This clause limits the remedies available when intellectual property (IP) warranties are breached—meaning it caps what you can recover if someone sells you something that infringes on another party's patents, trademarks, copyrights, or trade secrets. Rather than allowing full damages, indemnification, or injunctive relief, the clause typically restricts recovery to specific remedies such as repair, replacement, or refund of the purchase price. It may also include caps on liability (e.g., "liability shall not exceed the amount paid for the product") or exclude certain types of damages like lost profits or consequential damages. This is particularly important in IP contexts because IP infringement can create cascading business problems—if you're forced to stop using software due to a patent claim, your entire operation might suffer.
The clause essentially shifts risk from the warrantor to the buyer. If you purchase software that turns out to infringe on someone else's patent, and the clause limits your remedy to a refund, you may have already invested significant time and resources integrating that software into your business. The limitation can leave you substantially unprotected despite having paid for a warranty. This is a critical protection point because IP infringement claims can be expensive and unpredictable, and a limited remedy clause can leave you bearing most of that risk.
Resist remedy limitation clauses in IP warranty contexts, or at minimum negotiate for broader remedies that include indemnification (where the warrantor defends you against third-party IP claims) and the right to obtain substitute IP or modify the product to make it non-infringing. If you must accept limitations, ensure they're high enough to cover potential damages (consider negotiating for a multiple of the purchase price, such as 2-3x). Require that the warrantor bears the cost of defending against IP infringement claims, not just the cost of remedying the product. Additionally, request that the clause include a "survival" period—meaning the warranty protection extends for a reasonable time after purchase, not just during the initial transaction.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause limits the remedies available when intellectual property (IP) warranties are breached—meaning it caps what you can recover if someone sells you something that infringes on another party's patents, trademarks, copyrights, or trade secrets. Rather than allowing full damages, indemnification, or injunctive relief, the clause typically restricts recovery to specific remedies such as repair, replacement, or refund of the purchase price.
Why should I care about this clause?
It may also include caps on liability (e.g., "liability shall not exceed the amount paid for the product") or exclude certain types of damages like lost profits or consequential damages. This is particularly important in IP contexts because IP infringement can create cascading business problems—if you're forced to stop using software due to a patent claim, your entire operation might suffer.
What are my options?
The clause essentially shifts risk from the warrantor to the buyer. If you purchase software that turns out to infringe on someone else's patent, and the clause limits your remedy to a refund, you may have already invested significant time and resources integrating that software into your business.
How does this affect small businesses?
The limitation can leave you substantially unprotected despite having paid for a warranty. This is a critical protection point because IP infringement claims can be expensive and unpredictable, and a limited remedy clause can leave you bearing most of that risk.