The California Uniform Commercial Code (UCC) discusses the default rules that govern the rights and responsibilities of buyers and sellers of goods. §2-312(3) states that “unless otherwise agreed a seller who is a merchant regularly dealing goods of the kind warrant that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to a seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.”
This section of the UCC explains that merchants who regularly deal in a particular type of good warrants that those goods are delivered free of a rightful claim of infringement or the like. As such, if I sold my Yakima bike rack on ebay, the bike rack does not come with a warranty since I am not a merchant of bike racks. However, even if I am a merchant who deals in bike racks, the warranty applies only to rightful claims. The section shifts the risk of infringement upon the buyer if the buyer furnishes specifications (e.g., custom cars, custom machines, etc.) to which the seller must build the product to the extent that the infringement arises out of seller’s compliance with the buyer furnished specification. The buyer and seller can always contract around this default provisions.
In Pacific Sunwear of California, Inc. v Olaes Enterprises, Inc. (Cal. App. 4th 2008), a Court of Appeals of California interpreted section 3 of UCC § 2.312 to determine when a claim is a “rightful claim” which would then trigger the warranty by the merchant. The Court held that the all claims of infringement that have any significant adverse effect on the buyer’s ability to make use of the purchased goods are rightful claims, unless the claim is frivolous and completely devoid of merit. The standard set forth by the Court of Appeals appears to be low since the warranty attaches to non-frivolous claims.