Topic: Insurer’s Duty to Defend Infringement of “Advertising Idea” Patent
A jury found that Hyundai infringed a third-party patent by incorporating a “build your own” (“BYO”) vehicle feature into its web site. Hyundai then sought to recover the costs of defending the infringement action, claiming coverage and a duty to defend under the advertising injury section of its general liability insurance policy. Hyundai’s policy obligated its insurer to defend claims for advertising injuries including alleged “misappropriation of advertising ideas.” The district court granted summary judgment to the insurer, finding no causal relationship between Hyundai’s advertising and the patent infringement. However, the Ninth Circuit Court of Appeals reversed, holding the insurer had a duty to defend the patent infringement action because the involved patent covered an invention that could reasonably be considered an advertising idea. The Court of Appeals found that the BYO feature, which was potentially accessible by millions of people on the Internet, was a “marketing method” contemplated by precedent to be considered advertising. The Court refused the insurer’s request to limit coverage to claims only relating to the actual content of the challenged advertisement or those solely involving claims for misappropriation by competitors.
- Policyholders may have coverage for intellectual property and patent infringement claims under the “advertising injury” clause of their general liability policies. Companies should review this provision of their policy to determine whether coverage may be available against an infringement action.
- It is important to consider the context of facts and circumstances of a case, but reasonableness will control: patent infringement may qualify as a misappropriation of advertising ideas if a party alleges a violation of a patent involving a “process or invention which could reasonably be considered an advertising idea.”
- Consider your web-based activities. The Court here found that a direct causal connection existed between web-based advertising and the patent infringement that constituted the advertising.
What, if any, coverage may be available under a policy’s advertising injury provisions can only be determined by a thorough review of the actual policy and language in effect. See Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, L.L.C., --- S.E.2d ---, 2010 WL 1492136 (N.C. Apr. 15, 2010) (finding no duty to defend advertising injury claim when policy language specifically excluded coverage for the insured’s false statements about its own products and such statements were those alleged to have caused the advertising injury in the primary action).
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