Insurance Coverage for Intellectual Property Risks

COVERAGE FOR DIRECTORS & OFFICERS / ERRORS & OMISSIONS

Directors & Officers

This intellectual property exclusion only applies to claims against the Insured Organization under the Side “A” Difference in Conditions (“DIC”) policies. Thus “Wrongful Acts” D&O Coverage for claims against Directors and Officers under Coverage A will provide a defense for intellectual property lawsuits where a Company’s Officer or Director are named as Defendants than Intellectual Property lawsuits. [1]

Errors & Omissions

a. The IP Endorsement
We shall reimburse the Insured for those sums which the insured becomes legally obligated to pay and shall have paid as “Damages” resulting from any “Claim” or “Claims” [“a demand for Damages”] made against the Insured for any “Wrongful Act” [“any violation of a legal right or rights associated with patents”] caused by [the] manufacture, use, development, distribution, advertising or sale of a “Covered Product” [“any product . . . sold or any process used . . . by the Insured”] committed by the Insured . . . occurring within the term of this policy. [2]

• Intellectual Property Insurance Services Corporation Coverage (“IPISC”) www.patentinsuranceonline.com

●    Enforcement

#    Claims made and reported policy

#    Enforcement indemnification—to cover the substantial litigation expenses incurred in enforcing an organization’s own IP rights against infringers

#    Covers actions for most IP rights except

●    Infringement

#    Claims Made and Reported

#    Defense coverage insures infringement/misappropriation liability, including reimbursement for defense expenses and/or legal damages or settlements

#    Covers copyright, patent, trademark infringement

#    Available to companies domiciled and operating anywhere in the world

#    Optional extension for contractual indemnities to customers and distributors, directors and officers, trade secrets, and extended reporting periods.

• RPX Corporation (“RPX”) — www.rpxcorp.com

#    Proprietary cost and actuarial data from more than 2,500 litigations allows RPX to offer the only insurance policy designed specifically to cover NPE threats.

#    Hundreds of companies lowering the risk of patent litigation exposure to the costs of litigation, manage patent risk with data driven insights with a sale of patent assets to RPX.

BEST CHOICES FOR COVERAGE WITH INCLING IP CLIAMS

·         Preferred ISO Policy Language

●    2001/2007/2013 ISO CGL CG 00 01 12 07 / CG 00 01 04 13

Coverage B Personal and Advertising Injury Liability

1.     Insurance Agreement:

a.     We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury ....

1.     “Advertisement” means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters.

. . . .

14.  “Personal and advertising injury” means injury . . . arising out of one or more of the following offenses:

. . . .

d.     Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, product or services;

e.     Oral or written publication, in any manner, of material that violates a person’s right of privacy.

f.     The use of another’s advertising idea in your “advertisement” . . . .

g.     Infringing upon another’s copyright, trade dress or slogan in your “advertisement”

·         CHUBB MEDIA GUARD POLICY FORM 14-02-4078 (04/2008)

Internet Activities means display of use of Matter, including overlaying on an Internet Site which was created on or to the Inception Date Set forth in Item 2 of the Declarations. Internet Site means any internet site set forth in Item 6 of the Declarations.

Matter means the content of any communication of any kind whatsoever, regardless of the nature or form of such matter or the medium by which such matter is communicated, including but not limited to language, data, facts, fiction, music, photographs, images, advertisements, artistic expression, or visual or graphical materials.

Media Activities means:

(A) any actual or alleged act, error or omission arising directly out of the gathering, recording, collection, writing, editing, publication, dissemination, exhibition, broadcast or release of Matter in connection with the Covered Media, including but not limited to any actual or alleged:

        (1) Invasion or infringement of the right of privacy or publicity, including the torts of intrusion upon seclusion, publication of private facts, false light, or misappropriation of name or likeness;

        (2) libel, slander, or any other form of defamation or harm to the character or reputation of any person or entity, including product disparagement or trade libel

        (3) outrage, infliction of emotional distress or prima facie tort;

        (4) false arrest, detention or imprisonment, harassment, trespass, wrongful entry or eviction, eavesdropping, or other invasion of the right of private occupancy

        (5) copyright infringement or misappropriation of property rights, information or ideas or dilution or infringement of title, slogan, trademark, tradename, service mark, or service name

        (6) negligence in connection with the content of Matter, including but not limited to any Claim alleging harm to a person or entity who acted or failed to act in reliance upon such Matter

(B) any actual or alleged act, error or omission arising directly out of the development, creation, production, placement or dissemination of Matter consisting of or relating to advertising, publicizing, promotion or sale of the goods or services of the insured or others where such Matter is in, or directly relating to, the Covered Media.

·         Non-ISO Policies to Avoid with Problematic IP Exclusions

o   Admiral

Any actual or alleged antitrust…violation…unfair competition, collusion, conspiracy or unfair false, misleading or receptive trade or practice.[3]

o   CNA

Limited Endorsement redefines personal adverting in my “coverage” only referencing offense (a)-(c) but failing to advise, that the only “adverting injury” coverage referred in the Policy’s Relation Page was not just included as it only existed in offenses (c)-(d) which are not purposely part of the Policy[4]

o   Great American

(l) Any claim or “suit” ... arising out of any ... misappropriation, infringement, or violation of ... copyright ... patent ...  trademark ... trade name ... trade secret ... trade dress ... service mark ... slogan ... service name ...

o    laws or regulations concerning piracy, unfair competition, unfair trade practices, or other similar practices; or ... Anti Trust Exclusions

Any actuator alleged antitrust…violation…unfair competitor, collusion, conspiracy or unfair, false, misleading or receptive trade or practice

any other intellectual property right or law. (emphasis added)[5]

o   Hartford

("Any injury or damage alleged in any claim or 'suit' that [**4]  also alleges an infringement or violation of any intellectual property right, whether such  allegation of infringement or violation is made by you or by any other party involved in the claim or 'suit' . . .")[6]

o   Travelers

(“Any injury or damage alleged in any claim or ‘suit’ that also alleges an infringement or violation of any intellectual property right, whether such allegation of infringement or violation is made by you or by any other party involved in the claim or ‘suit’…)[7]

CHECKLIST

●    Design an insurance program that includes the broadest possible coverage for business tort claims looking beyond traditional CGL, D&O and E&O policies

●    Tender early claims for damages as well as complaints/counterclaims to all potentially implicated insurers, not just the insurance broker

●    Keep insurers apprised of facts that potentially impact coverage suit including developments in the underlying action that clarify the claims asserted whether through discovery or motion activity

●    Be careful to notify insurers in advance to avoid the “voluntary payments” provision and be aware that resolving business disputes or securing a license may entitle the insurer to allocate a portion of the settlement to uncovered claims.

·         Revisit prior denials in light of developing coverage law to unearth “buried treasure”

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[1] Am. Century Servs. Corp. v. Am. Int'l Specialty Lines Ins. Co., No. 01 Civ. 8847 (GEL), 2002 U.S. Dist. LEXIS 15016, at *26-27 (S.D.N.Y. Aug. 14, 2002) (Wrongful acts included patent infringement, but exclusion for “actual or alleged gaining of profit or advantage to which the Insured is not legally entitled” precluded settlement for “past or future use of a valuable technology in the course of its business[.]).

[2] Research Corp v. Westport Ins. Corp 289 Fed. Appx. 989, 992 (9th Cir. (Ariz.) 2008) (“{A}llegations of conversion, fruaduluent concealment, and breach of fiduciary duties raised claims of ‘wrongful acts’[.]”)

[3] Admiral Ins Co Policy Form EO 13060820 Section V Exclusions Antitrust Exclusion

[4] My Choice Software, Ltd. Liab. Co. v. Travelers Cas Ins. Co. of Am. 823 F. App’x 510, 511-12 (9thCir. 2020) citing Spandex House, Inc. v. Hartford Fire Insurance Company, 407 F. Supp. 3d 242, 247 (S.D.N.Y. 2019)

[5] JAR Laboratories , LLC v  Great American E & S Insurance Co. 945 F. Supp 937, 947 (N. D. Ill. 2013)("In short, Illinois policy, legal authority, and the language of the exclusions itself all militate in favor of construing the 'unfair competition' exclusion as targeting a narrow subset of intellectual property violations that does not include TPU's false advertising and related claims.")

[6]  Princeton Express Surplus Ins Co. v. DM Ventures USA LLC 209 F. Supp 3d 1252, 1258 (S.D. Fla. 2016) (“Exclusions that make coverage in effective are illusory.”)

[7] My Choice Software, Ltd. Liab. Co. v. Travelers Cas Ins. Co. of Am. 823 F. App’x 510, 511 (9thCir. 2020)(“The district court erred in finding that the insurer had no duty to defend the insured on counterclaims on the ground that the insured’s claims in the underlying action fell within the IP exclusion contained within the insurance policy because it was reasonable for an insured under the policy to interpret the exclusionary provision as applying only to allegations asserted against it in the absence of explicit language stating otherwise”)