We previously discussed the troubling issues of: a) whether your company’s insurance policy(ies) actually provides coverage for claims of IP infringement and b) which of your policies is the one(s) you should be looking to for possible coverage when you get sued for infringement.
For a great discussion of insurance coverage for IP infringement claims generally under the “Advertising Injury” clause of a commercial general liability policy, see
Attorney Dan Graham’s article in the DRI insurance coverage newsletter.
This week we’ll get more specific: a claim that was found not to be covered under a standard liability policy. In Hartford Casualty Ins. Co. v. Swift Distribution, Inc.
, the issue was whether Hartford had to cover its insured, Swift, in a lawsuit brought by Gary-Michael Dahl. Dahl (we’ll call him Company B) sells an item called the “Multi-Cart.” Swift (we’ll call it Company A) started advertising and selling an item called the “Ulti-Cart.” Dahl sued Swift for patent infringement, trademark infringement, unfair competition, trademark dilution, and misleading advertising. Among other things, Dahl alleged that Swift’s advertisements for the Ulti-Cart “disparaged” Dahl’s Multi-Cart. Swift requested that its insurance company, Hartford, defend it in the lawsuit brought by Dahl. Swift requested coverage under the “Advertising Injury” clause of the policy. Hartford refused to do so, arguing that the allegations in Dahl’s suit against Swift weren’t covered under the policy. To settle the dispute, Hartford sued Swift for a legal determination of whether it had a duty to defend Swift in the Dahl lawsuit.
In the Hartford policy issued to Swift, “Advertising Injury” was defined in several ways. One of the definitions was, “injury . . . arising out of . . . material that . . . disparages a person’s or organization’s goods, products, or services.” Swift alleged that Dahl’s claims in the lawsuit against it, came within this definition of Advertising Injury. The court disagreed.
The court found that Dahl’s lawsuit did make a variety of allegations that Dahl and its product, the Multi-Cart, were harmed by Swift’s infringements, by its unfair competition, and by its false and misleading advertising. Nevertheless, it found that Swift’s advertisements did not actually disparage Dahl or the Multi-Cart because they never mentioned Dahl or the Multi-Cart. Swift then argued that Dahl’s lawsuit alleged that Swift’s advertisements referred to Dahl’s Multi-Cart by implication. The court found that even if this were true, Swift’s advertisements did not actually disparage Dahl or the Multi-Cart; Swift’s advertisements mentioned only its own product, the Ulti-Cart. Regardless of whether Swift’s conduct might constitute trademark infringement and unfair competition against Dahl and the Multi-cart, Swift’s advertisements did not disparage Dahl or the Multi-Cart.
Therefore, the court held, because Swift did not disparage Dahl or the Multi-Cart, Dahl’s lawsuit did not come within the Advertising Injury coverage clause of Hartford’s policy issued to Swift, and Hartford was not required to defend Swift in the Dahl lawsuit.
In the coming weeks and months, we’ll have more to say on insurance coverage issues for intellectual property infringement claims.
*You can find the original post here