Advising on intellectual property and liability for damages under a services supply agreement with a foreign company

For a large services supply agreement that a Korean company was about to enter into with a foreign company, we reviewed the key legal risks of a revised draft prepared on the basis of the counterparty's standard terms and conditions.

The main issues were ownership of intellectual property newly created in the course of performing the services, and protection of the technology and know-how the supplier already owned.

Also at issue were indemnification against third-party claims of intellectual property infringement, the scope of liability for damages, the buyer's right to procure substitute services upon a breach, and the costs arising from termination.

We analyzed the intellectual property, indemnification, damages, termination and remedies provisions of the agreement to assess the supplier's legal liability and the adequacy of the existing revised draft.

In particular, we reviewed the distinction between new intellectual property and the supplier's existing technology, the cap on liability for damages and limits on the types of recoverable damages. We also proposed contract language excluding liability for intellectual property infringement resulting from modification, combination or use of the technology outside the supplier's control.

We advised that the existing revised draft substantially mitigated the supplier's risks regarding ownership of intellectual property and liability for damages, and that no material legal obstacle to signing the agreement had been identified.

We also proposed improvements to the contract terms that could further limit the scope of substitute procurement and the liability for third-party intellectual property infringement.