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Fear of liability is one of the most significant impediments to participation in the emerging identity market. Yet the term “liability” is often misapplied, and the risk of liability is often misunderstood. This OIX White Paper Series is designed to demystify liability, and assist in liability risk analysis. As the first step in that process, this paper seeks to explain the concept of liability, and to develop a common understanding of what it means for participants in an identity system to incur liability. The goal is to introduce identity system experts to the fundamentals of legal liability, while introducing the context of a federated identity system to legal counsel.