When an Idea is More Than Just an Idea: Insurance Coverage of Business Method Patent Infringements Suits Under Advertising Injury Provisions of Commercial General Liability Policies

Journal of Intellectual Property Law Volume 18 | Issue 2 Article 13 March 2011 When an Idea is More Than Just an Idea: Insurance Coverage of Business Method Patent Infringements Suits Under Advertising Injury Provisions of Commercial General Liability Policies Grace N. Witte Follow this and additional works at: https://digitalcommons.law.uga.edu/jipl Part of the Intellectual Property Law Commons Recommended Citation Grace N. Witte, When an Idea is More Than Just an Idea: Insurance Coverage of Business Method Patent Infringements Suits Under Advertising Injury Provisions of Commercial General Liability Policies, 18 J. Intell. Prop. L. 631 (2011). Available at: https://digitalcommons.law.uga.edu/jipl/vol18/iss2/13 This Notes is brought to you for free and open access by Digital Commons @ Georgia Law. It has been accepted for inclusion in Journal of Intellectual Property Law by an authorized editor of Digital Commons @ Georgia Law. Please share how you have benefited from this access For more information, please contact . Witte: When an Idea is More Than Just an Idea: Insurance Coverage of Bus WHEN AN IDEA IS MORE THAN JUST AN IDEA: INSURANCE COVERAGE OF BUSINESS METHOD PATENT INFRINGEMENT SUITS UNDER ADVERTISING INJURY PROVISIONS OF COMMERCIAL GENERAL LIABILITY POLICIES Grace N. Witte* TABLE OF CONTENTS ........................................... 633 1. INTRODUCTION II. ......... 636 ................................... BACKGROUND A. COMMERCIAL GENERAL LIABILITY INSURANCE POLICIES........... 636 B. IT. 1. Purpose ........................................ 636 ................................. 636 2. Advertising byuy Provisions ................... ..................... 636 a. StandardLanguage ............... 636 ......................... b. Interpretations 637 c. Three-Prong Test.......................... d. Applicability to IntellectualProperty Claims.............................. 640 3. Duty to Defend Versus Duty to Indemnf......................... 645 645 ................................. PATENT INFRINGEMENT ............... 645 1. Definition of Patent................. ............. 646 2. Business Method Patents................ a. Machine or Transformation Test...................647 b. CategoricalExclusion............................648 ...................... 649 c. Abstract Ideas.......... 3. Under CL Insurance Policies................................... 650 ANALYSIS.................................................. 651 A. HYUNDAI UNDERMINED THE INTENT OF THE .......... 652 ....................... CONTRACTING PARTIES 654 PATENT................... INFRINGED B. HYUNDAI MISCONSTRUED THE C. HYUNDAI SHOULD HAVE LABELED THE PATENT A .................. 655 COMPUTERIZED PROCESS PATENT.................. J.D. Candidate 2012, University of Georgia School of Law. The author would like to thank the BSFC for their unending support. 631 Published by Digital Commons @ Georgia Law, 2011 1 Journal of Intellectual Property Law, Vol. 18, Iss. 2 [2011], Art. 13 J. INTELL PROP.L 632 D. E. IV. [Vol. 18:631 HYUNDAI IMPROPERLY LABELED THE PATENT INFRINGEMENT AS PART OF AN ADVERTISING ACTIVITY .............................................. HYUNDAIIS ANALOGOUS TO AUTO SOX AND SHOULD NOT HAVE CREATED A DUTY TO DEFEND UNDER AN ADVERTISING INJURY PROVISION .............. CONCLUSION https://digitalcommons.law.uga.edu/jipl/vol18/iss2/13 ..................................... 657 ........... 657 ............. 658 2 Witte: When an Idea is More Than Just an Idea: Insurance Coverage of Bus 2011] WIENAN IDEA IS MORE THANJUSTAN IDEA 633 I. INTRODUCTION Technology changes everything. Once upon a time, car purchasers had to trek to a car dealership and deal with pushy salesmen. In modern society, customers can log onto a website and build the car of their dreams.' This privilege did not come without a fight, however. The patent holder of the design of the original build-your-own-car website has been buckling down on companies that have been infringing on its patent.2 Hyundai has experienced the pain that many modern businesses have felt; it was sued for infringing someone else's patent.3 As technology develops and businesses get more and more creative in reaching out to customers and attracting business, companies frequently step on one another's toes via their innovative processes and products. Fortunately, the business community is no stranger to risk. These days, virtually every risk is insurable. 4 Short of criminal prosecution, stealing another company's idea could be very lucrative, as long as the insurance company pays in the event that the infringing company gets caught. Hyundai got caught and it turned to its safety net, its insurance companyS Of course, as any good business would, the insurance company tried to avoid the expense of getting involved. 6 Understandably, the insurance company did not expect a business insurance policy to cover losses resulting from the insured's choice to steal someone else's website design. Hyundai and the Ninth Circuit thought differently, apparently.' The ideas underlying the Hyundai case are not new. Businesses are faced 9 with new ideas every day. 8 Patents have existed for years, serving to protect inventors and to encourage innovation to help make society and the economy 1 See, e.g., Build Your Own Huyndai, http://www.hyundaiusa.com/build-your-hvundai/. 2 See, e.g., Orion IP, LLC v. Mercedes-Benz USA, LLC, No. 6:05CV322, 2008 U.S. Dist. LEXIS 103607, at *3 (E.D. Tex. Dec. 22, 2008), rev'd in part, afd in part, vacated in part Orion IP, LLC v. Hyundai Motor Am., 605 F.3d 967 (Fed. Cir. 2010) (involving suit Orion brought against Hyundai and other alleged patent infringers, resulting in jury verdict finding no infringement of the relevant patent and appeal of finding of infringement of other patent). 3 Id. 4 See, e.g., Belinda Goldsmith, FootballStar Troy Polamalu's HairInsuredfor $1 Million, REUTERS, Aug. 31, 2010, http://www.reuters.com/article/idUSTRE67U0PX20100831 (describing Head & Shoulders' million dollar insurance policy on the hair of a football star). s Hyundai Motor Am. v. Nat'l Union Fire Ins. Co., 600 F.3d 1092 (9th Cir. 2010). 6 Id. at 1096. 7 Id. at 1104. 8 See, e.g., Business 2.0, The 31 Best Business Ideas in the World, CNNMONEY, Aug. 11, 2006, http:// (listing business money.cnn.com/2006/07/27/technology/bestbizideaslistO727.biz2/index.htm ideas from around the world and encouraging businesses to try them). 9 Press Release, United States Patent and Trademark Office, First U.S. Patent Issued Today in 1790 (uly 31, 2001), http://www.uspto.gov/news/pr/2001/01-33.jsp. Published by Digital Commons @ Georgia Law, 2011 3 Journal of Intellectual Property Law, Vol. 18, Iss. 2 [2011], Art. 13 634 J.INTELL PROP.L [Vol. 18:631 grow.' 0 Of course, when inventors choose to invent, they take on the risk of failure themselves." When businesses take on risk, they often pay someone else, usually insurers, to cover an (...truncated)