Infringement Of A Patent Trademark In Warranty Titles
(UCC 2-312) lays out the law for infringement against warranty of title and the buyer’s obligation in infringement cases. It states:
- The title conveyed shall be good, and its transfer rightful
- The goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge.
- A warranty under division (A) of this section will be excluded or modified only by specific language or by circumstances that give the buyer reason to know that the person selling does not claim the title in himself or that he is purporting to sell only such right or title as he or a third person may have.
- unless otherwise agreed a seller who is a merchant regularly dealing goods of the kind warrant that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to a seller must hold the seller harmless against any such claim which arises out of compliance with the specifications
The above law protects the rights of buyers and sellers, the first part giving buyers the rights to the title upon sale so that they are protected from infringement. It also gives the buyer warranty rights regardless of the fact if the product was sold directly by the seller or a registered merchant.
If there was a violation of the given terms by the seller, the buyer must inform him of it within a reasonable time so that it can be amended. The seller must take appropriate action if the breach was not voluntary and the goods were sold in good faith,i.e, only if he is informed by the buyer. If the seller has voluntarily sold the patented product knowingly violating the terms of USC2-312, he cannot claim ignorance of it under the fact that he was not misinformed or misled because of the delay in the notice by the buyer. These terms apply upon delivery of the goods because this warranty extends only upon exchange, not the performance of the goods when used in the future.
It is also the responsibility of the merchant to ensure that the goods he sells are not infringing on patents or trademarks. He can be held liable for knowingly or unknowingly selling infringed goods. Therefore, the registered merchant is responsible to check that the goods he is purchasing to sell in his store do not have a risk of infringement claims. Furthermore, if the buyer wants specifications to be made to the product he is buying, or the product is being sold by a third party, there is no responsibility on part of the seller for any infringement claim. Hence, the buyer cannot hold the seller responsible for any loss incurred after making changes to the product or buying from a third party.
The following case shows how the “rightful claim” clause in UCC2-312 was applied to decide the ruling in favor of the seller in a trademark infringement case between a buyer, seller, and third party claims.
In the Pacific Sunwear Vs Olaes Enterprise Case, the infringement against the warranty title of the merchant was applied to give a ruling in favor of Olaes. Olaes supplied T-shirts with a graphic design to Pacific Sunwear, which they sold in their stores. SNCL, a clothing maker, sued another company and Oeales for trademark infringement. They later included Pacific Sunwear in the claim as the T-shirts were sold in the store. The court denied the SNCL summary judgment as they were not able to prove the case because it did not satisfy all the criteria in the eight-factor test to establish the likelihood of confusion.
A year later, Pacific Sunwear sued Olaes for breach of statutory warranty, to which the Courts denied their motion and granted it to Olaes. The Court after examination of the case declared that SNLC were not able to prove the rightful claim for their trademark and consumer confusion. They further noted that Pacific Sunwear continued to sell the T-shirts in question after the SNCL claim because they also did not believe the claim was rightful. Therefore freeing the seller(Olaes) from the “rightful claim” clause in §2-312(3).
Since §2312(3) states that unless that was no proper agreement, the seller is free from infringement claims if the product in question has no “rightful claim” by a third party. Since SNLC was not given the rightful claim for their trademark, Olaes was not liable for selling the T-shirts with the alleged SNLC trademark design.
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