Several years ago, there was a flurry of lawsuits, brought by companies accused of patent infringement, against their liability insurance carriers. The accused infringers were seeking a declaration that their commercial general liability (CGL) insurance policies covered their legal fees in defending a patent infringement lawsuit, and any damages if the slimeballs were found guilty.
Almost invariably, they lost. The courts held that the standard CGL policy did NOT cover patent infringement. Fast forward a decade or so. Another accused infringer is seeking coverage under its CGL policy. (DISH Network Corp. v. Arch Specialty Insurance Co.)
DISH was sued for infringement of a patent directed to an automated telephone system that allowed users to order pay-per-view programming and to access various other services. While this litigation was pending, some bright – later proven to be not so bright – individual on the DISH defense team thought to recover the defense costs from the company’s CGL carrier. Not surprisingly, in view of the above-mentioned prior litigation, the insurance company declined coverage. DISH sued the insurance company.
DISH lost. The insurance policy provided coverage for “advertising injuries,” including the “misappropriation of advertising ideas or style of doing business.” The Court held that the “advertising injury” must occur in the advertising itself, not in the service being advertised or in the mode of transmitting the advertising. DISH was not covered because its automated telephone system was not an advertisement, but a mode of transmitting information to customers and interacting with them. Close, but no cigar.
THE LESSON TO BE LEARNED: Except in rather rare circumstances, an accused infringer will have to pay for its own defense.
This may mean that we can expect more patent enforcement defendants in the immediate future to claim that they have been accused of "misappropriation of advertising ideas or style of doing business."