You’ve been sued for infringement. Or, you’ve sued and discovered that the defendant has no money. Either way, the labyrinthine world of insurance coverage awaits you. Unfortunately, courts are far from unanimous about coverage for many intellectual property claims, but there are some general principles.
Under a standard Commercial General Liability ("CGL") policy, "advertising injury" coverage is most frequently implicated by a business tort or IP claim. It is "injury arising out of one or more of the following offenses: (a) oral or written publication of material that slanders or libels a person or organization’s goods, products, or services; (b) oral or written publication of material that violates a person’s right of privacy; (c) misappropriation of advertising ideas or styles of doing business; or (d) infringement of copyright, title or slogan."
While copyright claims are expressly covered by the definition, coverage for other intellectual property claims—trademark, trade dress, patent—is left to interpretation of the pleadings, arguments about the nature of the claim, and state law. The dialogue seems to center on a few points. The injury must "arise out of" the "advertising." Most courts hold that it is not enough that an injury occurred and that advertising was involved. As one court said, "there must be a nexus between the ground of asserted liability and the insured’s advertising activities." A more significant area of dialogue concerns efforts to fit the claim under the policy definition’s use of words like "title" or "ideas." Patent claims are the most difficult to bring under advertising injury coverage, and there are the inevitable exclusions to deal with. The key here is to read the policy carefully and be prepared to discuss coverage in light of the facts pleaded in the lawsuit and the nature of the legal claim asserted. To add to the confusion, coverage may vary by state. The claim may be pending in one state, but coverage will likely be governed by the law of the state where the policy was issued.
The best policy is not to take coverage for granted. Any business at risk for intellectual property claims should consider insurance review an important part of its business plan. If a suit is filed, prompt notice to the carrier is not only required by the policy, it makes good business sense. The earlier a claim is reported, the earlier coverage issues can be resolved.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
