120 Wash. App. 610 | Wash. Ct. App. | 2004
In a lawsuit against Amazon.com International, Inc., a software manufacturer alleged that Amazon infringed upon its patents by misappropriating its software for use on Amazon’s website to market goods for sale to the public. Because the allegations conceivably amounted to an advertising injury covered by Amazon’s policy with Atlantic Mutual Insurance Company, Atlantic Mutual had a duty to defend. We therefore reverse sum
FACTS
This insurance dispute originated with a lawsuit filed in March 2000 by Intouch Group. Intouch holds patents for interactive music preview technology, which enables customers to listen to samples of music products at kiosks and over the Internet. Intouch alleged Amazon and other defendants had infringed upon those patents; specifically, Intouch alleged Amazon used the Intouch technology to enable customers to preview music products available for sale via Amazon’s website.
Amazon tendered its defense to two insurers: Atlantic Mutual Insurance Company, its commercial general liability carrier; and American Dynasty Surplus Lines Insurance Company, an excess carrier. The Atlantic Mutual policy does not expressly cover patent infringement, but does cover advertising injury. The American Dynasty policy covers patent infringement, but only as excess coverage.
Both insurers refused to defend. Amazon initiated a declaratory judgment action against American Dynasty. The parties settled. American Dynasty reimbursed Amazon for its costs in the Intouch litigation, and Amazon assigned its rights against Atlantic Mutual to American Dynasty. American Dynasty then brought this action, alleging that Atlantic Mutual should have provided a defense because Intouch’s allegations amounted to an advertising injury.
Both parties sought summary judgment. The trial court granted summary judgment for Atlantic Mutual. American Dynasty appeals.
DISCUSSION
The duty to defend is broader than the duty to indemnify and arises whenever a complaint contains any
Amazon’s Atlantic Mutual policy covers advertising injury “caused by an offense committed in the course of advertising [its] goods, products or services.”
According to Intouch’s complaint, Intouch holds patents for technology that “provides a method by which consumers can download and listen to portions of pre-selected music over the Internet.”
The Atlantic Mutual policy defines “advertising injury” as injury arising from one or more of the following:
a. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services;
b. Oral or written publication of material that violates a person’s right of privacy;
c. Misappropriation of advertising ideas or style of doing business; or
d. Infringement or copyright, title or slogan.[8 ]
Misappropriation of an advertising idea may be accomplished by the “wrongful taking of another’s manner of advertising,”
Patent infringement arising from the manufacture of an infringing product is not an advertising injury even if the infringing product is used in advertising.
Course of Advertising
An advertising injury must occur in the course of advertising goods for sale. “Advertising” normally refers to “ ‘any oral, written, or graphic statement made by the seller in any manner in connection with the solicitation of business.’ ”
An advertising injury must also have a causal connection with the insured’s advertising activities.
This causal requirement is the reason most patent infringement claims do not constitute advertising injuries. The basis of such claims is typically the sale of infringing products, not their advertisement.
Atlantic Mutual contends that a software program embedded in a website cannot satisfy the causation requirement for an advertising injury. Atlantic relies particularly upon Microtec Research, Inc. v Nationwide Mutual Insurance Co.
By contrast here, the alleged injury derived not merely from misappropriation of the code, but from its use as the means to market goods for sale. In other words, the infringement occurred in the advertising itself. Intouch’s allegations therefore satisfied the causation requirement for a potential advertising injury.
Atlantic Mutual had a duty to defend Amazon unless the injuries alleged by Intouch were clearly not covered by the policy. Because the injuries were conceivably covered, Intouch’s complaint triggered Atlantic Mutual’s duty to defend. As Amazon’s assignee, American Dynasty was entitled to summary judgment in its favor.
Attorney Fees
American Dynasty requests attorney fees under Olympic Steamship Co. v. Centennial Insurance Co.
Reversed and remanded for entry of summary judgment in favor of American Dynasty, and for a fees award.
Baker and Kennedy, JJ., concur.
Review denied at 152 Wn.2d 1030 (2004).
Hayden v. Mut. of Enumclaw Ins. Co., 141 Wn.2d 55, 64, 1 P.3d 1167 (2000).
Truck Ins. Exch. v. Vanport Homes, Inc., 147 Wn.2d 751, 760, 58 P.3d 276 (2002) (citations omitted).
Unigard Ins. Co. v. Leven, 97 Wn. App. 417, 425, 983 P.2d 1155 (1999).
Clerk’s Papers at 120.
See, e.g., Homedics, Inc. v. Valley Forge Ins. Co., 315 F.3d 1135, 1139 (9th Cir. 2003).
Clerk’s Papers at 89.
Clerk’s Papers at 89.
Clerk’s Papers at 124 (emphasis added).
Am. States Ins. Co. v. Vortherms, 5 S.W.3d 538, 543 (Mo. Ct. App. 1999); Fluoroware, Inc. v. Chubb Group of Ins. Cos., 545 N.W.2d 678, 682 (Minn. Ct. App. 1996).
Green Mach. Corp. v. Zurich-Am. Ins. Group, 313 F.3d 837, 841 (3d Cir. 2002); Frog, Switch & Mfg. Co. v. Travelers Ins. Co., 193 F.3d 742, 748 (3d Cir. 1999).
Applied Bolting Tech. Prods., Inc. v. United States Fid. & Guar. Co., 942 F. Supp. 1029, 1034 (E.D. Pa. 1996).
Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500, 1506 (9th Cir. 1994).
Id. (“While patent infringement can be piracy of the advertised product, generally it is not piracy of the elements of the advertisement itself.”).
Id. at 1507 n.5 (emphasis added) (citing Bank of the W. v. Superior Court, 2 Cal. 4th 1254, 1275, 10 Cal. Rptr. 2d 538, 833 P.2d 545 (1992)); see also State Auto Prop. & Cas. Ins. Co. v. Travelers Indem. Co. of Am., 343 F.3d 249, 258 & n.12 (4th Cir. 2003) (trademark that serves to promote a company’s products to the public is an advertising idea, and not merely a label or identifier).
In the event this was not clear from the complaint, Intouch filed a claim chart in support of its complaint pursuant to the requests of federal patent local rule 3.6 (N.D. Cal. 2001) in which it detailed this allegation:
After entering the AMAZON.COM web site, users can navigate through the AMAZON.COM music area and view various music products, such as CD’s, that are available for purchase on-line. TheAMAZON.COM music web site also provides the user the ability to choose pre-selected portions of pre-recorded music products by clicking on an icon that identifies a music product available for preview.
Clerk’s Papers at 42-43.
State Auto Prop. & Cas. Ins. Co., 343 F.3d at 259 (quoting Elan Pharm. Research Corp. v. Employers Ins. of Wausau, 144 F.3d 1372,1377 (11th Cir. 1998)).
Vortherms, 5 S.W.2d at 542, 544.
Simply Fresh Fruit, Inc. v. Cont’l Ins. Co., 94 F.3d 1219, 1221 (9th Cir. 1996) (citing Bank of the W., 2 Cal. 4th at 1277).
Id. at 1222-23.
Id. (quoting Iolab, 15 F.3d at 1506) (“a patent is infringed by making, using, or selling a patented invention, not by advertising it”) (emphasis added). As American Dynasty points out, the 1994 amendment to the patent law allowing an infringement claim to be based on an offer to sell has removed any suggestion that patent infringement cannot occur in the course of an insured’s advertising activities as a matter of law. See Homedics, 315 F.3d at 1139 (recognizing the basis for such holdings as invalidated by recent changes in patent law). But because Intouch’s complaint alleges an infringement based on Amazon’s use of its patented product, the 1994 amendments do not affect the outcome here.
See, e.g., Simply Fresh Fruit, 94 F.3d at 1222-23 (allegation that defendant infringed on patent for automated fruit slicer and then advertised improved product did not meet causation requirement for advertising injury); Microtec Research, Inc. v. Nationwide Mut. Ins. Co., 40 F.3d 968, 971 (9th Cir. 1994) (harm caused by misappropriation of competitor company’s software code, not by subsequent advertising that might have misled customers); Gitano Group, Inc. v. Kemper Group, 26 Cal. App. 4th 49, 60, 31 Cal. Rptr. 2d 271 (1994) (infringement of patented method for acid washing jeans, where the jeans were later advertised, did not constitute advertising injury).
40 F.3d 968, 971 (9th Cir. 1994).
id.
id.
Atlantic Mutual also argues in passing that Intouch’s injury cannot have been caused by Amazon’s advertising because customers would not have been aware that they were using an infringing product. Whether the customer knows about the infringement is irrelevant.
117 Wn.2d 37, 811 P.2d 673 (1991).
98 Wn. App. 286, 303-04, 991 P.2d 638 (1999).
id.
See First State Ins. Co. v. Kemper Nat’l Ins. Co., 94 Wn. App. 602, 611, 971 P.2d 953 (1999).