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A Guide to IT Contracting by Michael R. Overly, Matthew A. Karlyn

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159
14
Drafting OEM Agreements (When
the Company is the OEM)
CHECKLIST
Scope of Engagement
Agreement covers all relevant activities
NDA prior to substantive discussions
Describe coordination eorts
Who will contact customers?
“Private label”?
Customer Terms
Controlling liability
Appropriate license
Terms and conditions
Absolve of liability
Appropriate draing
Territory
Geographic restrictions
Clear identication of restrictions
Hardware Products
How order will be placed
How order will be lled
Timing of orders
Return procedures
Warranty claims
Non-binding order projections
Price reduction incentives
Exclusivity
Address exclusivity explicitly
160  •  A Guide to IT Contracting: Checklists, Tools, and Techniques
Specic revenue commitments
Remedy is not breach of contract
Broad termination rights
Supplier Product Changes
Obligation to coordinate with company
Support and Training
Train personnel adequately
Ensure supplier cooperation
Specify service levels
Condentiality
Strong clause in agreement
IP Issues
Standard commercial licenses
Terms and conditions
Returning products
Reserve rights explicitly
No transfer or assignment
Warranties/Disclaimers
Authority to enter agreement
Non-infringement
Free of known defects
Unaware of litigation
Freedom from viruses
Freedom from disabling code
Compliance with relevant codes
Limitations of Liability
Direct and consequential damages
Last three months of fees paid
Injury to persons
Indemnication
IP infringement claims
Supplier violation of applicable law
Products liability
IP infringement claims caused by OEM
Limited jurisdictions
Term and Termination
Specic initial term
Agreement to renew companys option
Automatic renewal
Draing OEM Agreements (When the Company is the OEM) • 161
Company right to terminate without cause
Revenue commitments?
Breach of agreement
Sell-o period
Continue to support existing custom
KEY ISSUES AND GUIDING PRINCIPLES
is chapter discusses the dierent topics and issues that should be con-
sidered in entering into OEM arrangements where the company will be the
OEM (i.e., the company will take the soware and hardware products of a
supplier, combine those products with the company’s own products, and
then sell the combination). ese types of transactions can take several
forms. In some engagements, the supplier’s assistance may be required to
integrate its products with the company’s products. In other engagements,
the company may want to “private label” the combined product (i.e., mar-
ket and sell the combined product without identifying the supplier). Still
other engagements may require close interaction of the parties in render-
ing support and warranty service to customers. Depending on the type of
relationship, more detailed agreements may be required to fully address
the parties’ respective integration and support obligations.
e summary provided in this chapter is designed to minimize the time
required to negotiate these types of agreements, make the process proceed
more smoothly, and ensure the company’s business and legal objectives
are achieved.
DETERMINE THE SCOPE OF THE ENGAGEMENT
• As discussed in several other chapters, these types of relationships
can take several forms. e rst step is to determine the scope of
the engagement and to ensure the agreement covers all relevant
activities.
• Depending on the nature of the information to be shared between
the parties, a nondisclosure agreement should be entered into prior
to commencing substantive discussions.

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