Hyundai’s website had a “build your own vehicle” (“BYO”) feature and a parts catalogue feature. The BYO feature allowed users to build their own vehicle by responding to choices on a menu, including color, pricing, engine, options, etc. Orion IP, LLC sued Hyundai for infringing a patented method for generating customized product proposals for potential customers of an automobile dealer (U.S. Patent Nos. 5,615,342 and 5,367,627). Hyundai sought a defense under its commercial general liability policies, which was denied. Hyundai lost at trial and the jury awarded $34 million in damages to Orion.
Hyundai then sued its insurers National Union Fire Insurance and American Home Assurance Company in the Central District of California, where it lost on summary judgment because the district court ruled that patent infringement did not constitute “advertising injury” and was not covered under the liability policies. Further, the district court held that Hyundai was “unable to demonstrate a causal connection between its advertising and Orion’s alleged injury.”
The California Supreme Court has specified three required elements to establish a duty to defend for an “advertising injury” claim: