Australia Unlimited, Inc. v. Hartford Casualty Ins. Co., ___ P. 3d ___, 2008 WL 5234761 (Wash. Ct. App. (Div. 1) 2008) (Dec. 15) (Cox)
The pertinent “advertising injury” offense, “copying, in your ‘advertisement,’ a person’s or organization’s ‘advertising idea’ or style of ‘advertisement’ ” did not trigger a defense for the Colorado II action asserting trade dress claims in connection with a producer, importer and distributor of the NothinZ brand shoes sued by Crocs.
Whereas the underlying policy contained an express exclusion as applied to Crocs claims, the appeal dealt only with the umbrella policy’s provisions. Under the pertinent policy, “advertisement” was defined as:
[T]he widespread public dissemination of information or images that has the purpose of inducing the sale of goods, products, or services through . . . c. Any other publication that is given widespread public distribution.
Id. at *3.
“Advertising idea” is defined in the underlying policy as “any idea for an ‘advertisement[.]’ ” Id.
The court conceded that Crocs’ complaint provides notice of pleading of an “advertising injury” within the scope of the policy definition. Hence, the complaint rested
upon AU’s material breach of the settlement agreement in “[m]anufacturing, displaying, distributing, offering for sale, and selling footwear ... based on a design not approved by Crocs.”
Id. at *9.
Here, Crocs not only made general allegations of trade dress infringement, it also specifically included in its trade dress description its “marketing and sales materials” that “share an overall unique look and feel” that serve to identify Crocs as the origin. Crocs also expressly identified All’s NothinZ brand website as a source of infringing activities. And Crocs sought damages for AU’s profits from its “marketing” of products bearing any “copy or colorable imitation” of the Crocs Trade Dress.
Id. at *5.
Distinguishing coverage under cases asserting patent infringement from trademark or trade name or trade dress infringement, the court observed:
[W]hat Northern appears to overlook is that, in contrast to a claim for patent infringement – which is limited to the making, using, or selling of another’s product – Section 43(a) of the Lanham Act provides a remedy for “a false designation of origin, or any false description or representation.” 15 U.S.C. § 1125(a).... [T]rademark or tradename infringement ... necessarily involves advertising, or use, of the mark or name to identify the merchant’s goods or services.
Id. at *5.
Some causal connection between injury and the insured’s advertising activity arose as the complaint alleged that
“[d]efendants market, import, and/or sell footwear that infringes the Crocs Trade Dress,” and that “[d]efendants copied the Crocs Trade Dress with the intent to trade on the goodwill developed by Crocs in establishing the Crocs Trade Dress.”
Id. at *6.
The injunctive relief request related to marketing of shoes and infringement of Crocs’ trade dress instructive. Advance Watch was readily distinguished, noting that the flawed logic of Advance Watch was properly exposed in Westfield Cos. v. O.K.L. Can Line, 155 Ohio App. 3d 747, 756 (2003).
The policy contained an exclusion that limited all personal and advertising injury except to the extent that the underlying assurance was applicable to personal or advertising injury and claims arising out of that “personal and advertising injury.” Hartford’s argument was that the advertising injury coverage in the umbrella policy was meant to follow form the underlying policy in terms only of excess coverage for the underlying insurance. The court rejected Hartford’s narrow construction of the “knowledge of advertising injury” provision:
Hartford’s reading of the exception focuses on the word “that” – the umbrella policy will apply to “personal and advertising injury” if the underlying policy applies to personal and advertising injury and also to claims arising out of that (particular) personal and advertising injury.
Id. at *7.
AU’s distinct reading was more consistent with the plain language of the exception. Finding any ambiguity must be resolved against Hartford, the court concluded that AU’s argument should apply.
AU reads the second provision of the exception to mean that the underlying insurance must cover claims arising out of that category of offenses defined as “personal and advertising injury.” Even though the underlying insurance here admittedly does not cover intellectual property claims, the underlying insurance covers other personal and advertising injury claims. The exception only requires that the underlying insurance be applicable to some claims arising out of the personal and advertising injury category. It does not say that the underlying insurance must apply to “the” (specific) claim, it only states that underlying insurance must be applicable “to claims arising out of that” category.
Id. at *8.
The court, however, found that the federal court action in Colorado which stayed the proceeding pending resolution of the equivalent claim through the ITC action did not create an independent basis for defense of the ITC proceeding. The absence of a request for monetary damages in the ITC proceeding pursuant to 19 U.S.C. § 1337 precluded a defense opportunity therein. Pursuant to section 1337 the ITC did not have the authority to enter an order for monetary damages.
Since these actions were ultimately settled and thereafter AU sought to manufacture new designs, a case thereafter brought in Colorado II, which contested those activities which were allegedly in violation of the settlement agreement, was not within coverage.
The basis of the Colorado II compliant was AU’s “copy or colorable imitations of the Crocs Trade Dress” and use of “a design not approved by Crocs” not a specific advertisement of products related to that design and thus the court found no coverage.
