The IP uprising

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: Expect Microsoft vs Linux battle to heat up once again. Stoking the flame of the ongoing war now are intellectual property (IP) issues. The rising threat of third party IP infringement is promising to give a new turn to the entire debate, till now primarily focused on the ownership and security concerns.

The first shots have already been fired. IP indemnification issues are critical, comes the warning from Microsoft — “Litigation suits can be tremendously expensive, with the cost easily exceeding what you paid for the software many times over’’. Open source advocates, however, are convinced it is “plain FUD” (fear, uncertainty and doubt) and a “last-ditch effort to slow the open source momentum”.

In short, decibel levels are promising to go up, primarily fanned by Microsoft. “As an industry leader, we are committed to spreading awareness on the issue among the Indian CIOs so they can make the best software decision that will best meet their business needs while at the same time balancing the risks involved,’’ says Microsoft India customer and partner experience director, Sanjiv Mathur.

For starters, indemnity generally means that the software vendor will act as the responsible party with respect to third party claims. Companies using a software product “infringing” on someone’s IP could face litigation. For instance, if a third party like SCO sues you for violating its right because you don’t have its license but you have a contract from your vendor like Microsoft or IBM, your vendor will stand between you and SCO.

Explaining the importance of IP indemnification, Mathur says, “the current corporate governance and risk mitigation scenario have forced enterprises to factor in consideration for IP concerns in the software they procure of which indemnification from third party claims of IP claims is a big part.’’ It is different from insurance since the customer does not buy an insurance cover and does not have to pay premium. And in case of unlimited liability, there is no cap on the amount that an indemnification will cover.

There are many nuances to the scope of indemnity, depending on how an indemnity provision has been drafted. CIOs considering an indemnity provision offered by a vendor, are typically advised to check:

• What triggers and terminates the indemnity obligations?

• What intellectual property is covered?