The conventional wisdom in both the insurance world and the intellectual property world is that there is no coverage for patent infringement liability. Like most pieces of conventional wisdom there is some amount of truth to the perception, but there also are important exceptions to the rule, and, in fact, there are certain types of patent cases which may be covered under standard liability policies. Given the high costs associated with patent litigation, companies are wise to explore whether each and every patent case that they face may be among those that are covered.
The most common argument in support of coverage for patent cases is to assert that there is a covered “advertising injury” offense under standard commercial general liability (CGL) policies. Advertising injury (sometimes called “personal and advertising injury”) coverage is triggered by allegations of an enumerated “offense” in the course of advertising. One of the offenses that will trigger advertising injury coverage is defined as “use of the advertising idea of another.”
There is, however, a major caveat to the line of cases mentioned above, and because of that caveat, only a sub-set of cases alleging use of another’s advertising technique will be covered. In 2002, the Insurance Services Organization (ISO), a drafting organization that creates standard policy forms utilized by many major insurers, created a standard exclusion for trademark, copyright, patent infringement and trade secret theft. There is a carve-out to the exclusion with respect to copyright and trademark infringement, but not so with respect to patent infringement.