You sell through resellers, managed service providers, and distributors. Your partner signs the customer, deploys the software, runs the console, and holds whatever data exists. You have no contract with the company whose fleet is running your product. Every protection you negotiated sits in an agreement the end customer never saw and is not bound by.
That gap is the entire problem with indirect sales, and most channel programs paper over it instead of closing it.
What is a channel partner agreement?
A channel partner agreement is the master contract between a software vendor and an intermediary that resells, deploys, or manages the vendor’s product for end customers. It sets the appointment, the license grant, trademark use, confidentiality, warranty disclaimers, liability limits, and termination. It does not, by itself, bind anyone downstream of the partner.
The better architecture separates four layers. Base terms that apply to every partner regardless of type. Role modules the partner elects into, one each for reseller, MSP, and distributor, so a partner acting in two roles takes two modules instead of a negotiated hybrid. A deal-level order form carrying pricing, territory, term, and commitments. And a required-terms schedule that travels into every downstream contract in the chain.
Build the modules before the second partner, not after. Adding a partner type to a modular stack means drafting one module. Adding it to a monolithic agreement means renegotiating with the partners you already signed.
Why do a vendor’s liability caps stop at the reseller?
Privity. Your cap binds the party that signed it. The end customer running your software signed a contract with your partner, not with you, so your cap, your disclaimers, and your use restrictions have no path to that customer unless something carries them there. In the scenario that ends a small vendor, the plaintiff is a customer you never contracted with.
Take the failure mode seriously before drafting around it. Endpoint software that pushes a bad update can render a fleet of devices unusable. The company that suffers that loss is the end customer. Its theories will be tort, not contract, precisely because it has no contract with you, and it will not be bound by a limitation of liability it never agreed to.
What is a flow-down schedule, and why is it the document that matters?
A flow-down schedule is a single list of terms every downstream contract in the chain must contain: partner to customer, distributor to MSP, MSP to customer. It carries the vendor’s liability caps, warranty disclaimers, use restrictions, telemetry disclosures, and any no-data-access acknowledgment. It is the only instrument that puts vendor protections in front of the end customer.
Everything else in a channel stack is negotiable. This is not. If the required terms are absent from a downstream contract, the vendor’s protections stop one link up the chain and the deployment is naked exposure.
Two drafting points decide whether it works.
First, watch the safe harbor. Most flow-down schedules let a partner satisfy the requirement with substantially equivalent terms already in its own paper. That provision is reasonable and it will swallow your mandatory minimums, because a partner with a longer, higher cap in its MSA will argue the cap it already has is equivalent. Add an express sentence stating that the safe harbor cannot reduce or displace the mandatory cap provisions regardless of equivalence.
Second, keep every number in the stack consistent. A cap stated at one duration in the vendor’s direct customer agreement and a shorter duration in the flow-down floor is not a typo, it is an argument. The longer figure becomes the benchmark a sophisticated partner points to, and the inconsistency undercuts the characterization of the flow-down number as a mandatory minimum rather than an opening position. Conform the direct agreement down to the floor, not the floor up to the direct agreement, because the floor is what protects you against the customer you never contracted with. Caps, cure periods, notice periods, insurance limits, and audit rights are the recurring offenders. Every number that appears in more than one document needs one source of truth and a conforming pass before the next version goes out.
What happens when the partner refuses to change its own contract?
Draft the schedule to run in two modes. In module mode, the partner includes the required terms in its own customer paper. In addendum mode, the same schedule executes as a standalone addendum between the partner and its customer and is incorporated into the partner’s agreement by reference, controlling over conflicting terms as to the required terms only.
Addendum mode is what makes the design survive contact with real partners. Any established MSP sells on its own master services agreement and will not rewrite it for a vendor. A flow-down obligation that requires the partner to amend its MSA is a flow-down obligation that gets quietly ignored, and you will not find out until discovery.
For addendum mode to work, the schedule needs its own execution mechanics: a parties block, signature blocks, incorporation and precedence language, and a statement of what it controls. A schedule drafted only as an exhibit cannot be signed standalone.
Can a vendor enforce terms in a contract it never signed?
Yes, if the vendor is named as an express third-party beneficiary of the specific provisions it needs. An intended beneficiary may enforce the promise made for its benefit. Restatement (Second) of Contracts sections 302 and 304 supply the framework, and section 315 confirms that an incidental beneficiary gets nothing. Naming beats implying, because the standard for proving intent is not uniform across states.
How strict that standard is depends on governing law, and the spread is real. Texas applies a presumption that parties contract for themselves and requires a clear and unequivocal expression of intent to benefit a third party, with any doubt resolved against beneficiary status. First Bank v. Brumitt, 519 S.W.3d 95 (Tex. 2017), holds that implied intent will not do and that courts look solely to the contract language. New York is more forgiving. In Bayerische Landesbank v. Aladdin Capital Management LLC, 692 F.3d 42 (2d Cir. 2012), noteholders proceeded as beneficiaries even though the beneficiary clause did not name them, because other provisions showed the intent.
Two drafting rules follow. Keep the hook narrow. Name the vendor as beneficiary of the enumerated required terms, identify them by section number, and state that no other person has any right or remedy under the agreement. Drafting the vendor in as a general beneficiary invites the argument that it assumed obligations under a contract it never saw.
And never rely on the word “herein.” Bayerische let a third-party claim proceed in part because a limiting clause referring to rights “specifically provided herein” was ambiguous about whether “herein” meant that clause or the whole agreement. Enumerate.
Should required terms be covenants or conditions on the license?
Conditions, where you can get them. A term that limits the scope of a license is a condition, and exceeding it is copyright infringement. A term that is merely a promise is a covenant, and breaching it is only a contract claim. The distinction decides whether a noncompliant deployment is a lawsuit against a thinly capitalized partner or an unlicensed use.
This is the structural move that gives flow-down real teeth. Say that the license does not extend to a deployment made without the required terms in place. The noncompliant deployment then becomes the wrong itself. It supports immediate suspension and termination, and it gives the vendor a lever with the end customer, who is now running unlicensed software and needs the problem fixed. The remedy travels even though the contract does not. Territory works the same way: expressed as a covenant, an out-of-territory sale is a breach you have to prove damages on, and expressed as a condition on the grant, it is outside the license.
The case law sets real limits on how far this goes.
Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115 (9th Cir. 1999), framed the question: whether the terms breached were limitations on the scope of the license, making the conduct infringement, or separate covenants, making it a contract dispute. The court vacated a preliminary injunction and sent the covenant-versus-scope question back to the district court, which held on remand that the compatibility obligations were covenants.
Jacobsen v. Katzer, 535 F.3d 1373 (Fed. Cir. 2008), shows what condition language looks like. The Artistic License stated the “conditions under which a Package may be copied” and used “provided that,” which the court treated as denoting a condition under California law. Drafting matters. “Provided that the required terms are in place” reads differently from “Partner shall include the required terms.”
MDY Industries, LLC v. Blizzard Entertainment, Inc., 629 F.3d 928 (9th Cir. 2010), as amended, adds the screen most drafters miss. Even a genuine condition supports an infringement claim only where there is a nexus between the condition and the licensor’s exclusive rights of copyright. The Ninth Circuit held that World of Warcraft’s anti-bot terms were covenants, not conditions, and that users running the Glider bot did not infringe. A condition about payment, territory, or scope of authorized copies has a plausible nexus. A condition about how the partner runs its sales process does not, no matter how you word it.
One caution on remedies. Older cases in this line assumed that establishing a copyright claim carried a presumption of irreparable harm. The Ninth Circuit abandoned that presumption in Flexible Lifeline Systems, Inc. v. Precision Lift, Inc., 654 F.3d 989 (9th Cir. 2011), following eBay and Winter. A well-drafted condition gets you a copyright theory. It does not get you an automatic injunction.
Why is an uncapped gross-negligence carve-out worse than a longer cap?
Because a carve-out is a negotiation over whether there is a number at all, while cap duration is a negotiation over a bounded number. In the catastrophic scenario, gross negligence is exactly what the plaintiff pleads. It survives a motion to dismiss on a well-pleaded complaint and it stays a fact question until late. The cap does no work in the one case that matters.
This is worth spelling out because vendors get it backwards. A three-month cap with an uncapped gross-negligence exception is worse protection than a twelve-month cap with no exception. The three-month figure holds only for the claims you could have absorbed anyway. On the claim that ends the company, a plaintiff pleads recklessness, the carve-out opens, and there is no ceiling.
Three options for the standard form. Delete the carve-out and let non-waivable law do whatever it does, without volunteering the exception. Cap the carve-out at a multiple of the base cap, which reads as reasonable to a counterparty who will not accept deletion. Or accept uncapped exposure only after confirming that the policy in force actually covers the specific scenario at limits that matter, which is a coverage question and not an assumption.
Governing law changes the answer, and the current law is not where most templates think it is.
New York will not enforce an exculpatory clause against grossly negligent or willful conduct. Kalisch-Jarcho, Inc. v. City of New York, 58 N.Y.2d 377 (1983), holds that no matter how flat and unqualified the terms, a clause will not exempt conduct that “smacks of intentional wrongdoing” or betokens “a reckless indifference to the rights of others,” and that it fails even where the parties actually contemplated the conduct. But New York treats a damages limitation differently from an exculpation. Metropolitan Life Insurance Co. v. Noble Lowndes International, Inc., 84 N.Y.2d 430 (1994), calls a limitation of liability an allocation of economic risk that courts should honor, and it read a “willful acts” carve-out narrowly to exclude intentional nonperformance motivated by financial self-interest, relying on the fact that both sides were sophisticated entities represented by counsel.
California is now the harder jurisdiction, and this is the change to know. In New England Country Foods, LLC v. VanLaw Food Products, Inc. (Cal. Apr. 24, 2025), the California Supreme Court held that limitations on damages for willful injury are invalid under Civil Code section 1668. Two points matter for anyone drafting a cap. The court refused to distinguish total exculpation from a partial cap, since “exempt” does not require eliminating liability entirely. And it rejected any sophistication defense: that the parties were private commercial entities that bargained for the clause is irrelevant. Ordinary negligence is still releasable under the Tunkl framework. Willful injury is not.
For the consequential-damages exclusion itself, UCC section 2-719(3) is the strongest sentence in the Code for a vendor: limitation of consequential damages for personal injury in consumer goods is prima facie unconscionable, “but limitation of damages where the loss is commercial is not.” Whether Article 2 reaches your product is a separate fight. Advent Systems Ltd. v. Unisys Corp., 925 F.2d 670 (3d Cir. 1991), held software was a good under the Code and applied a predominant-purpose test, in a case that arose out of a non-exclusive hardware and software distribution agreement. Perpetual, one-time-fee, delivered software is often treated as goods. A hosted subscription with no title transfer and substantial ongoing service usually is not. Draft the disclaimers to stand under either regime rather than relying on Article 2 to supply the machinery.
While you are counting caps, count all three. A channel stack of this shape ends up with a partner-facing cap in the master agreement, a customer-entity cap in the flow-down floor and the direct agreement, and an end-user cap that is usually per seat or per device. Three counterparties, three exposure profiles, three negotiation dynamics. Explain them together in a drafting note or successive redlines will collapse them into each other.
Does your reseller agreement accidentally create a franchise?
It can, and this is the risk most software vendors have never priced. The FTC Franchise Rule at 16 C.F.R. 436.1(h) needs three elements: use of the franchisor’s trademark, significant control over or significant assistance in the franchisee’s method of operation, and a required payment. Authorized-reseller branding plus a certification program plus a minimum commitment can satisfy all three.
Read the second and third elements carefully. Under 16 C.F.R. 436.1(s), a “required payment” is all consideration the franchisee must pay “either by contract or by practical necessity,” which is broader than anything labeled a fee. The minimum-payment exemption in 436.8(a)(1) sits at $735 as of July 12, 2024, and it adjusts periodically. Mandatory certification fees, training fees, required marketing spend, compulsory demo units, and a minimum purchase commitment all count against it.
The control element is usually what saves a vendor, and it is easier to trip than it looks. Significant assistance in the partner’s method of operation is met by things channel programs do as a matter of course: required training curricula, mandated sales methodology, prescribed pricing practices, operations manuals, and required use of the vendor’s deal-registration system. A tightly managed MSP program with certification requirements and a quota is inside the fact pattern the Rule describes.
State law is the bigger exposure because two of the important statutes drop elements the federal rule requires.
New Jersey’s Franchise Practices Act defines a franchise at N.J.S.A. 56:10-3(a) as a written arrangement licensing a trade name or mark where there is a community of interest in marketing goods or services. No fee element. No control element. The thresholds at 56:10-4(a) are a New Jersey place of business, more than $35,000 in gross sales between the parties in the preceding twelve months, and more than 20 percent of the franchisee’s gross sales derived from the franchise. A New Jersey MSP that resells your product as its main line and uses your marks can clear all three without anyone intending a franchise.
The Wisconsin Fair Dealership Law reaches dealerships in goods or services where there is a community of interest, defined at Wis. Stat. 135.02(1) as a continuing financial interest in the operation of the dealership business or the marketing of the goods or services. Section 135.04 requires at least 90 days’ written notice of termination, nonrenewal, or substantial change in competitive circumstances, stating the reasons, with 60 days to cure. Section 135.025(3) says the chapter’s effect “may not be varied by contract or agreement,” so your governing-law clause and your termination-for-convenience right do not get you out of it. The statute covers services expressly, so “we only license software” is not a defense.
Ziegler Co. v. Rexnord, Inc., 139 Wis. 2d 593 (1987), supplies the test Wisconsin courts apply, and the holding cuts against vendors. The court rejected a rigid percentage test, saying community of interest “cannot be reduced to a mathematical equation,” and set two guideposts, continuing financial interest and interdependence, examined across the whole relationship: duration of dealings, contractual obligations, revenue and time devoted to the grantor’s products, use of the grantor’s marks, investment in inventory and facilities, dedicated personnel, advertising spend, and how far the parties coordinated their efforts. Those are the same facts a vendor asks a partner to commit to in order to earn a better discount. The commitments that make a partner valuable are the commitments that make it a dealer.
Puerto Rico’s Law 75 deserves its own look if you sell there. It is the most aggressive distributor-protection regime in any U.S. jurisdiction and it reaches distributors with no fee and no franchise label.
Is exclusivity legal, and should you give it?
Vertical territorial and exclusivity restraints are judged under the rule of reason and are ordinarily lawful for a vendor without market power. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977), put non-price vertical restraints including territorial restrictions under the rule of reason. The antitrust question is rarely the reason to say no. The commercial question is.
On foreclosure, Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961), asks whether the contract forecloses a substantial share of a properly defined relevant market, weighing the relative strength of the parties and the proportionate volume of commerce involved, and holds that “a mere showing that the contract itself involves a substantial number of dollars is ordinarily of little consequence.” A vendor with low share does not produce substantial foreclosure. Keep Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), in the right box: it is vertical minimum resale price maintenance, so it governs your MAP terms and not your territories. It is also federal law only, and several states still treat resale price maintenance more harshly under their own antitrust statutes.
The better answer to an exclusivity request is usually a fulfillment preference rather than exclusivity. The structure that works has six parts.
The obligation runs to the vendor’s own routing conduct, not to market outcomes. The partner gets every opportunity in the defined niche that the vendor can route to it.
Carve out procurement. Where a customer’s rules force a direct purchase, or require buying through an incumbent contract holder who will not work with your partner, the vendor may close the deal and that is expressly not a breach. Without this clause, public-sector and large-enterprise procurement rules put the vendor in breach through no act of its own.
Set benchmarks with automatic lapse. A missed benchmark ends the preference automatically and without notice. No election, no cure period, no notice letter that somebody forgets to send. Then calendar the term expiration and every measurement date the day the effective date is set, because a lapse nobody notices is a preference that continues in practice.
Pay a referral fee where the partner registered the opportunity first and procurement forced a direct sale. Limit it to the initial term and say so, or one registered deal becomes a permanent annuity.
Say in the rider that independent downstream partners are not bound. Other resellers, distributors, and a distributor’s own appointed MSPs can still sell into the niche. This is the point most often gotten wrong. A niche-exclusivity promise in a multi-partner channel puts the vendor in breach the day another partner closes in the niche, through conduct the vendor never controlled and often never sees.
Watch what carries the consideration. If you decline to require a commitment that the partner not carry a competing product, the benchmarks are carrying the entire consideration for the preference. Set them at numbers you will actually end the preference over. Aspirational benchmarks in that posture mean you gave up routing freedom for nothing.
Keep adjacent deals on separate paper. If the same partner has an integration or technical partnership under discussion, folding it into the exclusivity rider entangles the termination of one with the termination of the other.
Who owns data protection obligations when the vendor has no access?
Whoever operates the environment, not whoever sells. Allocating data obligations by contract position produces conflicts. Allocating them to the operator of the management environment tracks operational reality: if the partner runs it, the partner carries the regulated-data undertaking, and the partner is barred from committing the vendor to anything.
Here is the conflict this solves. A vendor’s direct customer agreement commits it to sign a business associate agreement where a customer’s use involves protected health information. The MSP module says the opposite for channel deals, putting the BAA between the partner and its customer. Read together with a flow-down safe harbor, a partner could pull the vendor’s direct-deal BAA commitment into a deal the partner owns, obligating the vendor on paper it never saw, for data it cannot access. Route the undertaking to the operator, bar the partner from committing the vendor, and preserve by cross-reference the vendor’s ability to sign directly where its own agreement requires it.
On whether a no-access vendor is a business associate at all, the regulation is specific and the common shortcut is wrong. Under 45 C.F.R. 160.103, a business associate is a person who creates, receives, maintains, or transmits protected health information on behalf of a covered entity. A vendor that genuinely does none of those things is not a business associate and needs no BAA. The contract requirements at 45 C.F.R. 164.502(e) and 164.504(e) never engage.
Encryption is not what gets you there. HHS states in its cloud computing guidance that lacking an encryption key for the encrypted data a provider receives and maintains does not exempt it from business associate status, and that the conduit exception is limited to transmission-only services where access is transient. Storing encrypted data makes you a business associate. “We never create, receive, maintain, or transmit it” is the defensible position, and only if the architecture actually supports it.
That last clause is where these positions fail. Remote support sessions, diagnostic uploads, crash dumps, log shipping, telemetry, and vendor-hosted backup or update infrastructure are the routine ways a no-access claim quietly stops being true. Have engineering confirm it in writing before the representation goes into a contract.
The same discipline applies to export classification. Silence in the paper is better than an unverified assertion, but it is not a resolved position. The live risk is a salesperson answering a customer security questionnaire with a classification nobody engineered. Strip assumed classifications from the documents, get a written engineering position on whether kernel-level modifications or bundled cryptographic functionality change the analysis, then assert once, consistently, everywhere.
What belongs in the order form?
The order form is the deal-level instrument the rest of the stack points to, and in most channel suites it is the document that does not exist yet. Master agreements and modules defer to pricing, territory, term, and compliance elections “as set forth in the applicable order form,” and nobody drafted one. The paper reads complete until the first deal.
What it should carry:
A pricing model election, with the alternatives drafted into the form so the commercial team picks one instead of writing pricing prose per transaction.
Territory as a condition on the license grant rather than a covenant, for the reasons in the conditions section above.
The required-terms compliance path, elected per deal: module mode or addendum mode. This is the highest-value clause in the form. It converts flow-down compliance from a general covenant nobody can verify into an auditable, deal-level record.
Term, renewal, minimum commitments, and the billing metric. Define the billed unit identically in the module, the order form, and the direct agreement. Divergent metrics across a stack produce revenue leakage and audit disputes.
Any service level commitment, or an express statement that there is none. For channel partners, none is usually right. A partner earning margin for support should not also be receiving an SLA.
A zero-charge pilot variant for early engagements. Use “pilot” consistently rather than “POC,” “beta,” or “trial.” Those words carry different implied expectations about acceptance criteria, free duration, and conversion, and partners will hold you to the most favorable reading.
What about insurance?
Require it as a condition, not a covenant. For the partner role that installs software and operates management environments, require separate errors and omissions or technology professional liability coverage and separate cyber liability coverage, because the failure modes differ. Then condition the first deployment on delivery of certificates.
The mechanic is the point. “Partner shall maintain insurance” produces a breach claim you discover after the loss, when there is no policy. A condition precedent produces a certificate in the file before the risk is taken. Confirm during negotiation that the partner can actually produce certificates at your limits for both coverages. A small MSP often cannot, and that is a commercial conversation, not a signature-day surprise.
What to do now
- Map your chain. For each live partner, write down who signs the customer, who deploys, who operates the management environment, and who holds data. Most vendors cannot answer this from the contracts alone, which is the finding.
- Pull every number that appears in more than one document. Caps, cure periods, notice periods, insurance limits, billing metrics, audit rights. Pick the source of truth and conform the rest before the next version goes out.
- Read your cap exceptions. If gross negligence or willful misconduct sits outside the cap with no ceiling, you do not have a cap in the case that matters. Decide which of the three options you want.
- Confirm whether your required terms are actually in your partners’ customer contracts. Ask for the executed downstream paper on a live deal. If nobody can produce it, flow-down is a covenant on your side and nothing on theirs.
- Run the franchise screen. Trademark use, required payment including anything owed by practical necessity, and control or assistance. Then check New Jersey, Wisconsin, and any state where a partner’s business is concentrated in your product.
- Get engineering’s written position on data access and export classification before either goes into a contract or a security questionnaire.
- Draft the order form. If your agreements defer to a document that does not exist, that is the first thing to build.
What to look for in counsel
For channel and distribution work, the useful selection criteria are specific.
Counsel who have built a modular channel stack, not just marked up a reseller template. The architecture decisions, base terms and role modules and order form and flow-down, are made once and are expensive to unwind.
Counsel who work the condition-versus-covenant question deliberately. Most reseller agreements are drafted entirely in covenants, which means every enforcement path runs through a damages claim against a partner who cannot pay it.
Counsel who screen for franchise and dealership statutes as a matter of course. The New Jersey and Wisconsin statutes catch technology channel programs that were never designed as franchises, and the exposure surfaces at termination, when it is too late to redraft.
Counsel who will tell you a decision is a business decision. Cap duration, exclusivity, insurance limits, and referral fees are priced by the client, not by the lawyer. What counsel owes you is a clear statement of what each choice exposes you to.
Counsel who negotiate against real partner paper. Established MSPs will not amend their MSAs. A channel program that assumes otherwise fails at the first serious partner.
Traverse Attorneys & Advisors serves as outside general counsel to software, SaaS, and technology companies, and builds channel and distribution contract suites for vendors selling through resellers, MSPs, and distributors. That work includes master channel partner agreements with role-elected modules, flow-down and required-terms schedules designed to execute standalone where a partner will not amend its own paper, deal-level order forms, exclusivity and fulfillment-preference riders, and the liability, insurance, and data-allocation analysis that sits underneath all of it. We also review existing channel stacks for the failure modes described above.
Frequently asked questions
What is the difference between a reseller and a distributor?
A reseller buys from the vendor and sells to end customers. A distributor sells to other channel partners, who then sell to end customers. The distinction matters because a distributor appoints its own downstream partners, so a vendor has to decide whether it wants approval rights over appointments it will otherwise never see.
Do flow-down terms actually bind the end customer?
Only if they appear in the contract the end customer signed. That is why the schedule needs an addendum mode and a scope condition on the license. If the required terms are not in the downstream contract, the vendor’s protections stop at the partner and the deployment is unprotected.
Can a vendor sue an end customer it has no contract with?
Yes, in two ways. If the vendor is named as an express third-party beneficiary of the required terms, it can enforce those terms directly. And if the license is conditioned on the required terms being in place, a deployment without them is unlicensed use, which supports a copyright theory rather than a contract theory.
Is an authorized reseller agreement a franchise?
Sometimes, without anyone intending it. The FTC Franchise Rule needs a trademark license, significant control or assistance, and a required payment. New Jersey’s statute needs only a trademark license and a community of interest, subject to sales and percentage thresholds. Run the screen before you build a certification program with a quota.
Should a software vendor grant exclusive territories?
Usually not. A fulfillment preference gives the partner most of what it wants while keeping the vendor out of breach when procurement forces a direct sale or another partner sells into the same niche. Antitrust is rarely the obstacle for a vendor without market power. The obstacle is that true exclusivity is a promise the vendor cannot keep.
Can we cap liability for gross negligence?
It depends on governing law and on whether the clause is a cap or an exculpation. New York will not enforce exculpation for grossly negligent or willful conduct, and California, after New England Country Foods v. VanLaw in 2025, will not enforce even a partial damages limitation for willful injury regardless of the parties’ sophistication. Draft for the jurisdiction you chose.
Does encryption avoid HIPAA business associate status?
No. HHS states that lacking the encryption key does not exempt a provider that receives and maintains protected health information, and the conduit exception covers transmission only. What avoids business associate status is genuinely never creating, receiving, maintaining, or transmitting the data, which is an architecture fact and needs engineering confirmation.
What is the single most important clause in a channel agreement?
The required-terms compliance election in the order form, paired with a license grant conditioned on those terms being in place. Together they make downstream compliance auditable per deal and make noncompliance a license problem rather than a damages claim against a partner who cannot pay.
Enrico Schaefer
Traverse, Attorneys and Advisors
enrico.schaefer@traverselegal.com
www.traverselegal.com
This article is general information about contract structure and is not legal advice. Channel agreements turn on the specific facts of your product, your partners, and your governing law. No attorney-client relationship is created by reading it.
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