Coverage for Intellectual Property Claims Under CGL Insurance Policies

on its face to allegations of solicitation of customers. since in sync's complaint alleged fdcc quarterly/spring 2008 which version of advertising injury coverage applies. as noted, coverage is much more to protection under patent and trade secret laws as well.25 id. at 198 (citing villa entrrs. mgmt., ltd v. fed. ins. co., 821 a.2d 1174, 1187 (n.j. super. t/ law productsbyplacingstunfencesignsongallagher'sproducts.infindingthatthedisplay copyright was always included as one of the enumerated offenses through the 1998 cgl finally, in some cases, the outcome has hinged up on the meaning of "infringement of policyholders, on the whole, have thecentralquestionaskedbycourtsinanalyzingtheissueofadvertisinginjury/causation i.e., misappropriating customer lists, or copying the design of another product?as with most ary or artistic work."21 offenses: the trend in cgl policies has been toward limitation of coverage for infringement of courseof"languagetofindadvertisingactivity. coverageforadvertisinginjuryfirstappearedincglpoliciesin1973bywayofen- out of an electronic bulletin board or chat room that the policyholder hosts, owns, or over the insured's claim must satisfy all three prongs of the test in order for the court to hold ing product as a direct patent infringement. the law is unsettled under the 1998 and earlier 13 1. the suit must have alleged a cognizable advertising injury; misappropriated via a former employee. in considering whether this was an advertising injury, and 15 specificallyexcludetrademarkinfringement,andasaresultmanypolicyholdershavebeen eugene t. rhee the1986formamendedthepriorendorsementwithachangeinthedefinitionof"ad- the 1976 broad form endorsement excluded coverage for "infringement of trademark, the biggest problem that the policyholder has with patent claims is with the issue of involve interpretation of pre-2001 cgl policies. again, as noted above, the 2001 revisions authorized use of another's name or product in the policyholder's e-mail address, domain circuitcourtofappealsupheldafindingofnocoverage,statingasfollows: v. the injuries alleged. ment. however, the exclusion does not apply to copyright if the infringement takes place successfulinpersuadingcourtstofindcoverageunderthe"advertisinginjury"provisionof the 2001 revisions are characterized primarily by new and broad exclusions. the 2001 whether coverage can be found or liability allegedly arising out of misappropriation of trade given the uncertainty of coverage for intellectual property infringements under cgl 10 and the "causal connection between the advertising injury and the advertising activity." it 4 which has come to be commonly referred to in case law and in legal treatises as one federal district court judge observed that the number of lawsuits brought in this area advertisingyourgoods,products,orservices...."consequently,courtshaveusedthe"inthe to trade secrets relate to customer lists or advertising strategies. in hayward v. centennial 14 secrets. however, it should be noted that the intellectual property exclusions contained in one of the insured's services; been unsuccessful in obtaining coverage under the advertising injury provisions of cgl the trial court granted centennial's motion for summary judgment and the appeals fdcc quarterly/spring 2008 representing both primary and excess insurance carriers id. at 748. ...title." in other words, what kind of "title" has to be infringed upon to trigger advertising wants to know whether her business has insurance coverage for these claims. priationofconfidentialcustomerlistscouldnotbeheldtofallwithinthepolicylanguage trade, or slogan." the new revision also excludes advertising injury coverage for website tendered defense to his insurance carrier, centennial, and centennial denied coverage. dorsement.in1986,theinsuranceservicesoffice,inc.("iso"),anentitywhichcompiles houbigant, the fragrance manufacturer, claimed that one of its the pre-1998 advertising injury policy text, have found coverage for trademark infringement and the advertising activity.6 injurycoverage?acaliforniacourtfoundthedefinitionof"title"tobe"thenameofaliter- be scrutinized closely--does the plaintiff claim injury as a result of "advertising" or "mar- in central mutual insurance co. v. stunfence, inc.,8 most of the litigation under "advertising injury" provisions of cgl policies pertaining of doing business" refers to a grouping of actionable conduct fairly well delineated becausethe2001isoformspecificallyexcludestradesecrets,itisnowdoubtful service mark, or trade name." however, as referenced above, the 1986 revisions did not 341 causation. courts uniformly reject arguments that the mere advertisement of an infringing advertising injury and the advertising activity itself. in "your advertisement." ered advertising. another source of litigation may be promotional material distributed at 3 the third circuit court ofappeals held that the term "title" includes sistrunk, anzelmo, hardy, maxwell & mcdaniel, p.c. he however, the 1998 revisions limited coverage to those offenses that took place "in your significantlyrestrictedcoverageforintellectualpropertyclaimsundercglpolicies. university and his j.d. in 2002 from paul m. herbert law intellectual property rights. the complaint alleging intellectual property infringement must steinberg,aninvestmentfirm,was 393 f.3d 1226 (11th cir. 2004). james r. warnot, jr. & daniel c. glazer, insurance coverage for intellectual property and cyberspace overthepasttwenty-fiveyears,countlesslawsuitshavebeenfiledbypolicyholders american motors insurance co.,7 of a competitor signs on one's own product did not constitute advertising, the trial judge all of these practice areas. he has extensive experience in coverage for intellectual property titles or slogans, they may also be symbols or emblems.17 d. infringement of copyright, title or slogan.2 sistrunk, anzelmo, hardy, maxwell & mcdaniel, p.c., which infringement, misappropriation of marketing ideas, and copyright infringement. your client discussion. in advance watch co. v. kemper national insurance co.,18 connection between the advertising activity and the resulting injury. therefore, many courts in the present action, we conclude that the reasonable expectation of these parties specially designed to cover these risks. b. trademarks and trade dress 20 competitorsfiledsuitclaimingthattheinsuredenteredaparticularproductmarketbyusing infringement, along with injury resulting from patent, trademark, and trade secret infringe- 346 iso form cg 00 01 07 98. what appears to have doomed hayward's claim was that there was very little concern- fdcc quarterly/spring 2008 cir. 1927). other words, the injury occurred not because of the policyholder's advertising, but because or device, or any combination thereof, adopted and used by a manufacturer or merchant to l. altman, callmann on unfair competition, trademarks and monopolies,�17:1(4thed.2002). coverage for patent infringement in connection with advertising is very remote. thefirstprongrequiresadeterminationofwhethertheinfringingpartywasengagedin vertisingasfollows: a. oral or written publication of material that slanders or libels a person or jury, or in the alternative, determining whether there was a causal connection between the one of the competitors 292 f. supp. 2d 1072 (n.d. ill. 2003). 1 7 misappropriatedtradesecretsinbringingconfidentialinformation,marketingplans,data, 193 f.3d 742 (3d cir. 1999). d. trade secrets finally, keep in mind that any attempt to invoke coverage under the advertising injury div. 2002)). 98 cal. rptr. 2d 753 (ct. app. 2000). which he exercises control. 22 is:whatcausedtheharmtotheoriginalplaintiff?wastheharmcausedbymisappropriation designers, and internet search, access, content, or service providers. also excluded is un- have used a similar analysis in determining whether there was a cognizable advertising in- iv. 18 the1998revisionalsodefined"advertisement"as: 2 keting" activities of your client? cgl policies should be scrutinized closely to determine although trademarks and service marks certainly may be trademarked for service-marked which some judges found coverage. name or metatag..." the fourth exclusion covers "personal and advertising injury" arising 343 c. copyright 24 unfair competition was not committed in the course of "advertising" the insured's goods or wrongful solicitation, not advertising, the complaint on its face absolved centennial of the as to coverage rests on the fact that "misappropriation of advertising ideas or style breachofcontract,breachoffiduciaryduty,andmisappropriationoftradesecrets.hayward of services of others and to identify the source of the trademark products or service marked. 345 tionships, misappropriating trade secrets, and misappropriating that company's client lists. 338 11 liability, 652 pli/lit 407, 409 (2001). is a member of the louisiana state bar association as well construction, products liability, retail employment matters, sued by a competitor for allegedly interfering with the original plaintiff's business rela- as a result of the 1998 and 2001 policy text revisions. for example, the 1986 revision pro- general civil litigation, insurance defense and commercial copyrightprotectstheexpressionofanideaaffixedinatangiblemedium.thecopy- revision excludes personal and advertising injury arising out of "copyright, patent, trademark, it does not, however, apply to "infringement, in your `advertisement,' of copyright, ii. the united states court of appeals for the fifth circuit. he the 2001 revisions formally acknowledged certain internet activities constituting ad- and publishes forms used by insurers, amended the cgl policy by moving this coverage his bachelor's degree from the university of alabama law policies for patent infringement claims. of advertising ideas, or was the true harm to the original plaintiff caused by other conduct, segments about your goods, products or services for the purpose of attracting cus- 337 the courts found only a duty to defend; they did not address actual coverage. it is reason- i. constituted a "litigation explosion."1 v. federal insurance co.22 trade secret, or other intellectual property rights."4 inthepolicies,andcourtswerefreetooffertheirowndefinitionsofadvertising,nomatter provisionofthepolicywillmostlikelyresultinaflatdenialofcoverage,oradeclaratory submitted by the authors on behalf of the fdcc intellectual property section. 430 f.3d 989 (9th cir. 2000). treatment of specific intellectual property claims sidney j. hardy the coverage test their cglpolicies for trademark infringement. policyholders argued that claims of trademark 3. there must have been some causal connection between the advertising injury a single customer was solicited and the court held that warnot, supra note 15. trademarks and service marks are devices used in connection with the sale or advertise- received his bachelor's degree in 1998 from louisiana state inotherwords,becausethepolicydidnotspecificallystatethatcoveragewouldbeprovided judgment sought by the insurer. most of the cases cited above involve decisions in which as the design of the traditional pepsi or coca-cola bottle. steinberg sought coverage under his state farm cgl policy, claiming that the offenses set in or slogan," the 1998 version provided coverage for "infringing upon another's copyright, for infringement of trademark, such infringement was not a covered offense. employerandjoinedacompetitor.hisformeremployer,insync,filedacomplaintalleging advertisement."themorerestrictivelanguagesignificantlyreducedthefringeareaswithin tions. during his career, he has tried jury cases in almost id. versionsofthecgl,butthe2001revisionsspecificallyexcludeclaimsforpersonaland in frog, switch & manufacturing co. v. travelers insurance co.,13 duty to defend hayward. how expansive or restrictive. 26 houbigant products.23 advertising injury arising out of patent rights. thus, the possibility of success in obtaining 12 many courts have confused prongs two and three, the "cognizable advertising injury" property claims under the "advertising injury" provision of the standard cgl policy. 374 f.3d 192 (3d cir. 2003). school in 1980. mr. hardy has represented clients in matters litigation. he is admitted to practice in all louisiana state the philosophy of the judge before whom the matter is pending. 6 frog switch,thecourtstatedasfollows:"atrademarkcanbeseenasan"advertisingidea": identify his goods and distinguish them from those manufacturers sold by others."16 productsatisfiesthecasualconnectionrequirement. id. at 1232. their defense were later disappointed when it was decided that there was no coverage for evolution of the policy language trial court's summary judgment in favor of state farm. this court found that the misappro- iso form cg 00 01 10 01. 340 into the policy itself. it provided coverage for "advertising injury" which was "caused by 25 vacy; invention in the united states for up to twenty years.15 eugene t. rhee is an associate with the law firm of mccranie, able to assume that some of the policyholders who prevailed in having the insurer assume commercial disputes, environmental claims, and class ac- thecompetitor'sproprietarytradesecrets,confidentialbusinessinformation,andtechnology 2. the infringing party must have engaged in advertising activity; in 1996, congress amended 35 u.s.c.a. 271(a) to include an "offer to sell" an infring- propriation of advertising ideas or style of doing business" was deleted and replaced by "the coverage for intellectual property the lanham act provides that the term "trademark" includes "any word, name, symbol conclusion 2. misappropriation of advertising ideas or style of doing business. "advertising," signs on a competitor's products did not.9 and customer and supplier identities to his new employer. in sync's complaint was limited 342 coverage for intellectual property fdcc quarterly/spring 2008 9 trade dress is the distinctive packaging, shape or overall appearance of a product, such organization or disparages a person's or organization's goods, products, or thetrialcourtdidnotagreewithmr.steinberg,andtheappellatecourtaffirmedthe coverage for intellectual property ofthepolicyholderfiledalawsuitallegingthatthepolicyholderhaddilutedthedistinctive- ment of products or services of a particular merchant to distinguish them from similar products of other conduct. conventions or trade shows. the 2001 cgl revisions exclude personal and advertising injury arising out of copyright 99 f.3d 795 (6th cir. 1996). tomers or supporters.3 eliminating the exclusion for trademark infringement. 1. infringement of copyright, title, or slogan; or other issues, the establishment of the causal connection more often than not depends upon the universe of what might be considered advertising has been considerably narrowed licensees had infringed upon houbigant's trademark by selling a "watered down" version of an offense committed in the course of advertising your goods, products, or services." "ad- the original plaintiff, gallagher, 5 17 are beyond the scope of this article; rather, the focus here will be on coverage for intellectual id. at 804. 21 alleged that the insured, stunfence, had infringed upon the overall appearance of gallagher's claims under cgl insurance policies however, the advance watch decision is the minority view. most courts, in considering center at louisiana state university. his practice focuses on competitor who claims to have been tortiously injured as a result of your client's trademark certainly may be argued that in order to have an advertising injury, there has to be a causal vertisinginjury"wasdefinedasfollows: thedefinitionof"title"wasgivenamuchbroaderinterpretationinhoubigant, inc. the determination of what is and what is not advertising is by its nature an inherently 339 coverage for intellectual property the court noted that "allegations of unfair competition or misappropriation have to involve or services for the purposes of attracting customers or supporters.5 "trademark and trade dress infringement."19 in state farm fire & casualty co. v. steinberg,10 rightofaworkincludesbooks,musicalcompositions,dramaticworks,films,graphicand a united states patent is a property right that grants the owner of the patent the power vertising injury," by deleting piracy and unfair competition as covered offenses and by also mail solicitations aimed at a certain segment of the population may or may not be consid- this section of this article will examine various intellectual property claims and the 1. "advertising injury" means injury arising out of one or more of the following policies, the best advice you can give your business clients is to purchase insurance products most of us have business clients who advertise their goods or services. suppose one as the federal and american bar associations. palmer v. truck ins. exchange, 988 p.2d 568 (cal. 1999). state farm fire & casualty co. v. steinburg, 393 f.3d 1226, 1123 (11th cir. 2004). use of another's advertising idea in your `advertisement.'" paragraph (d) of the covered of- 8 "misappropriation of advertising ideas or style of doing business."11 revision. nevertheless, there is very little case law concerning copyright infringement. iii. coverage for intellectual property ing "advertising" which was involved in in sync's claims against him. notedthatwhilearguablysomesignssuchasbillboardswouldfitthepolicy'sdefinitionof managing partner of the firm. medialiabilitypoliciesarespecificallydesignedtoprovidetailoredcoveragetocompa- day next week one of your clients calls and advises you that her business has been sued by a sculpture works, audio/visual works, sound recordings, and architectural works. software c. misappropriation of advertising ideas or style of doing business; or by case law, and does not refer to another, distinct grouping of actionable conduct programs are also protected by copyright law, although some software may also be entitled expansive under the 1986 version than under the later versions. has offices in metairie and covington, louisiana. he received nies in the business of publishing, broadcasting, and advertising. those specialized policies ...anoticethatisbroadcastorpublishedinthegeneralpublicorspecificmarket in adjudicating coverage disputes under the "advertising injury" provisions of cgl infringementpromptedcoverageundereitherorbothofthefollowingareas: introduction tising injury" provisions of their commercial general liability ("cgl") policies. in fact, 23 id. at 1226. itisawayofmakinggoodssothattheywillbeidentifiedwithaparticularsource."20 courtaffirmedthetrialcourt'saction.thecourtnotedthatinsyncallegedthathaywardhad an advertising idea, not just a non-advertising idea that is the subject of advertising."14 winklevoss consultants, inc. v. federal ins. co., 991 f. supp. 1024 (n.d.ill. 1998). a. patents one of houbigant's trade secrets to competitors and by using houbigant's name to sell non- insurance co.,26 fenses was also changed. instead of providing coverage for "infringement of copyright, title, advertisingactivity.priortothe1998cglrevisions,theterm"advertising"wasnotdefined courts, and all united sates district courts of louisiana and the frog, 193 f.3d at 749; see also northam warren corp. v. universal cosmetic co., 18 f.2d 774 (7th id. vided coverage for "advertising injury" caused by an offense committed in the course of iso form cg 00 01 11 86. 19 b. oral or written publication of material that violates a person's right of pri- in all stages of litigation. mr. hardy is currently serving as that the insurer has a duty to defend and/or indemnify its insured. fdcc quarterly/spring 2008 344 to exclude others from making, using, selling, and offering to sell a new, non-obvious useful ness of the competitor's trademark and therefore infringed upon its trademark. the sixth iso form cg 00 01 10 01. trade dress or slogan in your advertisement." material placed on the internet or on similar electronic means of communication; "any name, appellation, epithet, [or] word by which a product or service is known."24 to what extent does solicitation constitute advertising? in peerless lighting corp. v. in 1998, the cgl form underwent another revision. in this edition, the phrase "misap- treatment these claims have received by courts. most, if not all of the decisions referred to sidney j. hardy is a director in the law firm of mccranie, as a "misappropriation of an advertising idea or style of doing business." for example, in 15 u.s.c. �1127; shakespeare co. v. silstar corp. of am., 802 f. supp. 1386 (d.s.c. 1992). thedefinitionof"title"asitrelatestoinfringementhasalsobeenthesubjectofjudicial involving professional liability, transportation and trucking, factintensiveinquiry,anditwillundoubtedlybethesourceofcontinuedlitigation.direct regarding misappropriation of either "advertising ideas" or "style of doing business."12 16 polices,courtshaveadoptedathreeprongtest: regarding websites, only that part of a website that is about your goods, products services. in other words, "soliciting" and "advertising" were different activities. forth in the plaintiff's lawsuit constituted "infringement of copyright, title, or slogan" and/or mr. hayward, an employee of a san francisco area pre-press service, left his against their insurers seeking coverage for intellectual property claims under the "adver-