Original Equipment Manufacturer (OEM) Agreements • 169
and so on. e OEM essentially takes components provided by one or
more suppliers, combines them with technology of the vendor, and creates
a nished product. e OEM’s activity is sometimes referred to as adding
value to the components supplied by the supplier(s).
OEM agreements are written from either the perspective of the OEM,
the party making the distribution of the nished product, or the supplier,
the party furnishing one or more pieces for incorporation into the nished
product. e parties frequently have divergent interests. e OEM wants
broad distribution rights, strong protections from claims of intellectual
property infringement relating to the supplier’s technology, the right to
potentially distribute the nished product under a private label arrange-
ment (i.e., an arrangement in which the nished product appears to have
been entirely created by the OEM), clear support obligations, and so on.
In contrast, the supplier may be concerned about controlling liability for
claims from end users or customers purchasing the nished product, pro-
tecting its intellectual property from misuse by end users and customers,
limiting its responsibility for intellectual property infringement claims
when its technology is combined with other technology, and so on.
As an aside, the dierence between an OEM agreement and a reseller
agreement should be noted. In a reseller agreement, the supplier’s tech-
nology is sold or licensed by the reseller as is (i.e., not as part of a larger
product, but as a stand-alone product). In an OEM agreement, the sup-
plier’s technology is never sold as a stand-alone product, but only as part
of a larger product. In fact, it would be a breach of the OEM agreement to
distribute the supplier’s technology in a stand-alone fashion.
Key Contracting Concerns from the Perspectives of Both Parties
Since a business may nd itself serving in either the position of a supplier
or OEM, the following provides a discussion of the key issues presented to
both parties in these engagements.
• Scope of use of supplier technology. As a foundational issue, the
agreement should dene exactly how the supplier technology may be
used. In most cases, that means identifying the specic OEM prod-
ucts or lines of products into which the supplier technology may be
As noted above, the supplier will want to make clear that its tech-
nology can never be sold or licensed as a stand-alone product, but