Intellectual property (“IP”) infringement is a significant risk that companies face today. Those infringement claims include patent infringement, trademark or trade dress infringement, copyright infringement, trade secret misappropriation, unfair competition, to name a few. When a company is sued for an IP infringement claim, the cost to defend the claim can be very expensive. Insurance coverage may be available. The company should review its Comprehensive General Liability policies to see if the “advertising” injury coverage applies. In many policies, “Advertising Injury” is defined as (1) oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; (2) oral or written publication of material that violates a person’s right of privacy; (3) the user of another’s idea in your advertisement; and (4) infringing upon another’s copyright, trade dress, or slogan in your advertisement.” While these policies also contain a specific exclusion for “Personal Injury and Advertising Injury” arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. There is a carve back to the exclusion for “advertisement” of copyright, trade dress or slogan.
The advertising injury language in the policy may cover liabilities arising from allegations of IP infringement. For instance, several courts have held that insurance companies owe a duty to defend claims of trademark and trade dress infringement under the advertising injury provision. Some courts have also found, under certain circumstances, that there is coverage for patent infringement claims under particular fact patterns. In Hyundai Motor America v. National Union Fire Insur. Co. of Pittsburgh, PA, 600 F.3d 1092 (9th Cir. 2010), Orion IP, LLC sued Hyundai claiming that Hyundai infringed its patent by using a computerized method on the Hyundai website to “build your own car”. Hyundai sued its insurance carriers for coverage. The court concluded that Hyundai’s website constituted an “advertisement”. It held that the offense could constitute a misappropriation of an advertising idea – a covered offense under the policy – if the patent could reasonably be considered to cover an advertising idea. The court noted that patent infringement may constitute an advertising injury “where an entity uses an advertising technique that is itself patented.” See also Amazon.com International, Inc. v. American Dynasty Surplus Lines, Insurance Co., 120 Wash. App. 610 (2004) (Amazon.com’s use of music preview technology on its website is an “advertising technique”); and Dish Network Corporation v. Arch Specialty Insurance Company, 659 F.3d 1010 (10th Cir. 2011)(the patented means of conveying advertising content was “advertising injury”).
When faced with an IP infringement case, a company should carefully review its insurance policies to evaluate whether there may be coverage. The particular facts of each IP infringement case will significantly affect the evaluation of whether there is coverage. If coverage is found, this could save the company thousands of dollars in litigation costs.