Can you get insurance coverage for the costs of patent litigation?

Advertising injury claims and D&O insurance are two creative ways to get around IP exclusions

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.”

Recognizing that this feature is an advertising technique, the 9th Circuit followed the same reasoning as the Amazon cases and found coverage. In 2011, the 10th Circuit reached the same result in Dish Network Corp. v. Arch Specialty Ins. Co., 659 F.3d 1010 (10th Cir. 2011). The Dish Network patents alleged to have been infringed involved a telephone interface system that allowed customers to complete multiple tasks over the phone, including ordering pay-per-view programs. Finding the progeny of case law persuasive, the 10th Circuit reversed the lower court’s denial of coverage. 

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.

Contributing Author

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Richard Milone

Richard D. Milone is the Chair of Kelley Drye & Warren LLP’s Insurance Recovery practice, which has attorneys in Washington, D.C., New York and Los...

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Contributing Author

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Mahmood Ahmad

S. Mahmood Ahmad is an associate in the Insurance Recovery practice in the Washington D.C. office of Kelley Drye & Warren LLP.  He can be...

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