Will Your Commercial General Liability Policy Cover I.P. Litigation? (Part 2)

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Part 1 of this article addressed whether your Commercial General Liability (CGL) policy provided coverage for "advertising injury" resulting from patent infringement and trademark infringement. Part 2 explores the possibility of coverage for trade dress infringement, copyright infringement, and trade secret theft.

Trade Dress Infringement
As described in Part 1 of this article, "advertising injury" is often defined to include the "misappropriation of advertising ideas or style of doing business."

Trade dress has been described by the Ninth Circuit as the total image of a product and may include features such as size, shape, color, texture, and graphics. International Jensen v. Metrosound. One limitation, however, is that the feature must be non-functional for protection. Disc Golf Assoc. v. Champion Discs. Nevertheless, and at least in the Central District of California, the court considers trade dress to be a style of doing business. Dogloo Inc. v Northern Ins. Co. Therefore, coverage can exist under your CGL policy.

In California, the Court of Appeals has strongly suggested, but has not directly held, that trade dress infringement is a covered offense. In Lebas Fashion Imports v. ITT Hartford, the court indicated that business styles have been protected under trademark law, while citing to the U.S. Supreme Court trade dress decision in Two Pesos v. Taco Cabana. More recently, the court in Peerless Lighting v. American Motorist assumed that trade dress was a covered offense and relied upon Lebas.

Copyright Infringement
Coverage for "infringement of copyright" is expressly provided in CGL policies. Nevertheless, insurers can attempt to exclude coverage by arguing that that the infringement did not occur during the course of an advertising activity. Such was the situation in the California Court of Appeal case in Ziman v. Fireman's Fund wherein the display of a copyrighted painting did not occur in the course of advertising.

Trade Secret Theft
The Ninth Circuit has found coverage for trade secret theft, particularly where the misappropriated information related to marketing and sales. Sentex Systems v. Hartford. Such a situation is different from where the advertising activity does not disclose any trade secrets and, therefore, coverage does not exist. In other words, the advertising activity must cause the injury, and not merely expose it. Monarch v. National Casualty.

California courts, on the other hand, appear to be relatively quiet on the issue.

Final Thoughts
While many similarities exist among CGL policies, your particular CGL policy may have peculiarities. A defendant - whether actual or potential - may best be served by an early examination of policies that may afford coverage, as well as an early tender of defense to the involved carriers. Because of continuing court decisions on coverage and specific factual scenarios, what is true about coverages today may not be true tomorrow.

 

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