If you own your own business, you know that it’s not an easy job. In addition to long hours and economic insecurity, you likely also worry about one of the most frightening risks of owning a business: What if I get sued?
If your business is involved in litigation, you often will have coverage for claims, defense attorney’s fees, or both under a commercial general liability (CGL) policy. Coverage is usually straightforward for claims and suits related to premises injuries (like slip-and-falls) and accidents involving business vehicles or property damage. Coverage for some claims involving copyright issues and some intellectual property claims related to your marketing and advertising is included in a typical CGL, but there are numerous exclusions to coverage that may leave your business exposed.
What Kinds of IP Lawsuits Might be Covered by a CGL?
Actions relating to infringement of the intellectual property rights of others is only covered by a CGL in certain circumstances and is subject to exclusions. These situations are set forth in “Coverage B,” which describes the scope of a CGL policy’s “Personal and Advertising Injury Liability Coverage” (as opposed to Coverage A, which sets out the terms of the “Bodily Injury and Property Damage Injury Coverage”). “Advertising injury” coverage insures against claims for certain limited kinds of offenses committed in connection with the insured’s advertising of its goods or services. This section of coverage was originally introduced to the CGL policy in 1976; the coverage language has been modified multiple times since then, most significantly in 2001, and numerous exclusions have been added to the standard policy. A significant number of the published court cases involve the 1986 version of the standard Insurance Services Office, Inc. (ISO) CGL form.
Currently, the two situations in which IP claims are covered under standard CGL advertising injury policy coverage are claims for:
- Copyright, trade dress, or slogan infringement: Coverage under a CGL applies if the named insured is alleged to have, in an advertising campaign, infringed on the copyright, trade dress, or slogan of another business or individual. (“Trade dress” in this context refers to an image or “look” that is unique or distinctive.)
- Use of ideas: Coverage also exists, subject to exclusion, if another person or organization alleges your business is using their ideas (marketing or branding strategies, slogans, images, etc.) in your advertisements.
“Advertisement” is defined in the CGL policy as “a notice broadcast or published to the general public (or specific target markets within the general public) about the named insured’s goods, products, or services.”
Limitations on IP-Related Coverage in the Standard CGL
The extent of coverage for intellectual property claims is a frequently litigated issue. Historically, businesses claimed virtually all kinds of IP-related claims were “advertising injuries,” including those for patent, copyright, and trademark infringement. But insurers have trended towards an extremely limited interpretation of claims that are covered, holding that IP claims are generally excluded from coverage unless they are specifically related to a company’s advertising.
Claims that, for example, another company plagiarized your internal employee training manual or pirated your training videos would not be directly related to “advertising” and would, therefore, be excluded.
Policyholders, on the other hand, frequently contest the exact meaning and scope of policy terms, hoping for a broader interpretation and a wider range of coverage.
For example, creative policyholders have urged courts to consider patent infringement as a misappropriation of trade dress, a covered category of offense, rather than an excluded IP claim.
The Problem of “Trademarks”
The initial versions of the CGL contained no reference to trademarks whatsoever; the current version includes language protecting “trade dress,” “advertising ideas,” and “slogans,” but it still carries no protection for trademarks. In fact, there is a specific exclusion stating that advertising injury coverage does not extend to claims “arising out of copyright, patent, trademark, trade secret or other intellectual property rights;” however, confusingly, the current version goes on to note that the exclusion does not apply to “infringement, in your advertisement, of copyright, trade dress or slogan.” What constitutes a protected “slogan” rather than an excluded “trademark” is an issue that is routinely litigated.
Other Specific Exclusions to Coverage Situations Common to IP Claims
In support of the narrowest possible policy interpretations, the standard CGL contains numerous specific exclusions, severely restricting the scope of coverage. All of them are themselves the subject of extensive litigation and conflicting judicial interpretation.
- The infringement must be in the advertising material itself. This exclusion clarifies that advertising injury coverage applies only if the advertising material or broadcast itself is a copyright violation, trade dress infringement, or misappropriation of trade dress.
- One of the most popular (and heavily litigated exclusions) denies coverage for intentional violations of IP rights in situations where a company knew that the actions they, or someone on their behalf, took would violate the rights of another and that the violation would inflict personal or advertising injury. In some jurisdictions, a claim in the complaint itself that the violation was intentional is enough to support a denial of coverage.
- If the advertising in question was first published before the policy took effect, the issuer may contest coverage, depending on the policy language. However, if the publication is repeated or continued through the term of the policy, denying coverage under this exclusion can get murky.
There are an ever-increasing number of additional standard specific exclusions, including those for criminal acts and related to online activities. All of them, of course, are frequently contested.
Additional Policies Can Give Insurance Coverage for IP Claims
Additional “Professional Liability Coverage” policies often cover a much broader swath of copyright and intellectual property rights claims, as well as defamation (libel and slander) actions and professional negligence claims. “Media liability policies,” particularly, are a type of professional errors and omissions (E&O) liability insurance designed for publishers, broadcasters, and other media-forward firms to specifically include coverage for infringement of copyright and plagiarism claims. Claims relating to patents and trade secrets, however, typically are only covered by specialized patent insurance. Additionally, there also has been some precedent in favor of coverage for IP claims involving trade secrets under a D&O policy. And some insurers offer stand-alone “Intellectual Property” insurance policies that specifically cover suits to protect or defend IP-related claims.
Patent insurance, particularly, can be invaluable if your business is at risk of being sued for infringement (patent liability or infringement defense coverage) or anticipates needing to pursue action to enforce your own patents or trade secret claims (patent abatement or enforcement coverage) Patent litigation routinely costs between a few hundred thousand dollars and several million dollars in costs and attorney’s fees for both defending and enforcing litigants – in addition to any damages awards, which can include treble damages for willful infringement. Both defense and enforcement policies can be costly. However, if your business is in a competitive, litigious, and patent-heavy industry (for example, software development), a defense policy may be wise. If your business has significantly valuable intellectual property rights, patent enforcement insurance may be worthwhile.
Unfortunately, given the ambiguity in the current standard CGL policy, determining coverage under a standard CGL policy for IP claims remains ambiguous and open to judicial interpretation. If you are in a contested coverage situation for an IP-related claim, consult an insurance coverage attorney who is well-versed in intellectual property and coverage issues to evaluate your options.
The content of this legal blog is for educational purposes only in order to provide general information and a general understanding of the law. This blog does not provide legal advice and no attorney-client relationship is created between you and Bristow-Ford Law or Susan Bristow-Ford as a result of this blog. No information herein should be used as a substitute for competent legal advice from a licensed attorney in your state or jurisdiction and your use of this information is at your own risk. The information herein may not reflect the most current legal developments and may be changed, improved, or updated without notice. Neither Bristow-Ford Law nor Susan Bristow-Ford is responsible for any errors or omissions in the content of this blog or for damages arising from the use of information contained in this blog under any circumstances.
Written with the assistance of attorney Jamie Pfeiffer.
 Dodell, Leib. “The Trademark Problem: Casualty Insurance’s Dirty Little Secret.” MyNewMarkets.com. Insurance Journal, 15 May 2013.
 Wade, Anastasia J. and Dattilo, Alexandra V. “Trademark or slogan: insurance coverage for intellectual property infringement.” Lexology. Globe Media Business Group, 2 June 2015.
 Warren, Sanford E., Jr. “Where the Rubber Meets the Road—Intentional Trademark Infringement and Insurance Coverage.” IRMI. International Risk Management Institute, Inc., June 2003.
 LaCroix, Kevin. “Unexpected Coverage: D&O Insurance and IP Litigation.” The D&O Diary. 12 Dec 2014.
 Clark, Robert J. “Insurance For Defending Against And Pursuing Patent Infringement.” Hahn Loeser & Parks, LLP, 2006.