Failure to Prevent Unauthorized Access: IT Consultant Corp.
analyzes the hardware and software for their mercantile
client. They recommend several upgrades to their servers,
software and firewalls. As part of the proposal, they include
on-going 24/7 support. IT Consultant purchases, installs and
customizes the new hardware and software
Six months later, there is a breach when a hacker breaks
through the security firewalls and steals the personal
information of thousands of customers of the client. It
comes to light that IT Consultant Corp. did not install the
latest patch to fix vulnerabilities in the firewall. The
mercantile client loses business and accrues damages from
notification and requirements to pay for credit monitoring.
The mercantile client files suit against the IT consultant for
failure to prevent the unauthorized access.
Unintentional introduction of Malicious Code: Computer
Consultant, Inc. provides all the Information Technology
services needs for the local pizza shop in town. The
contract includes services for security vulnerability testing.
After the project is complete the pizza shop’s computer
system is attacked by a virus and all files on the hard drive
are lost including accounting records and customer
information.
The pizza shop files suit against Computer Consultant, Inc.
for the cost to recover their data and loss of business income
from not being able to send fliers to their customers due to
the loss of information.
Intellectual Property: Jane Smith has been programming for
Custom Developer, Inc., a large IT firm for 5 years designing
enterprise management systems. Due to a decrease in
orders, the software company must cut expenses and went
through a wave of layoffs, which included Jane.
Jane Smith decides to start her own business that will
specialize in enterprise management systems, since this is
where her expertise lies. She develops a new packaged
software product that provides enterprise management for
small businesses.
Custom Developer, Inc. feels that the software code used in
her new software is their copyrighted code and files suit
against Jane for copyright infringement.
Bodily Injury Arising out of Professional Services: Network
Installers, LLC is setting up a network for their client. One of
their employees is hooking up a cable in the client's cafeteria.
The employee’s phone rings and he walks outside to answer.
When the employee returns, one of the client's employees
has tripped over the cable and has injured their shoulder.
Surgery follows and the employee is out of work for 8 months.
The employee sues Network Installers for negligence and
seeks damages for bodily injury and lost wages.
TECHNOLOGY ERRORS & OMISSIONS
CLAIM EXAMPLES
Errors & Omissions: Website Developer, LLC is hired to
design a fully functional interactive website for a
communication company. After 6 months, the developer fails
to deliver the website as promised in their contract and the
company must hire another developer to finish the website.
The communication company sues and claims damages of
$3,000,000 which includes the increased cost to complete
the website, lost profits because of the delay in the delivery
and the market value of the website.
Website Developer, LLC argues that the only damages
sustained by the plaintiff were limited to the fees paid for the
work on the website which was approximately $650,000.
Discovery shows that our insured did, in fact, fail to deliver a
fully functional website and they sustained damages because
of his negligence. The jury renders a verdict for the
communications company in the amount over $1,000,000.
Defense Costs: A high school hires Software Programmer,
Inc. to design a program used to track student progress.
The high school alleges Software Developer, Inc. failed to
deliver all aspects of the program promised in the contract
and files suit against them for breach of contract on the
design of a software program delivered.
Discovery was initiated in order to determine what the
software programmer promised and what was delivered to
the client. The suit was very technical; experts had to be
brought in along with many depositions and a thorough
review of records.
The claim settled for $200.000. The defense costs incurred
in the suit were almost $900,000, which is a total incurred
cost of over $1,000,000
Personal Injury: Internet Presence Corp. is contracted by the
state government to develop and implement a website for all
of the state parks. During the creation process the take their
own photographs to use, which includes people throughout
the park system enjoying the parks and the various practices
they have to offer. In addition, Internet Presence casually
interviews the employees of the parks, and posts
biographies of each person they spoke to.
People in the pictures taken become upset at seeing their
images and the images of their children being used without
their consent and file suit for invasion of privacy.
Employees were also not pleased with the final portrayal of
their role in the park system, and file suit for libel and
defamation
INTELLECTUAL PROPERTY
WHAT IS INTELLECTUAL PROPERTY?
Intellectual property is a legal concept that protects
creations of the mind including software, logos and
photographs. Intellectual property laws are necessary to
encourage investment in the development of products that
are otherwise easy to copy and use without permission.
Common types of intellectual property protection include
copyright, trademark, trade name and trade dress.
WHY DO I NEED THIS COVERAGE?
The technology industry is surrounded by products and
processes protected by intellectual property laws. The day to
day operations of a technology professional provide
numerous situations where the intellectual property of
another can be violated either accidentally or intentionally.
Even if an alleged intellectual property violation has no
merit, simply defending such an allegation is lengthy and
extremely expensive.
As part of a nationwide campaign to prevent software piracy, Software Giant, Inc. went undercover to purchase computers from small computer businesses with the goal of discovering copyright violations. They purchased some computers from ABC Computer as part of this investigation. At least one computer purchased from ABC Computer contained unlicensed software from Software Giant.
Software Giant sued ABC Computer for copyright and trademark infringement. $63,909 in attorney's fees were incurred and another $97,500 were paid to settle with Software Giant, for a total cost of $161,409.
INTELLECTUAL PROPERTY
CLAIM EXAMPLES
Jane Smith has been programming for Custom Developer, Inc., a large IT firm, for five years designing enterprise management systems. Due to a decrease in orders, the software company cut expenses and went through a wave of layoffs, which included Jane.
Jane Smith decided to start her own business that specializes in enterprise management systems, since this is where her expertise lies. She developed a new packaged software product that provides enterprise management for small businesses. Custom Developer, Inc. felt that the software code used in her new software was their copyrighted code and filed suit against Jane for copyright infringement.
Easypoint, LLC provides pay-per-click and search engine optimization services. An employee of Easypoint was creating a pay per click campaign for a local business, Flowers-R-US. While developing the campaign, the employee used Flowers-R-US' competitor's trademark in error. The competitor, Flowers by the Bunch sued Flowers-R-US and Easypoint, LLC for trademark infringement. The suit involved much investigation to determine how much business Flowers by the Buch had lost including determining the number of impressions and click throughs that were received. Investigation and attorney's fees totaled more than $275,000 and the suit settled for only $20,000.
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