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

Continental’s arguments were misleading in seeking to narrowly interpret its trademark exclusion.

In arguing that the trademark exclusion relieves it of its duty to defend, Continental-in its own motion papers-uses the terms “trademark” and “trade name,” interchangeably. Curiously, trade name is a term of art that neither appears nor is defined in their policy. More baffling still is the policy's use of the term trademark, which is not defined therein. Is the Court to assume that the terms trade name and trademark are synonymous? While they may be in the minds of the defense team, they certainly aren't synonymous under the law. . . .

Professor McCarthy aptly describes the semantic confusion surrounding the basic legal terms used in trademark and unfair competition law as “Alice's Wonderland.” . . .

When faced with this “Alice's Wonderland” area of the law, Continental chose not to define the terms, “trademark” and “other intellectual property rights,” in its policy. Now, Continental argues that the terms trademark and trade name “clearly” apply to the claims at hand.

Like Humpty Dumpty, Continental wants to choose the meaning of its words to suit its own purposes. Such an approach is inconsistent with simple logic, principles of fairness, New Mexico law, and the Federal Rules of Civil Procedure. The Court declines to follow Continental down the rabbit hole. On this side of the looking glass, it is not clear that the trademark exclusion applies. Continental has failed to meet its burdens under New Mexico law and Fed.R.Civ.P. 56(c).

Id. at *3.

Concluding that the duty to defend survived, the court reasoned:

The trademark exclusion only applies to infringement claims. Yet, Continental fails to acknowledge that the counterclaims are not limited to infringement claims. The Pimentel Co-defendants sued, inter alia, for violations of the New Mexico Unfair Trade Practices Act [as well as other asserted claims]. . . .

The trademark exclusion does not apply to non-infringement claims. . . . Although the pleadings of the Pimentel Co-defendants are not models of clarity, some of the claims are non-infringement claims.

Id. at *2-3.

This Order, following the earlier favorable decision on the duty to defend as of November 16, 2005, reasserted the trademark exclusion. This subsequent case was brought after the underlying case led to issuance of an injunction by Judge Browning against the co-defendants for violating an earlier 1989 order respecting the Pimentel Marks.

Contrary to the views expressed by the insurers, the court found that Judge Browning did not determine that the “Marks” were exclusively trademarks. The court found it was equally possible that the registration referred to by Judge Browning was a trade name, which was distinct from a trademark and not within the scope of the exclusion. The court also suggested that the potential infringement of slogan claim outside the scope of the exclusion still created a defense as it did not apply the non-infringement claims.

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.

must be read expansively.

The expansiveness of the phrase “any claim arising out of” obviates the need to specify that the exclusion applies “whether committed by or at the direction of the insured or third parties.” Liquor Liab. Joint Underwriting Ass’n of Mass. v. Hermitage Ins. Co., supra at 320, 644 N.E.2d 964. Cases from other jurisdictions at in accord.

Id. at 697.

The insured’s objectively reasonable expectations in the court’s view were of no moment as there was no ambiguity. A.W. Chesterton Co. v. Massachusetts Insurers Insolvency Fund, 445 Mass. 502, 518, 838 N.E.2d 1237 (2005);1 B.R. Ostrager & T.R. Newman, Insurance Coverage Disputes § 1.03[b], at 34 (14th ed. 2008) (“The application of the reasonable expectations doctrine is typically limited to cases in which the policy is ambiguous and the mutual intent of the parties cannot be determined”).

Id. at 698.

Jones Day would not have incurred any loss in the absence of the nephew’s misappropriation and thus Jones Day’s claim arose out of same.

Thus, the AARP mark was used in an “improper way”.

Despite the fact that distinct claims for both trademark infringement and unfair competition in violation of 15 U.S.C. § 1125 were asserted, the court did not analyze – nor, apparently, did the parties raise – the potential argument that a defense could arise from the unfair competition claims in the event the trademark infringement claims were not held to be viable.

Applying Texas law, the court appeared to view each of the potential claims as so interrelated that the potentiality for a nonexistent trademark claim was not in play.

Judge Hilton, in Corporate Risk Int’l, Inc. v. Assicurazioni Generali, S.p.A., No. 95-1440-A, 1996 U.S. Dist. LEXIS 19720, at *8-9 (E.D. Va. Mar. 15, 1996), rejected an insurer argument that a broader exclusion than that in force here applied to false advertising and unfair competition claims because the underlying plaintiff’s claims went beyond the express terms of the exclusion.

After a reading of the underlying complaint, it is clear that the complained of conduct goes beyond trade or service mark infringement. . . . Each of the Lanham Act counts . . . complains of CRI’s conduct in the promotion, sale, and offering for sale of its corporate security services in conjunction with the allegedly infringing marks. Further, at paragraph thirty, the complaint asserted that CRI’s advertising activity was “in direct contravention of Plaintiffs’ CONTROL RISKS MARKS and other proprietary rights.” That reference to other proprietary rights is again made at paragraph sixty-five. Finally, . . . the Prayer for Relief asks that the underlying defendants be enjoined from “engaging in any conduct that tends falsely to represent that, or is likely to confuse, mislead, or deceive Defendants’ customers” into believing that CRI’s services were sponsored by Control Risks Group. The prayer also asks for damages resulting from CRI’s “unfair activities.”