X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Technology companies have long resisted pressure from customers to indemnify them for any litigation that might arise from using their products. Even as intellectual property litigation exploded in the 1990s, companies agreed to cover only their best customers. But with The SCO Group, Inc., suing International Business Machines Corporation for allegedly inserting SCO’s proprietary code into the “open source” Linux operating system, indemnification has suddenly become more pressing. “Indemnification is the number one issue [in sales pitches],” says Bryan Sims. He’s a vice president of business affairs and associate counsel at Red Hat, Inc., which sells Linux software and support. In September, Hewlett-Packard Company, which has a $2 billion Linux business, announced with fanfare that it would foot the bill for legal costs and any damages for customers that SCO sues. At about the same time, IBM quietly announced that it would not cover such damages for its Linux customers. Red Hat won’t either. But indemnity announcements are not limited to “open source” software: Last March Microsoft Corporation announced a new volume licensing program that broadens coverage of IP damages for its customers. What gives? Historically, tech customers who found products faulty had warranties to fall back on. Before last year, for example, Microsoft would only reimburse customers for the cost of its software, not legal fees or litigation-related damages. Morris Kremen, associate general counsel for the software giant, says the company decided on indemnity as part of a larger campaign to be seen as a kinder, gentler business. “Microsoft is viewed by the market as a company that maybe hasn’t been as good as it should be about hearing what customers are concerned with and responding to those concerns.” In deciding to indemnify its Linux customers, HP acknowledges that it was a response to the SCO litigation against IBM. Scott Peterson, senior counsel (IP) at HP, says the Palo Alto company saw an opportunity to put customers at ease and to show them the business’s commitment to Linux. Observers, however, say indemnification is a marketing ploy � albeit an effective one. “It’s a symbol of commitment, a promise to customers that you believe in this technology,” says Ted Schadler, a principal analyst at Cambridge, Massachusetts-based Forrester Research. If SCO manages to convince Linux users that the newer versions of the operating system contain copyrighted code, then more Linux vendors and distributors might indemnify customers. For now, says David Kelley, IP counsel at Ford Global Technologies, Inc., a subsidiary of Ford Motor Company, “I think reasonable minds can differ as to how important it is. I think if anyone is ever in a lawsuit [like IBM] is involved in now, they would take it very seriously.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.