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Article 42 [Third party claims based on industrial or intellectual property]

(1) The seller must deliver goods which are free from any right [1] or claim [2] of a third party based on industrial property or intellectual property [3], of which at the time of the conclusion of the contract [5] the seller knew or could not have been unaware [4], provided that the right or claim is based on industrial property or intellectual property:

(a) under the law of the State where the goods will be resold or otherwise used, if it was contemplated [7] by the parties at the time of the conclusion of the contract that the goods would be resold or otherwise used in that State; or [6]

(b) in any other case, under the law of the State where the buyer has his place of business [8].

(2) The obligation of the seller under the preceding paragraph does not extend to cases where:

(a) at the time of the conclusion of the contract the buyer knew or could not have been unaware [9] of the right or claim; or

(b) the right or claim results from the seller's compliance with technical drawings, designs, formulae or other such specifications furnished [10] by the buyer.

[WORDS AND PHRASES, CONCEPTS

[COMMENTARY]

[1] [obligation to deliver goods free from third party rights or claims: territorial restriction]

It is a generally recognized obligation of the seller to deliver goods that are free from third party rights or claims. Since industrial property rights only have a limited scope of application in accordance with the principle of territoriality, it is justified to restrict this obligation in the case of international sales contracts. Such restriction is made here in respect to the time (note 5) and the place (note 6) as [page 167] well as with regard to the knowledge of the seller (note 9) and to specific demands of the buyer (note 10).

[2] [goods free from third party rights or claims]

Concerning claims and their relationship to rights compare note 4 of Article 41. Also under Article 52 of ULIS it was sufficient for a third party to make a claim, irrespective of whether that party actually had the right to do so. (Compare the respective decisions in Schlechtriem/Magnus, 332 and 402.) The seller's responsibility is restricted in dealing with those third party claims based on industrial or other intellectual property of which the seller knew or of which he could not have been unaware when the contract was concluded.

[3] [industrial property or intellectual property rights or claims]

While one used to talk mostly of industrial property rights, today the term intellectual property is gaining ever more acceptance. It is used to denote patents, registered designs, trade marks, models, denomination of origin, copyrights, equipment and company names. Hence the notion "intellectual property" is more extensive than the notion "industrial property".

Schlechtriem (64) believes that the existence of intellectual property rights of third parties constitutes a special category of breach of contract that is closer to a lack of conformity than to a genuine defect in title. As in the seller's obligation with regard to the quality of the goods, it generally depends here on where and how the goods are to be used according to the contract.

[4] [of which seller knew or could not have been unaware: seller's obligation to conduct research]

The seller is obligated to conduct research (e.g. regarding the patent situation). Schlechtriem (65) agrees referring to the Secretariat's commentary according to which the seller would be responsible whenever the property rights in question were made public. According to Honnold (290), it would be in the seller's very interest to conduct research. Prager (166 fol), however, holds that there is no such obligation of the seller. This would mean that the seller could restrict his responsibility following the motto, "What the eye does not see the heart cannot grieve over."

Huber (502 fol) interprets the wording "knew or could not have been unaware" in such a way that the seller's responsibility would reduce itself to his maliciously keeping silence with regard to third party rights (critical remarks by Welser/Doralt, 115, and Schlechtriem, 65).

Subparas. (a) and (b) of para. 1 stipulate that the seller does not have to conduct research worldwide (which he could not do anyway). In conducting such research the seller will establish rights but hardly any unfounded claims. [page 168]

[5] [knew or could not have been unaware at the time of the conclusion of the contract]

The seller's responsibility requires that he knew of the rights or claims of third parties when the contract was concluded. Between the time of the conclusion of the contract and the date of delivery third parties could acquire rights that the seller could not have taken into consideration. Prager (151) construes here a knowledge of the seller at the time of delivery, which is contrary to the exact wording of the CISG.

[6] [seller's responsibility always applies to only one country]

The seller's responsibility to deliver goods which are free from third party rights or claims based on industrial property or other intellectual property rights always applies to only one country, either the country for which the goods were destined the conclusion of the contract or the country of the buyer.

Honnold (289) considers it possible, mistakenly, we believe, that for specific goods a patent may be registered in the seller's country or in a third country, and claims may be asserted in the buyer's country where those goods are used, but where there is no such patent. And the claims may be recognized by the courts of the buyer's country "based on rules of private international law or on a treaty providing for the international recognition of patent rights." This, however, would contradict the exclusively territorial effect of a patent.

(If, by contrast, a trademark is registered with WIPO it will consequently be protected in all Member States of the Organization, compare Handbuch 1, 123.)

Lüderitz (Freiburg, 187) doubts whether, given the international agreements dominating the scene, the territorial restriction of Article 42 will have the practical effect of freeing from liability in individual cases.

[7] [State where goods will be resold or otherwise used in contemplation of the parties]

In this event, no direct contractual agreement is called for. Contemplation by the parties means, however, that not only the buyer but also the seller has taken that possibility into account.

[8] [law of the State where the buyer has his place of business]

In most cases this will be the country where the goods were a priori intended to be used. Here account will have to be taken of the fact that international sales contracts frequently contain clauses prohibiting re-export of the goods by which the seller can protect himself against claims from non-contemplated countries. [page 169]

[9] [buyer knew or could not have been unaware: contrast with third party rights relating to title]

In contrast to third party rights relating to title, which need the agreement of the buyer (compare Article 41, note 3) in order to free the seller from liability, it is sufficient here that the buyer knows or has to be aware of third party rights or claims. It is unclear what care should be demanded from the buyer. It may be asking too much that he inform himself of the property rights situation in the country of destination. Honnold (292), therefore, attaches little importance to that restriction. (Since it is the seller, and not the buyer, who under the wording in para. 1 is obligated to carry out research, it is inferred here that generally the seller and not the buyer is responsible for the delivery of goods that are free from third party rights or claims).

There are, however, some contracts in which it is agreed that the buyer has to conduct the required research and to inform the seller thereof.

[10] [technical specifications provided by buyer]

If the buyer himself has provided the technical specifications for the manufacture of the goods, it is assumed that he has sufficient knowledge to correctly judge the intellectual property rights situation in his country. If the seller, however, knows that following the buyer's instructions he will infringe upon third party rights or claims, he has to notify the buyer (this is deduced from the general rules of good faith, compare Article 7, para.1). He does not, however, have an express obligation to conduct relevant research. [page 170]

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