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Announcement: My upcoming book: I’m working on an encyclopedic dictionary of contract clauses, for drafters, reviewers, and students. The book is built on a much-expanded version of the Common Draft clauses; it has links to specimens of real-world clauses found in contracts by companies you undoubtedly know; and it has lots of analysis and commentary. If you’d like to be notified and get a free sample chapter by email when I finish, send your email address to me at dc@toedt.com. Don’t worry, I won’t spam you or sell your email address.

Patent-infringement warranties should be negotiated very cautiously

A patent-infringement warranty in a contract can be a decidedly non-trivial matter, because:

  • You can infringe a patent * without knowing it, indeed without even knowing that the patent exists;
  • You can infringe a patent that didn’t exist when you did your product-design work — that can happen if the patent application was still pending when you did your design work, and the patent issued afterwards;
  • You can’t manage compliance with a patent infringement warranty merely by making sure your people do their own work.

* Generally, infringement of a patent consists of (1) making, using, offering, or selling • a product or service • that comes within the scope • of any one of the claims of the patent; or (2) by inducing others to do so; or (3) by ‘contributing’ to such action by others.

If you’re asked to give a patent infringement warranty for your product or service, you’ll definitely want to consult patent counsel. You and your counsel might decide you need to commission a patent search and have the counsel provide you with a clearance opinion. That will usually involve non-trivial calendar time and expenses, which of course might have to be factored into your pricing and scheduling for the contract.

In contrast, copyright- and trade-secret warranties are comparatively easy for a provider to manage. Generally speaking, demonstrably doing one’s own work, without improperly “borrowing” from others — that is, proving independent creation — should defeat claims of copyright infringement or trade-secret misappropriation. (FOOTNOTE: Proof of independent creation is great to have, but it’s not necessarily required to prevail against copyright-infringement or trade-secret-misappropriation claims.)

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