—David A. Gauntlett, Gauntlett & Associates

Reversing the district court, the Tenth Circuit found a duty to defend claim asserted by RAKTL under various business method patent claims. In so finding, the court reached a distinct result from that achieved in Discover Financial Services, LLC v. National Union Fire Ins. Co. of Pittsburgh, PA, 527 F. Supp. 2d 806 (N.D. Ill. 2007).

The different result flowed from the advertising technology patent at issue in the Dish Network suit. Notably, in Discover, those business method patent claims that involved “advertising methods or technology” were not set for trial. Thus, as of the date that a defense was adjudicated in the Discover case, there was no potential for coverage in the court’s view because the cases poised for a trial did not address any advertising technique patent claims. Moreover, National Union’s policy language was distinct as it limited coverage to “injury arising solely out of your advertising activities as a result of” one or more of the four types of offenses. Id. at 208.

The court also rejected the causal nexus analysis of Discover as inconsistent with Colorado law. Addressing the general concept of patent infringement as advertising injury, the court noted:

The bulk of the published case law addressing patent infringement as advertising injury deals with products the insured happened to advertise, rather than a means of advertising that the insured used to market its own products.

Id. at *6.

The court observed:

In the present case, by contrast, Dish allegedly committed patent infringement by using RAKTL’s technology to sell Dish’s own non-infringing satellite television products and services. Several courts considering similar facts have affirmatively held that where an advertising technique itself is patented, its infringement may constitute advertising injury. . . . In this case, the interactive telephone system Dish employs to communicate with its customers “plainly is not ‘the product being advertised,’ i.e.,” satellite television programming, Hyundai, 600 F.3d at 1101; rather, it is just as much the “form” of Dish’s advertisements as were the internet technologies in Hyundai and Amazon.

Id. at *6.

Addressing the elements of the pertinent offense, “misappropriation of advertising ideas,” the court found advertising ideas implicated. Refusing to take any singular definition, it did find that Hyman v. Nationwide Mut. Fire Ins. Co., “ ‘advertising’ was defined as the ‘action of calling something to the attention of the public.’ 304 F.3d 1179, 1188 (11th cir. 2002).” Id. at *9.

The Court of Appeals found it unnecessary to evaluate which of the claims in the 23 patents held by RAKTL had advertising implicated because “[i]nsurers concede that some of these patents explicitly claim the technology’s capacity for advertising. . . . Further, Insurers concede that ‘the patented technology could theoretically be used for advertising purposes.’ Id. at 39.” Id. at *10. In finding advertising implicated, the court placed a low threshold for “advertising,” stating:

The complaint, from the four corners of which the duty to defend must be determined, potentially alleges advertising simply because it provides no insight into what “pay-per-view ordering and customer service functions” entail. We cannot rule out the possibility that these activities involve not only the passive acceptance of sales requests, but also the active promotion of products through the dissemination of information, such as pricing and programming options.

Id. at *10.

It concluded that “advertising” was implicated no matter which definition of “advertising” was adopted because:

When the technology’s patented advertising capabilities are considered in conjunction with the vague factual assertions made in the complaint, the allegations are sufficiently broad to encompass “distribution of promotional materials,” “dissemination of information to promote a product,” or “calling something to the attention of the public.”


Id. at *10.

The liberal reading of the complaint was essential to this analysis and its possible construction so as to implicate a defense, to wit:

[T]he complaint may be read to allege actions that misappropriated patented advertising ideas, insofar as the product at issue was designed expressly for product promotion and dissemination of advertising information.

Id. at *10.

In words that could equally be apropos under the law of any jurisdiction, the court stated:

The question, under Colorado law, is not whether the complaint unequivocally spells out the specific advertising activities Dish engaged in, but rather whether “the alleged facts even potentially fall within the scope of coverage.”

Id. at *10.

Doubt itself evidences a potential for coverage under Colorado law. Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613-14 (Colo. 1999). The court found it of no moment that the technologies might have non-promotional uses. Rejecting this argument, the Court of Appeals observed:

It bears mentioning that Insurers’ examples might be more helpful if this were a patent infringement claim for the use of a telephone instead of the automated telephone interface systems actually at issue. But even so, nothing in the words “advertising ideas” suggests that the ideas must have no potential applications outside the field of advertising. . . . Dish’s customer service telephone system is likewise an advertising idea insofar as it constitutes the “form” for advertising material Dish conveys.[fn] . . . Thus, unlike the district court, we discern no basis for distinguishing the present case from Amazon and Hyundai. (footnote omitted).

Id. at *11, 12

Nor is the analogy to one-on-one solicitation through internet use a bar to coverage as the Hyundai and Amazon courts concluded. Adopting their reasoning, it noted that:

The court considered it critical, however, that the feature was not limited in the number of users who could access it and was intended for use by the public at large, “even if the precise information conveyed to each user varies with user input.” Id. at 1099–1100. The same logic applies to an interactive telephone system such as the one allegedly used by Dish.

Id. at *12.

Concluding why Hyundai was analogous, the court reasoned:

The complaint here can be read to allege that Dish’s phone system made product and service information available to any member of the general public who called. This sufficiently alleges actions which “potentially” or “arguably” constitute a predicate offense, misappropriation of an advertising idea.

Id. at *12.

Finding no “misappropriation of style of doing business” implicated, the court concluded:

We need not decide here whether, under some circumstances, a patented process or technology could be so comprehensive and detailed as to constitute a “style of doing business” even absent any actual past usage by, or identification with, a particular business. The allegations in this case do not rise to that level.

Id. at *13.

Addressing causation, the Court of Appeals found it must exist between advertising activities and advertising injuries, although the actual policy language required that the pertinent offense, “misappropriation of advertising activities” be committed in the course of the insured’s advertising of products. Notably this quote taken from Novell, quoting Bank of the West, looks to an earlier causation language formula. Looking to the nature of the injury to evaluate this element, the court stated:

RAKTL alleges that it “has been, and continues to be, damaged and irreparably harmed by [Dish’s] infringement, which will continue unless [Dish] is enjoined by this Court.” . . . More specifically, RAKTL alleges that Dish “employs the inventions of certain of the patents-in-suit. [RAKTL] has repeatedly attempted to engage each defendant in licensing negotiations, but to date, none of the defendants have agreed to take a license to any of the patents-in-suit.” Id. at 163. These allegations clearly indicate that the harm RAKTL complains of was not fully accomplished at a single point in the past when Dish’s system was first developed. Rather, the patent holder claims to have suffered—and to continue to suffer—harm from Dish using its patented technologies without paying for a license.

Id. at *14.

Distinguishing this case from ones where a product was simply manufactured and then subsequently advertised,

the injury RAKTL alleged in this case derived, at least in part, “from [the patented technology’s] use as the means to market goods for sale. In other words, the infringement occurred in the advertising itself.

Id. at *15.

Refusing to follow either Discover Financial Services LLC v. National Union Fire Ins. Co. of Pittsburgh, PA, 527 F. Supp. 2d 806 (N.D. Ill. 2007) or Delta Computer Corp. v. Frank, 196 F.3d 589, 591 (5th Cir. (Tex.) 1999), for simply identifying a circumstance when coverage might not arise, as if that sufficed to evidence the absence of potential coverage, the court found Colorado law required a distinct analysis.

In Colorado, however, the duty to defend is not restricted to the “core complaint” or to the underlying plaintiff’s “primary” grievance. Rather, the duty to defend an entire suit arises “when the underlying complaint alleges any facts or claims that might fall within the ambit of the policy.”  Id at *16.