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Insurance policies may exclude trademark infringement defense

Businesses in California may want to pay close attention to their insurance coverage, especially if they will be dealing with intellectual property issues. This is illustrated in one case where a company sought coverage from their insurer for a lawsuit that accused the firm of infringing a trademark. However, the insurance company said that its policy did not provide coverage for intellectual property disputes, disclaiming its responsibility to defend the case. The company's case was dismissed after the insurance company demonstrated exclusions in its business liability and technology policies that addressed trademark infringement cases.

The company claimed that it was entitled to receive coverage for its legal defense under its coverage for personal and advertising injury. The description of this listed eight different situations, including alleged copying of an advertisement. However, an endorsement on the company's policy excluded nearly all of the eight different allegations, including copying in advertising and associated trademark infringement. In addition, the company also sought to use its technology policy to obtain coverage. However, the court accepted the insurer's argument that this policy covered technology services provided to others and excluded all intellectual property claims.

When the policyholder appealed the decision, it argued that it should have been covered for the trademark infringement defense under the insurer's umbrella coverage. It is not clear what initial result would have been obtained under that claim as it was rejected by the appeals court for not being included in the original claim. The appeals court affirmed the dismissal of the lawsuit against the insurer, leaving the company to cover its own legal defense.

Companies dealing with intellectual property matters may want to pay particular attention to these exclusions when purchasing liability insurance. An attorney may provide guidance on obtaining insurance policies that provide relevant protection, including for intellectual property or trademark infringement litigation.

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