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What Should be Included in the Service Agreement


Things that Service Providers should insist in its Authority to Use the Customer’s Licensed Materials

In a service agreement, the service provider is usually being given a license to use the materials of the customer in order to deliver the agreed services. But how can the service provider protect its certain rights to use the customer’s licensed materials? Foremost, service provider should insist that the use should be royalty free and worldwide. It is understandable that the license will be non sublicensable and non assignable since customers have the right to protect their IP as well, but it is very important that the right of the service provider  to use the Customer’s licensed materials shall be royalty free and worldwide for the following reasons:

1.  It should be worldwide because the service provider ‘ s affiliate which may be required to use the licensed materials may be located in another country. This scenario is very common in multi- national companies where the services are being rendered offshore by an affiliate of the service provider. This set up will give the service provider its needed flexibility in its authority since a limited right  will cause a serious problem since the service provider is subject to restrictions that may refrain its affiliate to use the licensed materials in order to deliver the services.

2. The grant of license must be royalty free. Service provider should insist that any use of customer’s materials must be royalty free to ensure that it will not bear any additional cost in using the customer’s licensed materials.

3. Service providers shall ensure that there will be a provision in the contract that customer shall defend and hold the service provider free and harmless from any losses, liability or damages arising from any third party action of intellectual property infringement filed against the service provider due to the latter ‘s use of customer’ materials.

To avoid any problem while a service agreement is being enforced, service provider shall negotiate that the three foregoing items be included in the contract.

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