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

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.

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.”

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.”
 

"[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.