The insured, Dish Network Corporation, was sued for patent infringement by Ronald A Katz Technology Licensing, L.P. (RAKTL). See Dish Network Corp. v. Arch Specialty Ins. Co., 2011 U.S. App. LEXIS 20955 (10th Cir. Oct. 17, 2011). RAKTL alleged Dish infringed on twenty-three patents. The underlying complaint provided little information about how Dish actually used RAKTL's technologies.
Dish had several primary and excess policies from five different insurers. All of the policies agreed to defend and indemnify Dish against claims alleging "advertising injury." The policies defined "advertising injury" as, among other things, "[m]isappropriation of advertising ideas . . . ."
The insurers denied a defense. Dish sued and the insurers moved for summary judgment. The district court agreed that RAKTL's reference to "customer service functions" in its complaint was sufficient to allege that Dish engaged in "advertising." The court rejected, however, Dish's argument that its use of a patented interactive telephone system to advertise could constitute "misappropriation of advertising ideas." The complaint did not allege that the patented technologies were themselves misappropriated as an element of Dish's communications and interactions with its customers. Therefore, the conduct was not "misappropriation of an advertising idea."
The Tenth Circuit reversed. The court first considered whether patent infringement generally fell within the applicable CGL policies' "advertising injury" coverage. Here, Dish allegedly committed patent infringement by using RAKTL's technology to sell Dish's own non-infringing satellite television products and services. Normally, the scope of "advertising injury" coverage was clear where a patented product was advertised and sold. Where, however, the advertising idea that was misappropriated was also a patented technology, the scope of coverage was less certain.
Therefore, whether this case presented a "misappropriation of advertising ideas" was ambiguous. A suit for patent infringement could, under narrow circumstances, allege "misappropriation of advertising ideas." Therefore, the ambiguity had to construed in favor of coverage of a patent infringement case.
The court next asked whether the complaint potentially alleged a "misappropriation of advertising ideas." The underlying complaint potentially alleged acts of advertising because it did not fully explain what was meant by "pay-per-view ordering and customer service functions." This case differed from the typical case in which the insured merely advertised a product it had already misappropriated. Instead, the complaint here alleged misappropriation of a product specifically designed, in part, for advertising purposes. These allegations were sufficient to raise the possibility of misappropriation of an advertising idea.
Finally, the court considered causation, i.e., whether the complained of injury arose in the course of advertising, as the policy language required. RAKTL alleged it "has been damaged and irreparably harmed by Dish's infringement, which will continue unless Dish is enjoined." Accordingly, the allegations sufficiently stated causation.
Therefore, the district court's grant of summary judgment was reversed and remanded to allow consideration of exclusions in the policies yet to be addressed by the district court.