8.2.2.1 "Offer to Sell" as a Patent Infringement

• Jurisdiction: Arizona

The Arizona courts have not yet addressed whether the terms "misappropriation of advertising ideas or style of doing business" and "infringement of copyright, title, or slogan" encompass a patent infringement claim. However, a number of courts from other jurisdictions have interpreted and applied this language. The majority of these courts have held that patent infringement, unlike trademark infringement, does not constitute misappropriation of advertising ideas or style of doing business or infringement of title.^[158]

"Misappropriation of advertising ideas" has been defined as the wrongful taking of another's manner of advertising.^[159] The phrase "style of doing business" has been used by the courts to refer to a company's comprehensive manner of operating its business.^[160] "Style of doing business" expresses essentially the same concept as the more widely-used term "trade dress."^[161] It refers to the outward appearance or signature of a business, the sort of claim comprised under trade dress.^[162] A majority of courts have held that patent infringement is not remotely similar to advertising activities or outward appearances.^[163] As stated by a Virginia district court:

Patent infringement involving only the patents used in the manufacture of a single device does not even approach the showing of pervasive similarity in the overall manner of doing business that courts have previously recognized as necessary to successfully prove misappropriation of a "style of doing business."^[164]

The court further stated:

[I]t is nonsense to suppose that if the parties had intended the insurance policy in question to cover patent infringement claims, the policy would explicitly cover infringements of "copyright, title or slogan," but then include patent infringement, sub silentio, in a different provision, by reference to "unauthorized taking of . . . [a] style of doing business."^[165]

The majority of courts have also found that the plain reading of the term "infringement of copyright, title, or slogan" cannot reasonably be perceived to mean patent infringement.^[166] The term "title" refers to a distinctive name or designation used to identify a literary or artistic work and not the legal concept of ownership of property.^[167] That is, "title" refers to a name, such as a name of a literary or artistic work, rather than to ownership of an invention or other thing.^[168] "Infringement of title" refers to claims based on the confusion of names or designations, not the slander or disparagement of a third party's legal title to its property.^[169]

The court in Atlantic Mutual Insurance Co. v. Brotech Corp.,^[170] held that there was no coverage for a CGL policyholder who sued for patent infringement. The court held that the term "title" in the context of advertising injury refers to "a distinctive name or designation used to identify a literary or artistic work and not to the legal concept of ownership of property."^[171] The court also indicated that reading "title" to include evidence of property ownership, rather than name or designation, would be unreasonably broad.^[172] The court stated, "[U]nder the defendant's proffered reading, the insurance companies could be liable under this provision for an insured's theft, misappropriation or conversion of any personal property of another if such were then advertised for sale."^[173]

Even if a patent infringement were included in one of the specified acts defining "advertising injury," the claim in the underlying complaint would not trigger a duty to defend unless it was directly related to advertising activity. Indeed, the majority of courts that have addressed whether patent infringement constitutes advertising injury have held that patent infringement is not covered because patent infringement is not normally caused by advertising activity. Since the gravamen of patent infringement is the unauthorized production, use, or sale of a patented product, and not its advertisement, patent infringement does not and cannot occur in the course of advertising.^[174]

"Infringement of patent" is defined by federal law as:

(a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.^[175]

Patent infringement concerns the unauthorized manufacture, use, or sale of a device or process containing an invention reserved exclusively to the patent holder.^[176] One who makes, uses, or sells a product incorporating a patented invention is guilty of direct patent infringement.^[177] One who aids or abets infringement of a patent by intentionally inducing infringement is as liable as a direct infringer.^[178] The majority of courts have held that patent infringement cannot constitute an advertising injury because, under 35 U.S.C. Sec. 271, a patent is infringed by making, using, or selling a patented invention, not by advertising it.^[179]

Webster's also defines patent infringement as "the unlawful manufacture, use or sale of a patented or copyrighted article."^[180] These definitions illustrate that there is no causal relationship between patent infringement and advertising activity. Manufacture, use, and sale represent harms separate from advertising activity. The patentee is not injured because a product incorporating its invention is advertised, but because the infringer, without consent, used or sold a product utilizing a protected invention.^[181]

Several courts have also commented on the significance of the omission of any reference to patent in the definition of advertising injury. The court in Gencor Industries, Inc. v. Wausau Underwriters Insurance Co. observed:

It is nonsense to suppose that if the parties had intended the insurance policy in question to cover patent infringement claims, the policy would explicitly cover infringements of "copyright, title or slogan," but then include patent infringement, sub silentio, in a different provision, by reference to "unauthorized taking of . . . [the] style of doing business."^[182]

The court further stated:

It is even more absurd to suggest that the phrase "infringement of . . . title", as used in the clause "infringement of copyright, title or slogan," encompasses patent infringement or inducement to infringe. Basic common sense dictates that if these policies cover any form of patent infringement, the word "patent" would appear in the quoted "infringement" clauses.^[183]

There is nothing about the term "advertising injury" itself that suggests coverage of patent infringement. Patent infringement is a tort that does not normally occur in connection with advertising.^[184]

In Everest & Jennings, Inc., v. American Motorists Insurance Co.,^[185] the court considered whether patent infringement was within the ambit of a clause that defined "advertising injury" as "misappropriation of advertising ideas or style of doing business" or "infringement of copyright, title or slogan." The court acknowledged that an insurer's duty to defend is broad and encompasses the reasonable expectation of the insured. Nonetheless, the court found that an insurer had no duty to defend against patent infringement when the claim never...