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The agreement states that Customer is solely responsible for Customer Data and must defend and indemnify Modal against third-party claims alleging intellectual property infringement, misappropriation, or violation of applicable law related to Customer Data.
This analysis describes what Modal's agreement states, permits, or reserves. It does not constitute a legal determination about enforceability. Regulatory applicability and practical outcomes may vary by jurisdiction, enforcement context, and individual circumstances. Read our methodology
This provision establishes that Customer bears the full defense and indemnification burden for any third-party claims arising from Customer Data, including claims that Customer Data infringes third-party intellectual property rights or violates applicable law. Because Input and Output from AI Tools are classified as Customer Data, this obligation extends to AI-generated outputs that Customer uses.
Interpretive note: The legal status of AI-generated Output under copyright law is unsettled in the US and EU, meaning the practical scope of Customer's IP indemnification obligation for Output may depend on future regulatory or judicial developments.
Under this clause, Customer is contractually required to defend Modal against third-party claims arising from Customer Data, including IP infringement claims related to content Customer submits or AI-generated Output Customer uses. The agreement also states that Customer is solely responsible for obtaining any rights necessary to submit Input to AI Tools.
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"Customer will defend, indemnify, and hold Modal, its affiliates, suppliers and licensors harmless and each of their respective officers, directors, employees and representatives from and against any claims, damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to any third party claim with respect to alleged infringement or misappropriation of third-party's intellectual property rights or violation of applicable law related to Customer Data.Excerpt from Modal's Terms of Service
(1) REGULATORY LANDSCAPE: This provision engages copyright law, privacy law, and general commercial indemnification principles. Because AI-generated Output is classified as Customer Data and Customer bears responsibility for Output, this indemnification obligation intersects with emerging legal frameworks around AI output ownership and copyright eligibility, which remain subject to active regulatory and judicial development in the US and EU. (2) GOVERNANCE EXPOSURE: Medium. The classification of AI Tool Output as Customer Data, combined with the indemnification obligation, means Customers bear legal and financial exposure for third-party claims arising from AI outputs they use, including potential copyright infringement claims. This is particularly relevant given active litigation and regulatory activity around AI-generated content. (3) JURISDICTION FLAGS: EU Customers should assess whether the broad indemnification obligation is compatible with local mandatory liability protections. The emerging EU AI Act framework may impose additional obligations on deployers of AI systems that interact with this provision. US Customers should note that the copyright status of AI-generated Output remains unsettled under US Copyright Office guidance and pending litigation. (4) CONTRACT AND VENDOR IMPLICATIONS: Legal teams should ensure that Customer's own downstream agreements with customers or partners account for the IP indemnification exposure created by this provision, particularly where AI-generated outputs are incorporated into products or services. Insurance and risk management teams should assess whether existing IP indemnification coverage extends to AI output-related claims. (5) COMPLIANCE CONSIDERATIONS: Organizations using Modal's AI Tools should establish internal review and validation procedures for AI-generated Output before publication or commercial use, both to fulfill their obligations under the 'Customer is solely responsible for reviewing, validating, editing, and amending any Output' clause and to manage the indemnification exposure created by this provision.
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This provision establishes that Customer bears the full defense and indemnification burden for any third-party claims arising from Customer Data, including claims that Customer Data infringes third-party intellectual property rights or violates applicable law. Because Input and Output from AI Tools are classified as Customer Data, this obligation extends to AI-generated outputs that Customer uses.
Under this clause, Customer is contractually required to defend Modal against third-party claims arising from Customer Data, including IP infringement claims related to content Customer submits or AI-generated Output Customer uses. The agreement also states that Customer is solely responsible for obtaining any rights necessary to submit Input to AI Tools.
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