National Union Fire Insurance v. Seagate Technology, Inc.
Docket: No. 05-15950
Court: Court of Appeals for the Ninth Circuit; May 1, 2007; Federal Appellate Court
Seagate Technology, Inc. appeals the district court's summary judgment favoring its liability insurer, American International Specialty Lines Insurance Co. (AISLIC), in a diversity action concerning coverage under a Technology Liability Insurance Policy. Seagate contends that AISLIC has a duty to defend it in a lawsuit initiated by Convolve, Inc. and the Massachusetts Institute of Technology (MIT). The court agrees with Seagate, reversing the lower court's decision. Convolve's allegations against Seagate pertain to wrongful acts within the policy's coverage, specifically regarding Seagate's technology services involving marketing and selling. Convolve claims that Seagate developed competing technology with Compaq Computer Corp. and made statements suggesting that its technology mirrors Convolve’s proprietary technology. Furthermore, Convolve asserts that Seagate engaged in a campaign to undermine its image and products. The court emphasizes a broad interpretation of the insurer's duty to defend under California law, concluding that the policy covers potential trade libel claims against Seagate. Although the policy excludes claims related to the misappropriation of trade secrets, this exclusion does not affect AISLIC's duty to defend against trade libel claims, which can proceed independently of any misappropriation allegations. The ruling highlights that trade libel claims could succeed regardless of whether Seagate misappropriated Convolve’s technology. Consequently, the court reverses the lower court's judgment, indicating that the duty to defend extends to allegations that fall within the policy's scope. This decision is not intended for publication as precedent except as specified by Ninth Circuit Rule 36-3, and the court may consider facts outside the complaint in determining the duty to defend.