Guidance and Resources

Introduction

1 The specimen IP warranty and IP indemnity clauses set out below are starting points for agencies that wish to act in accordance with the "Act fairly towards developers when drafting IP warranties and indemnities" Policy Principle in NZGOAL-SE. They are designed for insertion into new contracts for the development of software where FOSS software might be used. They can also be used to amend the standard terms of the Government Model Contract for Services (which is done by making appropriate insertions into Schedule 2 of that Contract).

2 The precise drafting of such clauses in any given case, in the context of an agency's project and the contract it is using, is a matter for the agency. The provision of these specimen clauses does not constitute legal advice to any agency or person.

Context

3 It is common for software development contracts to contain a warranty clause along these lines:

1. Service Provider Warranties

The Service Provider represents and warrants that the possession or use by the Customer or its Personnel of any item of Intellectual Property supplied or licensed by the Service Provider will not infringe the Intellectual Property rights of any third party.

4 It is also common for software development contracts to contain IP indemnity provisions that include a clause like this (this is just an example; sometimes they are more elaborate):

2. IP Indemnity

(a) The Service Provider will indemnify the Customer against all Losses suffered or incurred by the Customer or its Personnel as a result of any claim that the possession or use by the Customer or its Personnel of the System or any other Intellectual Property or materials supplied or licensed by the Service Provider under this Agreement infringes any third party's Intellectual Property rights.

5 The specimen clauses set out below are based on the assumption that there are such clauses in the development contract in question.

Specimen clauses

Specimen open source software clause

6 The specimen open source software clause set out below:

1. requires the service provider to obtain the customer's consent before using particular open source software (this is not due to any judgement on the use of open source software but to enable the customer to be aware of the use of open source software and to assess the applicable FOSS licence(s) if it wishes);
2. gives primacy to the FOSS licence(s) used in relation to the software they cover;
3. confers ownership of new software IP on the customer;
4. qualifies the application of the service provider warranty mentioned above to open source software;
5. requires the service provider to comply with applicable FOSS licences; and
6. requires the service provider to release adapted FOSS software or new software designed to interact with FOSS software to an open source repository if the agency requests it to do so (this does not prevent the agency from doing so but some agencies may prefer their service providers to do this).

7 This is the specimen clause:

3. Open Source Software

(a) The Service Provider shall obtain the Customer's written consent before providing, incorporating or adapting, or developing any widget, plugin or module for, any Open Source Software, in the course of its performance and delivering the Services and any associated Deliverables. The parties acknowledge that the purpose of this requirement is to enable the Customer to review the applicable open source licence terms, make a decision as to whether those terms are acceptable and, should consent be granted, respect any obligations in those licence terms.

(b) If the Customer grants such consent:

(i) the terms of the applicable open source licence(s) will apply to that Open Source Software;

(ii) the provisions of that licence or those licences will prevail over the terms of this Agreement in the event and to the extent of any inconsistency;

(iii) all Intellectual Property rights in the Open Source Software that is supplied to the Customer (or incorporated into the System or any other Deliverables supplied to the Customer) under this Agreement, or under any collateral licence or agreement, remains the sole and exclusive property of the relevant third party;

(iv) the Service Provider will own the new Intellectual Property rights in any adaptation or derivative of the Open Source Software and in any widget, plugin or module the Service Provider develops under this Agreement that is designed to interact with the Open Source Software;

(v) the warranty in clause 1 does not apply in relation to that Open Source Software unless the Service Provider knows or has reason to believe, at the time it selects the Open Source Software, that the Open Source Software would, or would be likely to, infringe the Intellectual Property rights of a third party;

(vi) the Service Provider will comply with all applicable terms of the open source licence(s); and

(vii) if required by the Customer, the Service Provider will release:

(A) any adaptation or derivative of the Open Source Software provided or incorporated into the System; and

(B) any widget, plugin or module the Service Provider develops under this Agreement that is designed to interact with the Open Source Software and is used in the course of its performance and delivering the Services and any associated Deliverables,

to one or more specified online software code repositories and under the open source licence that is either:

(C) required to be applied to the adaptation, derivative, widget, plugin or module by the upstream open source licence; or, if there is no such requirement

(D) specified by the Customer,

provided that the Customer first consults the Service Provider for a minimum of 5 business days before exercising its right in this clause 3.2(b)(vii).

Specimen modification to IP indemnity clause

8 Sub-clause 2(b) in the specimen clause below has the effect of limiting the application of the IP indemnity mentioned above to open source software that the Service Provider uses in providing services and deliverables to the customer. It would usually form part of the indemnity clause mentioned above. For this reason, that indemnity clause is repeated here:

2. IP Indemnity

(a) The Service Provider will indemnify the Customer against all Losses suffered or incurred by the Customer or its Personnel as a result of any claim that the possession or use by the Customer or its Personnel of the System or any other Intellectual Property or materials supplied or licensed by the Service Provider under this Agreement infringes any third party's Intellectual Property rights.

(b) Clause 2(a) does not apply to any Losses arising from the Customer's possession or use of any Open Source Software, unless the Service Provider knew or believed, at the time of selecting the relevant Open Source Software, that the possession or use by the Customer or its Personnel of that Open Source Software would, or would be likely to, infringe any third party's Intellectual Property rights.

Associated definitions

The specimen clauses above use various defined terms (these are the terms that are capitalised). Not all of the defined terms need to be set out here. The relevant defined term for present purposes is the definition of Open Source Software. There are various ways to define Open Source Software. This is one way:

Open Source Software means any software that is released on licence terms that grant others the freedom to use, copy, modify and distribute the software, for either non-commercial or commercial purposes, as long as they comply with the applicable licensing conditions.