Question about Inventec

youshang

Q:
... they plan to purchase our version of STD and Elite

But their legal department ask to list the product warranty and compensaton in the contract.
They thought our product is an application software, it’s possible that IPR infringement may occur.
Product warranty and compensation are required to be normal transactions.
Even though we have explained your idea(as the following content), they thought it is not allowed to delete it arbitrarily.
They'd like to know the way that you can handle the infringement problem.

------------------------------------------------------------------------------------------------------------------------------------------------------

You require us to indemnify the Buyer against a number of things including  Intellectual Property (IP) Infringement.

By way of background, our product which you are purchasing is a standard-off-the-shelf Desktop software license.

Our SIMetrix/SIMPLIS simulation software serves as a design aid to your engineers.

From an IP infringement risk perspective, the use of our product would be in the same category as a standard spreadsheet desktop software tool.

Our End User License Agreement specifically prohibits you from incorporating our software into your product.

There is no mechanism where by an IP infringement of our product can result in an IP infringement of your product.

The typical cost of defending an IP infringement lawsuit is in excess of $1 million dollars USD.

SIMPLIS Technologies does not have the financial size or resources to deliver the kind of indemnity protection that you are requiring in this contract.

In practice, our customers understand both our capacity in this regard and also their actual risk exposure.

From a practical perspective, our customer's actual liability risk exposure is exceptionally low.

Please note that our product can never be incorporated as part of our customer's product.

Our product is only a tool that is used in the design process of our customer's product.

There is no way that IP infringement in our product can create a situation where our customer's product infringes that same IP.

The only issue for our customers is to avoid knowingly using infringing IP.

SIMPLIS Technologies has been selling licenses for customers to use SIMPLIS circuit simulation software since 1992. To date, there have been no IP infringement allegations made against us.

If at some point in the future we should accidentally infringe on someone's IP, we should be able to roll back to non-infringing IP in 48 hours.

Worst case, if we were unable to roll back to non-infringing IP, then our customers could reduce their liability to zero by just ceasing to use our product.

So, practically speaking, the maximum risk exposure our customers have is the purchase price of our product.

The bottom line is that we do not have the financial capacity to provide the liability coverage requested in in your contract language.

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A:
The words you included in your email (highlighted in blue below) are our response to the IP infringement issue.

I think it would be very similar to Inventec asking YouShang to contractually obligate yourself to guarantee to pay all the legal expenses in case someone sues Inventec because of a product that you sell them.  In the case of IP infringement, the cost to defend such a law suit is a minimum of $1,000,000 USD just to go through the preliminary legal procedures.  The total cost can be much more than that.  I don't know about YouShang, but SIMPLIS Technologies does not have the cash on hand to be able to pay for that kind of expense.  So, I don't want to promise a customer that we will do something (handle their legal expenses for an IP infringement suit) when we have no capacity to actually do that.  Because of this situation, we do not make that commitment to any of our customers.

The actual risk that our customers face is very small.  We explain that below.  What customers worry about is if an IP infringement in our  product causes their product to infringe that same IP.  In our case, that is not possible, because we prohibit our customers from including our product in their product.  So, our customer's risk is just the amount  of money that they pay for our product.  Compared to what they are worried about, this is a very small number.

I would be glad to discuss this in more detail by phone.  Please let me know how you would like to proceed.