While the use of the capitalization in “NOT” is less than aesthetically perfect, the more egregious error is the misuse of the word “not” with the word “shall”. I interpret this provision to mean that, not only does the licensor not have a duty to indemnify the licensee, but the licensor has a duty to refrain from indemnifying the licensee (although I don’t anticipate the licensee complaining about a breach of this clause…).

In this case, the capitalized term emphasizes more than merely the negative duty. It emphasized the clumsy drafting.

But the reason the writer felt so compelled to put in the misbegotten “not” here is that the writer first started with what those who write software licenses all day would quickly recognize as the typical language that is part of a grant of indemnity rather that something that would be typically used as part of a (potentially redundant) disclaimer, an exclusion within the granting clause or a reclamation of something that had been granted elsewhere in the agreement.

When I read that quickly, I start seeing words associated with “grant” and my mind starts to churn over the issues I need to analyze as part of a grant. In fact, if I took that entire sentence and simply removed the “not,” it might well serve as a granting clause for an indemnity to the Licensee regarding U.S. patents and world-wide (including U.S.) copyrights.

(SIDEBAR: There are substantive issues behind the distinction of U.S. patents versus ‘any’ copyright, which are beyond the scope of this particular blog, and which I do not always agree with in principal. But, if I accept as a given that this substance is justified in practice, I am also not all that happy with the phrasing here, which comes up all the time, since it is not crystal clear to me that the intention of adding “or any” necessarily removes the “U.S.” modifier that applied to “patents.” The simplest way to avoid that is to put the more narrowly protected patent rights at the end of the list and distinguish it as not part of one long list to which the narrower modifier might apply (i.e., “any worldwide copyrights, trademarks or service marks, or any U.S. patents (each of which is an “Indemnified IP Right”).)

If I am sloppy as a reader (or forced to read something a client just sent to me and he is hoping to sign in the next half-hour, and would I just give it a quick scan please…), I miss the “not” in the middle of it and completely miss the point.

The writer thinks it is helpful to me to be sure I note that the intention of the sentence, notwithstanding its borrowing of the language of a granting clause, by adding the rhetorical emphasis.

Of course, the better way to deal with this is to simply not use grant-like language in the first place. If the idea is that there is no indemnity in the first place (i.e., I am not giving with one hand and taking away with another), then simply state “The Licensor has no obligation to indemnify Licensee for any intellectual property claims.” If I have already given with one hand but now take it away, then (presuming I have defined a term “Indemnity” that is the original grant), I might state “The Indemnity shall not apply to U.S. patents or any copyrights.”

The worst intepretation of the quoted example is that it is simply a disclaimer of indemnity, and is not there to counter any other grant found elsewhere in the agreement. The proliferation of disclaimers that seem to be battling phantom implied warranties or obligations is one of my own pet peeves. There is no implied obligation to indemnify for intellectual property infringement (under the U.S. system at least). (There may be an implied warranty of intellectual property non-infringement, but that should be disclaimed using the required language under the statutory scheme where the implied warranty arose (for example, the Uniform Computer Information Transactions Act provides for an implied warranty of IP non-infringement and further dictates rules on how the contract drafter can effectively disclaim that implied warranty).) If the writer was seeking to disclaim an implied indemnity for intellectual property infringement claims, and there is no statutory basis for the implied warranty being disclaimed, the correct drafting of the disclaimer would be ” .” (Without the period. That’s just rhetorical emphasis.)