Copyright Infringement Indemnification – Mid Continent Casualty Company vs. Kipp Flores Architects.
Our firm can help Plaintiff's and Defendants in copyright infringement matters. In some cases, insurance may have to pick up the tab for wrongful conduct where an “advertising injury” is involved. But just what does that mean? This blog deals with one case involving an architecture firm (Kipp Flores Architects – “KSA”) suing a builder for using its designs to build houses when only some of the designs were licensed, while others were not. The insurance company did not want to pay the infringement bill and filed a declaratory relief action against the architecture company arguing that it had no duty to defend the builder (Hallmark Design Homes in Houston Texas) because it did not qualify as an “advertising injury” under the terms of the insurance policy with builder.
Can architecture design plans be copyrighted?
Obviously that is a loaded question since we are talking about a copyright infringement case dealing with architect plans. But yes, design plans are a “creative work of authorship fixed in a tangible medium of expression” which qualifies for copyright protection.
Sample quotes from the case
- re of the case – In its Second Amended Complaint, KFA (the architect) specifically asserted: “Defendants have created, published and used non-pictorial depictions of structures based on KFA's Copyrighted Works in promotional and advertising materials. Defendants have published and used these infringing materials in the course of advertising their infringing structures. Furthermore, defendants have used the structures themselves to advertise their infringing structures. These infringing advertising activities have resulted in the sales of infringing structures described above. Furthermore, these infringing advertising activities, and the resulting infringing sales, are and have been a substantial factor in the value of any infringing structures that defendants have not yet sold, and the prices that buyers would be willing to pay for such structures.” 2. Hallmark seeks to file for bankruptcy: “Hallmark filed for bankruptcy before trial, but the trial went forward because Hallmark was potentially covered by the Mid–Continent policies at issue in this action. The jury returned a verdict in favor of KFA on September 12, 2012, finding that Hallmark had infringed all 11 of KFA's designs and finding the amount of profit attributable to the infringement. The district court entered a final judgment on October 4, 2012, establishing that Hallmark had infringed KFA's.”
3. District Court enters whopping 3.2 million dollar judgment: “The district court entered a final judgment on October 4, 2012, establishing that Hallmark had infringed KFA's copyrights and allowing KFA an unsecured claim in Hallmark's bankruptcy in the amount of $3,231,084 plus taxable costs of $8,604.40. The Fifth Circuit affirmed Mid-Continent Cas. Co. v. Kipp Flores Architects, L.L.C., 602 F. App'x 985, 988 (5th Cir. 2015).”
4. Insurance company files a declaratory action regarding “advertising injury” and duty to defend
“On January 23, 2012, Mid–Continent filed this action seeking a declaratory judgment that it had no duty to indemnify under the policies it issued to Hallmark. The policies, discussed in detail below, generally exclude coverage for copyright infringement, but they exempt from that exclusion—i.e., cover—an “advertising injury” arising out of infringement in Hallmark's “advertisement,” as defined in the policies. The policies also provide that the holder of a judgment against Hallmark may recover under the policies. Mid–Continent filed a motion for summary judgment, seeking a judgment that the policies do not provide coverage for the judgment of copyright infringement for a number of reasons. Most notably, Mid–Continent argued that the prior judgment was not for a covered “advertising injury” because the infringement did not take place in an “advertisement” as defined in the policies.”
5. Language of the insurance policy:Policy Language Five successive one-year policies were in effect from May 28, 2004 to May 28, 2009, but the relevant language is the same in each. Under COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY, the policies provide: a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal and advertising injury” to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or “suit” that may result…. The policies define “personal and advertising injury” as “injury arising out of one or more of the following offenses: … infringing upon another's copyright, trade dress or slogan in your ‘advertisement. Section V.1 of the policies defines “advertisement” as follows: 1. “Advertisement” means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition: a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and b. Regarding web-sites, only that part of a web-site that is about your goods, products or services for the purpose of attracting customers or supporters is considered an advertisement.
At the end of the day, the Court said the insurance company had to cover the claim of the builder. They affirmed the lower court decision. Click here for more information about insurance advertising injury.
Contact an architect infringement law firm
We can help architects, engineers and designers with copyrighting, protecting, and licensing their plans. We can also help both Plaintiffs and Defendants in disputes (including arbitration, mediation and litigation) involving architectural designs, maps, technical drawings, music, photography, literary works, computer software, and other protected works. We also have helped many architect, engineers and designers in software audits with companies like CNC Mastercam, Solidworks, Siemens, Microsoft, Business Software Alliance and Autodesk. For more information about our services call (877) 276-5084. Unlike most law firms, we offer low (predictable) flat rate fees for most non-litigation cases.