'Tenth Circuit 'Dishes Out' Important Opinion Addressing The Scope Of Advertising Injury Coverage For Patent Infringement Claims

On October 17, 2011, the U.S. Court of Appeals for the 10th Circuit issued a much anticipated decision addressing the scope of "Advertising Injury" (AI) coverage for patent infringement claims. Dish Network Corp. v. Arch Specialty Ins. Co., No. 10-1445, __ F.3d __ , 2011 U.S. App. LEXIS 20955 (10th Cir. 2011), rev'g, 734 F. Supp. 2d 1173 (D. Colo. 2010). The court, applying Colorado law, reversed an order from the District of Colorado that granted summary judgment to the insurers. In the underlying action, the plaintiff alleged that Dish Network Corp. (Dish) had infringed one or more of 23 patents by "making, using, offering to sell, and/or selling ... automated telephone systems, including ... the Dish Network customer service telephone system, that allow[s] Dish's customers to perform pay-per-view ordering and customer service functions over the telephone." The 10th Circuit concluded that the record was unclear about how Dish actually used the technologies at issue, but that some of the patent holder's most well-known innovations involved interactive call processing.

Faced with the infringement claims, Dish requested a defense from its insurers, who denied coverage. Dish initiated coverage litigation. The district court applied the following three-part test previously articulated by the 10th Circuit to determine if the insurers owed a defense under the AI coverage: (1) the insured engaged in "advertising" during the relevant period, (2) the underlying complaint alleged a predicate AI offense under the policy, and (3) a causal connection existed between the advertising and the alleged injury suffered by the patentholder.1 The district court predicated its grant of summary judgment on its finding that the infringement claims failed to satisfy the "misappropriation of advertising ideas or style of doing business" enumerated AI offense contained in Dish's various primary and excess commercial general liability policies. Reasoning that even if Dish had engaged in advertising, the underlying complaint focused on the use of the patented technologies "as a means of conveying content ... [it] does not allege that the patented technologies are themselves incorporated as an element of [Dish's] communications and interactions with its customers." 734 F. Supp. 2d at 1184. Thus, according to the district court, unless the infringing technology itself was the subject of the advertisement (i.e. the message conveyed as opposed to the means of conveyance)...