Indemnification Clause

Defines the specific third-party legal actions the provider will defend and settle. A strong clause explicitly covers copyright infringement claims arising from the use of the model's generative outputs as intended. Weaker clauses may limit coverage to claims alleging the model's training data infringed copyright, excluding claims about the output itself. Scrutinize whether the clause covers trademark dilution, trade secret misappropriation, or right of publicity violations if those risks are material to your use case.

Specifies who controls the litigation strategy. A robust clause mandates that the provider assumes the defense and has the right to select counsel. Critically, it should require the provider to keep the customer informed and obtain consent before entering into any settlement that admits fault or imposes non-monetary obligations on the customer. Without this, a provider could settle a claim by agreeing to an injunction that halts the customer's use of the service.

Outlines the provider's obligations upon receiving a claim. Standard remedies include:

• Modifying the service to make it non-infringing without materially degrading functionality.
• Procuring a license for the allegedly infringing content or technology.
• Terminating the service and refunding prepaid fees as a last resort. Evaluate whether the provider can unilaterally degrade or discontinue a mission-critical service to satisfy a minor claim.

Identifies scenarios where the provider's indemnity obligation is voided. Common exclusions include claims arising from:

• Customer modifications to the model's outputs.
• Combination of the output with non-provider products or data.
• Use in prohibited high-risk domains explicitly forbidden in the acceptable use policy.
• Failure to use available filtering or citation tools provided by the vendor.
• Willful infringement by the customer despite knowledge of the risk. These carve-outs place a direct operational burden on the customer's engineering and compliance teams.

Some providers offer a copyright shield or IP indemnity as a standalone program, separate from the master service agreement. These programs often cap liability at a specific dollar amount and require the customer to use specific citation filters or output provenance tools. Verify whether the safe harbor is a contractual right or a revocable marketing policy. A contractual right is enforceable; a policy can be changed unilaterally.

Examines the monetary limits of the indemnity. The clause should specify whether the indemnity is subject to the agreement's general liability cap or a super-cap (a higher, dedicated limit). For enterprise customers, a super-cap is essential, as copyright statutory damages can reach $150,000 per work infringed. Confirm the provider carries cyber insurance that explicitly covers copyright infringement claims arising from generative AI, and request to be named as an additional insured if possible.