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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