While the concept of third-party property right is known to all legal systems, there are many different intellectual property rights in different legal systems. Furthermore, there is generally a territorial limitation to their scope of protection. Thus, the seller cannot be expected to guarantee worldwide freedom from intellectual property rights.

Article 42 CISG provides a much more restricted protection against encumbrance with intellectual property rights as it contains a territorial restriction as well as the requirement of knowledge on the part of the seller.

The buyer must prove that a third party asserted intellectual property rights relating to the goods delivered by the seller. It is, however, irrelevant whether these rights actually existed.

(a) The primary restriction on the seller’s liability is a territorial one. The seller is only liable for freedom from thirdparty intellectual property rights in the State where the goods will be resold or otherwise used and only if this was contemplated by the parties at the time of the conclusion of the contract. If there is no such contemplation, freedom from intellectual property rights must only be guaranteed in the State of the buyer’s place of business.

(b) As explained above (Q 42-1), the seller cannot be held liable worldwide because some intellectual property right of some third party may always exist in some country. In essence, this restriction aims at drawing the line between the sphere of risk of the buyer and that of the seller.

Requiring knowledge on the part of the seller ensures that the seller cannot be held liable for claims that even an investigation may not reveal. This is primarily true for non-registered third-party intellectual property rights.

They should fall under Article 42 CISG (see A 42-1, Rule 3(c)). Like other intellectual property rights, personality rights do not necessarily pertain to specific goods. Furthermore, worldwide liability for infringements of personality rights based on Article 41 CISG would be unjust, as the level of protection for personality varies significantly between different states.

Yes, there should be no distinction between ‘frivolous’ and ‘non-frivolous’ claims (see A 42-1, Rule 5). Drawing a line between these two situations is difficult. Even if a claim is deemed ‘frivolous’, the seller is generally in a better position than the buyer to contest such a claim without difficulty or great delay. However, an exception should apply when the buyer and the third party are colluding.

Yes, use in Art. 42 CISG also includes transit (see A 42-1, Rule 7). Potential customs measures based on IP rights like confiscation, destruction, or stoppage can seriously impede the use of goods. The contemplation requirement for the state of use and the exemption for cases where the buyer has (constructive) knowledge of the IP right in question provide sufficient protection.

Yes, they can (see A 42-1, Rule 13 and A 46-1, Rule 2). While the heading of Chapter II, Section II distinguishes between conformity of the goods and third-party claims, and Articles 46(2), (3), and 50 CISG explicitly reference conformity only, there are good reasons to apply them to third-party claims as well. Regarding Article 42 CISG, the structural similarity to Article 35 supports this approach, as both require that a particular purpose/ specific state of reselling or use be made known/ contemplated and exclude liability in cases of (constructive) knowledge. In addition, the buyer should be allowed to request substitute goods in cases of third-party claims only in case of fundamental breach (Article 46(3) CISG), not in case of ordinary breaches based on Article 46(1) CISG. If there is no fundamental breach, the buyer can request repair (Article 46(2) CISG) by the seller paying the third-party for an exemption. Last, Article 44 CISG indicates that price reduction may remain available even in cases of Articles 41 and 2 CISG.