CGL Policy Coverage of IP Claims Under 'Advertising Injury'

A company can expect to accumulate significant costs in defending against claims for intellectual property infringement. Plaintiffs claiming violations are often willing to expend significant resources enforcing their rights given the central importance of intellectual property assets—whether patents, trademarks, or copyrights—to many companies. Indeed, companies tend to derive a significant portion of their value from their brand identity and trademarks, such as Coca-Cola or Apple, and from the monopoly power they wield over specific technical innovations captured by patents. Given their importance to many companies, defending against a claim of infringement is doubly daunting for companies on the receiving end of these suits. They place their own IP assets at risk, can cost hundreds of thousands or millions of dollars to defend, and often result in major damage awards. Thus, it is especially critical for defending companies to understand the available resources to potentially preserve their continued existence. Companies can, and should, consider their Commercial General Liability (CGL) policies to seek coverage for defense of the claims and for indemnification if they have an unfavorable verdict or settlement.

When considering coverage under a CGL policy, as with all questions of insurance coverage, the policy language is paramount. The section most likely to provide a basis for enforcing an insurance company’s duty to defend, and possibly indemnify, is “advertising injury.” A typical advertising injury coverage provision will state that the insurance company will pay for damages arising out of injuries caused by some content included in the policyholder’s advertisement. Advertisement will often mean a notice or other announcement to potential customers or a market segment announcing the goods or services and intended to attract customers. Various policies will include exclusions, often including specific exclusions for IP infringement. Critically, many of these policies will include a carve-out from this exclusion for IP infringement that says that the exclusion will not apply when the infringement takes place in “your advertisement.” It is necessary to closely examine the policy in question, preferably in consultation with coverage counsel, to identify the strength of the policyholder’s position.