To explain a compensation agreement, it is first necessary to define the concept of “compensation”. Compensation is defined as “the obligation to obtain losses, damages or liabilities incurred by another (Black`s Law Dictionary). Compensation has the general importance of “keeping it unscathed,” i.e., one party considers the other to be harmless for loss or damage. Some variations in the meaning of the concept of “compensation”: according to U.S. law, the interpretation of compensation clauses varies from country to country.  In California, for example, compensation clauses do not cover certain risks, unless risks are included in the contract, whereas in New York, a short clause “X defends and compensates Y for all product claims” X makes liable for all claims against Y.  Compensation can be extremely costly, since X`s liability insurance does not generally cover claims against Y. But X still has to cover it.  The main benefit of a compensation provision is the protection of the compensated party from losses suffered by third parties. In general, difficult negotiations on compensation provisions are at stake. They`re also very much on trial. Keep in mind that in the above language of compensation, claims for intellectual property infringement are not explicitly addressed, but section 8 would indicate that the developer exclusively owns or has developed the entire intellectual property that must be developed as part of the agreement as a representative and guarantee for developers (stay on a blog about representations and guarantees). Therefore, if you have violated another person`s intellectual property and then delivered it to the client and the client has received a letter of formal notice from the third party alleging a violation, you would be required to cover those costs and damages in accordance with the compensation clause.