Patent Infringement Exclusion “Unambiguously” Barred Coverage for Injury Arising Out of Patent Infringement, Court Rules

October 31, 2013 | Insurance Coverage

A federal district court in Hawaii has ruled that a commercial general liability (“CGL”) insurance policy “unambiguously” did not provide coverage for two lawsuits filed against the insureds that were based on allegations of patent infringement.

The Case

A life-sciences inventor brought two lawsuits – a “business interference” action and a “patent infringement” case – against a pharmaceutical company and its wholly owned subsidiary in federal district court in Florida. Both lawsuits were based on allegations of patent infringement. The defendants sought coverage from the insurance carrier that had issued a CGL insurance policy to them. The defendants asserted that both underlying actions alleged wrongdoing in “advertising.”

The insurance carrier sought a declaration that it had no duty to defend or indemnify the defendants, and it moved for summary judgment.

The Court’s Decision

The court granted the insurer’s motion.

The court first declared that allegations of patent infringement (even if the allegations also involved advertisements of a patented invention) could not constitute “advertising injury” sufficient to trigger insurance coverage under a CGL policy unless the patented idea itself concerned a method of advertising.

Moreover, the court continued, even if there were some ambiguity as to whether patent infringement could constitute advertising injury, the policy contained a specific exclusion for patent infringement that “unambiguously” barred coverage for injury arising out of patent infringement.

The court concluded, therefore, that the insurance carrier owed no coverage duties as to the underlying complaints.

The case is United States Fire Ins. Co. v. Cyanotech Corp., No. 12-00537 JMS-BMK (D. Haw. Oct. 23, 2013).

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