pays the plaintiff’s damages? The vendor is then off the hook: it’s complied with the indemnity. But the licensee could still have a big problem. It might have to distribute its own software product under the open source model. The indemnity, in other words, doesn’t fully solve the licensee’s copyleft problem.
To address the remaining issue — possibly the biggest one — you need to go back to warranties and their remedies, discussed in the previous post. (That’s why warranties remain valuable to licensees, even if the vendor also grants an indemnity, despite the claims of some lawyers.)
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