Q&As

Is there an implied term that developed or licensed software does not infringe a third party’s intellectual property rights?

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Published by a LexisNexis TMT expert
Last updated on 15/05/2017

The following TMT Q&A provides comprehensive and up to date legal information covering:

  • Is there an implied term that developed or licensed software does not infringe a third party’s intellectual property rights?
  • Statutory implied terms relevant to intellectual property infringement
  • Software: goods or services?
  • Implying terms under common law
  • Market practice: express non-infringement provisions

Is there an implied term that developed or licensed software does not infringe a third party’s intellectual property rights?

Generally, terms may only be implied into contracts governed by the laws of England and Wales:

  1. by statute, or

  2. where common law tests are successfully applied

Statutory implied terms relevant to intellectual property infringement

Section 12 of the Sale of Goods Act 1979 (SGA 1979) implies the following terms, among others and subject to some exceptions, into relevant contracts:

  1. goods are free, and will remain free until the time when the property is to pass, from any charge or encumbrance—SGA 1979, s 12(1)

  2. the buyer will enjoy quiet possession of the goods—SGA 1979, s 12(2)

Accordingly, a seller may be in breach of SGA 1979, s 12 if contrary third party property rights existed at the time of entering into contract or are subsequently enforced. See Microbeads v Vinhurst Road Markings, a patent case, which confirmed that both SGA 1979, ss 12(1) and 12(2) could be breached if there was a claim for intellectual property infringement by a third party in relation to goods supplied to another party.

The term implied under SGA 1979, s 12(2) as to quiet enjoyment is a warranty and not a condition (SGA 1979, s 12(5A)). The warranty is only breached when the third party enforces its rights against the buyer, at which point the buyer

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Key definition:
Implied term definition
What does Implied term mean?

A term which is imported into a contract, in addition to those expressly agreed by the parties. There are three broad categories of implied terms—those implied by statute, by common law and by fact.

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