Warranting Rightful ClaimsExpressO (2011)
AbstractDamage awards for patent infringement have sky-rocketed and sparked significant debate in recent years. A part of this patent damage debate focuses on non-practicing entities, or so-called “patent trolls.” A patent troll is a patent owner that demands a royalty based on patented technology, yet does not actually make use of the technology to provide an end product or service. Patent trolls are known for their aggressive and opportunistic behavior. Their strategy is simple: create nuisance and inflict fear. Often, patent trolls employ this strategy against the buyers of goods that use the patented technology. Increasingly, those buyers are availing themselves of the “warranty against infringement” (“WAI”) implied by the Uniform Commercial Code in sales contracts when sued by patent owners, notably patent trolls, for alleged patent infringement. The WAI provides a guarantee that goods bought or sold in a given transaction are free from a “rightful” third-party infringement claim when delivered. A party protected by the WAI can receive an indemnity of sorts from the other party for costs and damages associated with expensive and high-risk patent infringement suits. Under the current definition of “rightful,” the mere threat of litigation is sufficient to trigger protection under the WAI. As damage awards for patent actions continue to fall consistently in the million dollar-plus range, and patent trolls target hundreds of companies at one time, this low threshold for determining when a “rightful claim exists is opening the door for unprecedented abuse. Scholars have overlooked the significance of the WAI because of the unique blend of two areas of law: intellectual property and commercial law. This Article corrects this oversight. It argues that courts should adopt a new framework for determining when a “rightful claim” has been made against a buyer or seller, therefore providing it protection under the WAI. This Article also argues that the main theoretical justification for warranty law—asymmetrical information between the parties—often does not apply in cases involving the WAI. Consequently, this framework will promote a realistic “symmetry” between the buyer and seller and protect companies from opportunistic patent trolls.
- Uniform Commercial Code,
- warranty of title and against infringement
Publication DateMarch 11, 2011
Citation InformationKaren E. Sandrik. "Warranting Rightful Claims" ExpressO (2011)
Available at: http://works.bepress.com/karen_sandrik/2/