Key Takeaways

  • A warranty against infringement under UCC §2-312 is an implied promise that goods sold do not infringe third-party intellectual property rights.
  • The warranty typically applies to merchants and covers goods sold in the ordinary course of business, protecting buyers from costly litigation.
  • Sellers may be liable even if indemnity clauses are excluded, unless they clearly disclaim or limit the warranty in the contract.
  • Exceptions exist when the buyer provides the specifications or when the infringement arises from the buyer’s specific use of the goods.
  • Sellers can mitigate risk through contractual disclaimers, indemnity provisions, and IP due diligence.

The Warranty of Infringement, or Warranty Against Infringement, is a warranty provided by the seller of goods to the buyer that the goods being sold have not broken any copyright laws, are not patented by someone else, and have no intellectual property claims against them. The seller of the goods is responsible for defending the buyer against any rightful claim of infringement. A "rightful claim" is a claim made by a third party of intellectual property infringement.

What Does a Warranty of Infringement Guarantee?

In addition to a warranty against intellectual property, the warranty against infringement also guarantees that the seller of the goods has "good title" to the goods. This means that the goods being sold:

  • Belong to the seller.
  • Are free from defects.
  • Are not the subject of any litigation.
  • Are not mortgaged to another person.
  • Would be bought by a reasonable buyer.

The warranty of infringement also covers the licensing of software — but only where the service aspect is negligible. In this case the vendor, or licensor of the software guarantees to the buyer, or the licensee, that the software does not infringe any intellectual property rights of another company.

The warranty of infringement only applies to the sale of goods and not services.

Scope and Legal Basis Under UCC §2-312

Under the Uniform Commercial Code (UCC) §2-312(3), a warranty against infringement is an implied warranty that automatically applies when a merchant sells goods in the ordinary course of business. This provision ensures that the goods delivered are free from any rightful claim of third-party intellectual property infringement, including patents, copyrights, trademarks, and trade secrets.

This warranty is fundamental in commercial transactions because it shifts the risk of infringement litigation away from the buyer, who may lack knowledge of potential IP conflicts, and places that burden on the seller, who is presumed to be more familiar with the product and its origins. Even if not explicitly written in the sales agreement, the warranty is typically implied unless expressly disclaimed or modified in the contract.

Furthermore, if the goods are subject to a rightful claim—meaning a claim that has a reasonable legal basis even if not yet proven in court—the seller is obligated to defend the buyer and may be liable for damages, costs, or settlements arising from the infringement suit.

Who Does the Warranty of Infringement Apply To?

The warranty of infringement forms a part of the Uniform Commercial Code (UCC). The UCC is not itself a body of laws but rather a standard set of recommendations for how states should create their own laws.

Article 2 of the Uniform Commercial Code covers the buying and selling of goods and includes the warranty of infringement. Most states have enacted a version of Article 2, with Louisiana being one state that has not.

Article 2 of the UCC states that the warranty of infringement only applies to sellers who are "Merchants." A merchant is defined as someone who:

  • Sells or deals in goods of a certain type.
  • Has specialized knowledge and skill with regards to the goods that they are selling.

This means that someone selling a laptop on Craigslist is not defined as a merchant because they are selling a single item in a one-off transaction. However, a company that refurbishes used laptops and resells them is merchant because they deal in these goods and have specialized knowledge of the sale of used laptops and the skills required to refurbish them.

Merchant Liability and Risk Allocation

The implied warranty against infringement primarily applies to merchants—individuals or companies regularly engaged in the sale of goods of the kind. These sellers are expected to have superior knowledge of the goods and their potential IP risks. Because of this presumption, courts often impose strict liability on merchants for infringement claims related to goods they sell, even when they did not manufacture the goods themselves.

For example, a U.S. distributor selling imported goods can be held liable under §2-312 if those goods infringe a U.S. patent, even if the manufacturer is overseas. This risk is particularly significant for non-U.S. suppliers who might assume that removing indemnity language from a contract shields them from liability — in reality, the implied warranty still applies unless explicitly disclaimed.

To balance this risk, many sellers include indemnity provisions or require upstream manufacturers to warrant non-infringement, shifting potential liability back through the supply chain.

When Does the Warranty of Infringement Not Apply to the Seller?

The guarantee of infringement does not apply if the buyer of the goods provides the seller with specifications or blueprints that the vendor uses to make the goods. In this situation, it is assumed that the buyer is better informed with regards to the origins of the specifications being supplied and will not hold the seller responsible for any claims against the goods.

In addition, the warranty of infringement does not extend to how the buyer will use the goods after they are sold. This means that, for example, if a seller manufactures components, they are only required to guarantee that the components themselves do not infringe any intellectual property. If the buyer subsequently uses them to create a product that infringes intellectual property, then the seller will not be held responsible for your buyer's later infringement.

Contractual Disclaimers and Modifications

While the warranty against infringement is implied by default, sellers can disclaim or limit this warranty under certain conditions. According to UCC §2-312(3), a disclaimer must be clear, conspicuous, and specifically mention “infringement” to be enforceable. General language such as “as is” or “with all faults” is insufficient to waive this particular warranty.

Additionally, parties often modify the warranty by including indemnification clauses that allocate responsibility for IP claims. For example, the buyer and seller may agree that the buyer will bear liability if they specify a particular design that leads to infringement, or the seller’s liability will be capped at a certain dollar amount. However, silence on this issue can leave sellers unexpectedly exposed to liability, as courts tend to interpret ambiguous contracts in favor of the buyer.

How Can Sellers Protect Themselves?

Sellers who want to ensure that they fall under the protection of the UCC and the warranty of infringement need to ensure that a few provisions are included writing a contract of sale. The first provision is to ensure that it is clearly stated that the seller is a merchant. This can be done with a simple provision like “The seller is a merchant who regularly deals in goods of the kind.”

When the seller supplies the design or specification of the goods, the contract should make it explicit that this has happened with the addition of a provision stating this. An example of such a provision is “The Buyer agrees to supply all designs and specification of the product. The seller will adhere to these designs.”

Best Practices for Limiting Infringement Liability

Sellers can adopt several proactive strategies to reduce exposure under a warranty against infringement:

  • Include explicit disclaimers: Clearly state in the sales contract that no warranty against infringement is provided, using unambiguous language referencing “infringement.”
  • Negotiate indemnity provisions: Require suppliers or manufacturers to indemnify the seller for any third-party IP claims related to the goods.
  • Obtain IP representations: Request written assurances from upstream providers that the goods do not infringe any known intellectual property rights.
  • Conduct IP due diligence: Perform patent and trademark searches to identify potential risks before manufacturing or importing products.
  • Tailor warranties to specific uses: Limit the warranty to particular uses of the product, excluding liability for unapproved or modified uses by the buyer.

Frequently Asked Questions

  1. What is a warranty against infringement?
    It’s an implied warranty under UCC §2-312 that guarantees the goods sold do not infringe on any third-party intellectual property rights.
  2. Can a seller disclaim the warranty?
    Yes, but the disclaimer must be explicit, conspicuous, and specifically mention “infringement” to be enforceable.
  3. Does the warranty apply if the buyer provides the design?
    Usually not. If the buyer provides the specifications, the seller is not responsible for infringement resulting from those designs.
  4. Are distributors or resellers liable for infringement claims?
    Yes. Merchants—including distributors and resellers—can still be liable under the implied warranty even if they did not manufacture the goods.
  5. How can sellers protect themselves?
    They can mitigate risk by including indemnity provisions, performing IP due diligence, obtaining upstream warranties, and limiting or disclaiming the warranty in the contract.

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