Dish Network Corp.. v. Arch Specialty Ins. Co.

• Decision Date: 17 October 2011
• Docket Number: No. 10–1445.,10–1445.
• Citation: 100 U.S.P.Q.2d 1729,659 F.3d 1010
• Parties: DISH NETWORK CORPORATION; DISH Network, LLC, Plaintiffs–Appellants,v.ARCH SPECIALTY INSURANCE COMPANY; Arrowood Indemnity Company; Travelers Indemnity Company of Illinois; XL Insurance America, Inc.; National Union Fire Insurance Company of Pittsburgh, PA, Defendants–Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

659 F.3d 1010

100 U.S.P.Q.2d 1729

DISH NETWORK CORPORATION; DISH Network, LLC, Plaintiffs–Appellants,

v.ARCH SPECIALTY INSURANCE COMPANY; Arrowood Indemnity Company; Travelers Indemnity Company of Illinois; XL Insurance America, Inc.; National Union Fire Insurance Company of Pittsburgh, PA, Defendants–Appellees.

No. 10–1445.

United States Court of Appeals, Tenth Circuit.

Oct. 17, 2011.

Lee M. Epstein of Fried & Epstein LLP, Philadelphia, PA (Todd Mackintosh of Mackintosh Law Office, LLC, Denver, CO, with him on the briefs), for Plaintiffs–Appellants.Daniel I. Graham, Jr. of Bates Carey Nicolaides LLP, Chicago, IL, (Richard H. Nicolaides, Jr., Barbara I. Michaelides, Agelo L. Reppas of Bates, Carey, Nicolaides LLP; Thomas N. Alfrey and Robert J. Zavaglia, Jr. of Treece Alfrey Musat & Bosworth, PC, Denver, CO; Roger K. Heidenreich and Deborah C. Druley of SNR Denton US LLP, St. Louis, MO; Kevin F. Amatuzio and Krista M. Maher of Montgomery Kolodny Amatuzio & Dusbabek, LLP, Denver, CO; and George S. McCall of Sedgwick LLP, Dallas, TX, with him on the brief), for Defendants–Appellees.Before BRISCOE, Chief Judge, BALDOCK, and HOLMES, Circuit Judges.BRISCOE, Chief Judge.

Plaintiffs DISH Network Corporation and DISH Network LLC (collectively, Dish) filed a diversity action in the District of Colorado, seeking a judgment declaring that Dish's insurers had a duty under Colorado law to defend Dish in a patent infringement suit.¹ The district court held that the underlying complaint did not allege an “advertising injury” under the policies issued to Dish by the five defendant insurers, Arrowood Indemnity Company (Arrowood), Travelers Indemnity Company (Travelers), XL Insurance America (XL), Arch Specialty Insurance Company (Arch), and National Union Fire Insurance Company (National Union), or their predecessors (collectively, Insurers). The court granted Insurers' motion for summary judgment, and Dish appeals. Exercising jurisdiction under 28 U.S.C. § 1291, we reverse and remand.

I.

A. The Underlying Complaint and Patents–in–Suit

Dish ² sells satellite television programming. Aplt.App. at 2156. The present insurance coverage dispute arises from a patent infringement suit brought against Dish by Ronald A. Katz Technology Licensing, L.P. (RAKTL). Ronald A. Katz Tech. Licensing, LP v. EchoStar Commc'ns Corp. and EchoStar Satellite LCC, Case No. C–07–03151 WDB (N.D.Cal.).

In its amended complaint, RAKTL alleged that Dish had infringed one or more claims in each of twenty-three patents. Aplt.App. at 167 ¶ 45. RAKTL asserted that Dish did so by “making, using, offering to sell, and/or selling ... automated telephone systems, including without limitation the DISH Network customer service telephone system, that allow [Dish's] customers to perform pay-per-view ordering and customer service functions over the telephone.” Id. Although the record reveals little more about how Dish actually used the technologies at issue, the complaint does provide some general background regarding RAKTL's patents:

Among [the inventor's] most prominent and well-known innovations are those in the field of interactive call processing. [His] inventions in that field are directed to the integration of telephonic systems with computer databases and live operator call centers to provide interactive call processing services.

Id. at 162 ¶ 10. RAKTL alleged that its patents have “multiple fields of use, including but not limited to financial services call processing, automated securities transactions, automated credit card authorization services, automated wireless telecommunication services and support, automated health care services, and product and service support.” Id. at 163 ¶ 17.

Each of the patents-in-suit contains detailed claims outlining numerous possible applications for the technology. Id. at 2177–2744. Insurers concede that at least six of the claims Dish may have infringed explicitly mention advertising or product promotion. See Insurers' Response Brief (Ins. Resp. Br.) at 60 (citing Aplt.App. at 2269, 2271, 2681 (claims describing “[a] process ... wherein [the] operating format is an automated promotional format;” “an automated promotional format for promoting ... products;” and “[a] telephone interface system ... wherein said select interactive operating format involves advertising of a product for sale”)).

B. The Relevant Insurance Policies

Between 2001 and 2004, Dish purchased the primary and excess commercial general liability policies at issue here from the five defendant Insurers. Ins. Resp. Br. at 5–7. Primary insurance is provided by Arrowood and Travelers, while XL, Arch, and National Union are responsible for excess coverage if the primary policies are exhausted. Id.

All of the policies promise to defend and indemnify Dish against claims alleging “advertising injury,” among other things. Most of the policies define “advertising injury” in terms of four categories of offenses:

“Advertising Injury” means injury arising out of one or more of the following offenses:

1. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

2. Oral or written publication of material that violates a person's right to privacy;

3. Misappropriation of advertising ideas or style of doing business; or

4. Infringement of copyright, title or slogan.

Aplt.App. at 208, 431, 479, 536, 964. The National Union policy, by contrast, limits 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 (emphasis added). The Arch policy is the only one to provide a different definition of “advertising injury,” referring, in relevant part, to “[t]he use of another's advertising idea in your ‘advertisement.’ ” Id. at 1013. Arch's policy also contains a clause excluding from coverage “any claim ... [a]rising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” Id. at 1004. This exclusion, however, “does not apply to infringement, in [the insured's] ‘advertisement,’ of copyright, trade dress or slogan.” Id.

C. The Present Action

On receiving RAKTL's complaint, Dish requested a defense from Insurers, who denied coverage. Dish Network Corp. v. Arch Specialty Ins. Co., 734 F.Supp.2d 1173, 1176 (D.Colo.2010). Dish then brought this suit, seeking a judgment declaring that Insurers had a duty to defend and indemnify it in the underlying action. Aplt.App. at 29–34. Dish also sued for damages for breach of contract and Insurers' duty of good faith and fair dealing. Id. Insurers moved for summary judgment, which the district court granted. See Dish, 734 F.Supp.2d at 1185–86.

Applying Colorado law, the district court concluded that a claim for patent infringement, such as the one at issue here, could “properly give rise to coverage, or even the specter of coverage, such that an insurer will have a duty to defend.” Id. at 1186. The duty would arise, the court stated, where the insured established three elements: first, that it was engaged in “advertising” during the relevant period; second, that the underlying complaint alleged a predicate offense under the policy language; and third, that a causal connection existed between the advertising and the alleged injury suffered by the patent holder. Id. at 1180.

“For purposes of th[e] summary judgment motion,” the court ruled that RAKTL's reference to “customer service functions” in its complaint was sufficient to allege that Dish engaged in “advertising.” Id. at 1182. The court rejected, however, Dish's argument that its use of a patented interactive telephone system to advertise could constitute “misappropriation of advertising ideas or style of doing business,” the sole predicate offense on which Dish relied. Id. at 1184–85. The court explained that “[t]he [RAKTL] complaint focuses on [Dish]'s use of these patented technologies as a means of conveying content to and tailoring its interactions with its customers.” Id. at 1184.

[The complaint] does not allege that the patented technologies are themselves incorporated as an element of [Dish]'s communications and interactions with its customers. The complained of conduct does not, therefore, constitute “misappropriation of an advertising idea” within the meaning of the contested insurance policies.

Id.

Accordingly, the court granted summary judgment for Insurers without addressing the third element of its test—causation—or the additional arguments certain insurers had raised under their individual policies. Id. at 1185 & n. 20. The court also did not reach the duty to indemnify or Dish's other claims. Id. at 1186. Because we conclude that the complaint potentially alleges advertising injury arising from the misappropriation of advertising ideas, we reverse and remand for further proceedings consistent with this opinion.

II.

In this appeal, we are asked to apply Colorado law in deciding several issues without clear guidance from the courts of that state.³ First, Insurers dispute whether a claim for patent infringement can ever constitute “advertising injury” within the relevant policy language. We conclude that it can. Accordingly, we reach the second issue: whether the specific allegations in this case bring the underlying suit within the policy language. This question requires us to decide, first, whether the underlying complaint can be read to allege “misappropriation of advertising ideas or style of doing business,” and second, whether advertising activities are alleged which caused the injury of which the underlying plaintiff complains.⁴ We agree with Dish that both “misappropriation of advertising ideas” and the requisite causal connection potentially are alleged.

A. Standard of Review

The district court granted Insurers' motions for summary judgment pursuant to Fed.R.Civ.P. 56(c). We review de novo this decision, using the same...