FEDERAL COURT IN HOUSTON FINDS NO DUTY TO DEFEND PATENT-INFRINGEMENT LAWSUIT

In granting summary judgment in favor of Continental Casualty Company last week, Judge Keith Ellison of the Southern District provided guidance on “personal and advertising injury” provisions in commercial insurance policies. The coverage dispute in Uretek arose from an underlying patent dispute between Uretek and its competitor Applied Polymerics.  Uretek (USA), Inc. v. Continental Cas. Co., 2015 WL 667880 (S.D. Tex. Feb. 17, 2015).  Uretek first sued Applied for patent-infringement of a lifting-process used in roadway maintenance and Applied counterclaimed alleging Uretek had misrepresented to third-parties that certain contracts were covered by the patent.  Uretek requested a defense from Continental, which Continental refused. 

Uretek held a general liability policy with Continental that provided coverage for “personal and advertising injury,” which included damage from any “Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products, or services…”  The policy also excluded claims arising from: “The use of another’s advertising idea in your ‘advertisement’” and “Infringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’”  Uretek argued coverage was triggered by Applied’s allegation that “Uretek disparaged the services of Applied and others.”  The Court disagreed finding the surrounding allegations concerned Uretek’s own services and patent.  In other words, Applied never alleged that Uretek disparaged a particular competitor’s services to a third party, as required by the policy provision, but rather alleged that Uretek had attempted to mislead competitors regarding Uretek’s patent to discourage competitors from bidding on similar pavement-lifting projects and mislead contractors into believing that Uretek was the sole provider of these services.  Citing other cases that held similar personal-and-advertising provisions did not apply when underlying allegations involve a party making misrepresentations about its own product the Court granted summary judgment in favor of Continental finding it had no duty to defend Uretek.