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

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.

The court’s discussion of why an advertising idea is implicated is of greatest interest.

[T]he use of another's advertising idea may include trademark infringement because to infringe upon someone's trademark, which is an advertising device, one improperly uses another's advertising idea to draw the consumer's attention to a product. Accordingly, we answer the third certified question, yes.

Id. at *6.

The court found that a trademark may be a product slogan and that trademark infringement potentially relates to the improper use of another slogan.

It finally found that a trademark infringement may occur when a party infringes upon another’s trade dress or slogan in its advertisement because “a trademark may serve as an element to the overall trade dress of a product.” Id. at *6.

“Without Atkins' valid authority or informed consent, IMT and Thane have invaded and continue to invade Atkins' privacy by appropriating Atkins' name and likeness by using Atkins' name and image on the EFL package and Atkins' name and image in at least one infomercial which was aired on television. Atkins' image on the EFL package and in the infomercial is readily identifiable in that any person viewing these images with the naked eye can reasonably determine that the person depicted in these images is Atkins because Atkins' face is clearly visible and distinguishable, the image depicting Atkins on the EFL package is situated next to Atkins name on the package and the image depicting Atkins in the EFL infomercial is shown with a verbal statement of Atkins' name.”

Id. at *3.

A duty to defend these fact assertions was owed by Hartford.

All causes of action were covered because the defendant refused to defend citing, Buss v. Superior Court, 16 Cal. 4th 35, 48-50 (1997).

The fair market value of the goods, i.e., the EFL units, or $492,793.62, that Thane agreed to relinquish in consideration for the settlement of all claims against it in the underlying lawsuit is recoverable as damages arising from Defendants’ breach. Earth Elements, Inc. v. Nat'l Am. Ins. Co. of Calif., 41 Cal.App.4th 110, 116-17, 48 Cal.Rptr.2d 399 (1995); McMahan's of Santa Monica v. City of Santa Monica, 146 Cal.App.3d 700-701 (1983), disapproved on other grounds, Bunch v. Coachella Valley Water Dist., 15 Cal.4th 432, 63 Cal.Rptr.2d 89, 935 P.2d 796 (1997).

Id. at *6.

The court also found 10% prejudgment interest was recoverable on the fair market value of the goods relinquished as well as on defense fees from the date incurred.

former employees of the claimant as independent contractor real estate salespersons assisting clients in the purchase and sale of investment properties throughout the U.S., asserted various acts of unfair competition, to wit:

(1) stealing M & M's customers by persuading them to abandon their listing agreements with M & M and sign one with plaintiffs; and (2) misappropriating M & M's confidential, proprietary business forms, in particular its form representation agreement and purchase agreement, for use in plaintiffs' day-to-day business operations.

Id. at *5.

Applying Oregon law, Magistrate Stewart formulated a meaning for “advertising idea” in the phrase “misappropriation of advertising ideas” as “misappropriat[ing] a plan, conception, or design aimed at calling M & M's services to the attention of the public.” Id. at *6.

Adopting this definition, the court claimed it was similar to that found by other courts:

Other courts have similarly defined “advertising idea.” See Atl. Mut. Ins. Co. v. Badger Med. Supply Co., 191 Wis 2d 229, 239, 528 NW2d 486, 490 (1994) (consulting dictionary definitions, including Webster's, to determine that “[a]n advertising idea ... is an idea for calling public attention to a product or business, especially by proclaiming desirable qualities so as to increase sales or patronage”); Am. Econ. Ins. Co. v. Reboans, Inc., 852 F Supp 875, 879 (ND Cal 1994) (“ ‘advertising ideas or style of doing business' refers to the mode of presenting a product to the public”).

Id. at *6 n.1.

The court found no potential coverage. It reasoned:

The M & M Complaint contains no such allegation. While it does allege that plaintiffs stole M & M's form documents and that these form documents are “material” to M & M's success, the M & M Complaint does not tie these forms to any advertising idea conceived or employed by M & M. According to the M & M Complaint, the major advantage M & M receives from these forms is that they “clearly define the obligations and liabilities of the parties with particular care to the interests of M & M.” This does not pertain to “advertising ideas.”

Id. at *6.

Looking to dictionary definitions, the court deduced that “misappropriation of a style of doing business” is the misappropriation of M&M’s “peculiarly distinctive technique or methods or characteristics” of “commercial or mercantile activity.” Id. at *6.

The court found that, so defined, “style of doing business” was akin to trade dress and that misappropriation must not be of just one minute facet of a business. It reasoned, “[A] style of business is what sets one company apart from its competitors in the same industry.” Id. at *7.

The court also explained that “style of business” in context refers to “a company’s comprehensive manner of operating its business.” Atlantic Mutual, 191 Wis. 2d at 239, 528 N.W.2d at 490, quoting St. Paul Fire & Marine Ins. Co. v. Advanced Interventional Sys., Inc., 824 F. Supp. 583, 585 (E.D. Va. 1993). Id. at *7.

Since the misappropriation focused on customers and proprietary forms, the court found this provision not implicated.

Had M&M claimed to be an industry leader in the use of prepared-form documents and that it gained a competitive advantage distinctly from such use, the court intimated a different result might attend. While there was a gain in efficiency of operations, it was not sufficient to transform the conduct into “misappropriation of style of doing business.”