Personal Injury - Disparagement
(1) Parkham Industrial Distributors, Inc. v. Cincinnati Ins. Co.
No. 3:06CV-533-S, 2008 WL 451023 (W.D. Ky. Feb. 15, 2008)
? At issue were alleged buried fact allegations of disparagement triggering coverage under a 1998 ISO CGL policy provision covering personal and advertising injury arising out of “oral ord written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.”
? The court found fact allegations, which have been deemed sufficient by a number of courts to evidence a disparagement claim, insufficient on the facts before it, applying Kentucky law. Judge Simpson stated: IRST contends that the allegation that it falsely represented that it had “all necessary proprietary rights” in the technology used in its allegedly infringing products could be read to allege either (1) that IRST falsely advertised that it had all rights to sell SPI’s patented technology, or (2) that IRST falsely advertised that it had its own patented technology. In either event, IRST contends that CIC must provide a defense to the claims because under either interpretation, the alleged statement disparages SPI’s products.
Id. at *3.
? The court found that there was no allegation that IRST made any comparisons to SPI’s goods or services in its complaint. The court reasoned:
IRST is alleged to have stated that it had proprietary rights in its own technology (which SPI claims could not have been true because it holds the patents on the technology used by IRST), or that it had proprietary rights in SPI’s technology (which SPI claims that it did not grant). It appears doubtful whether this allegation could constitute disparagement of SPI’s goods.
Id. at *4.
? The court rejected the argument that IRST’s insistence of a claim of proprietary rights in technology to which SPI claims to have sold exclusive patent rights impliedly disparages SPI’s products because it implies that SPI’s assertion of exclusive rights is untrue. In its view this is inconsistent with the ruling in Heritage Mutual Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913, 931-32 (S.D. Ind. 2000). Id. at *4. In that case, addressing an analogous scenario, the court stated:
Hence, we look to Environ’s allegations to determine if it alleged that APT denigrated, discredited or belittled Environ’s products in the course of advertising . . . Environ simply fails to claim that APT said anything negative about its piping, which negative connotation is, after all, the essence of disparagement. The insured’s lack of any direct reference to a competitor’s goods or products repeatedly has compelled courts to find that the underlying plaintiff has not alleged an advertising injury under this disparagement offense. ... Even in the unlikely event that consumers would somehow connect APT’s advertised product with Environ’s product (to which APT’s advertisements do not refer, let alone discredit), the phrase “patent pending” does not equate to saying by implication that Environ’s products are inferior, that the claims in APT’s patent application are equivalent to the claims in Environ’s patent, or that Environ’s patent is invalid.
Id. at *4 (citation omitted).
? The court concluded:
Additionally, there is no allegation that SPI or SPI products were identified in IRST’s advertisement, making the connection to SPI tenuous at best. As in Heritage Mutual, supra., IRST is not alleged to have said anything negative about SPI’s products; only that it held proprietary rights in the technology.
Id. at *5.
? The court also intriguingly found that the patent infringement exclusion would bar any coverage even if there was a possible disparagement claim.
IRST urges that SPI could fail on the patent infringement claims but succeed on the misrepresentation claims. However this assertion does not disenfranchise the alleged act of misrepresentation from the essential facts of the claim. SPI complains of an infringement on its patent rights. The alleged misrepresentation as to IRST’s rights in the technology necessarily arises from the employment of that technology in IRST’s products. It is the alleged infringement with which SPI takes issue, and it is the alleged misrepresentation of IRST’s right to utilize the technology which SPI’s claims address. . . . [T]he essential facts cannot be parsed in such [a] fashion as to excise the “arising out of” patent infringement from the misrepresentations alleged.
Id. at *5.
? The court does not persuasively show why, in one possible world, indemnity could arise from misrepresentation but not patent infringement, and that misrepresentation would be a disparagement by virtue of the reference to the technology rights which one party claims it possessed, which it did not, whether or not the patent was ever found to be valid, much less infringed.
No. 3:06CV-533-S, 2008 WL 451023 (W.D. Ky. Feb. 15, 2008)
? At issue were alleged buried fact allegations of disparagement triggering coverage under a 1998 ISO CGL policy provision covering personal and advertising injury arising out of “oral ord written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.”
? The court found fact allegations, which have been deemed sufficient by a number of courts to evidence a disparagement claim, insufficient on the facts before it, applying Kentucky law. Judge Simpson stated: IRST contends that the allegation that it falsely represented that it had “all necessary proprietary rights” in the technology used in its allegedly infringing products could be read to allege either (1) that IRST falsely advertised that it had all rights to sell SPI’s patented technology, or (2) that IRST falsely advertised that it had its own patented technology. In either event, IRST contends that CIC must provide a defense to the claims because under either interpretation, the alleged statement disparages SPI’s products.
Id. at *3.
? The court found that there was no allegation that IRST made any comparisons to SPI’s goods or services in its complaint. The court reasoned:
IRST is alleged to have stated that it had proprietary rights in its own technology (which SPI claims could not have been true because it holds the patents on the technology used by IRST), or that it had proprietary rights in SPI’s technology (which SPI claims that it did not grant). It appears doubtful whether this allegation could constitute disparagement of SPI’s goods.
Id. at *4.
? The court rejected the argument that IRST’s insistence of a claim of proprietary rights in technology to which SPI claims to have sold exclusive patent rights impliedly disparages SPI’s products because it implies that SPI’s assertion of exclusive rights is untrue. In its view this is inconsistent with the ruling in Heritage Mutual Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913, 931-32 (S.D. Ind. 2000). Id. at *4. In that case, addressing an analogous scenario, the court stated:
Hence, we look to Environ’s allegations to determine if it alleged that APT denigrated, discredited or belittled Environ’s products in the course of advertising . . . Environ simply fails to claim that APT said anything negative about its piping, which negative connotation is, after all, the essence of disparagement. The insured’s lack of any direct reference to a competitor’s goods or products repeatedly has compelled courts to find that the underlying plaintiff has not alleged an advertising injury under this disparagement offense. ... Even in the unlikely event that consumers would somehow connect APT’s advertised product with Environ’s product (to which APT’s advertisements do not refer, let alone discredit), the phrase “patent pending” does not equate to saying by implication that Environ’s products are inferior, that the claims in APT’s patent application are equivalent to the claims in Environ’s patent, or that Environ’s patent is invalid.
Id. at *4 (citation omitted).
? The court concluded:
Additionally, there is no allegation that SPI or SPI products were identified in IRST’s advertisement, making the connection to SPI tenuous at best. As in Heritage Mutual, supra., IRST is not alleged to have said anything negative about SPI’s products; only that it held proprietary rights in the technology.
Id. at *5.
? The court also intriguingly found that the patent infringement exclusion would bar any coverage even if there was a possible disparagement claim.
IRST urges that SPI could fail on the patent infringement claims but succeed on the misrepresentation claims. However this assertion does not disenfranchise the alleged act of misrepresentation from the essential facts of the claim. SPI complains of an infringement on its patent rights. The alleged misrepresentation as to IRST’s rights in the technology necessarily arises from the employment of that technology in IRST’s products. It is the alleged infringement with which SPI takes issue, and it is the alleged misrepresentation of IRST’s right to utilize the technology which SPI’s claims address. . . . [T]he essential facts cannot be parsed in such [a] fashion as to excise the “arising out of” patent infringement from the misrepresentations alleged.
Id. at *5.
? The court does not persuasively show why, in one possible world, indemnity could arise from misrepresentation but not patent infringement, and that misrepresentation would be a disparagement by virtue of the reference to the technology rights which one party claims it possessed, which it did not, whether or not the patent was ever found to be valid, much less infringed.
