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Chubb wins software infringement dispute on appeal

Posted On: Aug. 24, 2022 1:14 PM CST


A Chubb Ltd. unit does not have to indemnify a software company in an infringement lawsuit under its claims-made policy because the dispute is related to an earlier settlement, where the insurer was American International Group Inc., a federal appeals court said Tuesday, in affirming a lower court ruling.

East Rutherford, New Jersey-based Gold Type Business Machines Inc. developed and sold a product called Info-Cop that permitted law enforcement officers access to motor vehicle and warrant information from multiple law enforcement agencies, according to the ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in Datamaxx Applied Technologies Inc. v. Brown & Brown Inc., Chubb Custom Insurance Co.

GTBM subsequently entered into a development and licensing agreement with Tallahassee, Florida-based Datamaxx, a law enforcement software provider, to incorporate GTBM’s systems into Datamaxx’s existing product suite, Omnixx, to create a jointly developed “enhanced product,” according to the ruling.

But according to GTBM, rather than promoting the enhanced product, Datamaxx marketed its own competing product, Omnixx+, which violated the agreement.

GTBM filed suit and initiated arbitration proceedings against Datamaxx. Datamaxx reported the lawsuit to its then-insurer, AIG, in September 2013. The lawsuit was settled in 2014, with AIG partially reimbursing Datamaxx for the settlement payment and Datamaxx releasing AIG from any future claims.

Following the settlement, Datamaxx marketed a separate product that GTBM alleged infringed on its patented process.

Meanwhile, in 2018 Datamaxx obtained a new, claims-made insurance policy with Chubb.

Later that year, Datamaxx notified GTBM it was terminating its developing and licensing agreement. GTBM again filed suit against Datamaxx. Datamaxx filed a claim with Chubb, which denied coverage, on the basis the claim related to the earlier litigation.

In the ensuing litigation, the U.S. District Court in Orlando ruled in Chubb’s favor and was affirmed by a three-judge appeals court panel. 

Datamaxx’s “second attempt to circumvent and violate the (developing and licensing agreement) necessarily correlates to…the 2014 claim stemming from its first attempt” to circumvent and violate it, the ruling said.

Attorneys in the case had no comment.