Will insurance cover my intellectual property infringement case as a "advertising injury?"
Many times during an intellectual property infringement case (whether in a demand letter or after a federal court copyright case is filed), Defendants and potential defendants trying to settle their cases will look to their insurance policies to see if they have coverage (ex. a general liability insurance policy) or a "cyber" insurance policy. Usually, whether coverage will be provided by your insurance company depends on the actual language of the policy and how "advertising injury" is defined and what the EXCLUSIONS are. If an insurer has a "Duty to Defend" their failure to defend can lead to a lawsuit for bad faith insurance. We can help persons and companies analyze their policies and see if a "tender" letter should be sent to the insurance company. If they fail to defend when required, we can sue them for insurance bad faith if within our jurisdiction if we feel it is an appropriate case. Here is sample language from one policy I recently review. I have highlighted and added a question or two.
Sample "Advertising Injury" Insurance Language
COVERAGE B – PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
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. But:
The amount we will pay for damages is limited as described in Section III – Limits Of Insurance; and
Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments – Coverages A and B.
This insurance applies to "personal and advertising injury" caused by an offense arising out of your business but only if the offense was committed in the "coverage territory" during the policy period.
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This insurance does not apply to:
a. Knowing Violation Of Rights Of Another
"Personal and advertising injury" caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict "personal and advertising injury".
b. Material Published With Knowledge Of Falsity
"Personal and advertising injury" arising out of oral or written publication, in any manner, of material, if done by or at the direction of the insured with knowledge of its falsity.
c. Material Published Prior To Policy Period
"Personal and advertising injury" arising out of oral or written publication, in any manner, of material whose first publication took place before the beginning of the policy period.
d. Criminal Acts
"Personal and advertising injury" arising out of a criminal act committed by or at the direction of the insured.
e. Contractual Liability
"Personal and advertising injury" for which the insured has assumed liability in a contract or agreement. This exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement.
f. Breach Of Contract
"Personal and advertising injury" arising out of a breach of contract, except an implied contract to use another's advertising idea in your "advertisement".
g. Quality Or Performance Of Goods – Failure To Conform To Statements
"Personal and advertising injury" arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your "advertisement". (query - were there any statements of quality such as "this is an iPhone" when in fact it is not, it is a counterfeit)
h. Wrong Description Of Prices
"Personal and advertising injury" arising out of the wrong description of the price of goods, products or services stated in your "advertisement".
i. Infringement Of Copyright, Patent, Trademark Or Trade Secret
"Personal and advertising injury" arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in your "advertisement".
However, this exclusion does not apply to infringement, in your "advertisement", of copyright, trade dress or slogan.
Insureds In Media And Internet Type Businesses
"Personal and advertising injury" committed by an insured whose business is:
(1) Advertising, broadcasting, publishing or telecasting;
(2) Designing or determining content of web sites for others; or
(3) An Internet search, access, content or service provider.
However, this exclusion does not apply to Paragraphs 14.a., b. and c. of "personal and advertising injury" under the Definitions section.
For the purposes of this exclusion, the placing of frames, borders or links, or advertising, for you or others anywhere on the Internet, is not by itself, considered the business of advertising, broadcasting, publishing or telecasting.
Electronic Chatrooms Or Bulletin Boards
"Personal and advertising injury" arising out of an electronic chatroom or bulletin board the insured hosts, owns, or over which the insured exercises control.
Unauthorized Use Of Another's Name Or Product
"Personal and advertising injury" arising out of the unauthorized use of another's name or product in your e-mail address, domain name or metatag, or any other similar tactics to mislead another's potential customers.
"Personal and advertising injury" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants" at any time.
Any loss, cost or expense arising out of any:
(1) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, "pollutants"; or
(2) Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning
up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, "pollutants".
CG 00 01 04 13 © Insurance Services Office, Inc., 2012 Page 7 of 16
"Personal and advertising injury", however, caused, arising, directly or indirectly, out of:
(1) War, including undeclared or civil war;
(2) Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or
(3) Insurrection, rebellion, revolution, usurped power, or action taken by a governmental authority in hindering or defending against any of these.
Recording And Distribution Of Material Or Information In Violation Of Law
"Personal and advertising injury" arising directly or indirectly out of any action or omission that violates or is alleged to violate:
(1) The Telephone Consumer Protection Act (TCPA), including any amendment of or addition to such law (ex engaging in robocalling);
(2) The CAN-SPAM Act of 2003, including any amendment of or addition to such law (i.e. sending SPAM);
(3) The Fair Credit Reporting Act (FCRA), and any amendment of or addition to such law, including the Fair and Accurate Credit Transactions Act (FACTA); or
(4) Any federal, state or local statute, ordinance or regulation, other than the TCPA, CAN-SPAM Act of 2003 or FCRA and their amendments and additions, that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.
As you can see, these are pretty broad exclusions and a case alleging willful infringement of copyrights (ex, unlicensed software installation allegations by Autodesk or the Business Software Alliance) or allegations of counterfeit (illegal activity) could raise problems with getting coverage. Another class of cases that could invoke "advertising injury" are the Joe Hand Promotions, G&G Closed Circuit Events and Joe Hand Promotions illegal broadcasting piracy cases. In these cases, typically there is a Facebook advertising post that triggers the investigation from firms like the Riley firm (Pasadena California) and Lonstein Law Office, P.C. (New York) or Jekielek & Janis, LLP.
Click here for more information about Boxing Piracy cases.
Advertising Injury Caselaw
In one case from the 9th Circuit, the Court discussed the definition of advertising injury
"The district court correctly determined Reliance's duty to defend was triggered by Valkyrie's complaint. The duty to defend under California law is a broad duty, encompassing not only covered claims but also claims that are "merely potentially covered." Buss v. Superior Court, 16 Cal. 4th 35, 939 P.2d 766, 773 (Cal. 1997).
An insured is entitled to a defense "if the complaint might be amended to give rise to a liability that would be covered under the policy." Reese v. Travelers Ins. Co., 129 F.3d 1056, 1060 (9th Cir. 1997) (quoting Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 861 P.2d 1153, 1160 (Cal. 1993)). To determine whether the duty to defend was triggered, we must compare the allegations in the complaint with the terms of the policy. Valkyrie's complaint contained a specific claim for copyright infringement. Because the policy at issue covers "infringement of copyright, title, or slogan; arising out of advertising activities," the only question is whether the alleged infringement "arose out of advertising activities."
The policy does not define "advertising activities." The term should therefore [*3] be assigned its commonly understood meaning within the context of the policy. See Foster-Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal. 4th 857, 959 P.2d 265, 280 (Cal. 1998). "Advertising" is defined as "the action of calling something (as a commodity for sale, a service offered or desired) to the attention of the public especially by means of printed or broadcast paid announcements."
Webster's Third New International Dictionary (1986). Valkyrie alleged J.I.P. "infringed said copyright by causing manufacture, importing, distributing, displaying, selling and placing upon the market apparel items with artwork copied from the [Bear Logo]." Distributing, displaying, and selling involve calling a product to the attention of the public and therefore fall within the commonly understood meaning of "advertising activities."
Thus, Valkyrie's complaint alleged at least one potentially covered claim, particularly in light of California's requirement that "any doubt as to whether there is a duty to defend must be resolved in favor of the insured."
J.I.P., Inc. v. Reliance Ins. Co., Nos. 97-55385, 97-55422, 1998 U.S. App. LEXIS 27538, at *2-3 (9th Cir. Oct. 23, 1998)
Contact an IP Litigation Attorney
We can help you review to see if you have coverage in your dispute. If we determine coverage is required we can tender the claim to the carrier. If they refuse to cover as required by law, a lawsuit for bad faith insurance may be possible. We can be reached at (877) 276-5084. Our firm has previously represented a very large insurance carrier so "we know a thing or two about insurance" as they say.