Kim Seng Co. v. Great American Ins. Co. of New York,___ Cal. Rptr. 3d ___, 2009 WL 3791874 (Cal. Ct. App. (2d Dist.) 2009)
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.
The court found determinative the recent decision of United National Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772 (9th Cir. 2009), which interpreted an identical exclusion finding it applicable to the full range of offenses. Id. at 778.
Spectrum follows a problematic analysis of the four offense subparts. It fails to recognize that 4 minus 2 equals 2, not 4. Only subparts (a) and (b) are implicated by the use of the “advertising injury” definition. “Advertising injury” is defined by its four constituent elements that comprise the pertinent offenses. All must be considered when the phrase “advertising injury” is used as a predicate to those items which are excluded. Thus, four items within “advertising injury” demark the possible scope of the covered claims; and only two “arising out of oral or written publication of material” are implicated since only two of the four offenses have such an element in play. Exclusions are to be narrowly interpreted and this is not the path followed by the Ninth Circuit in Spectrum.
The first publication exclusion was not limited to a trade dress claim and moreover there is nothing to suggest “material” as used in the policy requires a tangible option such as packaging, citing Aloha Pacific, Inc. v. California Ins. Guarantee Assn., 79 Cal. App. 4th 297, 319-20 (2000).
It would make no sense for the exclusion to apply only to the specific packaging or label and not to the infringing trademark that is the subject of the underlying action.
Id. at *5.
In essence the court found that the same mark was used before, after and during, and thus the exceptions to applicability of the IP exclusion had no reign here.
The pertinent marks “Old Man Que Huong Brand” and “Que Huong” mark, in the insured’s view, differed from certain marks initiated during the policy period. To wit,
“Bun Tuoi Hieu Que Huong Brand,” “Bun Que Huong Dac Biet,” and the Water Buffalo design mark consisting of the words “Que Huong” and any other mark confusingly similar to Great River's marks) . . . .
Id. at *6.
A simple republication of the same improper words “Que Huong” prior to the policy period was the basis for asserted trademark liability.
The underlying action focused on the use of a trade mark, “Que Huong.” Great River did not allege an infringement based on Kim Seng's use of any other words or images. Great River alleged in the underlying action infringement by any Kim Seng trademark using the words “Que Huong” as part of a trademark that was confusingly similar to Great River's Que Huong mark. Great River has no claim as to any words other than “Que Huong.” Even with the addition of descriptive words and logos, the use of the term “Que Huong” still suggests that the Kim Seng product is from the same source as products bearing the original “Que Huong” mark – the Great River product.
Id. at *7.
Distinguishing but affirming the viability of Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069, 1072-73 (7th Cir. 2004), the court found a distinct act of potential liability for common law misappropriation involving the specific episode in the barking feisty Chihuahua character used by Taco Bell to promote its food where they had it popping out of a cardboard cut-out.
The case fell within Ringler Assocs., Inc. v. Maryland Cas. Co., 80 Cal. App. 4th 1165 (2000), which found that immaterial variation from the original work to that republished was not sufficient to avoid the applicable exclusion.
“[T]he first-publication exclusion language at issue is intended to and in fact bars coverage of an insured's continuous or repeated publication of substantially the same offending material previously published at a point of time before a policy incepts, while not barring coverage of offensive publications made during the policy period which differ in substance from those published before commencement of coverage.” (Id. at p. 1183, 96 Cal.Rptr.2d 136.)
Id. at *7, quoting Ringler.
