Expert Commentary

Graham v. USI MidAtlantic

The Graham Company recently won an $18.9 million verdict against USI MidAtlantic. It is the first time in the history of copyright law that damages were awarded for copyright infringement with regard to insurance materials.


Intellectual Property
August 2006

Insurance organizations need to take heed to both avoid liability for infringement and protect its own valuable intellectual property.1

Beginning in the 1980s, Graham drafted hundreds of pages of prose, as well as standardized forms and lists, to assist its employees in preparing insurance documents for its customers. The documents were used to present customer-specific proposals that analyzed a particular customer's business and risk situation. Graham contends that developing the standard documents required the "expenditure of tremendous time and effort." Graham called this written material the Standard Survey and Analysis and the Standard Proposal. These documents were registered with the U.S. Copyright Office in 1995.

In late 1991, an employee who had access to the copyrighted documents left Graham and went to work for a competitor which was later acquired by USI. The employee had an employment agreement with Graham that provided the employee would not disclose Graham's information to anyone for a period of 3 years after termination of his employment with Graham. Additionally, the agreement provided that the employee would turn over all books, files, records, notes, and lists upon termination.

Shortly after joining USI, the employee provided the Standard Survey and Analysis and the Standard Proposal to USI, and it was subsequently entered into USI's computer system. Employees of USI had full access to the Standard Survey and Analysis and the Standard Proposal and were free to incorporate the language from these documents into proposals to USI's customers. In 2004 Graham became aware of USI's actions after USI sent a proposal containing Graham's copyrighted materials to a former employee of Graham.

Graham filed suit against USI and the employee, claiming copyright infringement and breach of contract. The employee admitted that he used Graham's copyrighted materials as they existed in 1991 in more than 900 proposals over a 15-year period.

Copyright Infringement

A copyright infringement claim requires proof of (1) ownership of a valid copyright and (2) actionable copying, which is the copying of constituent elements of the work that are copyrightable. Two separate inquiries must be made to determine whether actionable copying has occurred.

The first question is whether the alleged infringer copied or actually used the copyrighted material in his own work. Circumstantial evidence may support an inference of copying if the defendant had access to the copyrighted work and there is probative similarity between the copyrighted work and the allegedly infringing work.

The second question is whether substantial similarity exists between the copyrighted work and the allegedly infringing work. To answer this question, a side-by-side comparison must be made between the original and the copy to determine whether a layman would view the two works as substantially similar.2

In a case before the U.S. District Court for the Eastern District of Pennsylvania on June 29, 2006, the jury found that both USI and Graham's former employee were liable and awarded significant damages to Graham.

Issues To Consider

This case raises two important questions that every insurance company should consider:

  1. Are my company's materials protectable, and should I seek protection?

    In the insurance industry, forms are a way of life. Most insurance companies must continually navigate constantly changing legal issues and find that providing form language to its employees allows them to stay in compliance with various laws and regulations.

    Some of the language used on forms in a particular industry may actually be common phrases that are used by virtually everyone in the industry. So, when does a piece of work become protectable under current copyright laws?

    It is settled law that to obtain a valid copyright, the applicant need not show that the material in question is unique or novel; it need only be original. Thus, a work may be protected by copyright even though it is based on a prior copyrighted work or something already in the public domain if the author, through his skill and effort, has contributed a distinguishable variation from the older works. In such a case, of course, only those parts which are new are protected by the new copyright.3

    In determining the amount of originality required, it is frequently stated that the standards are minimal, and that in copyright law, originality means little more than a prohibition against copying. Nevertheless, something more than merely refraining from outright copying is required before a new variation on an old work has sufficient originality to be copyrightable. The author must add some substantial—not merely trivial—originality. The variation must be meaningful and must result from original creative work on the author's part.4

    Put simply, if you currently use common form language that can be found in most typical proposals or contracts in the insurance industry, it probably is not protectable. However, if you have taken that common language and made changes that cause it to become distinguishable from the original work, it may be protectable. The inquiry on whether a work is protectable under copyright law is one that is both factually and legally driven.5

    Keeping the above guidelines in mind, if you have protectable materials that you deem to be important to your business, it makes sense to pursue a copyright. Having a copyright will allow you to safeguard your valuable materials from competing business.

  2. Are any of my employees using copyrighted forms that could expose my business to liability?

    It is difficult to know whether your business is currently using copyrighted materials by a mere inspection. There are, however, a few things you can do to help protect against becoming a target.

Know Your Employee's Obligations

First, if you hire employees from competitors, always check and see if that individual is obligated under any agreements with that competitor. Specifically, tell the new employee that he/she must fully comply with any employment or termination agreements imposed by their old employer. If the agreement requires the return of all company materials, make sure that your new employee fully complies. Instruct the new employee to avoid bringing any of his former employer's documents or materials into their office. It is always good business to know about and fully understand the obligations that your new employee will be bound by in their new position.

Know Your Documents

Second, when putting together a set of forms or standard materials, track the evolution of the documents very closely. Make sure that someone does not incorporate a protected piece of material into your project thereby contaminating the entire document. A little bit of due diligence in the early stages of standardization will help ensure that your final product is both protectable and will not subject your business to liability due to copying.

Taking a few precautionary measures in your business could save you time and money down the road. Also, consider registering your protectable materials with the U.S. Copyright Office. It will ensure that you are protected and allow a means for relief if someone is using your materials without authorization.


1Most of the documents and pleadings in the Graham case were filed under seal and are not available for review.

2Bridgmon v. Array Sys. Corp., 325 F.3d 572 (5th Cir. 2003).

3Norma Ribbon & Trimming v. Little, 51 F.3d 45 (5th Cir. 1995).

4Donald v. Zack Meyer's T.V. Sales & Service, 426 F.2d 1027 (5th Cir. 1970)

5If you have any questions or concerns regarding whether your work is protectable, you should consult with your legal counsel to help you make the determination.


Eric J. Klein's practice focuses on all aspects of intellectual property litigation, including patent, copyright, and trademark matters. Mr. Klein received his B.S.C.E. from Texas A&M University and both his M.B.A. and J.D. degrees from Texas Tech University. He is a member of the State Bar of Texas, the Dallas Bar Association, the American Bar Association, and the American Intellectual Property Association. He can be reached by calling (214) 969-2751 or by email.


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