Illinois Federal Court Finds Advertising Injury Coverage Not Implicated by Business Competition and Intellectual Property Claims

In Lemko Corp. v. Federal Insurance Co., No. 12 C 03283, 2014 U.S. Dist. LEXIS 138667 (N.D. Ill. Sept. 30, 2014), the Northern District of Illinois granted summary judgment in favor of Federal Insurance Company (Federal) and Cincinnati Insurance Company (Cincinnati), finding that they had no duty to defend Lemko Corporation in a business competition and intellectual property infringement lawsuit brought by Motorola. The underlying complaint involved several claims by Motorola against Lemko originating from Lemko accessing “Motorola computers without authorization, or in excess of existing authorization, to obtain Motorola’s trade secrets and confidential information, including source code, and their transfer to Lemko, during a period running from approximately 2002 to 2007.”  Lemko tendered its defense to its insurers, Federal and Cincinnati, but both denied coverage.

Lemko brought the instant action seeking to impose a duty to defend on Federal and Cincinnati. Specifically with regard to the “advertising injury” coverage under the Federal and Cincinnati policies, the district court concluded that the underlying complaint did not satisfy the “infringing upon another’s copyright, trade dress or slogan in your ‘advertisement’” offense. In particular, the district court agreed with Cincinnati that the underlying complaint did not allege that Lemko infringed any of Motorola’s copyrights in any Lemko “advertisement.” The court remarked, “Motorola’s allegations pertain to the theft and use of the technology in Lemko products, not in any ‘advertisement.’” Thus, the district court granted summary judgment in favor of the insurers.