Opinion ID: 1241
Heading Depth: 2
Heading Rank: 2

Heading: Patent Infringement as Misappropriation of Advertising Ideas

Text: Hyundai next must establish that Orion's patent infringement claim constituted a misappropriation of advertising ideas. In Mez Industries, Inc. v. Pacific National Insurance Co., 76 Cal.App.4th 856, 90 Cal.Rptr.2d 721, 733 (1999), the California Court of Appeal explained that a contextual reasonableness analysis applies to that question. We must determine, in the context of the case and in light of common sense, whether a lay person reasonably would read the phrase misappropriation of advertising ideas to include the patent infringement claim at issue. Id. More precisely, the proper test is whether the patents at issue involve any process or invention which could reasonably be considered an `advertising idea.' Id. We have applied the test described by Mez: The court [in Mez, 90 Cal.Rptr.2d at 733,] noted that the patents at issue did not involve any process or invention which could reasonably be considered an `advertising idea' or `a style of doing business.' Similar to Mez, the underlying [third-party] actions at issue here do not allege violation of a method patent involving advertising ideas or a style of doing business. Like the allegations that Mez was inducing infringement of a design patent in airflow conduction systems, the [third-party] actions allege violation of a design patent for certain therapeutic magnetic devices. Homedics, Inc. v. Valley Forge Ins. Co., 315 F.3d 1135, 1140-41 (9th Cir.2003) (emphasis added). Although neither we nor the California courts affirmatively have held that certain types of patent infringement can constitute advertising injuries, the implication in Mez and Homedics is clear: Depending 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,' Mez, 90 Cal.Rptr.2d at 733 (emphasis omitted); or, expressing the same idea in different words, if the third party allege[d] violation of a method patent involving advertising ideas, Homedics, 315 F.3d at 1141. Unlike in Mez and Homedics, the third party here did allege violation of a method patent involving advertising ideas. Id. Orion patented a method of displaying information to the public at large for the purpose of facilitating sales, i.e., a method of advertising. And Orion's complaint alleged that Hyundai violated that method patent by using the patented techniques as part of its own marketing method or marketing system. In other words, Orion patented a process or invention which could reasonably be considered an `advertising idea,' Mez, 90 Cal.Rptr.2d at 733, and Orion allege[d] violation of a method patent involving advertising ideas, Homedics, 315 F.3d at 1141. In the context of the facts and circumstances of this case,  Mez, 90 Cal.Rptr.2d at 733, Orion's patent infringement claim alleged the misappropriation of advertising ideas. Defendants attempt to rebut that conclusion on two grounds. First, they argue that a misappropriation of advertising ideas must relate to the actual content of the challenged advertisement. In support, Defendants quote our holding 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. Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500, 1506 (9th Cir.1994). Defendants' reliance on that quotation is misplaced because the BYO feature at issue in the Orion action easily meets that test. The BYO feature is the form of the advertisement itself, i.e., a build-your-own-vehicle module, and plainly is not the product being advertised, i.e., motor vehicles. Defendants' reliance on other cases is similarly misplaced. See, e.g., Heritage Mut. Ins. Co. v. Advanced Polymer Tech., Inc., 97 F.Supp.2d 913, 927 (S.D.Ind.2000) (Environ simply does not claim ... that the piping product that APT allegedly took was inherently an idea on how to advertise. Rather, Environ alleged that APT unfairly competed with it by stealing its product and claiming the piping as its own, a distinctly different claim from alleging that APT took an idea about how to ... advertise the underground piping product. (emphasis added)). Second, Defendants argue that the source of the advertising idea must be from a competitor. Because Orion is a patent-holding company and not a direct competitor of Hyundai's, Defendants reason, the Orion action cannot constitute a misappropriation of advertising ideas. As an initial matter, nothing in the policy's textmisappropriation of advertising ideassuggests that it must be a misappropriation of a competitor's advertising ideas. Nor can we discern any contextual, public-policy, or logical significance to who owns the legal rights to the advertising idea in question. In any event, we find no support for Defendants' competitor-only rule in California law. In conclusion, we acknowledge that the California courts, and we, have rejected past claims that a patent infringement constitutes an advertising injury. But both the California courts and our court, applying California law, have held that a contextual analysis applies and have recognized that infringement of a patented advertising method could constitute a misappropriation of advertising ideas. In the context of the facts of this case, we conclude that the Orion action contained allegations of misappropriation by Hyundai of a patented advertising method. We find support for our conclusion in the persuasive authority, Amazon.com International, Inc. v. American Dynasty Surplus Lines Insurance Co., 120 Wash. App. 610, 85 P.3d 974(2004) (applying Washington law). [3] In that case, Amazon.com used music-preview technology on its website; a company named Intouch sued Amazon.com for patent infringement; and Amazon.com's insurers declined to defend it. Id. at 975-76. In addressing Amazon.com's claim against the insurers, the court held: The misappropriation [of advertising ideas] must occur in the elements of the advertisement itselfin its text, form, logo, or picturesrather than in the product being advertised. [ Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500, 1506 (9th Cir.1994).] Patent infringement arising from the manufacture of an infringing product is not an advertising injury even if the infringing product is used in advertising. [ Id. ] But patent infringement may constitute an advertising injury  where an entity uses an advertising technique that is itself patented.  [ Id. at 1507 n. 5.] That was the essence of Intouch's allegation against Amazon.... Intouch alleged that its patented music preview technology was an element of Amazon's advertisement. The Intouch complaint thus conceivably alleged misappropriation of an [advertising] idea.... Amazon.com, 85 P.3d at 977(footnotes omitted; footnote citations in brackets). The same analysis applies here: Hyundai use[d] an advertising technique that is itself patented, and [t]hat was the essence of [Orion's] allegation against [Hyundai]. Id.