IP, CGL … WTH? INSURING AN INTELLECTUAL PROPERTY CLAIM

By Kevin C. Amrhein, CIC, CBIA

Most people think of New Year’s Day as the “beginning of a new me” (or perhaps “that day I’ll spend recovering from last night’s rager”).

For those of us interested in the complexities of Intellectual Property (IP) rights, the ushering in of a new year also signifies the day that thousands of previously copyrighted works enter the Public Domain. Everything from images to music to full-length books are finally free to be used by anyone for educational, personal, or commercial purposes. “Fair Use” be darned!

Unfortunately, many folks don’t wait until this happens to effectively rip-off someone else’s copyrighted work. Intentional or not, unless usage is protected under federal “Fair Use” law, violators can face significant consequences.

PUTTING IT ONLINE DOESN’T = FREE TO USE

I’ve talked with agents who believe that once an IP owner publishes their work online that’s it’s fair game to copy/paste/duplicate. This incorrect view is cited as the primary excuse in many of the IP-related claims that have been shared with me throughout the years. While the internet unarguably makes it easy to find and use people’s stuff, it doesn’t typically amend the owner’s IP rights.

THE INSURANCE BIT

While some insureds may inquire about specialty markets designed specifically for IP-related claims, others will simply go about their business and hope (dare I say, assume) standard business liability insurance will be there if/when the time comes. Using an unendorsed ISO’s Commercial General Liability policy as a basis for discussion, the good news is that it’s possible some coverage may kick in for certain claims. But much like that time you thought you could fetch a fortune selling that thriller of an insurance trade publication article as a NFT, when it comes to the available coverage, don’t get your hopes up.

CLAIM EXAMPLE

An agent finds a movie clip online that he thinks is a clever compliment to an email blast about the agency’s services. Without reviewing usage terms, he copy/ pastes the clip into the blast and off it goes. A few weeks later the agency receives notice from the studio’s general counsel ordering a cease-and-desist and outlining a process for determining damages. Counsel illustrates that since the agency is using the studio’s IP to boost sales, it’s clear the agency is not protected under federal Fair Use doctrine.

COVERAGE EXAMPLE

The agency submits the details to the general liability carrier. Assuming it’s an unendorsed ISO CGL, applicable language is found in Coverage B – Personal And Advertising Injury Liability. The following provisions are found within the definition of “personal and advertising injury:”

“Personal and advertising injury” means…

f. The use of another’s advertising idea in your “advertisement”; or

g. Infringing upon another’s copyright, trade dress or slogan in your “advertisement”.

DEFINITION OF “ADVERTISEMENT”

“Advertisement” means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition:

a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and

b. Regarding web sites, only that part of a web site that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.

EXCLUSIONS

While there are a few that could be a factor depending on the nature of the allegation, for the purpose of our example, let’s look at the wording in Exclusion i. – Infringement Of Copyright, Patent, Trademark Or Trade Secret:

“Personal and advertising injury” arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your “advertisement.”

However, this exclusion does not apply to infringement, in your “advertisement,” of copyright, trade dress or slogan.

The exception is positive news for the agency. The source of the allegation can be summarized as infringement of a copyright and the use of the clip in an email blast seems to fit the definition of “advertisement.”

TAKEAWAYS

▲ It’s easy to see from the CGL’slanguage that many IP claims,such as those alleging patentor trademark infringement, areexcluded.

▲ Specialty policies exist for a variety of IP infringement claims and counsel from a broker specializing in such coverage is ideal.

▲ Review any content for terms before using, and when in doubt, don’t.

That’s all for now. Until the next round…. Cheers!

Kevin C Amrhein, CIC, CBIA is IA&B's education consultant. He works with our CISR and CIC programs, as well as our special topic seminars and live webinars. Catch him at one of our upcoming professional training offerings: IABforME.com/education