Liability Management: Intellectual Property Rights-related Recourse Claims

• Jurisdiction: European Union
• Law Firm: Schoenherr Attorneys at Law
• Subject Matter: Consumer Protection, Intellectual Property, Copyright, Dodd-Frank, Consumer Protection Act
• Author: Mr Ventsislav Tomov
• Published date: 28 February 2023

This article reviews certain measures aimed at optimising the liability of consumer goods producers and supply chain actors in business-to-business transactions. Although the legislation that provoked these thoughts and interpretations is consumer-protection legislation, this review will not address business-to-consumer liability issues.

The relatively new Directive (EU) 219/771 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the sale of goods (amending Regulation (EU) 2017/2394 and Directive 2009/22/EC, and repealing Directive 1999/44/EC ("SGD")), has shifted the spotlight onto the legal defects of goods and the legal consequences related to such defects. In contrast, the usual legislative approach until now was for consumer-protection legislation to cover mainly material defects, where legal defects had been left to the rules of the respective local general civil law.

Already in paragraph 35 of its preamble, the SGD states that "Conformity should cover material defects as well as legal defects." In addition, the EU legislator pays special attention to legal defects related to violation of intellectual property rights ("IPR"), by confirming in the same paragraph that "Restrictions resulting from a violation of third-party rights, in particular intellectual property rights, could prevent or limit the use of the goods in accordance with the contract." Moreover, the SGD provides for identical legal consequences for both material and legal defects, by stipulating that "Member States should ensure that in such cases the consumer is entitled to remedies for the lack of conformity as set out in this Directive, unless national law provides for the nullity of the contract or for its rescission in such cases."

Developing the above principles, as set out still in the preamble, Article 9 SGD entitled "Third-party rights" provides that "Where a restriction resulting from a violation of any right of a third party, in particular intellectual property rights, prevents or limits the use of the goods in accordance with Articles 6 and 7, Member States shall ensure that the consumer is entitled for the remedies for the lack of conformity provided for in Article 13, unless national law provides for nullity or rescission of the contract in such cases."

Consider the following example: A consumer bought some goods from a seller, but already in the process of producing the goods third-party IPR were violated. The holder of...