American Century Services Corporation v. American International Specialty Lines Insurance Co.

U.S. Dist. LEXIS 15016 (2002)

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American Century Services Corporation v. American International Specialty Lines Insurance Co.

United States District Court for the Southern District of New York
U.S. Dist. LEXIS 15016 (2002)

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Facts

American Century Services Corporation (ACSC) (plaintiff) purchased an investment-management insurance policy from American International Specialty Lines Insurance Co. (AISLIC) (defendant), in which AISLIC offered coverage across a range of risks. While the policy was in effect, ACSC was sued for patent infringement by individuals who claimed that ACSC infringed their patented internet and telephone technologies while providing investment-management services to a group of mutual funds. ACSC notified AISLIC of the claims, and AISLIC denied coverage, asserting that patent infringement was not covered by ACSC’s insurance policy. ACSC argued that the policy covered patent-infringement claims, pointing to policy language stating that any sums ACSC was required to pay that resulted from damages claims for its wrongful acts conducted while doing business would be covered under the policy. In response, AISLIC argued that another policy provision excluded coverage for any actual or alleged profits ACSC made but to which it was not legally entitled. AISLIC argued that because the patent-infringement claims sought royalties that ACSC would have had to pay if not for its patent infringement, the claims were really to recoup ACSC’s ill-gotten profits—not a result of its wrongful acts—and thus were not covered by the insurance policy. ACSC sued AISLIC, seeking a declaratory judgment requiring AISLIC to pay ACSC’s costs and settlement amounts to resolve the patent-infringement claims. ACSC filed a motion for summary judgment, which AISLIC opposed.

Rule of Law

Issue

Holding and Reasoning (Lynch, J.)

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