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

The publication did not alert the reader that Toffler was a consulting firm or tell the reader what services Toffler offered.

In concluding that the publication was not advertising, Hartford’s claim representative, Dengler (who did not speak to Barnett or any other Toffler employees) “was directed to 150 specific clients and does not constitute ‘widespread public distribution.’” She also concluded that the Publication “was principally a medium to convey information and was not advertisement.”

The court found no conflict between the law of Pennsylvania, Massachusetts and Virginia as to the pertinent coverage issues and thus applied Pennsylvania law.

The court found a duty to defend Toffler.

IWP's Complaint alleges that Barnett distributed the Publication, which it described as “a serial” containing articles, to “many recipients.” The “many recipients” allegation supports that the Publication had widespread distribution, as required by the Policy's definition of an advertisement.

Id. at *9.

Looking only to the complaint and the policy under Pennsylvania law, the court found that the duty to defend did not expire on October 21, 2007 when Toffler’s answer to the underlying complaint admitted emailing the publication “to a select group of friends and associates.” Id. at *9.

Applying an objective standard, the court found that a reasonable person in Toffler’s position would have understood and expected that the publication would fall within the policy’s description of “information or images” that has the purpose of inducing the sale of goods, products or services.

There are numerous objective indicia that, prior to the alleged copyright infringement, Barnett made changes to the Publication that caused the Toffler name and Toffler themes to appear throughout the Publication-in the title, in the footnote, on the watermark . . . . Barnett sent the Publication to various persons in the industries from which Toffler had sold its services in the past or might sell its services in the future.

Id. at *10.

No indemnity arose, however, because “Barnett's e-mail distribution of the Publication to approximately 300 persons outside of Toffler was not widespread public dissemination, as required by the Policy . . . .” Id. at *13.

No prejudice was proven to bar all defense fee reimbursement.

"[N]o reasonable jury could find that Great Northern was not prejudiced by Guaranty Bank's inexplicable failure to give prompt notice [until over 90% of the defense fees were incurred and the preliminary injunction motion had been lost]. RTE Corp. v. Maryland Casualty Co., 74 Wis.2d 614, 247 N.W.2d 171, 178-79 (Wis.1976), and cases cited there; Sanderfoot v. Sherry Motors, Inc., 33 Wis.2d 301, 147 N.W.2d 255, 259 (Wis.1967)."

Id. at *2.

The court also noted that the leniency towards insureds demonstrated by the Wisconsin legislature and Supreme Court were to individuals, not substantial commercial enterprises. The court noted, however, that the contra proferentum rule has been exercised for the benefit of large corporations as well as individuals as the Supreme Court of Wisconsin had not spoken on topic.

Guaranty Bank argued in effect that there was no harm, no foul, because the insurer would have denied on grounds other than late notice. The court elected to analyze whether a duty of defense arose to determine if that would conclusively bar policy benefits even if notice was found appropriate. The court found no arguable coverage evidence on the face of the complaint.

The court noted:

"There is an express exclusion for advertising injury to 'any intellectual property law or right' 'other than one described in the definition of advertising injury' – that is, other than (so far as relates to this case) a registered trademark. So unless Midwest Guaranty Bank was suing for infringement of a registered trademark, any damages it obtained would not be covered by Great Northern's policy."

Id. at *4.

The court found it was clear that the suit was for infringement of an unregistered trademark. The court found it significant that the suit was for a common law claim of trademark infringement and unfair competition under Michigan common law. The court noted:

"There is no such animal as a registered common law trademark. Dana Shilling, Essentials of Trademark and Unfair Competition 4 (2002); Richard Raysman et al., Intellectual Property Licensing: Forms and Analysis § 4.02[4], p. 4-10 (1999). If it is registered, it is registered pursuant to a statute, either the Lanham Act or a state statute. Michigan has a trademark registration statute, Mich. Comp. Laws §§ 422.34, 429.33, .35, .42, and it is not preempted by the Lanham Act because it does not limit federal rights. Attrezzi, LLC v. Maytag Corp., 436 F.3d 32, 41-42 (1st Cir.2006); 3 McCarthy on Trademarks and Unfair Competition § 22:2, p. 22-3 (4th ed.2004). But Guaranty Bank did not sue under the statute, and so far as appears never registered its mark under any law."

Id. at *5.

The court also noted there was no trademark number referenced on the Civil Cover Sheet, which is a contemporaneous publicly filed document even though it is not part of the complaint. Id. at *5.