Supplier Agreements Should Include Patent Litigation Protection

Anyone who uses patented technology can in theory be an infringer, and a considerable number of patent infringement cases are now being brought against non-tech companies. Use of a patented technology can result in liability even when only a part of the claimed invention is actually practiced, or not practiced at all.

One safeguard against this kind of litigation is including patent infringement indemnification terms in supply agreements involving any product or service that could be considered a basis for a patent suit. At minimum, seek language that current and future approved purchase/service orders are covered for indemnification under the master supply agreement, or else in the language of particular orders.

When a supplier provides a form agreement, make sure the terms include patent suit indemnification safeguards and don’t include fine print limiting the scope of coverage in situations where the customer modifies or uses the product in a manner not intended by the supplier.

Have a system for storing supply agreements for extended periods of time. Instruct responsible employees to ensure that addendums and specifications pertaining to the master agreement are easily accessible.

These suggestions are particularly important for small to medium-sized non-tech companies that do not anticipate patent suits because of the nature of their business, who may have little or no experience with patent lawsuits, or where a patent suit could severely impact the company’s operations.