Managing IP Indemnification in Offshore Wind Farm Construction Contracts (Philippines): Protecting Local Subsidiaries from Turbine Technology Infringement Claims

Introduction: why IP indemnification matters in offshore wind projects

Offshore wind farm construction involves multiple contracts (EPC, supply, installation, marine works, O&M) and a long chain of vendors. Where a third-party contractor or supplier uses copied turbine technology or infringing designs, a foreign developer’s Philippine subsidiary can be named as a defendant because it is the project owner, operator, buyer, or end-user of the allegedly infringing component.

In the Philippines, contractual IP indemnities are a primary tool to shift the financial burden (defense costs, damages, settlements, replacement costs, and project delay exposure) to the party that introduced the infringement risk. But indemnities only work if they are drafted with enforceability, coverage, and remedies in mind—and aligned with how Philippine courts interpret IP rights and construction-related dispute mechanisms.

Governing Philippine law for IP infringement risk allocation

Philippine law recognizes that intellectual property rights are protected by statute and that remedies depend on whether the subject matter falls within the Intellectual Property Code’s scope and definitions. The Supreme Court has stressed that a threshold question is whether the dispute involves an “intellectual property” as defined by law; if it does not, IP Code-based claims may fail. This is relevant when parties label a dispute as “IP infringement” even if the underlying issue is functional design or utilitarian features. (Coca-Cola Bottlers, Phils., Inc. v. Gomez, et al., 2008)

For copyright-related disputes involving technical drawings or designs, the Supreme Court has held that useful articlesare not protected by copyright unless the artistic elements are physically or conceptually separable from their utilitarian function. Drawings may be copyrighted, but that does not automatically grant monopoly over the functional object depicted. (Olaño, et al. v. Lim Eng Co, 2016)

For contract interpretation and allocation of risk (including warranties and indemnities), the Supreme Court has enforced contract terms between parties with relatively equal bargaining power, and it has recognized that later agreements can supersede earlier ones by novation when clearly intended. This matters when a master supply agreement, purchase orders, and technical annexes contain inconsistent IP indemnity terms. (ACI Philippines, Inc. v. Coquia, 2008)

Common offshore wind infringement scenarios affecting a Philippine subsidiary

Below are recurring scenarios where a local project company can face exposure even if it did not itself copy the technology:

• Copied turbine components: blades, control systems, gearboxes, power electronics, or sensor packages sourced from a contractor’s sub-supplier.
• Unlicensed software embedded in SCADA, turbine control, monitoring, or predictive maintenance tools.
• Replicated drawings or shop plans for towers, substations, transition pieces, or marine structures, reused across projects without authorization.
• Branding and labeling issues where “passing off” or misleading markings are alleged (risk depends on deception-based elements for unfair competition-type theories). (Coca-Cola Bottlers, Phils., Inc. v. Gomez, et al., 2008)

What Philippine jurisprudence says about copyrighted plans, functional designs, and “useful articles”

In disputes involving copied technical designs, parties often assume that any copying is automatically copyright infringement. Philippine jurisprudence is more specific.

In Olaño, et al. v. Lim Eng Co (2016), the Supreme Court discussed the distinction between protected expression and unprotected function in relation to a hatch door design. The Court explained that a useful article is generally not eligible for copyright protection unless the artistic features are separable from the functional aspects. The case also shows a typical construction supply chain pattern: shop drawings are approved, multiple subcontractors participate, and disputes arise over who owns what and what can be reused.

For offshore wind, this has two implications:

• Not every “copied component” is a copyright problem; it may be a patent/industrial design/trade secret issue, or it may not be an IP violation at all, depending on the protected subject matter and evidence.
• Indemnity clauses should not be limited to “copyright”; coverage should be drafted to include patent, industrial design, trademark, trade secret, and other IP-related claims, as applicable.

Contract tools: IP warranty and indemnity clauses that actually protect the local subsidiary

An effective package typically combines (1) warranties, (2) indemnities, (3) defense-and-control provisions, and (4) replacement/mitigation remedies.

1) IP non-infringement warranty

Require the contractor/supplier to warrant that deliverables and their use will not infringe third-party rights. The Supreme Court has enforced similar warranty-and-defense commitments in commercial contracting settings. (ACI Philippines, Inc. v. Coquia, 2008)

2) IP indemnity with duty to defend

Draft indemnity language to cover:

• Claims and proceedings (civil, criminal, administrative) alleging infringement;
• Defense costs (including counsel fees, experts, e-discovery/forensics, bonds where allowed);
• Damages and settlements (with consent mechanics);
• Consequential project exposure where negotiable (delay, demobilization, replacement logistics), subject to agreed caps and exclusions.

3) “Repair, replace, procure license, or redesign” remedy clause

Indemnification should not only pay money; it must keep the project running. Common remedies include requiring the supplier to promptly:

• procure a license;
• replace with non-infringing equivalents;
• redesign to avoid infringement; or
• refund/credit and pay removal and reinstallation costs.

4) Flow-down requirements to the contractor’s subcontractors and OEMs

Many infringement risks sit below the tier-1 contractor. Require “flow-down” IP warranties/indemnities and require proof (contractual undertakings, IP clearance, and vendor attestations).

5) Clear priority-of-documents to avoid accidental dilution of the indemnity

Offshore wind projects often use layered contracting: MSA, EPC, technical specs, POs, and change orders. Philippine jurisprudence recognizes that subsequent agreements can supersede earlier ones when novation is clear. (ACI Philippines, Inc. v. Coquia, 2008)

To avoid losing protection through later purchase orders or vendor terms, include:

• order-of-precedence clause (indemnity terms should prevail over conflicting vendor T&Cs);
• anti-novation language unless explicitly stated; and
• no “battle of forms” override of the negotiated IP indemnity.

Dispute resolution and why it matters for enforceability

Construction disputes in the Philippines may be routed to specialized arbitration depending on the arbitration clause and the parties bound by it. The Supreme Court has ruled that even a non-party to a construction contract may be bound by an arbitration clause if it is significantly connected to the contract—such as an assignee or a construction manager that assumed obligations. (Hyundai Engineering Co., Ltd., et al. v. National Grid Corporation of the Philippines, et al., 2023)

For offshore wind developers using a Philippine subsidiary, this affects planning because:

• an indemnity claim may need to be pursued in the forum required by the construction contract’s dispute clause;
• entities “pulled in” by assumption/assignment structures may become subject to arbitration; and
• the indemnitor’s ability to fund defense quickly may be tested by interim relief procedures.

Drafting checklist: IP indemnity provisions for offshore wind construction contracts

The table below summarizes common clause elements and what they are meant to accomplish.

Clause element	What to include	Why it protects the local subsidiary
Covered IP rights	Patent, copyright, trademark, industrial design, trade secrets, software licenses, and similar rights	Prevents narrow coverage that misses the real claim type
Covered losses	Claims, suits, investigations; damages; settlements; defense costs; recall/removal costs (as agreed)	Captures both litigation expense and operational impact
Duty to defend	Immediate defense upon notice; counsel selection rules; reporting; funding mechanics	Avoids cash-flow strain on the project company
Control of settlement	No settlement admitting fault or imposing non-monetary obligations without subsidiary consent	Protects permits, financing covenants, and reputation
Infringement cure	Procure license, replace, redesign, or refund plus removal/reinstallation	Keeps the wind farm on schedule and operating
Flow-down	Subcontractor/OEM back-to-back IP indemnity; proof on request	Moves the risk to the party closest to the infringement source
Priority of documents	Indemnity prevails over inconsistent POs/vendor T&Cs; controlled change process	Avoids silent weakening of the negotiated protection (ACI Philippines, Inc. v. Coquia, 2008)

Operational risk controls that support the contract protections

Indemnities are stronger when paired with documented diligence. Typical controls include:

• IP clearance and provenance checks for critical turbine components (supplier disclosures, chain-of-title, licensing status of embedded software).
• Document control for drawings and shop plans (who created them, ownership, permitted reuse).
• Audit rights allowing the subsidiary to verify software licensing and source documentation.
• Insurance review to assess whether any policies respond to IP claims (coverage is often limited; confirm exclusions).

Typical “problem clauses” to avoid

Foreign developers should watch for provisions that can neutralize IP indemnity value, such as:

• Indemnity limited to “final court judgment” (leaves defense costs unfunded during litigation);
• Supplier caps too low relative to turbine package value and project exposure;
• Exclusion for “customer specifications” drafted too broadly (can swallow the indemnity when the EPC relies on employer’s requirements);
• Vendor “sole remedy” clause that restricts replacement/redesign options needed to keep COD timelines.

Conclusion: protecting the subsidiary requires both clause design and deal discipline

For offshore wind projects in the Philippines, protecting a local subsidiary from turbine technology infringement claims depends on ensuring that IP protections are not merely “standard clauses,” but enforceable commitments tied to defense funding and operational remedies. Philippine jurisprudence highlights (1) the need to understand what is actually protected IP versus functional design (Olaño, et al. v. Lim Eng Co, 2016), (2) the enforceability of negotiated warranties and defense obligations in commercial contracts (ACI Philippines, Inc. v. Coquia, 2008), and (3) how dispute resolution clauses can bind closely connected entities in construction settings (Hyundai Engineering Co., Ltd., et al. v. National Grid Corporation of the Philippines, et al., 2023).

Recommended next steps for foreign developers include: (1) require broad IP indemnity with duty to defend and clear cure remedies; (2) impose flow-down obligations to OEMs and subcontractors; (3) harden priority-of-documents and change-control language to prevent inadvertent weakening; and (4) implement IP provenance checks for critical turbine technology and embedded software before shipment and installation.

About Nicolas and De Vega Law Offices

 Nicolas and de Vega Law Offices is a full-service law firm in the Philippines.  You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at [email protected]. Visit our website https://ndvlaw.com.