Intellectual property (IP) takes many different forms including trademarks, copyrights and patents, and includes other rights, such as unfair competition and trade dress. Regardless of its form, IP is economically valuable and strategically important to businesses of all shapes and sizes. A substantial portion of a company’s value may stem from its IP, so businesses often find themselves in lawsuits involving allegations of infringement. Yet, business owners often fail to consider that insurance coverage can be an equally valuable asset to protect against the expense of defending those lawsuits and funding a settlement or judgment. As the number of IP-related lawsuits increase (which it has done and continues to do since the turn of the century), so too does litigation between insurers and insureds over the extent to which general liability policies cover the defense and cost of settlement or judgment in those suits.
Comprehensive General Liability or Commercial General Liability (CGL) coverage provides broad insurance for claims against an insured alleging, among other things, “advertising injury.” A CGL policy’s insuring agreement typically obligates the insurer to “pay those sums that the insured becomes legally obligated to pay as damages” such as for what the policy defines as “advertising injury” (the duty to indemnify). It also typically obligates the insurer to provide and/or pay the litigation costs related to that claim, including attorney fees incurred in defending a lawsuit (the duty to defend). As early as 1998, one federal district court was already referring to the “litigation explosion” involving insurers’ duty to defend IP claims alleging “advertising injury” as that term was then defined. That definition has since gone through numerous iterations and the “litigation explosion” is showing no signs of slowing.
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