𝐃𝐫𝐚𝐟𝐭𝐢𝐧𝐠 𝐚𝐧 𝐢𝐧𝐟𝐫𝐢𝐧𝐠𝐞𝐦𝐞𝐧𝐭 𝐢𝐧𝐝𝐞𝐦𝐧𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐜𝐥𝐚𝐮𝐬𝐞 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞 𝐩𝐞𝐫𝐬𝐩𝐞𝐜𝐭𝐢𝐯𝐞 𝐨𝐟 𝐚 𝐒𝐚𝐚𝐒 (𝐒𝐨𝐟𝐭𝐰𝐚𝐫𝐞 𝐚𝐬 𝐚 𝐒𝐞𝐫𝐯𝐢𝐜𝐞) 𝐯𝐞𝐧𝐝𝐨𝐫 𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐬 𝐜𝐚𝐫𝐞𝐟𝐮𝐥 𝐜𝐨𝐧𝐬𝐢𝐝𝐞𝐫𝐚𝐭𝐢𝐨𝐧 𝐭𝐨 𝐩𝐫𝐨𝐭𝐞𝐜𝐭 𝐭𝐡𝐞 𝐯𝐞𝐧𝐝𝐨𝐫’𝐬 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭𝐬 𝐰𝐡𝐢𝐥𝐞 𝐛𝐚𝐥𝐚𝐧𝐜𝐢𝐧𝐠 𝐭𝐡𝐞 𝐧𝐞𝐞𝐝𝐬 𝐚𝐧𝐝 𝐞𝐱𝐩𝐞𝐜𝐭𝐚𝐭𝐢𝐨𝐧𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐜𝐮𝐬𝐭𝐨𝐦𝐞𝐫. 𝐇𝐞𝐫𝐞’𝐬 𝐚 𝐬𝐭𝐞𝐩-𝐛𝐲-𝐬𝐭𝐞𝐩 𝐚𝐩𝐩𝐫𝐨𝐚𝐜𝐡 𝐭𝐨 𝐜𝐫𝐞𝐚𝐭𝐢𝐧𝐠 𝐚 𝐦𝐢𝐧𝐢𝐦𝐚𝐥𝐢𝐬𝐭𝐢𝐜 𝐲𝐞𝐭 𝐞𝐟𝐟𝐞𝐜𝐭𝐢𝐯𝐞 𝐢𝐧𝐝𝐞𝐦𝐧𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐜𝐥𝐚𝐮𝐬𝐞.
Step 1: Define the Scope of Indemnification
Begin by clearly defining what the indemnification covers. As a SaaS vendor, you typically want to indemnify your customers against claims arising from your software and services, but not for issues arising from the customer’s misuse or modification of the software.
Example:
Vendor shall indemnify, defend, and hold harmless Customer against any third-party claims, demands, suits, or proceedings (“Claims”) alleging that the Services, as provided by Vendor, infringe any intellectual property rights of such third party.
Step 2: Exclusions from Indemnification
Specify any exclusions where the indemnification does not apply. This is crucial to limit the vendor’s liability.
Example:
Vendor shall have no obligation under this Section to the extent that a Claim arises from: (i) use of the Services in combination with any hardware, software, or other materials not provided by Vendor; (ii) modifications to the Services not made by or authorized by Vendor; or (iii) use of the Services in a manner contrary to the written instructions or documentation provided by Vendor.
Step 3: Procedures for Indemnification
Outline the procedures that the customer must follow to claim indemnification. This includes notifying the vendor promptly, providing necessary information, and cooperating with the vendor in the defense of the claim.
Example:
Customer shall promptly notify Vendor in writing of any Claim and shall provide Vendor with all reasonable information and assistance necessary to defend such Claim. Vendor shall have sole control of the defense and all related settlement negotiations.
Step 4: Limitations and Cap on Liability
Establish any limitations or caps on the indemnification liability to avoid unlimited exposure.
Example:
Vendor’s total liability to Customer under this Section shall not exceed the amounts paid by Customer to Vendor under this Agreement in the twelve (12) months preceding the Claim.
Step 5: Remedy for Infringement
Provide a course of action if the services are found to infringe on third-party rights, such as modifying the service or obtaining the necessary rights.
Example:
If the Services are found to infringe, Vendor may, at its option: (i) modify the Services to be non-infringing; (ii) obtain a license for Customer to continue using the Services; or (iii) terminate the Agreement and refund to Customer any prepaid, unused fees.
Step 6: Include a General Disclaimer
It’s often prudent to include a general disclaimer of warranties and liabilities to further protect the vendor.
Example:
Except as expressly provided in this Section, Vendor makes no warranties, express or implied, regarding the Services, and disclaims all other warranties, including any implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
Complete Minimalistic Indemnification Clause:
Combining the elements above, a minimalistic indemnification clause might look like this:
- Indemnification by Vendor. Vendor shall indemnify, defend, and hold harmless Customer against any third-party claims, demands, suits, or proceedings (“Claims”) alleging that the Services, as provided by Vendor, infringe any intellectual property rights of such third party. Vendor shall have no obligation under this Section to the extent that a Claim arises from: (i) use of the Services in combination with any hardware, software, or other materials not provided by Vendor; (ii) modifications to the Services not made by or authorized by Vendor; or (iii) use of the Services in a manner contrary to the written instructions or documentation provided by Vendor.
- Procedures. Customer shall promptly notify Vendor in writing of any Claim and shall provide Vendor with all reasonable information and assistance necessary to defend such Claim. Vendor shall have sole control of the defense and all related settlement negotiations.
- Limitation of Liability. Vendor’s total liability to Customer under this Section shall not exceed the amounts paid by Customer to Vendor under this Agreement in the twelve (12) months preceding the Claim.
- Remedy for Infringement. If the Services are found to infringe, Vendor may, at its option: (i) modify the Services to be non-infringing; (ii) obtain a license for Customer to continue using the Services; or (iii) terminate the Agreement and refund to Customer any prepaid, unused fees.
- Disclaimer. Except as expressly provided in this Section, Vendor makes no warranties, express or implied, regarding the Services, and disclaims all other warranties, including any implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
This minimalistic approach ensures the essential protections are in place while maintaining clarity and simplicity.
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