Inappropriate use of indemnities

This golden oldie discusses one of IP Draughts’ hobby horses: inappropriate indemnities. He found himself teaching on this point earlier in the week, at one of his UCL courses on IP licensing.

IP Draughts

Too many contracts include indemnities.  IP Draughts has noticed a increasing trend to include indemnities in commercial contracts, in recent years.

First, we need to distinguish between two types of indemnity.  Take the example of a contract between A and B, under which A is engaged to manufacture a pharmaceutical drug for B, to B’s specification, which B will use in human clinical trials.

A third party indemnity allocates responsibility between A and B for dealing with third party claims or liability.  In the present example, a patient might be injured by the drug.  The manufacturing contract may provide that, if a patient brings a claim in respect of that injury:

(a) if the injury arose because the drug was inherently toxic or harmful, B will indemnify A against the patient’s claim; or

(b) if the injury arose because A introduced some contaminent into the drug during the manufacturing process…

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