Gauntlett on Intellectual Property/Antritrust Insurance : Insurance Policyholder Advocate & Attorney David Gauntlett : Gauntlett Law Firm : Insurance Recovery, Policy Interpretation : Irvine, Orange County, California

The trademark infringement lawsuit arising out of the suit by Climb Tech LLC against Aearo Corporation and Company for alleged wrongs arising out of Aearo’s distribution of Climb Tech’s fall protection products and other products that were similar to Climb Tech’s products.

AISLIC denied a defense. The court found that denial to be wrongful and concluded a duty to defend arose.

The underlying suit was brought by the claimant who was located in Texas in the United States District Court in Texas. The insured elected to sue the umbrella carrier, AISLIC, after the primary insurer, Liberty, denied a defense. The deceptive practice and unfair competition claims were based on the representation that Aearo “[‘expressly portrayed and represented [the infringing product] as an “enhanced version” of [Climb Tech's product], creating the false impression that the newer product comes from the same source as the earlier product.’]” Id. at *2.
 

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The court found, affirming the trial court, that the first publication exclusion applied to bar potential coverage. The court specifically rejected arguments that the exclusion does not apply to a trademark infringement but is rather limited to libel, slander, and invasion of privacy claims. It also rejected the notion that the word “material” used in the policies’ definition of the “advertising injury” rendered the prior publication inapplicable to the trademark infringement claims in the case.

Finally, it concluded that the fact that the trademark words in question were used in different word formulas and in connection with a new logo during the term of the policy did not make a difference.

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Answering a certified question from a federal district court, the Supreme Court of South Carolina found that a trademark infringement lawsuit could implicate potential coverage under the offense of “misappropriation of advertising ideas” or “style of doing business” as well as “infringement of copyright, title or slogan,” “use of another’s advertising idea in your ‘advertisement’” and “infringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’ ”

Notably, the court found that alleged trademark infringement was only in the first certified question, but not the remaining three.

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The underlying suit alleged that Perry and Wilson, Inc. dba Marvin J. Perry & Associates (“P & W”) had acquired the trade name and trademark of “Marvin J. Perry & Associates” through a purchase agreement with MJP in 1993 and that MJP’s continued use of the name and mark after the sale violated P & W’s common law and federal statutory rights.

The court concluded that no defense was owed in light of an applicable IP exclusion of its policy. It barred coverage for any personal and advertising injury “ ‘. . . [a]ris[es] out of any violation of any intellectual property rights, such as patent, trademark, trade name, trade secret, service mark or other designation of origin or authenticity.’ ”

Id. at 437.

The court found applicable Seventh and Sixth Circuit authority on point to wit Native Am. Arts, Inc. v. Hartford Cas. Ins. Co., 435 F. 3d 729, 732-35 (7th Cir. 2006) where the intellectual property exclusion relieved the insurer of its duty to defend its

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Analyzing the ”use of another’s advertising idea in your ‘advertisement’ ” question, the court determined whether in trademark infringement claim for wrongful use of the word “hobbit” by Hobbit Travel triggered a defense on the issue certified by the District Court.

The court found that it did, questioning the contrary line of authority including Callas Enterprises, Inc. v. Travelers Indem. Co., 193 F.3d 952, 956-57 (8th Cir. 1999).

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Alleged misappropriation of an Italian company’s furniture design for academic-style furniture, its designated CAMPUS line. See Studio & Partners v. KI, No. 06-C-0628, 2007 WL 3342597 (E.D. Wis. Nov. 7, 2007).

In 2003 KI applied for and received patents on an Einstein/Intellect desk and chair which are allegedly misappropriated from S&P’s furniture line. Also among the asserted claims was correction of patent inventorship

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The court found an applicable intellectual property exclusion which expressly eliminated coverage for trademark infringement barred coverage for a suit which alleged consumer confusion as to whether the AARP had sent cards that were in fact sent by a Mail House. A high-pressure sales pitch about financial services and living trusts, promoted to senior citizens by various Financial Services Defendants, was forwarded to them by the Mail House Defendants. The recipients could not determine that the pitch did not come from the AARP.

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Guaranty Bank v. Chubb Corp., ___ F.3d ___, 2008 WL 2764631
(7th Cir. (Wis.) 2008) (Posner)

Affirming Judge Randa’s decision applying Wisconsin law, Judge Posner, with Judges Ripple and Manion, found no potential coverage under “advertising injury” provisions for fact allegations of trademark infringement and unfair competition in a suit pending in Michigan federal court.

The suit arose out of Guaranty Bank’s public announcement of its intent to enter the same geographic market as Midwest Guaranty Bank. Six days after a preliminary injunction was issued, Guaranty Bank advised Great Northern Insurance Co. of the suit and asked it to defend. Two and a half months later, it settled the suit for $200,000. The court found that the Wisconsin prejudice standard put the burden on the insured, not insurer. The panel concluded:
 

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Wausau Business Ins. Co. v. Fisher Printing Co., Inc., 2008 WL 2704874 (N.D. Ill. July 8, 2008) (Kennelly)

The underlying suit asserted unlawful intentional copying of copyrighted images and repeated use of Ashley’s protected trademarks and images. The court, applying Illinois law, focused principally on the exclusions.
The court found the exclusion inapplicable, following Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069 (7th Cir. (Ill.) 2004):

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Two recent trademark cases analyzing trademark infringement coverage properly found a duty to defend.

Capitol Indem. Corp. v. Elston Self Service Wholesale Groceries, Inc., No. 04 C 6536, 2008 WL 696919 (N.D. Ill. March 13, 2008)

Analyzing the meaning of “infringement of title” under Illinios law, the court found that “infringement of title” can include improper use of a business name, citing Charter Oak Fire Ins. Co. v. Hedeen & Cos., 280 F.3d 730, 736 (7th Cir. 2002). At issue were allegations of advertising falsely labeled counterfeit cigarettes under the Newport brand. The court found that affirmative self-promotion of the actor’s goods or services was implicated by labeling of the cigarettes with the Newport mark characterizing earlier Michigan precedent from the 6th Circuit in the Advanced Watch case as anomalous. See Peterson Tractor Co. v. Travelers Indem. Co., 156 Fed. Appx. 21, 23 (9th Cir.2005). Id. at *9. It also rejected application of two exclusions, the first for “knowledge of falsity” which it mixed characterized as an intentional conduct exclusion noting that Trademark Infringement claims did not depend on either intentional or knowingly false conduct. Continue Reading...

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Two distinct decisions, one applying North Carolina the other Illinois law, both found false advertising claims fell within standard advertising injury coverage where initiated by competitors.

Granutec, Inc. v. St. Paul Fire & Marine Ins. Co., No. 5:96-CV-489-BO(2), 2008 WL 312146 (E.D.N.C. Jan. 16, 2008)

Granutec, Inc. (“Granutec”) is a North Carolina corporation that manufactures and sells generic, over-the-counter (“OTC”), pharmaceutical products. Following an initial agreement with Johnson & Johnson in 1989 to employ a color scheme for generic caplets different from that of the Tylenol Gelcaps, in February 1994 Granutec changed the color scheme to mimic the Tylenol Gelcaps. This conduct precipitated a suit against it for Lanham Act claims under 15 U.S.C. § 1125(a) and 43(a)(2) for false and deceptive advertising, as well as trademark trade/trade dress infringement.

Following issuance of a preliminary injunction against Granutec on December 21, 1995, Granutec agreed to market its OTC product in a color scheme that was conspicuously different from that used by McNeil, a Johnson & Johnson subsidiary, after incurring $500,000.00 in defense fees. Two policy forms were in effect from June 30, 1994 to July 31, 1994, a 1986 ISO form covering as “advertising injury” “misappropriation of advertising ideas or style of doing business”, and from August 1, 1994 to August 1, 1995, a St. Paul variant of an ISO 2001 policy form covering as “advertising injury” “unauthorized taking or use of any advertising material, slogan or title of others” the later policy included intellectual property exclusion.

Focusing on the express unfair competition claim pursuant to NCGS § 75-1.1 et seq., which prohibits “[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce,” the court found a defense owed. It noted under the earlier 1986 ISO policy issued by Aetna:

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Two cases looked at the 1986 ISO policy provision offering “advertising injury” coverage for misappropriation of “advertising ideas or style of doing business”, the later, the 1998 ISO CGL “advertising injury” provision for “use of another’s advertising idea in your advertisement.” Each found a defense in a series of distinct scenarios.

General Cas Co. of Wisconsin v. Wozniak Travel, Inc. No. 07-3515 RHK/AJB, 2008 WL 440747 (D. Minn. Feb. 14, 2008)

The court determined there was a split of authority between an unpublished court of appeal decision – Williamson v. N. Star Cos., No. C3-96-1139, 1997 WL 53029 (Minn. Ct. App. Feb. 11, 1997), review denied (Apr. 15, 1997), and the Eighth Circuit Court of Appeal applying Minnesota law in Callas Enters., Inc. v. Travelers Indem. Co. of Am., 193 F.3d 952 (8th Cir. (Minn.) 1999). The court certified to the Minnesota Supreme Court the issues of: Continue Reading...

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