the creepy clause

In the last two design contracts I have signed there is this little clause which creeps me out.
I have never seen it before but now it is recurring so I wonder if it’s a sign of the times, and what are other people’s thoughts on this.

“The designer warrants that the design does not infringe any intellectual property or patents anywhere in the world”

Now, I understand a clause that states that the design is new and to the best of your knowledge it’s not been lifted from somewhere else, but surely asking a designer to represent or warrant that there is no breach of i.p is nonsense, we would need to conduct a patent search (in all countries) in order to be able to sign this? I can always bite the bullet and sign away but it does creep me out.

Does anyone find this type of clause often? do you contest it?

That is a clause that i would strike. In all the contracts i have written or signed the responsibility lies on the client to ensure that they do a proper patent search,either mechanical or ornamental;.

My question is what is what comes after that clause? How is the warranty enforced? Is there a monetary penalty or other penalty spelled out?

Also, due diligence is a separate, billable deliverable. If that is not a part of the contract with said clause, I would renegotiate the contract to include a fee for due diligence. And if they still use the phrase “anywhere in the world”, a patent search in that many countries would cost a fortune. If they expect that work for “free”, I would run as hard as I could from that client.

I would add to iab that unless you are fully qualified to do a proper patent search, this is not a task you should do. Sure feel free to outsource it for the client to a proper patent firm, but doing it your self means the liability is on you.

Thanks guys, absolutely, I wouldn’t want to be involved in due dilligence or patent search activity, these companies have legal departments for crying out loud, and I’m only small.
Anyway in terms of enforcement there is nothing much, I understand this clause to be just in case so they have a chance to blame the designer if things go pear shape.

keep in mind buy signing it, it opens you up to lawsuits if there is a case of patent infringement and loss of revenue. Your client would simply direct the suing party you …

I have been at a company where we sued for patent infringement and loss revenue and won several millions and also left the other company with a bunch of inventory and tooling that was useless.

Ouch. I am rather paranoid with that kind of outcome. I understand it’s also very difficult to get insurance against this, or at least being properly covered for the client’s potential loss of revenue.

We’ve seen it before as well. Not just lately.

You would be wise to strike that clause, initial the strike and request an edited contract before signature. Signing a contract with the clause in place opens you up to responsibility for clearance searches, IP infringement suits, etc. It’s a sneaky way for companies to try to offload some of their IP expenses on unknowing consultants.

Ya, no way would I sign that. In fact, I have a clause in my contract (why are you the one not making the contract if you are the one providing the services?), that states -

Limitation of liability- The Company agrees to assume all legal liability for any resulting product.

That I figure (IANAL) covers me from IP issues, accidents, etc.

R

Absolutely. It didn’t happen often, but we would subcontract that out. Tack on a 20% up fee and bill back to the client. God bless capitalism.

Good question, but most companies I have come across have standard contracts they want their design consultants to sign. I could make my own contract but that wouldn’t be enough for them i suppose.

Actually on a full read of the contract It also says that I would have to hold the company harmless and indemnify them if i breech that clause (i.e if there is conflict of ip).
I have managed to strike this off from another client’s contract but what is really annoying is if the client says take it or leave it. This time they are big and this project is actually ready to market. Kind of a dream client for my field.

That leaves you open to any suit filed against the company. The dream job could turn into a boomerang nightmare in 5 years.

On the other hand, lawyers go to where the money is. If you are a freelancer and your client has a few million in the bank, the lawyers won’t waste their time with you and they would try to blow holes in the contract to get to your client. The question is, do you see yourself in the position to lose big in a few years and what is your perception of the risk?

This seems to be a semi-standard thing, I’ve signed a couple contracts with a clause worded almost exactly the same. Like Ray says, lawyers follow the money. This language is in there more so the company has plausible deniability if they get sued, not so that you’ll be on the hook for a multi-million dollar patent infringement case. I am not a lawyer, and I know your corporation laws are a bit different in the UK, but over here the corporate veil is pretty hard to pierce. If your LLC (that has no assets) gets sued, you hand over the keys and start a new one. Everybody has a different tolerance for risk, but this particular scenario doesn’t scare me too much.

Yes, that makes sense about the money trail, and this is a wake up call to get a limited company, as i’m still self employed (toying with danger :smiling_imp: ).
If i got sued I am definitely not well off but there would be my house on the line I image. Thanks for the comments, it’s good to know.

One tangential question, If you go from self employed to limited company, what happens with all the contracts you’ve already signed on your name? does the responsibility/duties get automatically transferred to the limited company or do you have to get the clients to agree to such change?

I still don’t see why you aren’t making your own contracts. It is normally the service provider that provides the contact. I’ve been running my design consultancy for 6 years and have always created the contact, working with both small and large companies.

R

I should definitely give it a go, but don’t know how to swing it, so far the client has always come up with their own contract before me.

Pretty simple. Do you make them a proposal? How do you currently give them information about deliverables, scope, price? You should be making a document for every project that defines what work you are going to do for them. That is your job. Include all the legal terms and conditions, payment conditions, termination clauses, etc. in this doc.

If you aren’t in control of the service you are providing, I don’t know how you can even provide a service. Who decides when you get paid? Them? Who decides when you provide a deliverable?

R

I do give them such document with scope and terms and conditions. but so far they always provide their contract on top of that.