By: Jeffrey G. Sheldon, Esq.

law-on-ip-blog-11-4-2016Some insurance policies can be used to defend against a lawsuit for intellectual property infringement. For example, an option for a CGL policy (Comprehensive General Liability Policy) that most businesses carry is advertising injury defense and indemnity. If there is a possibility of being sued for intellectual property infringement, make sure your broker includes advertising injury coverage. Better yet, have the advertising injury coverage reviewed by an attorney before buying the policy. Different insurance companies provide different coverage. Some policies will provide protection with regard to copyright and trademark infringement. Only rarely do the policies provide protection against patent infringement.

Also consider obtaining a cyber liability policy that may provide protection against trademark and copyright infringement associated with use of a web site.

Unfortunately, we know of no good policy for defending against a lawsuit that has only patent claims, unless the case is combined with another case of a different kind. The only such policy currently on the market is expensive and full of exclusions.

Some companies offer offensive insurance for patent infringement. They will help fund a lawsuit against an infringer and can be useful for a company with limited assets against a large infringer. However, if the case is successful, the insurer gets all of its money back and a significant portion of any recovery.

Whenever sued for intellectual property infringement, it is generally a good idea to promptly tender the suit to the insurers for defense. Make sure to include any insurer providing coverage during the term of infringement and not just the current insurer. Your insurance broker should do this for you. The reason for doing this promptly is many insurers take the position that any legal fees incurred before tender are the responsibility of the insured. If the delay is too long, the insurer may refuse to defend because most policies include a requirement of prompt tender. The downside of tendering is it often results in higher insurance rates and sometimes policy non-renewal. So if the matter is likely to be settled promptly, then a short delay in tendering may be a good strategy.

Sometimes a broker is not as cooperative as you would like. Keep in mind that brokers get rated on their claim history. Too many claims by their customers could result in an insurance company no longer allowing the broker to sell policies for it. Bear that in mind if the broker wants to delay tender. The broker may not always have your best interests at heart.

If the insurer agrees to defend, it may be under a “reservation of rights.” The insurer may take the position that only some of the claims are covered, or that none is covered, reserving the right to ask for some or all of the monies paid in defense to be recovered. If there is a charge of willful infringement, the insurer may take the position that such willful acts are not covered at all. There are reported cases where insurers sue the insured to determine if a defense needs to be provided. There are also reported cases where the insurer sues the insured after the case is over to recover all or part of the monies paid. So do not consider the insurance company’s payment to be free money.

Also the insurer may insist on using its “panel counsel” who are willing to work at reduced rates because of the volume of work received and the fact that insurance companies almost always pay. It is our experience that some panel counsel are more liberal with regard to how much time certain tasks should take, and make up for lower billing rates with greater number of hours to get a task done.

A problem for the insured is sometimes panel counsel is not as effective as you would like. Consider the option of requesting your attorney of choice to match that price, or paying the difference between what the insurance company will pay and what the real going rate is. At a minimum, have your own experienced attorney look over the work done by panel counsel to make sure everything that needs to be done is done, and done well.

 

***

DISCLAIMER

The information contained on this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in your state. LawonIP.com and Leech Tishman expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this site.

Leave a Reply

Your email address will not be published. Required fields are marked *