August 02, 2012 Articles

Coverage for Suits Alleging Infringement of Business Method Advertising Patents

Companies need to realize that contamination under a first party property policy is very different from pollution under a third party liability policy

by Erin L. Webb and Courtney Alvarez

Though patent infringement claims are generally not thought of as covered under commercial general liability (CGL) insurance policies, allegations involving certain types of business method patents may be covered because they constitute advertising. Several patented methods of advertising have been the subject of recent disputes. As courts have pointed out, a principled distinction exists between suits alleging infringement of advertising patents and suits involving an allegedly infringing product that is later advertised.

Recent allegations between Yahoo! and Facebook, among others, highlight an area of CGL coverage that some courts have stated applies to patent infringement suits involving advertising patents, such as pay-per-click sidebar advertising on webpages.

Though policy wordings may differ, in general, most CGL policies cover personal and advertising injury liability. That means that if the policyholder company is sued, and the claims involve personal injury or advertising injury as defined by the particular policy, the policyholder is potentially entitled to a defense and indemnity for any liability. Many CGL policies also specifically exclude patent infringement claims, but an exception to that exclusion may grant coverage back for claims relating to advertising.

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