Patent violation - retailer libility

[tkrose]

What is the name of your state? California

I own a retail website. I am trying to decide on one of 2 similar products manufactured by different companies (who seem to hate each other!).

BACKGROUND:
Company A created the first product of this kind and got a patent and FDA approval. They have since introduced an updated version - it is also marked with the original patent number.

Company B later came out with a similar product, got a patent for a particular feature and FDA approval.

Company B is warning us that Company A has made significant design changes and the product is no longer covered by the patent, therefore the patent marking is a violation.

If company B is correct, I understand there are some significant penalties for Company A. However, Company B is "warning" us that we would also incur penalties (up to $500 per unit) if we sell the product with the alleged mislabeled patent number.

MY QUESTION:
What is a retailer's liability if they sell another company's product that is LATER proven to have some patent violation? We like to be honest, so if something was proven, we would definitely discontinue selling the product.

Thanks for any thoughts you can share!

 

[divgradcurl]

Well, if you want to be completely technical:

"...whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent."

35 U.S.C. 271

The "sale" part is typically used to make liable people who import infringing products for sale, or who manufacture and sell their own infringing products -- I am unaware of any case law that shows a retailer being found liable for direct infringement by selling an infringing object purchased from another. However, if you are aware an item is infringing and sell it anyway, even if you are not directly infringing, you could still be found liable for contributory infringement.

All that said, I am not aware of any case law that has found a retailer liable for infringment, either direct or contributory, merely for selling an infringing product -- but it could happen. Even if infringement is not found, though, a patent holder could seek some sort of injunctive relief to keep the infringing product from being sold, which could result in having your inventory seized, for example.

The problem you have here is that B has informed you that they believe that A is infringing. If they are right, then you have been "noticed" of a potentially infringing activity, and therefore if for some reason you are found liable for infringement, the penalties would be much more severe.

If you are really need to sell one of these products, their are ways you could protect yourself. Probably the best way, is pick one or the other and require them in their contract to indemnify you against any infringement liability -- that puts them on the hook. You may also want to take the time to speak with a patent attorney, who may have more up-to-date or specific information on the liability of a retailer for selling and infringing product -- a few bucks spent with an attorney now may help save you later.

Finally, concerning marking, the statutes provide for a fine of up to $500 for the person who does the fraudulent marking, so unless you marked products yourselves, merely selling a fraudulently marked product should not expose you to any liability. See 35 U.S.C. 292 for the full statute.

Good luck. If you do decide to get in the middle of A and B, definitely talk with an attorney to make sure you protect yourself.

 

[tkrose]

divgradcurl,

Thank you for your thoughtful reply and the time you took to write it. That helps a great deal.

Is it possible to find out if a company is being investigated by the Federal Government for patent violations?

Thanks again - I really appreciate it.

 

[divgradcurl]

I'm not sure I understand your question. Typically, the federal government does not get involved with patent infringement, and only gets involved with patent "misuse" if there is a major antitrust issue involved. Generally, it is up to the entity accusing another of infringement or misuse to file a lawsuit against the infringer or misuser.

Lawsuits are public record, so, in pronciple, you should be able to find out if a particular company has been sued or is being sued. The problem, howver, is that there is not one single free web-based database that I am aware of that would make it easy to track down legal filings.