Patent Infringement Indemnification: Do You Have It?

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Patent Infringement Indemnification: Do You Have It?

Last week, a major cannabis brand was sued for patent infringement by Geographic Location Innovations (“GLI”) in Colorado District Court. The complaint alleges that GLI owns the ‘285 patent entitled “Apparatus, System, and Method for Remote Entry, Storing and Sharing of Addresses for a Location Information Device,” which a user can use to request an address, e.g. the address for a business from a server. The server determines the requested address and transmits it to the user. The system can also determine routing to the business address based at least in part on the location of the user.

The defendant’s website has a similar store locator system that GLI claims is in violation of the ‘285 patent. A user can enter an address and a list of the closest retail locations will be displayed on the website. The website also loads navigation when the user requests directions. If you read this and think, “Wow, most of the retail websites I’ve accessed lately have this feature,” you are absolutely right. GLI has been busy – our search of the federal courts found that GLI has filed 49 lawsuits since 2016, 11 of which are pending. And, of course, it’s worth noting that this trend of patent infringement litigation will become increasingly important in the industry as players focus on their online presence.

The real lesson I can learn from reviewing this lawsuit is: Do you have any intellectual property protection? Most of our clients are visionaries who create and execute their business plans, build business relationships, etc. They also build their online presence, but the actual work of creating a website is often outsourced to web developers. In such situations it is important not to gloss over the compensation provisions of the agreement.

Some developers, knowing that intellectual property trolls are on the rise, vigorously refuse to agree to any compensation. These developers feel that they are only building what the customer requests and therefore the customer should bear the burden of potential patent infringement. However, if the developer suggests features or uses templates or tools of their own accord, full intellectual property compensation is likely appropriate and should be combated (or at least a premium should be paid for it). As every situation is different, your arguments for partial to full compensation may change, but in every case the risks and benefits that can result from this typical “boilerplate” rule must be weighed.

As you can see from the warning above, having adequate indemnification clauses can be very useful for you. Otherwise, if you find yourself in a legal dispute over something over which you had little or no control, you could be holding the bag for someone else’s fault. Do not rely on your web developer for legal advice. Our intellectual property team has seen it all and is here to help.

For earlier articles on the importance of compensation provisions in other contexts see: