Insurance Policyholder Advocate & Attorney David Gauntlett : Gauntlett Law Firm : Insurance Recovery, Policy Interpretation : Irvine, Orange County, California

Wausau Business Ins. Co. v. Fisher Printing Co., Inc., 2008 WL 2704874 (N.D. Ill. July 8, 2008) (Kennelly)

The underlying suit asserted unlawful intentional copying of copyrighted images and repeated use of Ashley’s protected trademarks and images. The court, applying Illinois law, focused principally on the exclusions.
The court found the exclusion inapplicable, following Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069 (7th Cir. (Ill.) 2004):

Ashley's description of Fisher's activity indicates the use of separate and distinct protected images without authorization, not (as in Taco Bell ) different permutations of a general concept. . . . The exhibits in Ashley's complaint also show separate copyright or trademark applications for each image that Fisher allegedly used without authorization. . . . Rather than one continuous use of a general idea with uncertain boundaries, see Taco Bell, 388 F.3d at 1074, publishing copyrighted or trademarked works involves, as least as characterized in Ashley's suit against Fisher, the use of separate images with “pretty definite metes and bounds,” not an ongoing use of a single general idea with uncertain boundaries. Id. If an infringer uses different copyrighted or trademarked material on separate occasions, he commits a set of “fresh wrongs” each time, and each occasion represents a separate publication, not simply a repetition of an earlier infringement. Id. at 1073.
Id. at *3.

If some of the issues allegedly used by Fisher without authorization were published after policy inception, a defense for the suit arises. The court found the “knowing violation” exclusion inapplicable because

A complaint that alleges, but does not require, proof of intent as a predicate for liability does not “plainly predicate liability on a theory of intentional misconduct.” To establish an infringement of copyright, a plaintiff needs to show only ownership of the copyright and copying of protected expression by the defendant. See Microsoft Corp. v. V3 Solutions, Inc., No. 01 C 4693, 2003 WL 22038593, at *9 (N.D.Ill. Aug.28, 2003) (citing Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991)). The plaintiff's ability to prevail does not depend on whether the defendant acted knowingly or intentionally. Id. (“Neither lack of knowledge nor intent are defenses to a copyright infringement claim”).
Id. at *5.

The court did not, however, find that Wausau’s conduct met the standard for vexatious and unreasonable conduct under 215 ILCS 5/155. Id. at *6.

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How to Get an Insurer to Pursue Patent Infringers with Attorneys You Choose at Its Expense – The Advent of Patent Pursuit Policies

As the cost of patent infringement litigation escalates, the average case will require more than $1,000,000 to pursue through trial according to a 1999 AIPLA (American Intellectual Property Law Association) survey. Many patent holders have been successful in procuring damages, principally via reasonable royalty awards, that make such lawsuits financially worthwhile. Lawsuits that do settle between major corporations are typically resolved through cross-licensing of patents possessed by each corporation. The net effect of these cases is to generate new marketing alliances.

For companies that do not have a significant patent portfolio that they can exchange with a competitor to resolve infringement disputes, the inability to afford costly patent litigation may mean the abandonment of a key market advantage, central to the company’s strategy. For such companies, the ability to afford patent infringement is a matter of economic survival.

Some years ago, creative patent attorneys appreciated the insurance industry seeking solutions to this issue. Persuaded that an advance of monies to fund such lawsuits could often be paid back from the proceeds realized through successful litigation, some select insurers began underwriting a new form of insurance – pursuit coverage that placed insurers and companies with patent rights into partnership in their efforts to realize the full benefit of the patents the companies had procured.
Known as “pursuit,” “abatement” or “enforcement” coverage, the purpose of this policy is to reimburse a policyholder for legal expenses it incurs in its pursuit of an infringer. This is really not a true form of insurance, but rather a risk-transfer mechanism with certain insurance-like aspects in the trigger of coverage.

Industries Likely to Benefit from Pursuit Coverage

Infringement Insurance: Offensive Exposed Industries:

– Legal Costs to Prosecute an Infringer – Manufacturing
– Covers Scheduled Patents Only – Consumer Products [Toys,
– Prior Approval Required to Commence Apparel, Personal Care, etc.]
   Litigation – Computers – Hardware &
– Insurer Shares in the Recovery Software
– Limits over $1M – Electronics
– Premium under $100,000 – Furniture
– Medical
– Food

Coverages Available for Pursuit of Patent Infringement Lawsuits

As yet, few of these policies have been interpreted. Nevertheless, a number of intellectual property counsel have procured reimbursement of the fees that they reasonably incurred in patent litigation. Typical issues will revolve around whether: (1) a viable infringement claim exists; and (2) facts not disclosed at time of application bar the right to pursue a claim (i.e., on sale bar applies because products within patent claims were advertised one year or more prior to application for the patent). The patents issued to Markman and Hilton Davis were both covered by pursuit insurance. A number of major insurers are considering extending similar coverage. The ensuing decade may well see such policies change the complexion of patent infringement litigation.

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