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

In the underlying suit Multi-Vet alleged that Premier manufactured and sold dog training collars bearing the designations “Gentle Spray Bark Citronella Anti-Bark Collar” and “Gentle Leader Spray Sense Anti-Bark Collar,” in competition with Multi-Vet's products, which bear the trademarked name, “GENTLE SPRAY®.” Id. at *2.

The pertinent claims were unfair competition of common law, trademark infringement in violation of the Lanham Act § 1114 and false designation of origin and violation of the Trademark Act, 15 U.S.C. § 1125(a).

At issue were alleged false association with the attributes and characteristics of Multi-Vet’s products with the dog training collars originating from Premier. The three part test adopted from a district court decision in Virginia, Solers, Inc. v. Hartford Cas. Ins. Co., 146 F. Supp. 2d 785, 793 (E.D. Va. 2001), included its third element advertising activities that caused harm. However, neither harm nor damages is the focus of offense-based coverage. The question the policy asks is where there’s a causal relationship between the advertising activities and the advertising injury offense and not the ultimate injury. Since Travelers’ policy language only requires that the “advertising injury” must be “caused by an offense committed in the course of advertising your goods, products or services … .” the Court’s construction adds words of limitation that are not in the policy. Id. at *2.

Following the eight corners rule, the Court ignored any facts not set forth in the complaint in its coverage analysis pursuant to a recent Fourth Circuit case – CACI Int’l, Inc. v. St. Paul Fire & Marine Ins. Co., 566 F.3d 150, 155 (4th Cir. 2009) (“CACI”), applying Virginia law, purportedly relying on Brenner v. Lawyers Title Ins. Corp., 397 S.E. 2d 100, 102 (Va. 1990). Id. at *5.

While not entering the fray as to whether the term “title” was as limited as Travelers urged “the title of the distinguishing name of the written, printed, or finished production;” “a similar distinguished name of a musical composition or a work of art,” or any form of business name as urged by the insured, the court found there was no causal nexus because Premier’s alleged activities did not occur in the course of advertising, or in the alternative, cause harm.

Adopting the Solers definition, claiming it was based on what the majority of cases have determined and finding the term “advertising” refers “unambiguously to the widespread distribution of promotional material to the public at large, or least to widely disseminated solicitation or promotion.” Id. at *7.

The court found these risk tests not satisfied.

The Multi-Vet Initial Complaint seeks an injunction against advertising in its prayer for relief, but it fails to allege any facts as to advertising at all, much less harm from advertising, in the allegations it placed before the New York federal court. In Solers, the Court found that solicitation did not constitute advertising. Id. at 795. Given this precedent, this Court finds that “sale” and “use,” which the Mutli-Vet Initial Complaint alleges without any further context, could not constitute advertising, or “widespread promotion” (as opposed to sale) of goods.

Id. at *8.

It did not consider it was implicit in the allegations that wrongful use occurred in connection with sale that that use would necessarily implicate advertising and was unwilling to look beyond the four corners of the complaint to evidence how the actual goods were sold, see evidence of advertising. Nor did the court agree that use of trademark applies advertising.

The court observed that in many cases where a trademark infringement action was asserted, courts readily found the causal nexus met because the factual allegations evidenced advertising.

Distinguishing the Fourth Circuit’s seminal decision, applying North Carolina law, State Auto Prop. & Cas. Ins. Co. v. Travelers Indem. Co. of America, 343 F.3d 249, 259 (4th Cir. 2003), the court observed:

Even in State Auto, where the Fourth Circuit held that the use of the “Nissan” name on a website for a computer company owned by Mr. Uzi Nissan invoked a duty to defend because Nissan was a “quintessential example of a trademark functioning to advertise a company’s products,” State Auto, 343 F.3d at 258 . . . .

Id. at *9.

The court also found it significant that the complaint alleged that the “offending websites” were used “for advertisement purposes.” fn13, id. at 259, citing underlying complaint. Id. at *9. It was concerned that finding the advertising nexus met by mere claims of sale over importation was improper.

Absent reliance on CACI, reference to defendant’s website revealed advertisement of products that was readily available to the claimant as well as the court’s complaint. The court’s reliance on a narrow construction of duty to defend means that the duty to indemnify may be broader in this action since the website advertising might create ultimate liability and be a basis for judgment. Cases have readily found that scenario is an inappropriate one in which to deny a defense, and thus the impact of the rigorous application of the complaint allegations rule per CACI is to improperly address coverage in many scenarios where indemnity will thus be broader than defense duties.

The pertinent coverage, an exception to the IP exclusion under which Microsoft need establish liability, was “infringement of copyright . . . in your ‘advertisement.’ ” Id. at *5.

To trigger coverage under the advertising injury provisions of the Policies, the Underlying Lawsuit must have alleged, and judgment must have been entered, on the theory of potential for liability on one of the listed offenses and the offense was committed in the course of advertising the insured's goods, products or services. See Bank of the West v. Superior Court, 2 Cal.4th 1254, 1277 (1992). The California Supreme Court in Bank of the West held that there can be no coverage where the alleged injury had no causal connection to the insured's advertising activities. Id. at 1276.

Id. at *5.

As the court explained:

Here, the EEE Defendants' alleged copyright infringement did not have any causal relationship with its advertising as required to fall under the coverage for “advertising injury.” The allegations in Microsoft's complaint and the judgment entered in its favor concern merely the fact that the EEE Defendants infringed Microsoft's software copyrights by importing and selling the software in the United States when it was only licensed for sale abroad and to educational institutions. The judgment and the complaint upon which it was entered does not relate to any content in advertising or injury caused therefrom.

Id. at *6.

The other problem is that the alleged copyright infringement was deemed to be intentional, which is how the court characterized personal and advertising injury “arising out of an offense committed by, at the direction of or with the consent or acquiescence of the insured with the expectation of inflicting ‘personal and advertising injury.’ ” The court found that this implicated California Insurance Code § 533, precluding coverage for willful misconduct.

Clearly Microsoft could have planned against pirates in such a way that it could have obtained a judgment that was more likely to be enforceable against the insurer but elected not to do so. That decision was costly as it simply obtained the benefit of relief as a practical matter but no damages.

The court rejected this argument stating:

While the AARP has alleged that Mailers inappropriately used the AARP's trademark in a deceptive manner, the AARP is not challenging the shape, design, color scheme, or any other aesthetic aspect of the cards or the similarity of Mailers's cards to any other advertisements for financial products. The AARP is only challenging the fact that Mailers used the AARP name on its cards. This is not a trade dress claim.

Id. at *2.

The court did not analyze whether the use of the words American Association of Retired Persons instead of the abbreviation AARP which changed the result since the eight corners rule did not permit such a speculative analysis of the allegations of the complaint.

The trademark infringement claims could not fall within the misappropriation of advertising ideas or style of doing business offense uncharacteristically maintained in this policy form as it is part of the 1986 standard policy form because of the Sport Supply Group, Inc. v. Columbia Cas. Co., 335 F.3d 453, 464-65 (5th Cir. 2003) case concluding that “trademark infringement claims do not involve misappropriation of advertising ideas.”

This decision has been criticized by other decisions including that in State Auto Prop. & Cas. Ins. Co. v. Travelers Indem. Co. of America, 343 F.3d 249 (4th Cir. (N.C.) 2003) (“Finally, the term ‘misappropriation’ is necessarily ambiguous: Although it could refer specifically to the common law tort of misappropriation, it also could refer more generally to the wrongful acquisition of property. Significantly, the courts in other jurisdictions are unable to agree on how to interpret the term “misappropriation.” (emphasis added)).

It asked the wrong question, not what is the nature of the trademark claim but whether the fact allegations in a trademark claim may constitute a “misappropriation of advertising ideas,” this ambiguous string of non-tort terminology that can encompass within its ambit a number of fact scenarios including many articulating relief trademark infringement.

See also Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group, 50 Cal. App. 4th 548, 565 (Cal. Ct. App. 1996) (“There is nothing about the terms “misappropriation of an advertising idea” or “misappropriation of a style of doing business,” neither of which constitutes a recognized tort, which compels us to conclude one way or the other as to just how broadly or narrowly they should be read. Nor is there anything about the statutory offense of trademark infringement which necessarily precludes its inclusion as a part of either.”).

Curiously, the policy form had it included “use of another’s advertising idea in your advertisement” as in a standard 1988 ISO form would, would have escaped the Support Supply argument. It would also have fallen within case authority finding trademark claims fall within the ambit of such an allegation. Ohio Cas. Ins. Co. v. Albers Medical, Inc., No. 03-1037-CV-W-ODS, 2005 WL 2319820 (W.D. Mo. Sept. 22, 2005).

causal connection between the alleged patent infringement of the 336 Patent and any advertisement by defendants, this was sufficient to bar coverage. Citing Hyman v. Nationwide Mut. Ins. Co., 304 F.3d 1179, 1191 (11th Cir. 2002) (stating, in interpreting a policy with similar language to that at issue here, that “the injury for which coverage is sought must be caused by the advertising.”). Id. at *6.

There were no enumerated offenses arising out of the insured, Allied’s business even if the causal nexus could be satisfied. Looking to the other operative offense, the court observed:

[T]he underlying Suit does not allege that Defendants made use of another’s advertising idea.

Id. at *7.

Notably, nothing about the character with patent in issue is explained that would make an advertising idea implicated as the pertinent patent covers the method for fighting fire in confined areas using nitrogen expanded foam.

The court concluded otherwise, finding that the bankruptcy case and related hearings were subject to reimbursement.

Unresolved was the issue of whether Erie breached its duty to defend under the policy by not agreeing to pay the bankruptcy-related defense fees, triggering thereby a foreclosure from raising any further challenges to coverage.

[N]one of the cases considers an insurer's duty to defend an insured in the bankruptcy court after a pending lawsuit is stayed by the insured's bankruptcy petition. However, bankruptcy proceedings are civil proceedings, and to the extent LifeScan pressed its claims in the underlying litigation in this Court, the same principles would apply to make the coverage determination.

Id. at *3.

In the November Memorandum, LifeScan alleged that the Debtor continued to sell test strips in violation of the previous injunction, and alleged violations of the Lanham Act for selling purportedly harmful products. Concerning the Lanham Act claims, LifeScan made identical allegations of copyright and trademark infringement as it did in its complaint in the New York action. Moreover, the November Memorandum discusses the New York litigation in detail, specifically LifeScan's seizure of test strips and the temporary restraining order issued in that action. The November Memorandum is replete with allegations of trademark and copyright violations, seizure orders under the Lanham Act, and harm LifeScan allegedly suffered due to the Debtor's actions. . . . The claims made in the October Motion and November Memorandum are virtually identical to the allegations in the complaint in the New York action, and those claims constitute a “suit” against the Debtor just as the New York complaint did.

In the same way, LifeScan's bankruptcy pleadings allege “personal and advertising injuries” as defined in the Policy, and also allege that LifeScan suffered damages from these injuries. LifeScan claims that the Debtor infringed upon its copyrights and trademarks, violated the Lanham Act, and engaged in advertising that caused injury to LifeScan. . . . the policy arguably provides coverage, meeting the requisite standard. Acuity v. Bagadia, 310 Wis. 2d 197, 750 N. W. 2d 817 (2008).

Id. at *5.

Citing Johnson Controls, 264 Wis. 2d at 89 the court concluded that there was no narrow and technical meaning for the term “damages” under Wisconsin law as urged by the insurer based on the rejection of earlier case authority in Sch. Dist. of Shorewood v. Wausau Ins. Co., 170 Wis. 2d 347, 368, 488 N.W. 2d 82, 89 (1992).

Giving the term “damages” its ordinary meaning as interpreted by a reasonable insured, the Court finds that the pleadings filed by LifeScan in this Court do allege damages as defined by Wisconsin insurance law.

Id. at *6.

The court did not agree that the Rule 2004 examinations were Erie’s legal responsibility noting that even though they LifeScan with discovery in the underlying litigation, Rule 2004 examinations were a right given to creditors under the Bankruptcy Code to investigate the affairs of the debtor.

It also concluded that an insurer was not required to fund an insured’s affirmative claims. See, e.g., Wis. Prof’l Baseball Park Dist. v. Mitsubishi Heavy Indus. Am., Inc., 304 Wis. 2d 637, 738 N.W.2d 87 (Ct. App. 2007) (apportioning costs between offensive and defensive claims). Under this principle, an action initiated by an insured is, by it nature, not a defense cost properly covered under a policy. Towne Realty, Inc. v. Zurich Ins. Co., 201 Wis. 2d 260, 273, 548 N.W.2d 64, 69 (1996) (policy's language providing for defense of claims “clearly precludes” recovery for offensive actions).

The court parted company with case law nationally which finds that offensive litigation activity can serve the defensive end and thus, where reasonably related to a defense in some jurisdictions and others where it is conducted against liability be recoverable as noted in Adobe Systems, Inc. v. St. Paul Fire & Marine Ins. Co., No. C 07-00385 JSW, 2007 WL 3256492 (N.D. Cal. Nov. 5, 2007):

Adobe contends that it initiated the London and California actions as a necessary legal strategy to defend itself against an impending claim from Agfa/ITC. The Court finds persuasive the reasoning in IBP, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, which held that even though an insured initiates a lawsuit, that fact does not automatically preclude coverage for defense-type legal fees and expenses where the insured is resisting a contention of liability for damages. 299 F.Supp.2d 1024, 1031 (D.S.D.2003) (citing Simon v. Maryland Cas. Co., 353 F.2d 608, 613 (5th Cir.1965) (holding that sub-contractor insured was entitled to recover legal fees and expenses from insurer for bringing a declaratory judgment action asserting it was not negligent and was entitled to be paid funds withheld by the general contractor, despite a “defense” clause in policy); Potomac Elec. Power Co. v. California Union Ins. Co., 777 F.Supp. 980, 984-85 (D.D.C.1991) (finding that an affirmative suit brought by an insured is not per se unrecoverable as a defense cost)). Id. at *9.

The court then stated:

To be clear, the Policy does not cover the fees the Debtor incurred to file bankruptcy, prepare Schedules, negotiate a cash collateral agreement, or any other general bankruptcy matters, because those costs do not relate to the defense of the LifeScan's claims. If the Debtor objects to LifeScan's proof of claim, Erie would be responsible for the costs of “defending” the Debtor against that proof of claim. However, to date, the Policy covers only the Debtor's fees and costs associated with defending against the October Motion and November Memorandum.

Id. at *7.

The defense of the underlying New York action under reservation of rights was sufficient under Wisconsin law to maintain Erie’s coverage defenses, especially where separate bankruptcy counsel was retained in order to deal with issues therein.

Id. at *8.

The refusal to assist argument was rejected by the court because of the defense under reservation of rights as no estoppel arose respectively under Wisconsin law.

insured in an underlying suit asserting mislabeling of products and trademark violations. This because all of the underlying complaints were based on the insured’s use of the trademark.

The court also noted Parameter Driven Software, Inc. v. Mass. Bay Ins. Co., 25 F.3d 332, 337 (6th Cir. 1994), Global Computing, Inc. v. Hartford Cas. Ins. Co., No. 05-C-6753, 2007 WL 844618, at *4 (N.D. Ill. March 14, 2007) as well as Greenwich Ins. Co. v. RPS Prods., Inc., 882 N.E.2d 1202, 1212 (Ill. Ct. App. 2008) but a different result attended in NGK Metals Corp. v. Nat’l Union Fire Ins. Co., No. 1:04-CV-56, 2005 WL 1115925, at *15 (E.D. Tenn. Apr. 29, 2005). Although the court did not note this fact, the applicable Illinois or Michigan law cases cited, all apply a four-corners doctrine while Tennessee does not.

P & W’s complaint in the underlying action alleges two causes of action: the first for common law trademark infringement and the second for dilution and diminishment of P & W’s “famous mark” in violation of the Lanham Act.

The exclusion did not enumerate all intellectual property rights encompassed because it referenced the phrase “any intellectual property rights” citing Bragdon v. Abbott, 524 U.S. 624, 639 (1998) (noting that “the use of the term ‘such as’ confirms [that] the list is illustrative, not exhaustive”).

The question was whether the unfair competition count alleging infringement of common law rights also fell within the exclusion. The court took comfort from the reference in the exclusion that injury “arising out of any violation of any intellectual property rights” was excluded.

Federal trademark law does not preempt Maryland’s “broader consumer-oriented remedies provided by the common law of unfair competition.” Barnett v. Maryland State Bd. of Dental Examiners, 293 Md. 361, 379 (1982).

Id. at 437.

But for the alleged trademark violation, there would be no unfair competition claim. Notably, the court did not examine or evaluate whether there could be liability for unfair competition under the asserted claim, even if the trademark infringement claims were deemed not viable because the trademark rights did not vest in the claimant as asserted or the trademark was found to be invalid as presumably the answer to the complaint asserted as affirmative defenses.

The court also did not address with any clarity whether the mere use of P & W’s registered name, “Marvin J. Perry & Associates,” logo, website and subsequent launch of a similar-sounding website, www. marvin j perryinc. com “could be viewed as disparagement of P & W’s separate identity from MJP.”

Id. at 437.

No fact allegations of tarnishment associated with claims of trademark dilution were specifically alleged or referenced by the court and the presumption of disparagement argued by the insured was not even evaluated by the court following a brief mention.

There could be no tortious interference claim because there was no contract involved and tortious interference for business relationships required some underlying factual assertions equivalent to defamation, injurious falsehood, fraud, etc., which the court found absent.

The court deduced that the interference count was solely based on alleged misrepresentations that MJP was the same entity as P & W through its use of P & W’s trade name and trademark, in effect blurring, not tarnishment as the wrongful act was based purely on alleged wrongful use of trademark rights.

The cases cited by the insured were inapposite because they did not address the applicability of analogous intellectual property exclusions. To wit State Auto. Prop. & Cas. Ins. Co. v. Travelers Indem. Co. of Am., 343 F. 3d 249, 253, 260 (4th Cir. 2003) and AMCO Ins. Co. v. Lauren-Spencer, 500 F. Supp. 2d 721, 729 (S. D. Ohio 2007).

The mere use of a letterhead and logo were no more than directed solicitations to the United States Department of State which are not considered “widespread dissemination.” See Monumental Life Ins. Co. v. U.S.F. & G., 94 Md. App. 505, 526-27 (1993). And in any event, the advertisements that fall within the exclusion for use of a “trademark, trade name … or other designation of source” thereby relieving Hartford of its defense duty.

“Misappropriation of advertising ideas” or “style of doing business” offense was implicated by the trademark infringement claim as the certified question queried.

We conclude that the absence of the word “trademark” in the CGL policy does not foreclose the possibility that trademark infringement falls within the scope of the advertising-injury definitions in General Casualty's policy. First, the policy provides coverage for injuries “arising out of” the advertising-injury definitions, which expands the scope of the policy language since this court has defined “arising out of” broadly as “originating from,” “growing out of,” or “flowing from.” Dougherty v. State Farm Mut. Ins. Co., 699 N.W.2d 741, 744 (Minn.2005). Second, the Minnesota rules of insurance policy interpretation require policies to be read in favor of finding coverage, and require courts to look past the legal nomenclature to the underlying allegations. Finally, the duty to defend applies to claims that “arguably” fall within the policy, and if insurance policy language is susceptible of more than one meaning, it must be given the meaning that favors coverage.

Id. at *3.

Noting that the only other supreme court that reached a similar view, it found Acuity v. Bagadia, 750 N.W.2d 817, 827 (Wis. 2008) persuasive. Adopting the broader definition of advertising in accord with the Acuity court’s reasoning, it stated:

[W]e interpret the term “advertising” . . . as: “any oral, written, or graphic statement made by the seller in any manner in connection with the solicitation of business.”

Id. at *6.

This opinion reflects a modern trend broadly construing the term “advertising.” It circumvents misstatements in earlier cases that improperly asserted that the majority of courts (Id. at 26) had narrowly interpreted “advertising” as “widespread promotional activities usually directed to the public at large”. Hameid v. National Fire Ins. Co. of Hartford, 31 Cal. 4th 16, 24 (2003). See The Proper Definition of “Advertising” in an “Advertising Injury” Coverage Case - a Critique of the California Supreme Court’s Decision in Hameid v. National Fire Ins. Of Hartford, 31 Cal. 4th 16, 1 Cal. Rptr. 3d 401, 71 P.3d 761 (2003) [Published in Mealey’s Litigation Report: Intellectual Property Vol. 12, Iss. #1 also published in Mealey’s Emerging Insurance Disputes Vol. 8, Iss. # 20; Mealey’s Litigation Report: California Insurance Vol. 3, Iss. # 5].

The “use of another’s advertising idea in your ‘advertisement’ ” offense was implicated, thus the court found it unnecessary to decide whether there was an infringement of copyright, trade dress or slogan at issue. It reasoned,

Tolkien also alleged that Hobbit Travel used the word “hobbit” in its domain name and on its website to attract the national public's attention to its travel agency, and capitalize on the goodwill surrounding the Tolkien works. These uses of the word “hobbit” by Hobbit Travel were made in connection with the solicitation of travel business within our broad reading of “advertisement”; thus, Tolkien's damages arose out of Hobbit Travel's “use of another's advertising idea in [its] ‘advertisement.’ ”

Id. at *7.

A vigorous dissent by Chief Justice Magnuson found that the court had too broadly stretched the meaning of “arguably” bring into question the previous views expressed in Franklin v. W. National Mut. Ins. Co., 574 N.W. 2d 405, 407 (Minn. 1998) (citing Ross v. Briggs and Morgan, 540 N.W. 2d 843, 847 (Minn. 1995)). Id. at *9.

solutions which was an “important differentiator” between competing products, even though some competitors offered products for these exact features was disparaging of one principal competitor, Sigma, who did not purport to have such capabilities.

The Court reasoned,

The gravamen of the Underlying Complaint, therefore, is that Plaintiff made false claims about the superiority of its own products, which clearly and necessarily implied the inferiority of Sigma's competing products, resulting in damages to Sigma.

Id. at *6.

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.