Advising on intellectual property and contractual liability in a technology and manufacturing supply agreement with a foreign company

For a Korean company planning to enter into a technology and manufacturing services supply agreement with a foreign company, we reviewed the key legal risks in the counterparty's standard terms and its revised draft.

The key issues were ownership of intellectual property created in the course of performing the services and protection of existing technology, indemnification for third-party claims, and the scope of liability for damages and the liability cap.

Other issues included ownership of manufacturing equipment and responsibility for its maintenance and upkeep, recovery of upfront costs upon termination or suspension of work, and export control obligations relating to foreign components and technical data.

We analyzed the intellectual property and damages provisions and reviewed contract terms to protect the supplier's existing technology and know-how and to limit its liability.

We also analyzed the structure for responsibility for loss of, damage to, and repair or replacement of manufacturing equipment, exceptions to the liability cap, termination for convenience, and recovery of costs upon suspension of work, and reviewed whether the supplier could realistically comply with import and export licensing and regulatory compliance obligations.

We advised that although the allocation of risk under the contract did not depart significantly from ordinary international business practice, some provisions could expand the supplier's liability and costs beyond what it expected.

Accordingly, we provided specific proposals to improve the contract terms on intellectual property protection, limitation of liability for damages, responsibility for manufacturing equipment, and recovery of upfront costs.