In Design Basics, LLC v. Best Built, Inc., the court held two insurers owed no duty to defend and indemnify an insured for copyright infringement claims where the complaint alleged infringement of the designs at issue before their policy periods. The court affirmed an insurer’s right to rely on extrinsic evidence of the dates when the allegedly infringing advertisements at issue began, and rejected the insured’s argument that the insurers had a duty to defend based on speculation that the plaintiff may discover additional infringements triggering coverage.
In Design Basics, LLC v. Best Built, Inc., Design Basics alleged that the insured contractor, Best Built, infringed on six of its copyrighted architectural plans in its advertisements and home construction activities. There was no dispute that Design Basics first used all six designs in its marketing materials in the late 1990s and first published them on its website in 2003. Two of Best Built’s insurers, Secura and Acuity, intervened in the lawsuit seeking a declaratory judgment that they owed no coverage because their policies were issued after 2003.
Design Basics moved to compel documents unrelated to the designs identified in its complaint, which Best Built refused to produce, contending the discovery requests were overbroad. Best Built moved for summary judgment based on a prior release and the statute of limitations. Secura and Acuity moved for summary judgment based on the prior publication exclusion. The court granted Design Basics’ motion to compel, denied Best Built’s motion and granted the insurers’ motions.
Addressing the insurers’ motion, the court first recognized that where an insurer defends under reservation and intervenes in the underlying action, the court may consider evidence outside the four corners of the complaint in evaluating the duty to defend. The court found it was undisputed that all designs identified in the pleadings were first marketed in 1997 or 1998 and first advertised on Best Built’s website in 2003. Acuity did not issue policies until 2006 and Secura did not issue policies until 2008. On this basis alone, the prior publication exclusion applied.
Design Basics and Best Built appealed to Rule 56(d), arguing that discovery may lead to additional allegations of infringement of other designs, which may or may not have been first infringed upon during the insurers’ policy periods. The court noted the parties had ample opportunity to take discovery, and refused to find a duty to defend based on speculation as to what the plaintiffs would allege in the future.
Design Basics argued the insurers’ continued publication of designs during the policy period constituted new publications that gave rise to distinct copyright claims, but the court found this irrelevant with respect to the prior publication exclusion. Indeed, the prior publication exclusion is specifically intended to exclude infringement starting before and continuing into the policy period.
James A. Pinderski and Michael DiSantis represented Secura Insurance, a Mutual Company, in this case.