Impact | Business Risk Management Blog

Woody Allen once said, “Showing up is 80 percent of life.” But this observation, while often apropos, is not applicable if one’s objective is to obtain insurance coverage for IP infringement claims.

Coverage can often be found for those claims if they are viewed through the right lens. But recent insurance coverage decisions highlight the nuance required to present such a claim in a way that brings it potentially within the coverage. The “potentially within the coverage” is magic that triggers the insurer’s duty to provide a defense in what can be expensive litigation. And even if a claim is potentially covered, coverage will be lost if the claim is not timely asserted. So showing up late may be no better than failing to show up at all.

Two recent appellate decisions¹, one in the Fifth Circuit and one in Illinois, highlight the value to policyholders from the aggressive pursuit of insurance coverage in claims arising from allegations of the infringement of intellectual property rights. In most insurance policies that afford advertising injury coverage, coverage is generally excluded for injuries “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” In other words, the policies, on their faces do not provide coverage for the infringement itself. However, this exclusion from coverage does not apply when the infringement is in the policyholder’s “advertisement.” In other words, a claim to coverage, both for the cost of defense and indemnification for settlement or judgment, can be developed to the extent that an argument can be made that the infringement at issue is actually found in the “advertising.” By taking expansive approaches to what constitutes an “advertisement,” the policyholders in Kipp Flores Architects and Creation Supply obtained insurance coverage for their infringement of intellectual property rights by pointing to the use of the infringement in the marketing of the product.

In the wake of a recent United States Supreme Court decision B&B Hardware, Inc. v. Hargis Industries, Inc., 575 U.S. _____ (2015) (Slip Op.), there is now no doubt that the strategy decisions you make in brand enforcement efforts before the Trademark Trial and Appeal Board (TTAB), a federal administrative agency, may have a critical impact on the outcome of any later federal court infringement litigation. The Court made clear that the doctrine of “issue preclusion” can foreclose relitigation of the likelihood of confusion issue – the key test of trademark infringement -- in that federal court litigation.