Depreciated License Fee as a Vendor's Infringement Remedy
In my software license contract template, my infringement indemnification provision requires the vendor to pay me back the full price for the software if I'm enjoined from using it and the vendor can't design around the infringement or acquire a license for me to use the infringing software.
Vendors routinely redline my contract template to read something such as "...Vendor shall reimburse to Customer the depreciated price of the Product over a five (5) year period..." The vendor's argument when challenged on this redline is, "Well, you've used the software and had the value of it until you had to stop using it, so we should only have to partially reimburse you..."
Of course, I already know the vendor's excuse because I've heard it so many times before from other vendors--and maybe you have, too. Here's how to respond:
"Dear Vendor,
The last thing I want is my money back, because the refunded license fee will likely pale in comparison to the sourcing, installation, and replacement costs associated with the infringing software that my company licensed from you. If I get all of my company’s money back, big deal, because it’s not going to begin to cover the costs that my company incurred implementing your software or replace the value that the software theoretically created for my company. Not only that, but my company is going to have to pay even more for replacement software, implementing that software and so on. Actually, after thinking about it, not only do I want the full license fee refunded, I want some additional amount back to compensate my company for the cost of yanking your software out and putting someone else’s software in as a replacement. Your company should have known better and should have known that your software was infringing--I mean didn't your company do a patent clearance search before marketing your software? I'd say that's downright negligent if you didn't."
After mentioning the foregoing to the vendor, the refunded license fee starts looking a pretty good contractual compromise.







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