Patent - Insurance Coverage Advice and Litigation

Gauntlett Law is a trailblazer whose attorneys have set precedent throughout the United States compelling insurance companies to pay client legal expenses incurred in defending patent, infringement lawsuits. It is presently representing a number of major corporations either evaluating, negotiating or litigating claims for insurance recovery for select business method patent infringement claims where his clients "occurrence" based commercial/umbrella/excess insurance coverage predate the inception of express patent infringement exclusions.

Representative Cases:

Homedics, Inc. v. Valley Forge Ins. Co., No. SA CV 99-0928 DOC (ANx), 1999 WL 33301457 (C.D. Cal. Oct. 29, 1999) (Ownership rights to patent conveyed "title" which was allegedly infringed by Homedics' use in advertisements of similar products to those Nikken maintained rights to exclude others from offering for sale. This advertising conduct was an "infringement of title" triggering "advertising injury" coverage.).

Bradleys' Electric Co., Inc. adv. Cigna Lloyds Ins. Co., 993 S.W.2d 673 (Tex. Ct. App. 1998) (On May 14, 1998 Justice Linda Reyna Yanez filed an Opinion on Motion for Rehearing, finding that the case was improperly transferred. The judgment of the trial court was reversed and the case was remanded with instructions that it be returned to Harris County. On June 10, 1999, the Supreme Court of Texas, in an opinion styled as Bradleys' Electric, Inc. v. Cigna Lloyds Ins. Co., 995 S.W.2d 675 (Tex. 1999), granted Bradleys' Electric's, Cigna Lloyds', United National's, and Texas Pacific's petitions for review, and without hearing oral argument, reversed the judgment of the court of appeals and remanded the case for a determination of the rendition issue. The court found that the court of appeals erred by not deciding the rendition issue before the remand issue.).

Land & Sky, Inc. adv. Union Ins. Co., 247 Neb. 696 (1995) (The Nebraska Supreme Court, the first state supreme court to address coverage for patent infringement issues, found that the insured was entitled to a defense for claims of inducing patent infringement of a waterbed patent. The court, applying Nebraska law, found that no Nebraska public policy intruded to avoid coverage for claims of inducing patent infringement.

It also found that piracy could encompass patent infringement and that a causal nexus could arise between claims of inducement and the insured's advertising activities. There was separate evidence that various farmers used the bladder (i.e., bag) to carry water in the back of pickup trucks. Based on the advertisements, the preferred use, which led to infringement (i.e., use of the bag in an assembled waterbed), was the cause of injury to the patent owner.).

Arbek Mfg., Inc. v. Select Ins. Co., 28 U.S.P.Q.2d (BNA) 1435, 1993 WL 528182 (C.D. Cal. Aug. 31, 1993) (Claims of inducement of patent infringement through promotion of furniture as a receptacle for liquid containers that, combined with water, created an infringing waterbed, triggered a defense. Furniture advertising emphasized its use for waterbeds, thereby making Arbek's advertisements a basis for its potential patent infringement liability.).

Omnitel v. Chubb Group of Ins. Companies, 26 U.S.P.Q.2d (BNA) 1933, 1993 WL 438839 (Cal. Super. Ct. Mar. 26, 1993) (Modem distributor sued by Hayes for inducing infringement through its dissemination of advertisements and manuals procured a defense under 1976 ISO CGL policy language including coverage for "advertising injury" offenses of "piracy" and "unfair competition" which the court found could encompass the patent infringement claims at issue or liability for "unfair competition" if the former tort was not established at trial. Without its advertising, Omnitel's product was merely a standard modem box with which a pair of users could use any communications protocol - among which Hayes' patented method of including codes in communications between computers was only one possibility.).

Consultant Cases:

Hyundai Motor America v. National Union Fire Ins. Co. of Pittsburgh, PA, No. 08-56527, 2010 WL 1268234 (9th Cir. (Cal.) Apr. 5, 2010)

Ninth Circuit Issues Published Order Finding Patent Infringement Lawsuit Addressing "Build Your Own Vehicle" Feature Triggered a Defense under Advertising Injury Coverage for "Misappropriation of Advertising Ideas" Offense

In 2005, Hyundai Motor America ("Hyundai") was sued for patent infringement by Orion IP, LLC ("Orion") based on allegations that Hyundai's website used Orion's patented methods of generating customized product proposals. Specifically, Orion alleged that Hyundai's website used a build your own vehicle ("BYO") feature and a parts catalogue feature. Hyundai sought a defense from its insurers asserting that Orion's claims constituted allegations of "[m]isappropriation of advertising ideas" which was covered under the standard "advertising injury" provisions of their policies. The insurers refused to defend Hyundai. After the jury in the patent infringement trial found against Hyundai, Hyundai brought suit against its insurers in the Central District of California seeking a declaration that the insurers had a duty to defend.

The district court granted summary judgment to the insurers. The Ninth Circuit reversed. It found the three element test for proof of "advertising injury" coverage satisfied.

First, "advertising" was implicated rather than individualized solicitation because Hyundai's BYO feature was widely distributed to the public at large as part of Hyundai's dissemination of a product through its marketing methods and marketing systems. The Court found that the insurers should have viewed the BYO feature on the insured's website in making their determination whether to defend the underlying suit.

Second, the Court held the "misappropriation of advertising ideas" offense was satisfied where the patent was for a process or invention which could reasonably be considered an "advertising idea." The Court found that Orion did allege a violation of a method patent involving advertising ideas. There need not be a suit by a competitor since the misappropriation of advertising ideas could injure an NPE (non-practicing entity) as the policy did not limit the identity of the claimant by its specific language.

Third, the Court found that a causal connection arose because of the linkage between the "advertisement" and the "advertising injury" offense of "misappropriation of advertising ideas" where an advertising idea itself was patented. In noting that there may be situations where an advertisement induces another to infringe a patent, the Court left open the question of whether a causal connection could be established in such a situation.

Thus, for patent infringement suits alleging that websites or other types of marketing methods/systems infringe a patent, defendants may be entitled to a duty to defend from their insurers under the standard "advertising injury" provisions of their policies. So long as the alleged wrongful acts constituting patent infringement potentially occur during a policy period where no patent infringement exclusion is in force, this analysis clarifies a pathway to coverage in a number of patent infringement lawsuits.

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