December 23, 2013 Articles

The "Silver Lining" of Other Claims in IP Litigation

They might trigger insurance coverage!

By Mary Craig Calkins and Daniel H. Rylaarsdam

Technology and entertainment companies often face copyright- and trademark-infringement claims and lawsuits. When a crisis hits in the form of a cease-and-desist letter, a tolling agreement, or a claim or counterclaim, a policyholder has a right to obtain the insurance benefits it purchased as expected, from defense costs through contributions to settlement and judgment. After all, "[t]he insured's desire to secure the right to call on the insurer's superior resources for the defense of third party claims is, in all likelihood, typically as significant a motive for the purchase of insurance as is the wish to obtain indemnity for possible liability." Montrose Chem. Co. v. Superior Court, 6 Cal. 4th 287, 295–96 (Cal. 1993).

Claims alleging intellectual-property (IP) infringement—of patents, copyrights, trademarks, or another form of IP—whether with or without merit, can threaten a company's bottom line. These IP-based claims are often accompanied by a panoply of statutory or common-law claims alleging interference with business and economic advantage, among others. Companies and their counsel—and creative plaintiffs' counsel—need to be savvy when it comes to maximizing insurance coverage when defending against or drafting complaints with such claims. Allegations and legal theories in these ancillary claims, or "implicit claims" based on assertions of fact in the complaints or disclosed in discovery, can provide a basis for coverage beyond insurance that might be provided for standard IP lawsuits.

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