Source: https://brucecornblum.com/intellectual-property-exclusion/
Timestamp: 2019-04-19 22:12:48+00:00

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2. or violation of other intellectual property rights or laws.
◆ OBSERVATION: Where the underlying suit contains patent infringement claims (excluded), intellectual property exclusion eliminates coverage for claims ‘alleged in the suit that also alleges any such infringement’. [SBCC Inc. v. St. Paul Fire (2010) 186 Cal.App.4th 383, 397, 112 Cal.Rptr.3d 40] It is to be noted that defamation in unfair competition claims are not clearly within the reach of the intellectual property exclusion. Also disparaging statements are not ‘directly or indirectly related’ to intellectual property infringement within the meaning of the intellectual property exclusion. [SBCC Inc. v. St. Paul Fire (2010) 186 Cal.App.4th 383, 397, 112 Cal.Rptr.3d 40 (citing federal court opinions)] See § A35 ADVERTISING INJURY [§ A35:14.1].
Certain patent infringements can constitute advertising injury. This is described as a “method patent”, i.e. a patent of a “process or invention which reasonably can be an advertising idea”. Such patented methods are also referred to as marketing methods. A marketing method is a patent in the form of an electronic system creating customized products by rendering visual images in response to specific request by the potential customer. In Hyundai Motor America v. National Union the insured Hyundai infringed upon a method patent injuring a third party holder of the patent. The Court of Appeal held that this process was a “misappropriation of an advertising idea”. [Hyundai Motor America v. National Union (2010, CA, 9th Cir.) 600 F.3d 1092, 1103 (policy did not contain an intellectual property exclusion as discussed in SBCC Inc. v. St. Paul Fire (2010) 186 Cal.App.4th 383, 397, 112 Cal.Rptr.3d 40] See analysis § A35 ADVERTISING INJURY [§ A35:18 Exclusions].
◆ COMMENT [Patent infringements are usually excluded]: Except for limited circumstances, patent infringement allegations are not covered under a commercial general liability (CGL) policy. See § P18 PATENT INFRINGEMENT [§ P18:1 Liability policy]. A claim of patent infringement does not occur in the course of advertising activities within the meaning of a CGL policy even though the insured advertises the infringing product, if the claim of infringement is based on the sale or importations of the product rather than its advertisement. [Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 10 Cal.Rptr.2d 538] More specifically, the advertising activities must cause the injury, not merely expose it to the public. [Hyundai Motor America v. National Union (2010, CA, 9th Cir.) 600 F.3d 1092, 1103] Where, however, the patent relates to a ‘process or invention which could reasonably be considered an advertising idea’, which idea is a ‘form of advertising itself’, absent an intellectual property exclusion to the contrary, coverage exists under a CGL policy extending coverage for ADVERTISING IDEAS. [Hyundai Motor America v. National Union (2010, CA, 9th Cir.) 600 F.3d 1092, 1103] See § A35 ADVERTISING INJURY [§ A35:13 Patent infringement not covered].
Exception: An exception rule that patent infringement is not covered as a “misappropriation of ideas” is where the third party plaintiff alleges the “elements of the advertisement itself, in its context, form, logo, or pictures, rather than in a product being advertised itself”. [Hyundai Motor America v. National Union (2010, CA 9th Cir.) 600 F.3d 1092, 1101] This is referred to as a “violation of a method patent” involving advertising ideas. [Hyundai Motor America v. National Union (2010, CA 9th Cir.) 600 F.3d 1092, 1100-1101] See § P18 PATENT INFRINGEMENT [§ P18:2].

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