Trademark Dilution “Tarnishment” Claims Implicate Offense “d” Coverage
Following our previous blog addressing trademark dilution based on “blurring,” we now turn to dilution based on “tarnishment.” The Lanham Act defines trademark dilution based on “tarnishment” as “association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” Like “blurring,” this form of dilution also commonly implicates one of the “personal and advertising injury offenses found in Commercial General Liability (“CGL”) policies
Trademark Dilution “Blurring” Claims Fall Outside Standard Exclusions
A typical trademark suit will assert various causes of action with names familiar to the average person, including the well-known trademark “infringement.” Unfortunately for policyholders, these claims are typically excluded by a policy’s IP exclusion. Though less known, trademark “dilution” is also common and can often be leveraged to attain coverage for the entire suit. This path to coverage is rarely recognized by insurance claims handlers, leading to a quick denial. Luckily, experienced coverage counsel can explain that mistake and secure coverage despite an initial denial.
Assuring Coverage Counsel’s Proactive Assistance Requires Early Intervention
Currently, eleven states (and the District of Columbia) still adhere to the draconian “eight corners” analysis for the duty to defend. Under this policy, a court can only consider the policy language and the pleadings of the underlying case to determine whether the insurer’s duty is triggered. The modern trend, embraced by the remaining jurisdictions, is to consider additional “extrinsic evidence” in making the determination. Those states are split, however, in whether the duty is determined by facts known to the insurer or facts available to the insurer. The distinction being that the former requires the policyholder to proactively notify the insurer of any facts that implicate the duty to defend before the insurer’s obligations are activated. The burden is on the policyholder to supply the insurer with the information, even if the relevant facts are publicly available.
Pursuit and Defense of Patent Infringement at Insurer’s Expense
Patent infringement litigation fees constantly escalate. According to a 2023 American Intellectual Property Law Association (“AIPLA”) survey, the median cost of litigating a patent lawsuit through trial ranges from $600k when the amount in controversy is less than $1M to $3.625M when the amount is over $25M. Patent holders have secured significant settlements and judgments premised on reasonable royalty awards. These recoveries have led patent litigation entities such as Burford to finance this litigation. Cross-licensing of patents also factors into resolutions of these lawsuits. Companies that do not have a significant patent portfolio cannot exchange licensing rights with competitors to resolve infringement disputes. Therefore, the inability to afford costly patent litigation may cause the abandonment of key market advantages that are central to the company’s strategy.
Mistaken Denial of Coverage for Trademark Dilution Claims
A typical trademark suit will assert various causes of action with names familiar to the average person, including the well-known trademark “infringement.” Unfortunately for policyholders, these claims are typically excluded by a policy’s IP exclusion. Though less known, trademark “dilution” is also common and can often be leveraged to attain coverage for the entire suit. This path to coverage is rarely recognized by insurance claims handlers, leading to a quick denial. Luckily, experienced coverage counsel can explain that mistake and secure coverage despite an initial denial.
No Discovery Is Appropriate in Addressing Coverage for IP Disputes
Three distinct approaches are implicated in determining what the facts are for purposes of insurance coverage analysis: the “complaint allegations,” “facts known to the insurer,” or “facts available to the insurer” rules. Forum selection, which will require adoption of one rule over another, may be result-determinative in a coverage dispute where facts beyond the pleadings are essential to either establish or eviscerate potential coverage.
Why Policyholders Should Retain Insurance Coverage Savvy Counsel
Intellectual property litigation proceeds through a variety of causes of action. They can include a number of distinct factual allegations that often trigger insurance policy benefits entitling policyholders to a defense at their insurer’s expense. While the most common form of business insurance to secure coverage remains the Commercial General Liability (“CGL”) policy, securing defense benefits under such policies presents increasing challenges.
To secure that benefit, the parties may evaluate facts beyond the complaint (“extrinsic evidence”) that clarify how the claims asserted implicate insurance coverage. Enlisting the assistance of insurance-coverage-savvy policyholder council who are also intellectual property litigators enhances the prospects for securing insurance policy benefits.
Ten Common Mistakes Policyholders Make Re IP Claims
IP claims are misunderstood even by most people in the insurance industry, so it’s no surprise that policyholders also struggle with them. This blog addresses the most common mistakes I’ve seen clients make and tries to offer some advice on how to avoid them.
What Insurers Do Not Want You to Know About the Policies They Sell
Insurance policies are difficult to read at the best of times. This is a calculated move by the insurance providers in the hopes that policyholders will not avail themselves of all the protections contained therein. On occasion, however, the insurers’ tactics can be turned upon them. The twisting, complicated language can sometimes open the door for policyholders to argue for coverage in areas the insurer may not have intended to provide it. Careful lawyering and receptive judges have codified several of these expanded coverage areas over the years, and a few such examples are presented below.
Searching for a Unicorn: Unearthing Buried Trade Dress Claims
Standard Commerical General Liability (“CGL”) insurance policies typically exclude claims for the most well-known intellectual property claims: copyright, trademark, trade secret, and patent infringement. However, they also include an exception for infringement of copyright, trade dress, or slogan in your “advertisement,” with the term “advertisement” broadly defined. Fact allegations for unfair competition typically included with trademark or patent infringement, and on occasion trade secret or copyright infringement claims, may implicate the duty to defend under the exception IP torts, such as trade dress infringement. Thus, policyholders often scramble to establish the applicability of the trade dress coverage with mixed results.
Why Evaluating Coverage for Intellectual Property Is Challenging
Courts analyzing CGL policies have wrestled with how to discern whether coverage under these policies may extend to IP claims. The vast majority of these cases address when coverage may be triggered under the CGL policy’s “personal and advertising injury” coverage. At the inception of that coverage in 1976, it was initially an add-on element to the standard form policy, offering coverage for the offenses of “piracy” and “unfair competition.” In 1986, the “personal and advertising injury” coverage was integrated into the policy as a whole. It included the offense “misappropriation of an advertising ideas or style of doing business.” In 1998, that offense was replaced by “use of another’s advertising ideas in your ‘advertisement’” with the term “advertisement” broadly defined.
All those offenses under the progressive CGL policies are notable for a common failure—they fail to use terms that have any clear or definable limits in contrast to traditional torts that have legally defined parameters established by case law. Thus, courts have had to assess the scope of these no-singular torts labeled offenses when analyzing what intellectual property torts be covered.
Coverage for Patent Infringement Lawsuits under CGL Policies
Most Commercial General Liability (“CGL”) policies do not explicitly include patent infringement as a covered offense. Also, many policies expressly exclude patent infringement coverage in an Intellectual Property (“IP”) exclusion. Based thereon, insurers will often deny coverage for patent infringement claims because they fall outside the coverage scope of its CGL policy. Patent infringement claims, however, can still secure coverage under various pathways.
Insurance Recovery for Restitutionary Intellectual Property Claims
Insurance recovery in intellectual property lawsuits is often not limited to “compensatory damages”. Claimants who suffer a Loss in an intellectual property dispute may secure recovery that is not limited to “compensatory damages”. Licensing revenue is commonly recoverable in the successful pursuit of trademark infringement lawsuits.
Preferred Pathways to Secure Trade Secret Coverage
Many trade secret litigators presume that insurance coverage for trade secret lawsuits is not readily available. But, this overstates the viability of the insurer’s arguments against coverage. Trade secret disputes often include fact allegations that address an array of different liability theories often articulated under counts such as tortious interference as well as misappropriation offering coverage that trade secret litigators should explore.
Insurance Coverage for Trade Secret Lawsuits under CGL Policies
The defendant in a trade secret lawsuit can often turn to its Commercial General Liability (“CGL”) insurance policy find coverage for its defense and liability.
Knowing Where and How to Look for IP Coverage in CGL Policies
Litigating an Intellectual Property dispute raises important questions: When does an insurer have to pay for a defense? Who should notify insurers and when—and which insurers? What if the insurers all say no? What kinds of policies make for favorable recovery prospects?
Insurance Coverage for Intellectual Property Risks
A primer on the types of policies that one may turn to coverage for Intellectual Property issues
New Opportunities for Coverage of Intellectual Property Torts
Many professionals with Errors & Omissions Coverage may find that their insurance includes no “advertising injury” coverage despite their widespread use of digital marketing to reach potential new clients. One solution is to secure express coverage for intellectual property (“IP”) infringement claims through an insurer.