Patent Troll Liability in Client/ Agency Contracts

December 1, 2014

By Bill Duggan

ANA has just released the white paper, "Patent Troll Liability in Client/Agency Contracts."

Patent assertion entities (PAEs), sometimes referred to as patent trolls, are firms which have the sole business of buying up patents and then filing patent infringement claims against targeted companies, costing those compa­nies millions of dollars in fees in order to avoid paying even more to defend themselves in court. In the adver­tising space, patent trolls have been increasingly in the news. In order to more clearly understand how marketers currently handle the risks associated with patent infringement in their agency contracts, ANA members were surveyed. This survey, along with ongoing dialogue that the ANA has had with members, has helped provide the foundation for the following ANA recommendation:

The ANA recommends that clients generally not indemnify agencies for patent claims. Rather, agencies should assume the liability for their work product, including liability for patent infringement. Accordingly, client/agency contracts should include “indemnity clauses” which require that the agency step in and defend the client in the event of a patent infringement claim. It is recognized, however, that shared approaches to liability are gaining traction in the marketplace. ANA members are encouraged to consider whether a shared approach to liability makes sense in any of their agency relationships.

Plain and simple, agencies need to be thoughtful in what they pitch to clients and accountable for the work they create. Agencies cannot recommend ideas to clients and then put the client in the position of researching that such work does not infringe on patents. Agencies, in most cases, should have that responsibility.

The ANA survey results provide a clear benchmark for the industry. Currently, agencies are most likely to assume the risks associated with patent infringement. Close to half the respondents note that some of their contracts with agencies have a shared approach to liability. Among those respondents who changed the terms of agency contracts in the past year to address patent troll liability, the most cited reason for doing do was to share liability. Among those considering a change in the next year, shared liability is a key consideration. It is recognized that there are limited circumstances where a shared approach to liability makes sense.

ANA members would be well served to understand the threats of patent trolls and make sure that contracts with agencies are up to date. 

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