As reported by Wilson Elser, the Court of Appeals for the Ninth Circuit has ruled against a GL insurer looking to avoid picking up the tab for a patent suit.  After being sued for patent infringement for its online “build your own” car feature, Hyundai sought GL coverage under the “advertising injury” clause – specifically alleging that the patent infringement suit triggered the “misappropriation of advertising ideas” coverage grant.  The suit was ultimately rebuked in the lower court and Hyundai appealed.  In reversing the dismissal, the Ninth Circuit found that “the advertising itself constituted the (injurious) use of the patented method.”

Specifically, the Circuit Court reasoned:

The third-party patent infringement claims here alleged that Hyundai’s web-based advertisement violated the third party’s advertising-method patents. We hold that, in the context of the facts of this case, the third-party patent infringement claims constituted allegations of “misappropriation of advertising ideas” for purposes of the insurance policy.

Although the decision was decided on narrow grounds and the recent Bilski decision likely narrows the field of future online business method patents, the ruling remains a wakeup call to insurers who want nothing to do with patent suits.