In the context of a licensing agreement, an indemnification clause generally indemnifies a licensee against costs arising out of the licensee’s use of a licensor’s software. However, in some instances an agreement will call for the licensee to indemnify the licensor. The identity of the indemnifying party will typically be determined by the terms of the agreement (whether the license is free or paid, etc.) and the bargaining power of the parties involved.
While state contract law generally protects the licensee in most jurisdictions, the parties will want to expand or modify these provisions to define explicitly the protections and obligations for each party.