DISH Network: Tenth Circuit Holds that Patent Infringement Claims may be Covered by CGL Insurance

Ranked by Law360 as the ‘Top Decision for Policyholders – 2011,’ Lee M. Epstein, a member of Flaster Greenberg’s Insurance Coverage Practice Group, claimed an important victory for policyholders of the DISH Network in a high profile case involving insurance coverage for patent infringement claims.

The case involves DISH Network’s pursuit of a defense and indemnity from its insurers in response to an underlying lawsuit charging DISH Network with patent infringement. The underlying infringement lawsuit arose in connection with DISH Network’s alleged use of patented technology in automated telephone systems that allow its customers to perform pay-per-view ordering and customer service functions over the telephone.

The Tenth Circuit held that the underlying claims of patent infringement fell potentially within the Advertising Injury offense of “misappropriation of advertising ideas.”  In reaching its holding, the Court rejected the insurers’ contention that the phrase was unambiguous and could not encompass patent infringement claims.  Following the holdings in cases such as Hyundai Motor Am. v. Nat. Union Fire Ins. Co. of Pittsburgh, Pa., 600 F.3d 1092, 1102 (9th Cir. 2010) and Int’l, Inc. v. Am. Dynasty Surplus Lines Ins. Co., 85 P.3d 974, 977 (Wash. Ct. App. 2004), the DISH Network court held that, “where an advertising technique itself is patented, its infringement may constitute advertising injury.”  DISH Network, 2011 U.S. App. LEXIS 20955, at *20.

Having determined that patent infringement claims could, as a general matter, fall potentially within the coverage afforded for Advertising Injuries, the Tenth Circuit proceeded to hold that (1) DISH Network’s use of the allegedly infringing automated telephone systems constituted “advertising;” (2) the specific claims asserted against DISH Network fell within the covered offense of “misappropriation of advertising ideas” and (3) the alleged underlying injury arose in the course of DISH Network’s advertising. 

Thus, despite the near-uniform contention by insurers that patent infringement claims are never covered, the DISH Network case represents another in a growing trend of cases finding the potential for coverage when the infringement involves the alleged wrongful taking of a patented advertising idea.

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