What is an Indemnity clause?

How much initial capital should a Japanese corporation have?
March 15, 2017
What happens if my Japanese visa application is denied?
March 22, 2017
Show all

An indemnity clause can be a powerful tool to control costs and manage risk when licensing technology.  An indemnity clause, at its most powerful, can completely shield one party from liability, forcing the other party to cover all potential risk stemming from the agreement.  However, more commonly, it will be used to cover specific areas of risk such as potential damage caused by use of the licensed technology or claims by 3rd parties for IP infringement.

As indemnity clauses heavily favor one party over the other, they usually are only included in agreements where the bargaining power between the parties is unbalanced.  As disadvantageous as an indemnification clause is to the party bound by it, it may still be worth it for companies who can obtain a benefit through the license relative to the risk of having to indemnify the other party.

Please contact our office if you would like further information regarding indemnity clauses.