Intellectual Property Coverage Under CGL Policies

History of 'Advertising Injury' Coverage

The national insurance policy drafting organization, Insurance Services Office (“ISO”), introduced an endorsement in 1973 to cover certain advertising injuries. The 1973 Broad Form Endorsement defined “advertising injury” as follows:

“Advertising Injury” means injury arising out of an offense committed during the policy period occurring in the course of the named insured's advertising activities, if such injury arises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition, or infringement of copyright, title or slogan.

Coverage for trademark, service mark, or trade name infringement, other than titles or slogans, was expressly excluded, however. See Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group, 50 Cal.App.4th 548, 558 (1996). The 1973 Broad Form Endorsement also failed to define what was meant by offenses committed in the course of the insured's “advertising activities,” resulting in substantial litigation concerning the meaning of this phrase.

In 1986, ISO amended the standard CGL policy by incorporating the advertising injury endorsement into the main policy. In addition, ISO redefined “advertising injury” to mean, inter alia, “misappropriation of advertising ideas or style of doing business” and “infringement of copyright, title or slogan” caused by an offense committed “in the course of advertising your goods, products or services.” Notably absent from this revision was coverage for “unfair competition,” as well as the trademark infringement exclusion. Since trademark infringement claims are typically considered a form of “unfair competition,” ISO felt the trademark infringement exclusion was redundant after coverage for “unfair competition” was eliminated. See Lebas Fashion Imports, 50 Cal.App.4th at 562. The term “advertising” was still not defined in the policies. These omissions led courts to continually wrestle with what exactly was considered “advertising.” Some courts found that a single letter to a prospective customer could trigger coverage, and others held that widespread public dissemination of the advertisement was required. Moreover, many courts now hold that trademark or trade dress infringement could trigger coverage under the “misappropriation of advertising ideas or styles of doing business” clause. Other courts hold that coverage for such claims was warranted by the policy's inclusion of coverage for claims of infringement of “title,” as this term was conceivably broad enough to encompass claims for trademark infringement.

ISO revised its standard form CGL policy in 1998 to further clarify and limit coverage to certain intellectual property disputes. The 1998 standard-form CGL policy replaced the language regarding coverage for “infringement of copyright, title, or slogan” with “infringement upon another's copyright, trade dress or slogan in your advertisement.” This marked a significant change for trademark coverage because it eliminated the rationale that a trademark could function as a “title” and thus trigger coverage. Moreover, the fact that the standard-form CGL policy now expressly covered “trade dress” claims, but did not provide similar coverage for claims of trademark infringement, helped reinforce the notion that these policies were not intended to cover such claims. Furthermore, the language limiting coverage to “another's” copyright, trade dress, or slogan eliminated the rationale for seeking coverage for the infringement of the insured's intellectual property assets, such as in a declaratory judgment action for non-infringement or suits for cancellation of the insured's intellectual property rights. Also, for the first time, the 1998 standard-form CGL policy defined “advertising” to mean “a notice that is broadcast or published to the general public or specific market segments about your goods, products, or services for the purpose of attracting customers or supporters.” This revision further narrowed the scope of coverage by excluding from coverage statements made in letters to prospective customers.

In 2001, ISO once again revised its standard-form CGL policy by including several intellectual property exclusions. Specifically, the 2001 standard-form CGL policy brought back the intellectual property exclusion, as follows:

This insurance does not apply to ' “Personal and advertising injury” ' Arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. However, this exclusion does not apply to infringement, in your “advertisement,” of copyright, trade dress or slogan.

Consequently, following the 2001 amendments to standard-form CGL policies, policyholders face an uphill battle in obtaining coverage for most types of trademark, patent, and trade secret claims. Whether coverage will be triggered in a given case will likely depend on the wording of the specific allegations of the complaint, as well as the policy terms.

IP Coverage Under the Current 2001 CGL Form

Intellectual property disputes typically concern patent, trademark, trade dress, and copyright infringement. Before examining the availability of coverage under the 2001 CGL form for these types of intellectual property claims, an analysis of one of the more common limitations that may apply to all types of intellectual property disputes is warranted.

Damage Requirement

There are numerous coverage exclusions and limitations that may apply in intellectual property disputes, the full exploration of which is beyond the scope of this article. That said, one important limitation that warrants discussion is the requirement that a demand for damages be asserted in the complaint. On this point, the 2001 CGL form reads as follows:

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.

Thus, if an intellectual property litigant seeks only injunctive relief, coverage likely will not be triggered by the policy due to the lack of a covered damages claim.

Coverage is also typically not available where the claim for relief is that of disgorgement of the defendant's profits. In Bank of the West, the California Supreme Court held that the covered claim, that of “unfair competition,” was not simply covered in the abstract, but rather was covered in connection with a claim for damages. As the only monetary relief sought by the plaintiff was that the defendant be ordered to return money that had been wrongfully acquired, the court held that “such orders do not award 'damages' as that term is used in insurance policies.” Bank of the West v. Superior Court, 2 Cal.4th 1254, 1266 (1992). But see American Employers' Ins. Co. v. DeLorme Pub. Co., Inc., 39 F. Supp. 2d 64, 78 (D. Me. 1999) (holding that, under certain circumstances, disgorgement of profits and other forms of restitution may be sufficient to trigger coverage).

For some intellectual property claims, such as trade dress infringement, it may be more important to obtain an injunction from further use of an allegedly infringing design than it is to obtain damages for such use, especially when one considers that damages in such cases are often nominal and/or very difficult to prove. For this reason, some plaintiffs in these types of lawsuits elect to forego damage claims in lieu of injunctive relief so that the defendant does not get the benefit of a vigorous defense fully paid for by its CGL insurer.

The damage requirement also comes into play in Trademark Trial and Appeal Board (“TTAB”) proceedings. The TTAB is a body within the U.S. Patent and Trademark Office responsible for hearing certain kinds of cases involving trademarks, such as inter partes trademark cancellation and opposition proceedings. These proceedings are very similar to court actions, as they allow for full discovery (i.e., depositions, interrogatories, requests for production of documents and things, and requests for admissions) as well as motion practice. One important difference between a TTAB proceeding and a court action, however, is that the TTAB cannot consider questions of infringement or unfair competition, and may not grant injunctions, award damages, or attorneys' fees. See Trademark Trial and Appeal Board Manual of Procedure (“TBMP”) s. 102.1, et seq. Plaintiffs who seek only to cancel or oppose the federal registration of a competitor's mark may, therefore, be better served by proceeding through the TTAB, where CGL insurance coverage will be unavailable to the defendant.

Patent Infringement

A patent is a set of rights conferred by the government to the patent holder which grants the patent holder the exclusive right to make, use, offer for sale, and sell its patented inventions for a period of 20 years. Most courts that have analyzed the issue of whether standard CGL policies cover patent infringement have held that such claims are not considered “advertising injuries” that would trigger coverage because patent infringement typically does not involve advertising. Moreover, the 2001 standard-form CGL policy specifically excludes “advertising injuries” resulting from patent infringement. Policyholders encountering this exclusion will likely have little luck in convincing a court to find coverage under such policies.

Whether patent infringement is covered by policies without the intellectual property exclusion, however, remains an unsettled question. In Novell, Inc. v. Federal Ins. Co., 141 F.3d 983, 989 (C.A.10 1998), for instance, the Tenth Circuit rejected the notion that patent infringement could be covered by CGL policies as an “advertising injury” merely because the insured advertised its patented products. Instead, the court held that there must be a causal connection between the insured's “advertising activities” and the “advertising injury.” The court went on to note that:

Virtually every business that sells a product or service advertises, if only in the sense of making representations to potential customers. If no causal relationship were required between “advertising activities” and “advertising injuries,” then “advertising injury” coverage, alone, would encompass most claims related to the insured's business.

'

[A] claim of patent infringement based upon the sale of an infringing product does not occur “in the course of advertising activities,” and thus does not give rise to an “advertising injury,” even though the insured advertises the infringing product to its customers or potential customers. Id. at 989 (internal citations omitted).

Conversely, in Elan Pharmaceutical Research Corp. v. Employers Ins. of Wausau, 144 F.3d 1372 (11th Cir. 1998), the Eleventh Circuit held that a patent infringement complaint against an insured pharmaceutical manufacturer alleged a causal connection between the insured's adverting activities, in disseminating clinical studies for the purpose of commercializing a drug, and the advertising injury of patent infringement, thus triggering coverage for patent infringement under the insured's CGL policy.

One type of patent litigation that is not specifically barred by the intellectual property exclusion is litigation based on false patent marking. As noted, although the intellectual property exclusion excludes coverage for “patent infringement,” false marking claims are not premised on the infringement of a patent. Instead, false marking claims make it a violation of patent law to intentionally deceive the public by falsely marking a product as patent pending or patented when no such pending or registered patent exists. Although the exclusion may not serve as a bar to coverage, coverage will still only trigger from the “use of another's advertising idea in your 'advertisement'” or from “infringing upon another's copyright, trade dress, or slogan in your 'advertisement.'” Since false marking claims concern the marketing of the policyholder's own products, it is difficult to imagine a scenario where a false marking claim is covered under the definition of “advertising injury.”

Copyright Infringement

A copyright grants a set of exclusive rights to creators of original works of authorship, including literary, dramatic, music, and artistic works, to reproduce, distribute, perform, display, and sell such works. Copyright protects the expression of an idea affixed to a tangible medium.

Since 1973, copyright infringement has been one of the enumerated offenses covered by standard-form CGL policies. Despite nearly 40 years of possible coverage for such claims, there is very little case law interpreting the scope of coverage for copyright claims. The changes made to the 2001 standard-form CGL policy have limited such protection to claims where the policyholder infringes upon another's copyright in its advertisements. A recent case on this issue reaffirmed that the copyright infringement must occur in the policyholder's own advertisements in order to be covered. See Partain v. Mid-Continent Specialty Ins. Services, Inc., 2012 WL 201864, 16 (S.D.Tex. 2012) (noting that “a critical issue in any [copyright infringement] coverage dispute would be whether the alleged infringement was in an advertisement.”)

Coverage seems clear in most copyright infringement lawsuits, as a defendant infringing upon another's work likely advertises its allegedly infringing products for sale. That said, coverage becomes murkier where the infringement concerns materials that are not typically publicly advertised, such as computer code or passages from a book. Does the mere fact that the product that contains the infringement is advertised to the public satisfy the “advertisement” requirement, or does the infringing material itself need to appear in the advertisement? There is little guidance from the courts on this issue, though the “causal connection” argument, supra, could conceivably apply to bar coverage in these situations. See Novell, Inc., 141 F.3d at 989.

Trademarks and Trade Dress Infringement

Trade dress refers to characteristics of a product's design and overall appearance which may be protectable, such as the distinctive shape of a “Coca-Cola” bottle or the bright orange color of a bottle of “Tide” detergent. Trade dress “involves the total image of a product and may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques.” See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 765, 112 S.Ct. 2753, 2755 (1992). Similar to the copyright infringement analysis above, trade dress protection is a specifically enumerated offense covered by most CGL policies. Furthermore, as the very purpose of trade dress is to advertise to consumers, most trade dress infringement claims will be covered under the “advertising injury” clause of CGL policies.

A trademark, on the other hand, is any word, name, symbol, device, or any combination thereof, used as a source identifier to distinguish the goods of one manufacturer from those offered by another manufacturer. Unlike trade dress, trademark infringement is specifically excluded from coverage pursuant to the 2001 policy amendments:

This insurance does not apply to ' “Personal and advertising injury” ' Arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. However, this exclusion does not apply to infringement, in your “advertisement,” of copyright, trade dress or slogan.

Although the intellectual property exclusion may work to bar coverage for such claims, some policyholders have been successful in securing coverage under the carve-out to the exclusion that allows coverage for infringement of a “slogan.” The term “slogan” is not defined by these policies, but has been held by numerous courts to mean a “brief attention getting phrase used in advertising or promotion.” See, e.g., Interstate Bakeries Corp. v. OneBeacon Ins. Co., 773 F.Supp.2d 799 (W.D.Mo. 2011). Several courts interpreting this language in connection with trademark infringement claims have held that trademarks may also serve as company slogans thereby triggering coverage for the defendant. See, e.g, Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264, 1269 (C.A.9 2010) (holding that a complaint for trademark infringement in connection with “STEEL CURTAIN” trademark could trigger coverage under the “slogan” exception to the intellectual property exclusion despite the fact that the complaint never referred to “STEEL CURTAIN” as a slogan and never listed slogan infringement as a cause of action); Cincinnati Ins. Co. v. Zen Design Group, Ltd., 329 F.3d 546 (6th Cir. 2003) (holding that the trademark “WEARABLE LIGHT,” as used in connection with flashlights, could also serve as a slogan and any doubt on this issue “as to the insurer's liability must be resolved in favor of the insured). But see Interstate Bakeries Corp. v. OneBeacon Ins. Co., 773 F.Supp.2d 799 (W.D.Mo. 2011) (refusing to find that “NATURE'S PRIDE,” as used in connection with bread products, served as a slogan as opposed to a trademark because a slogan is not typically the name of a product or product line).

In addition to the argument that trademarks may also serve as slogans, another potential trigger for coverage in trademark infringement lawsuits is trade dress. Many trademark infringement lawsuits describe the infringing similarities between the overall look or placement of the infringing trademarks on the competing product's packaging, allegations which could potentially encompass a claim for trade dress infringement.

Conclusion

Although there is little doubt that the 2001 amendments to the standard-form CGL policy have left policyholders with a more difficult challenge in obtaining coverage for many types of intellectual property claims, there still remains a large degree of uncertainty over coverage for these types of disputes. As with all other types of coverage disputes, the answer to whether coverage will trigger will turn on the specific allegations of the complaint and the terms of the insured's policy.

Brad E. Harrigan is an attorney with the New Orleans firm of Lugenbuhl, Wheaton, Peck, Rankin & Hubbard. He primarily handles intellectual property litigation concerning trademarks, copyrights, and patents. Harrigan is admitted to the state bars of Louisiana, Texas, and Illinois.

It is well known that intellectual property litigation is expensive, time-consuming, and complicated to defend. It frequently involves numerous experts with specialized scientific knowledge, damages experts, and market surveys of potential customers. Although some insurers offer specialty intellectual property insurance policies, in practice, such insurance is rare amongst most businesses, which often do not consider the need for such insurance until after they have been sued. Moreover, insurers often limit coverage under these types of policies to intellectual property assets that can be proven to have first been thoroughly researched and cleared through intellectual property counsel. Without an intellectual property insurance policy, many businesses that find themselves sued for intellectual property infringement will instead turn to their Commercial General Liability (“CGL”) insurers for possible coverage ' often with mixed results.

Most standard CGL policies cover “bodily injury,” “property damage,” or “personal and advertising injury,” as those terms are defined in the policies. Intellectual property claims, to the extent they are covered at all, typically fall under the “advertising injury” provision of such policies. Once triggered, the insurer will owe a duty to defend and indemnify the insured in lawsuits arising from the advertisement of the policyholder's products and services. The insurer's duty to defend involves hiring competent intellectual property counsel, as the policyholder is likely to have a strong argument that its insurer has failed to satisfy its duty to defend if the insurer hires counsel with no intellectual property experience.

This article discusses the applicability of standard CGL policies to the most common types of intellectual property claims, namely, patent, trademark, trade dress, and copyright infringement.

History of 'Advertising Injury' Coverage

The national insurance policy drafting organization, Insurance Services Office (“ISO”), introduced an endorsement in 1973 to cover certain advertising injuries. The 1973 Broad Form Endorsement defined “advertising injury” as follows:

“Advertising Injury” means injury arising out of an offense committed during the policy period occurring in the course of the named insured's advertising activities, if such injury arises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition, or infringement of copyright, title or slogan.

Coverage for trademark, service mark, or trade name infringement, other than titles or slogans, was expressly excluded, however. See Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group , 50 Cal.App.4th 548, 558 (1996). The 1973 Broad Form Endorsement also failed to define what was meant by offenses committed in the course of the insured's “advertising activities,” resulting in substantial litigation concerning the meaning of this phrase.

In 1986, ISO amended the standard CGL policy by incorporating the advertising injury endorsement into the main policy. In addition, ISO redefined “advertising injury” to mean, inter alia, “misappropriation of advertising ideas or style of doing business” and “infringement of copyright, title or slogan” caused by an offense committed “in the course of advertising your goods, products or services.” Notably absent from this revision was coverage for “unfair competition,” as well as the trademark infringement exclusion. Since trademark infringement claims are typically considered a form of “unfair competition,” ISO felt the trademark infringement exclusion was redundant after coverage for “unfair competition” was eliminated. See Lebas Fashion Imports, 50 Cal.App.4th at 562. The term “advertising” was still not defined in the policies. These omissions led courts to continually wrestle with what exactly was considered “advertising.” Some courts found that a single letter to a prospective customer could trigger coverage, and others held that widespread public dissemination of the advertisement was required. Moreover, many courts now hold that trademark or trade dress infringement could trigger coverage under the “misappropriation of advertising ideas or styles of doing business” clause. Other courts hold that coverage for such claims was warranted by the policy's inclusion of coverage for claims of infringement of “title,” as this term was conceivably broad enough to encompass claims for trademark infringement.

ISO revised its standard form CGL policy in 1998 to further clarify and limit coverage to certain intellectual property disputes. The 1998 standard-form CGL policy replaced the language regarding coverage for “infringement of copyright, title, or slogan” with “infringement upon another's copyright, trade dress or slogan in your advertisement.” This marked a significant change for trademark coverage because it eliminated the rationale that a trademark could function as a “title” and thus trigger coverage. Moreover, the fact that the standard-form CGL policy now expressly covered “trade dress” claims, but did not provide similar coverage for claims of trademark infringement, helped reinforce the notion that these policies were not intended to cover such claims. Furthermore, the language limiting coverage to “another's” copyright, trade dress, or slogan eliminated the rationale for seeking coverage for the infringement of the insured's intellectual property assets, such as in a declaratory judgment action for non-infringement or suits for cancellation of the insured's intellectual property rights. Also, for the first time, the 1998 standard-form CGL policy defined “advertising” to mean “a notice that is broadcast or published to the general public or specific market segments about your goods, products, or services for the purpose of attracting customers or supporters.” This revision further narrowed the scope of coverage by excluding from coverage statements made in letters to prospective customers.

In 2001, ISO once again revised its standard-form CGL policy by including several intellectual property exclusions. Specifically, the 2001 standard-form CGL policy brought back the intellectual property exclusion, as follows:

This insurance does not apply to ' “Personal and advertising injury” ' Arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. However, this exclusion does not apply to infringement, in your “advertisement,” of copyright, trade dress or slogan.

Consequently, following the 2001 amendments to standard-form CGL policies, policyholders face an uphill battle in obtaining coverage for most types of trademark, patent, and trade secret claims. Whether coverage will be triggered in a given case will likely depend on the wording of the specific allegations of the complaint, as well as the policy terms.

IP Coverage Under the Current 2001 CGL Form

Intellectual property disputes typically concern patent, trademark, trade dress, and copyright infringement. Before examining the availability of coverage under the 2001 CGL form for these types of intellectual property claims, an analysis of one of the more common limitations that may apply to all types of intellectual property disputes is warranted.

Damage Requirement

There are numerous coverage exclusions and limitations that may apply in intellectual property disputes, the full exploration of which is beyond the scope of this article. That said, one important limitation that warrants discussion is the requirement that a demand for damages be asserted in the complaint. On this point, the 2001 CGL form reads as follows:

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.

Thus, if an intellectual property litigant seeks only injunctive relief, coverage likely will not be triggered by the policy due to the lack of a covered damages claim.

Coverage is also typically not available where the claim for relief is that of disgorgement of the defendant's profits. In Bank of the West, the California Supreme Court held that the covered claim, that of “unfair competition,” was not simply covered in the abstract, but rather was covered in connection with a claim for damages. As the only monetary relief sought by the plaintiff was that the defendant be ordered to return money that had been wrongfully acquired, the court held that “such orders do not award 'damages' as that term is used in insurance policies.” Bank of the West v. Superior Court , 2 Cal.4th 1254, 1266 (1992). But see American Employers' Ins. Co. v. DeLorme Pub. Co., Inc. , 39 F. Supp. 2d 64, 78 (D. Me. 1999) (holding that, under certain circumstances, disgorgement of profits and other forms of restitution may be sufficient to trigger coverage).

For some intellectual property claims, such as trade dress infringement, it may be more important to obtain an injunction from further use of an allegedly infringing design than it is to obtain damages for such use, especially when one considers that damages in such cases are often nominal and/or very difficult to prove. For this reason, some plaintiffs in these types of lawsuits elect to forego damage claims in lieu of injunctive relief so that the defendant does not get the benefit of a vigorous defense fully paid for by its CGL insurer.

The damage requirement also comes into play in Trademark Trial and Appeal Board (“TTAB”) proceedings. The TTAB is a body within the U.S. Patent and Trademark Office responsible for hearing certain kinds of cases involving trademarks, such as inter partes trademark cancellation and opposition proceedings. These proceedings are very similar to court actions, as they allow for full discovery (i.e., depositions, interrogatories, requests for production of documents and things, and requests for admissions) as well as motion practice. One important difference between a TTAB proceeding and a court action, however, is that the TTAB cannot consider questions of infringement or unfair competition, and may not grant injunctions, award damages, or attorneys' fees. See Trademark Trial and Appeal Board Manual of Procedure (“TBMP”) s. 102.1, et seq. Plaintiffs who seek only to cancel or oppose the federal registration of a competitor's mark may, therefore, be better served by proceeding through the TTAB, where CGL insurance coverage will be unavailable to the defendant.

Patent Infringement

A patent is a set of rights conferred by the government to the patent holder which grants the patent holder the exclusive right to make, use, offer for sale, and sell its patented inventions for a period of 20 years. Most courts that have analyzed the issue of whether standard CGL policies cover patent infringement have held that such claims are not considered “advertising injuries” that would trigger coverage because patent infringement typically does not involve advertising. Moreover, the 2001 standard-form CGL policy specifically excludes “advertising injuries” resulting from patent infringement. Policyholders encountering this exclusion will likely have little luck in convincing a court to find coverage under such policies.

Whether patent infringement is covered by policies without the intellectual property exclusion, however, remains an unsettled question. In Novell, Inc. v. Federal Ins. Co. , 141 F.3d 983, 989 (C.A.10 1998), for instance, the Tenth Circuit rejected the notion that patent infringement could be covered by CGL policies as an “advertising injury” merely because the insured advertised its patented products. Instead, the court held that there must be a causal connection between the insured's “advertising activities” and the “advertising injury.” The court went on to note that:

Virtually every business that sells a product or service advertises, if only in the sense of making representations to potential customers. If no causal relationship were required between “advertising activities” and “advertising injuries,” then “advertising injury” coverage, alone, would encompass most claims related to the insured's business.

'

[A] claim of patent infringement based upon the sale of an infringing product does not occur “in the course of advertising activities,” and thus does not give rise to an “advertising injury,” even though the insured advertises the infringing product to its customers or potential customers. Id. at 989 (internal citations omitted).

Conversely, in Elan Pharmaceutical Research Corp. v. Employers Ins. of Wausau , 144 F.3d 1372 (11th Cir. 1998), the Eleventh Circuit held that a patent infringement complaint against an insured pharmaceutical manufacturer alleged a causal connection between the insured's adverting activities, in disseminating clinical studies for the purpose of commercializing a drug, and the advertising injury of patent infringement, thus triggering coverage for patent infringement under the insured's CGL policy.

One type of patent litigation that is not specifically barred by the intellectual property exclusion is litigation based on false patent marking. As noted, although the intellectual property exclusion excludes coverage for “patent infringement,” false marking claims are not premised on the infringement of a patent. Instead, false marking claims make it a violation of patent law to intentionally deceive the public by falsely marking a product as patent pending or patented when no such pending or registered patent exists. Although the exclusion may not serve as a bar to coverage, coverage will still only trigger from the “use of another's advertising idea in your 'advertisement'” or from “infringing upon another's copyright, trade dress, or slogan in your 'advertisement.'” Since false marking claims concern the marketing of the policyholder's own products, it is difficult to imagine a scenario where a false marking claim is covered under the definition of “advertising injury.”

Copyright Infringement

A copyright grants a set of exclusive rights to creators of original works of authorship, including literary, dramatic, music, and artistic works, to reproduce, distribute, perform, display, and sell such works. Copyright protects the expression of an idea affixed to a tangible medium.

Since 1973, copyright infringement has been one of the enumerated offenses covered by standard-form CGL policies. Despite nearly 40 years of possible coverage for such claims, there is very little case law interpreting the scope of coverage for copyright claims. The changes made to the 2001 standard-form CGL policy have limited such protection to claims where the policyholder infringes upon another's copyright in its advertisements. A recent case on this issue reaffirmed that the copyright infringement must occur in the policyholder's own advertisements in order to be covered. See Partain v. Mid-Continent Specialty Ins. Services, Inc., 2012 WL 201864, 16 (S.D.Tex. 2012) (noting that “a critical issue in any [copyright infringement] coverage dispute would be whether the alleged infringement was in an advertisement.”)

Coverage seems clear in most copyright infringement lawsuits, as a defendant infringing upon another's work likely advertises its allegedly infringing products for sale. That said, coverage becomes murkier where the infringement concerns materials that are not typically publicly advertised, such as computer code or passages from a book. Does the mere fact that the product that contains the infringement is advertised to the public satisfy the “advertisement” requirement, or does the infringing material itself need to appear in the advertisement? There is little guidance from the courts on this issue, though the “causal connection” argument, supra, could conceivably apply to bar coverage in these situations. See Novell, Inc., 141 F.3d at 989.

Trademarks and Trade Dress Infringement

Trade dress refers to characteristics of a product's design and overall appearance which may be protectable, such as the distinctive shape of a “Coca-Cola” bottle or the bright orange color of a bottle of “Tide” detergent. Trade dress “involves the total image of a product and may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques.” See Two Pesos, Inc. v. Taco Cabana, Inc. , 505 U.S. 763, 765, 112 S.Ct. 2753, 2755 (1992). Similar to the copyright infringement analysis above, trade dress protection is a specifically enumerated offense covered by most CGL policies. Furthermore, as the very purpose of trade dress is to advertise to consumers, most trade dress infringement claims will be covered under the “advertising injury” clause of CGL policies.

A trademark, on the other hand, is any word, name, symbol, device, or any combination thereof, used as a source identifier to distinguish the goods of one manufacturer from those offered by another manufacturer. Unlike trade dress, trademark infringement is specifically excluded from coverage pursuant to the 2001 policy amendments:

This insurance does not apply to ' “Personal and advertising injury” ' Arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. However, this exclusion does not apply to infringement, in your “advertisement,” of copyright, trade dress or slogan.

Although the intellectual property exclusion may work to bar coverage for such claims, some policyholders have been successful in securing coverage under the carve-out to the exclusion that allows coverage for infringement of a “slogan.” The term “slogan” is not defined by these policies, but has been held by numerous courts to mean a “brief attention getting phrase used in advertising or promotion.” See, e.g., Interstate Bakeries Corp. v. OneBeacon Ins. Co. , 773 F.Supp.2d 799 (W.D.Mo. 2011). Several courts interpreting this language in connection with trademark infringement claims have held that trademarks may also serve as company slogans thereby triggering coverage for the defendant. See, e.g, Hudson Ins. Co. v. Colony Ins. Co. , 624 F.3d 1264, 1269 (C.A.9 2010) (holding that a complaint for trademark infringement in connection with “STEEL CURTAIN” trademark could trigger coverage under the “slogan” exception to the intellectual property exclusion despite the fact that the complaint never referred to “STEEL CURTAIN” as a slogan and never listed slogan infringement as a cause of action); Cincinnati Ins. Co. v. Zen Design Group, Ltd. , 329 F.3d 546 (6th Cir. 2003) (holding that the trademark “WEARABLE LIGHT,” as used in connection with flashlights, could also serve as a slogan and any doubt on this issue “as to the insurer's liability must be resolved in favor of the insured). But see Interstate Bakeries Corp. v. OneBeacon Ins. Co. , 773 F.Supp.2d 799 (W.D.Mo. 2011) (refusing to find that “NATURE'S PRIDE,” as used in connection with bread products, served as a slogan as opposed to a trademark because a slogan is not typically the name of a product or product line).

In addition to the argument that trademarks may also serve as slogans, another potential trigger for coverage in trademark infringement lawsuits is trade dress. Many trademark infringement lawsuits describe the infringing similarities between the overall look or placement of the infringing trademarks on the competing product's packaging, allegations which could potentially encompass a claim for trade dress infringement.

Conclusion

Although there is little doubt that the 2001 amendments to the standard-form CGL policy have left policyholders with a more difficult challenge in obtaining coverage for many types of intellectual property claims, there still remains a large degree of uncertainty over coverage for these types of disputes. As with all other types of coverage disputes, the answer to whether coverage will trigger will turn on the specific allegations of the complaint and the terms of the insured's policy.

Brad E. Harrigan is an attorney with the New Orleans firm of Lugenbuhl, Wheaton, Peck, Rankin & Hubbard. He primarily handles intellectual property litigation concerning trademarks, copyrights, and patents. Harrigan is admitted to the state bars of Louisiana, Texas, and Illinois.