Opinion ID: 615422
Heading Depth: 2
Heading Rank: 4

Heading: Patent Infringement as Advertising Injury

Text: The threshold issue in this case is whether patent infringement can ever fall within the applicable commercial general liability policies' advertising injury coverage. The parties have focused their arguments exclusively on the offense within the definition of advertising injury consisting of misappropriation of advertising ideas or style of doing business. Dish Op. Br. at 30; Ins. Resp. Br. at 36. The district court concluded that, under certain circumstances, Colorado courts would hold that patent infringement may indeed fall within the policy language. Dish, 734 F.Supp.2d at 1183. We agree. The Colorado courts have not addressed this issue, and the parties disagree as to what the weight of authority from other jurisdictions teaches. Dish states that a clear majority view has emerged.... [C]ourts routinely distinguish between claims based on the manufacture and sale of an infringing productin which case the claim is not covered even if the product is used in advertisingand a claim based on the unauthorized use of a patented advertising idea or methodin which case the claim is covered. Dish Op. Br. at 20. Insurers, on the other hand, contend that courts hold that the phrase `misappropriation of advertising ideas or style of doing business' is unambiguous: It does not encompass patent infringement claims. Ins. Resp. Br. at 49. Numerous cases do, indeed, categorically rule out advertising injury coverage for patent infringement. See, e.g., Heritage Mut. Ins. Co. v. Advanced Polymer Tech., Inc., 97 F.Supp.2d 913, 930 n. 10 (S.D.Ind.2000) (stating that patent infringement cannot be misappropriation of style of doing business); Auto Sox USA Inc. v. Zurich N. Am., 121 Wash.App. 422, 88 P.3d 1008, 1011 n. 1 (2004) (noting that the majority of cases hold that patent infringement is not covered by the misappropriation of an advertising idea in an insurance policy, but acknowledging the contrary holding in Amazon, 85 P.3d at 976-77). We note, though, that in spite of their broad language, many of the cases Insurers cite focus on the policy terms misappropriation of style of doing business or infringement of title. See, e.g., St. Paul Fire & Marine Ins. Co. v. Advanced Interv'l Sys., Inc., 824 F.Supp. 583, 586 (E.D.Va.1993), aff'd 21 F.3d 424 (4th Cir.1994); U.S. Test, Inc. v. NDE Envtl. Corp., 196 F.3d 1376, 1381 (Fed.Cir.1999). Our decision today, by contrast, rests on the misappropriation of advertising ideas language in Dish's policies. [5] More importantly, however, many of the cases Insurers rely on are distinguishable from the facts before us. The bulk of the published case law addressing patent infringement as advertising injury deals with products the insured happened to advertise, rather than a means of advertising that the insured used to market its own products. In Heritage, for example, the court addressed allegations of infringement arising from the manufacture and sale of a patented piping producta distinctly different claim from alleging that [the policy holder] took an idea about how to solicit business or advertise the underground piping product. 97 F.Supp.2d at 927. Similarly, in Advanced Interventional, the patentee alleged that the insured had infringed its patents by manufacturing a certain device and had induced patent infringement by causing others to use it. 824 F.Supp. at 584. Finally, in Auto Sox, the technology at issue was an apparatus and related method for displaying [a] removable advertising sign on a vehicle. 88 P.3d at 1011. Although this idea at least related to advertising, the court explained that Auto Sox did not take [the inventor's] ideas about how to solicit customers with his patented design for a rooftop sign. Auto Sox took his idea for the manner in which a rooftop sign is attached to a vehicleand manufactured and sold a product using that idea. Id. These cases offer only limited guidance in the less common factual setting before us here. In the present case, by contrast, Dish allegedly committed patent infringement by using RAKTL's technology to sell Dish's own non-infringing satellite television products and services. Several courts considering similar facts have affirmatively held that where an advertising technique itself is patented, its infringement may constitute advertising injury. See Hyundai Motor Am. v. Nat. Union Fire Ins. Co. of Pittsburgh, Pa., 600 F.3d 1092, 1102 (9th Cir.2010); Amazon.com Int'l, Inc. v. Am. Dynasty Surplus Lines Ins. Co., 120 Wash.App. 610, 85 P.3d 974, 977 (2004); but see Discover Fin. Serv., LLC v. Nat. Union Fire Ins. Co. of Pittsburgh, Pa., 527 F.Supp.2d 806 (N.D.III.2007) (concluding that a patent infringement suit by RAKTL did not allege advertising injury). In Hyundai and Amazon, the underlying complaints alleged patent infringement through the use of certain technologies on the policy holders' websites. Hyundai 600 F.3d at 1095; Amazon, 85 P.3d at 976. The Ninth Circuit, applying California law, and the Washington Court of Appeals concluded that these complaints potentially alleged misappropriation of advertising ideas. Hyundai 600 F.3d at 1101-02; Amazon, 85 P.3d at 977. The Hyundai court noted the general rule that to constitute an advertising injury, the third-party claim must concern the `elements of the advertisement itself in its text[,] form, logo or picturesrather than in the product being advertised.' 600 F.3d at 1101 (emphasis in original) (quoting Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500, 1506 (9th Cir.1994)). This dichotomy is suggested even in many of the cases Insurers cite. See, e.g., Auto Sox, 88 P.3d at 1011 (Auto Sox[`s] alleged infringement occurred not in advertising but in the manufacture and sale of an infringing product.); Heritage, 97 F.Supp.2d at 927. In this case, the interactive telephone system Dish employs to communicate with its customers plainly is not `the product being advertised,' i.e., satellite television programming, Hyundai 600 F.3d at 1101; rather, it is just as much the form of Dish's advertisements as were the internet technologies in Hyundai and Amazon. Insurers correctly point out that Dish's policies do not expressly extend coverage for patent infringement, though they specifically list certain other intellectual property offenses. Ins. Resp. Br. at 8 (citing Aplt.App. at 208, 431, 479, 536, 964 (covering [i]nfringement of copyright, title or slogan)). Other courts have rejected the duty to defend patent suits on this basis. See, e.g., Owens-Brockway Glass Container, Inc. v. Int'l Ins. Co., 884 F.Supp. 363, 367 (E.D.Cal.1995); Gencor Indus. Inc. v. Wausau Underwriters Ins. Co., 857 F.Supp. 1560, 1564 (M.D.Fla.1994). Insurers argue that it is `nonsense' to suppose that an insurer intends to cover patent infringement claims through silence when the policy expressly includes infringement of other types of intellectual property copyright, title or sloganin the `advertising injury' definition. Ins. Resp. Br. at 46 (quoting Advanced Interventional, 824 F.Supp. at 586 (discussing style of doing business language)). In response, Dish argues that four of its policies are at least ambiguous because only the fifth includes an intellectual property exclusion which specifically withdraws coverage for patent infringement. Dish Op. Br. at 51-52; Reply Br. at 24. Citing Union Insurance Co. v. Land and Sky, Inc., 247 Neb. 696, 529 N.W.2d 773 (1995), Dish argues that the absence of such exclusionary language in the other policies means that they may cover patent actions. Dish Op. Br. at 51-52; Reply Br. at 24. Land and Sky, however, is of limited utility to Dish. In that case, the Nebraska Supreme Court held that the term piracy was ambiguous in the context of advertising injury coverage because the insurer had issued both a primary and an excess policy to the plaintiff, and only the excess policy contained a clause excluding patent coverage. Land and Sky, 529 N.W.2d at 777. This, the court concluded, suggested the insurer's intent to cover patent infringement in its other policy. Id. But the fact that one of Dish's insurersArch drafted a policy with a patent infringement exclusion says nothing about what coverage the other four insurers provided. Aplt.App. at 1004. It says little more that another insurer, National Union, subsequently inserted an exclusion in policies not at issue here. See Aplt.App. at 2165-66, 2168-69, 2171-72, 2174-75. The present case must be distinguished from Land and Sky for the simple reason that the purported inconsistency does not exist within policies that Dish received contemporaneously from any single insurer. Nonetheless, we do conclude that misappropriation of advertising ideas, in the context of this case, is ambiguous and must be construed in favor of coverage. As Insurers note, policy terms may be ambiguous as applied to one set of facts, but unambiguous as applied to another. Ins. Resp. Br. at 24 (citing Allstate, 931 P.2d at 514). The scope of advertising injury coverage may be manifestly clear in most cases, in which a patented product is advertised and sold. See, e.g., Auto Sox, 88 P.3d at 1011 (holding the term misappropriation of an advertising idea to be unambiguous). In a setting where the advertising idea that is misappropriated happens to also be a patented technology, however, the scope of coverage is less certain. Numerous cases suggest that while the advertisement of an infringing product will not qualify, the infringement of a patented advertising idea will. See, e.g., Iolab, 15 F.3d at 1506; Heritage, 97 F.Supp.2d at 927. At the same time, many cases unequivocally reject patent coverage. See, e.g., U.S. Fid. & Guar. Co. v. Frosty Bites, Inc., 232 F.Supp.2d 101, 103 (S.D.N.Y.2002). Faced with a large amount of conflicting authority, Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1092 n. 13 (Colo.1991), we do not believe that an ordinary person would reasonably expect the words misappropriation of advertising ideas to exclude coverage for a suit alleging the misappropriation of a patented advertising idea, even if the word patent appears nowhere in the policy. State Farm Mut. Auto. Ins. Co. v. Nissen, 851 P.2d 165, 167-68 (Colo.1993) (The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations.). To rule otherwise would risk ignoring the real contours of intellectual property litigation, which often proceeds under a bewildering variety of different labels covering the same material facts. Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 747 (3d Cir.1999); see also Gerrity Co., Inc. v. CIGNA Prop. & Cas. Ins. Co., 860 P.2d 606, 607 (Colo.App. 1993) (It is ... the factual allegations in the complaint, and not the legal claims, that determine an insurer's duty.). Moreover, to categorically exclude patent coverage merely because a policy enumerates other intellectual property violations would conflict with the principle, well established in Colorado, that exclusions are strictly construed against the insurer and must be written in clear and specific language. Bohrer v. Church Mut. Ins. Co., 965 P.2d 1258, 1262 (Colo.1998). Finally, as Dish notes, the intellectual property exclusion in Arch's policy demonstrates that the other insurers could have used more precise language if the parties had desired to exclude coverage for patent suits. Dish Op. Br. at 18. While imperfect wording does not necessarily make [a policy term] ambiguous, In re Katrina Canal Breaches Litig., 495 F.3d 191, 209-10 (5th Cir.2007), the failure of National Union, XL, Travelers, and Arrowood to make explicit the exclusion they now seek does undermine[ ] [their] claim that the contested language is clear and unambiguous, Entron, Inc. v. Affiliated FM Ins. Co., 749 F.2d 127, 130 (2d Cir.1984). In short, the scope of advertising injury coverage in this case is at least ambiguous with regard to patent infringement allegations. Although the cases are rare in which an allegedly infringed patent is itself an advertising idea rather than merely an advertised product, we find persuasive the Hyundai and Amazon courts' approach to this unusual situation. Construing ambiguous policy language in favor of coverage, as we must under Colorado law, we hold that [d]epending on `the context of the facts and circumstances of th[e] case,' patent infringement can qualify as an advertising injury if the patent `involve[s] any process or invention which could reasonably be considered an advertising idea.' Hyundai 600 F.3d at 1100 (quoting Mez Indus., Inc. v. Pac. Nat'l Ins. Co., 76 Cal.App.4th 856, 90 Cal. Rptr.2d 721, 733 (1999)). Because we conclude that a suit for patent infringement can, under narrow circumstances, allege misappropriation of advertising ideas, we need not consider evidence of the evolutionary history of the relevant policy language that Dish proffered in the district court to demonstrate ambiguity. See Dish Op. Br. at 44-48 (describing materials promulgated by the Insurance Services Office). [6]