Sunday, December 30, 2012

Intellectual Property Infringement Remedies

Frequently there may be a number of remedies for intellectual property infringement that get negotiated in addition to the intellectual property infringement.
a. Obtain the right the use Procure a license to use the Intellectual Property.
b. Modify their product or service so it is non-infringing.
c. Replace the product or service with non-infringing products or service.
d. Allow cancellation of open orders without liability.
e. Refund the amount paid for any all inventories of infringing product.

The key issue in negotiating these remedies is cost. For the supplier, the lower the remedy they have to provide on the list normally represent a lower cost to them. As such they may want the right to pick which remedy they want or they may want to limit their potential cost further by placing a limit on their liability or decreasing the amount they have to pay. For example, they may want to pay a refund on a depreciated basis taking into account the buyer’s use of the item. For the buyer the lower the remedy is on the list the higher the buyer’s potential cost. Obtaining the right to use the infringing item costs the buyer nothing. Modifying the product or service, even if the supplier came to the buyer or buyer’s customers location, has a cost in that you will lose the use of the item while it is being modified. If it needed to be returned for rework the costs go up substantially. Replacing a product or service with a non-infringing one can have a cost, especially if you had the item integrated with other products or software which now need to be compatible with the new item. The ability to cancel open orders without liability can have a cost as you purchased the item for a specific need and now that need may not be met or it could take some time and have losses as a result. For example it you had a single sourced item that was determined to be infringing cancellation doesn’t provide you with the product or service you need and it could require you to re-design your product to use another company’s product. Providing you with a full refund of the price you paid may not make you whole, especially if you invested money to integrate that product. For example, if you license a piece of software and then developed additional software to fully integrate it into your systems and have it play with other software, getting a refund of the license price doesn’t compensate you for those other investments.

As a buyer if you weren’t the cause for the infringement, why should you be forced to pay more because of it? As a buyer, you want to either limit the remedies to only those that are acceptable to you or better yet, require the supplier to perform the first remedy they can perform. I’ve seen language that said that the “Supplier shall provide first of the following remedies that is practicable. "Practicable" means able to be done, used or put into practice successfully). In establishing that, the supplier would need to be able to show that what are higher cost remedies for them couldn’t be done before moving down the list to provide another remedy that may have a cost for the buyer.