Will Your Commercial General Liability Policy Cover I.P. Litigation? (Part 1)

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A Commercial General Liability (CGL) policy typically includes coverage for "advertising injury." Included in advertising injury is usually "misappropriation of advertising ideas or style of doing business." Also included is infringement of "title or slogan." What types of intellectual property offenses fall within the advertising injury coverage continues to be litigated.

"Advertising" under a CGL policy is usually left undefined. However, the CGL policy typically requires that the offense be committed in "the course" of the insured's advertising activities. In the Ninth Circuit, advertising has included one-on-one solicitations, as well as group solicitations. Sentex Systems v. Hartford. California courts have referred to advertising as "action of calling something to the attention of the public especially by means of printed or broadcast paid announcements." Nichols v. Great American Ins. It may also include something as simple as "making representations to potential customers." Bank of the West v. Superior Court.

Patent Infringement
Interpreting the "infringement of title" provisions, a California court recently found an absence of coverage for patent infringement. Maxconn v. Truck Ins. Exchange. The court viewed the coverage provision as a reference to infringement of a legally protected name, appellation or designation. However, whether patent infringement was covered under an alternative theory of misappropriating advertising ideas or business styles was not addressed. Also, the court noted that infringement under 35 U.S.C. 271 includes "offers to sell," thereby making non-dispositive earlier decisions which found that infringement could not arise from advertising activities.

Following Maxconn, the Central District of California considered both coverage provisions but found no coverage for patent infringement. Homedics v. Cigna Fire.

However, the alternative theory not addressed in Maxconn has been addressed in the Northern District of California where coverage was found based on the insured's advertising of the infringing product. Everett Assoc. v. Transcontinental Ins. This decision preceded both Maxconn and Homedics. Specifically, the Northern District of California found the policy language ambiguous and that the insured had a reasonable expectation of coverage based on the "offers to sell" infringement language in 35 USC Section 271.

For inducement of patent infringement, California has addressed the issue in the context of the "misappropriation" and the "title or slogan" provisions." Mez Industries v. Pacific National. No coverage was found because Insurance Code Section 533 bars coverage for intentional acts, and inducement requires intent.

Subsequent to Mez Industries, the Ninth Circuit reached the same conclusion of no coverage for inducing patent infringement. Kemmer v. Mutual Service Casualty.

Trademark Infringement
Several years ago, a California appellate court found coverage for trademark infringement under the "misappropriation of advertising ideas or style of doing business" which was considered ambiguous by the court as ambiguous. Lebas Fashion v. ITT Hartford. Given the ambiguity, the court found there to be an objectively reasonable expectation that trademark infringement was a covered act.

Recently, the California Supreme Court has found no coverage for trademark infringement under the provision for infringement of "title or slogan." Palmer v. Truck Exchange. However, the policy at issue specifically excluded infringement of a registered trademark. In view of the exclusion, the Supreme Court explained that "title" under the policy only meant the name of a literary or artistic work. Thus, coverage only existed for infringement of a name of a literary or artistic work or a name that is also a slogan. Coverage did not exist for names used for marketing or advertising purposes. Importantly, the court explained that other decisions that broadly construed "title" were inapplicable since those policies did not contain a trademark exclusion clause.

Subsequent to Palmer, and for infringement of an unregistered trademark, an absence of coverage was again found by a California court. Aloha Pacific v. California Ins. The policy at issue contained a trademark infringement exclusion, but was not limited to registered trademarks.

In the federal courts, the Central District of California, as did the Lebas Fashion court, reached the conclusion of coverage being present for trademark infringement. Arnette v. ITT Hartford. In an unpublished opinion, the Ninth Circuit criticized Arnette and apparently suggested that coverage would not be afforded for trademark infringement.

Final Remarks
Court decisions continue to change, as well as the CGL policies themselves. A plaintiff considering a lawsuit based on I.P. claims should consider whether the causes of action should or should not be drafted to trigger insurance coverage for the prospective defendant. Likewise, and once an I.P. lawsuit has commenced, the defendant may wish to elicit discovery responses from the plaintiff to trigger insurance coverage.

Part 2 of this article will be in a subsequent Intellectual Property Law Bulletin and address advertising injury coverage for other I.P. claims such as trade dress infringement and copyright infringement.

 

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