In IP infringement indemnities, what is a typical mechanism to limit seller exposure?

In IP infringement indemnities, what is a typical mechanism to limit seller exposure?

• A. Indemnity with no cap
• B. No indemnity required
• C. Cap and basket thresholds with survival periods
• D. Unlimited liability

Answer: (C)

In IP infringement indemnities, the typical mechanism to limit seller exposure is to structure liability with a cap, baskets (deductibles), and survival periods. The cap sets a maximum amount the seller can be liable for, giving the seller a clear ceiling on exposure. Baskets mean the buyer must suffer a threshold loss before the indemnity kicks in, which prevents small or nuisance claims from triggering liability. Survival periods establish how long after closing claims can be brought, providing a finite window to bring up IP issues. This combination is favored because it provides meaningful protection for the buyer against substantial, undisclosed IP risks while giving the seller a predictable, bounded obligation. Indemnities with no cap or unlimited liability would expose the seller to potentially ruinous costs and are not typical in modern deals. Conversely, a structure with no indemnity at all leaves the buyer without protection against third-party IP claims.

In IP infringement indemnities, the typical mechanism to limit seller exposure is to structure liability with a cap, baskets (deductibles), and survival periods. The cap sets a maximum amount the seller can be liable for, giving the seller a clear ceiling on exposure. Baskets mean the buyer must suffer a threshold loss before the indemnity kicks in, which prevents small or nuisance claims from triggering liability. Survival periods establish how long after closing claims can be brought, providing a finite window to bring up IP issues.

This combination is favored because it provides meaningful protection for the buyer against substantial, undisclosed IP risks while giving the seller a predictable, bounded obligation. Indemnities with no cap or unlimited liability would expose the seller to potentially ruinous costs and are not typical in modern deals. Conversely, a structure with no indemnity at all leaves the buyer without protection against third-party IP claims.