A common tactic of patent trolls is to sue buyers of patented items for infringement based upon the buyer’s use of the goods. If you are faced with such a claim, don’t overlook the UCC’s warranty against infringement.
In New Jersey, the UCC provides that “a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claims of any third person by way of infringement.” N.J.S.A. 12A:2-312(3). This leads to the question of, what is a rightful claim of infringement that would result in a breach of warranty and trigger a claim against the seller? The buyer does not need to prove the validity of the patent infringement claim. Rather, the buyer “must establish that the infringement claim is of a substantial nature that is reasonably likely to subject the buyer to litigation and has a significant and adverse effect on the buyer’s ability to make use of the goods in question.” Sun Coast Merchandise Corp. v. Myron Corp. 393 N.J. Super 55 (App. Div. 2006).
What does this mean for a buyer of goods that is sued for patent infringement? First, the seller should be contacted and demand made for indemnification. If the seller refuses, then a claim against the seller for breach of the UCC warranty against infringement should be considered. Under the Sun Coast case, you can raise the breach of warranty claim in circumstances short of a finding of infringement by a court.
Buyers of goods should also be cognizant of this provision when entering into a contract to purchase goods. The warranty against infringement can be waived by agreement of the parties at the time of sale so the terms of any contract of sale should be scrutinized for waiver of any UCC Warranties.
For further information about legal services for patents and patent infringement claims, contact Art Peslak at 732-363-3333.
The Patent Guys are attorneys in the Intellectual Property Practice Group of the law firm of Gertner Mandel LLC providing legal support for legal, technical & business issues.