Intellectual Property Breach

A PE-backed buyer acquired a retail chain from individual sellers. A third party competitor brought a claim against the target for copyright or passing off on the grounds that the target had knowingly copied the designs of the competitors and were selling product.

The buyer brought a claim on the policy on the basis that the third party claims amounted to breach of the intellectual property and information warranties. The warranties were subject to seller awareness, however certain of the seller’s key executives had knowledge of the third party claim before signing.

The buyer removed the products as soon as they were made aware of the allegations, and a settlement was subsequently agreed with the insurer.