Seattle Trademark Lawyer

I’m not much of an insurance guy, but these cases don’t come along too often, so they’re interesting when they do: courts interpreting insurance policies as they relate to coverage for trademark infringement.

The underlying dispute arose out of a trademark infringement complaint that AcademyOne, Inc., filed against CollegeSource, Inc. AcademyOne claimed that CollegeSource had registered AcademyOne’s trademark as its domain name, which was likely to divert AcademyOne’s customers to CollegeSource’s Web site.

CollegeSource tendered a claim to its insurer, Travelers Indemnity. When Travelers denied the claim, CollegeSource sued for breach of contract.

Travelers moved for judgment on the pleadings, and the Southern District of California granted the motion. It found the underlying trademark infringement claim fell within the policy’s exclusion for “‘personal injury,’ ‘advertising injury,’ and ‘web site injury’ arising out of the unauthorized use of another’s name or product in your email address, domain name or metatag, or any other similar activities that mislead another’s potential customers.”

On appeal, the Ninth Circuit agreed. It found that “[e]ven construing the exclusion narrowly, the phrase ‘any other similar activities that mislead another’s potential customers’ can be read only as referring to activities similar to ‘unauthorized uses of another’s name or product in your e-mail address, domain name, or metatag,’ because ‘use’ is the only word in the clause which constitutes an ‘activity.’”

It also rejected CollegeSource’s contrary interpretation. “The only reasonable reading of the complaint’s allegation (that CollegeSource used AcademyOne’s domain name in its own domain name in a way likely to cause confusion in the marketplace) is that it claims injury from an activity that (1) is ‘similar to’ the unauthorized use of another’s name or product in one’s domain name, and (2) would mislead customers. We also reject CollegeSource’s argument that Travelers’s removal of a trademark infringement exclusion from the policy shows an intent to provide coverage for domain name infringement. Because the language of the Unauthorized Use exclusion is unambiguous, we do not consider drafting history or other extrinsic sources to determine the parties’ intent.”

The case cite is CollegeSource, Inc. v. Travelers Indem. Co. of Connecticut, No. 11-55708, 2013 WL 492462 (9th Cir. Feb. 11, 2013).

The Pittsburgh Steelers’ “Steel Curtain”: “Mean” Joe Greene,
L.C. Greenwood, Ernie Holmes, and Dwight White

Last week, the Ninth Circuit decided a relatively rare insurance coverage case involving claims of trademark infringement.

Its decision, however, isn’t surprising given precedent that an insurer has a duty to defend any suit that potentially seeks damages covered by a policy, resolving any ambiguity in the policy in favor of finding coverage.

In NFL Properties LLC v. All Authentic Corp., NFL Properties sued All Authentic for allegedly selling counterfeit NFL jerseys that contained the words “Steel Curtain.” The Pittsburgh Steelers have used STEEL CURTAIN as a trademark and own a state registration for that mark. The complaint alleged causes of action for trademark infringement, counterfeiting, dilution, unfair competition, and deceptive acts and practices.

Hudson Insurance Company defended All Authentic in the case under its insurance policy with All Authentic. Colony Insurance Company, however, argued its policy did not cover the claims against All Authentic and refused to defend the suit because its policy excluded trademark infringement other than infringement as part of the insured’s “slogan” — something Colony argued NFL Properties did not allege.

In the follow-on lawsuit between the insurers, Hudson sought equitable contribution from Colony for Hudson’s costs of defending All Authentic. The Central District of California granted Hudson’s motion for summary judgment, finding that Hudson was entitled to equitable contribution because Colony had a duty to defend All Authentic but failed to do so.

Colony appealed.

On Nov. 5, the Ninth Circuit affirmed, taking the lead from a similar case out of the Sixth Circuit.

“In Cincinnati Insurance Co. v. Zen Design Group, Ltd.[, 329 F.3d 546, 550, 556 (6th Cir. 2003)], the Sixth Circuit concluded that the underlying complaint potentially stated an action for slogan infringement because the complaint stated that the third-party plaintiff ‘marketed and advertised its LED handheld flashlights using the widely-recognized trademarks ‘WEARABLE LIGHT’ and ‘SAPPHIRE.” Just as in this case, the insurance policy covered slogan infringement but not trademark infringement. The Sixth Circuit held that it did not matter that it was doubtful whether WEARABLE LIGHT could legally be a slogan or that the complaint ‘never refer[red] to WEARABLE LIGHT as a slogan.’ Because ‘[a]ny doubt as to the insurer’s liability must be resolved in favor of the insured,’ the court concluded that ‘the complaint’s failure to refer to ‘The Wearable Light’ as a slogan and its failure to include infringement of slogan as a specific claim does not alleviate [the] duty to defend.’ Similarly here, it does not matter that the NFL complaint never referred to ‘steel curtain’ as a slogan and never listed slogan infringement as a cause of action.

The court added that ”… NFL Properties did not unambiguously concede in its complaint that it had no standing to bring a slogan infringement claim for ‘Steel Curtain,’ and NFL Properties did not expressly disclaim a slogan infringement claim or standing to bring such a claim. The NFL Complaint states that ‘NFL Properties is jointly owned in equal shares by the Member Clubs of the NFL…. NFL Properties promotes the intellectual property of the NFL and the Member Clubs … and protects the marks owned by the Member Clubs against misuse in various forms.’ Then the complaint states that ‘[t]he Steelers [an NFL Member Club] have strong common law rights in the mark ‘Steel Curtain.”

“Rather than unambiguously conceding the element of ownership or disclaiming standing, these statements argue that NFL Properties does have standing to enforce the Steelers’ rights to the phrase ‘Steel Curtain.’ Because any ambiguity in the complaint or doubt regarding the duty to defend must be resolved in favor of coverage, NFL Properties’ ambiguous statements potentially support standing to sue for slogan infringement.”

For these reasons, the court found: “The district court correctly concluded there was a duty to defend based on a potential slogan infringement claim. Because the NFL complaint potentially stated a cause of action for slogan infringement, Colony had a duty to defend All Authentic in the NFL Action, and Hudson is entitled to equitable contribution.”

The case cite is Hudson Ins. Co. v. Colony Ins. Co., __ F.3d __, 2010 WL 4367014, No. 09-55275 (9th Cir. Nov. 5, 2010).

On Feb. 2, the Ninth Circuit addressed whether the “first publication” exclusion contained in an insurer’s excess insurance policy applied to an insured’s injury arising from a third party’s trade dress claim.

Sunset Health Products, Inc., hired Spectrum Worldwide, Inc., to advertise and distribute Sunset’s HOLLYWOOD 48-HOUR MIRACLE DIET drink. Soon thereafter, two of Spectrum’s executives formed their own company, Celebrity Products, Inc., and began selling and marketing a similar product, THE ORIGINAL HOLLYWOOD CELEBRITY DIET drink. Spectrum then terminated its contract with Sunset and began marketing its competing product.

In December 1998 and March 1999, Sunset demanded that Spectrum cease infringing its MIRACLE DIET trademark. In October 2001, Sunset filed a trade dress infringement claim against Spectrum, alleging that Spectrum deliberately made the packaging of Spectrum’s CELEBRITY DIET drink confusingly similar to the packaging of Sunset’s MIRACLE DIET drink.

In 2001, Spectrum purchased a $1 million excess third party liability policy from United National Insurance Co. The policy contained a clause indemnifying Spectrum for “advertising injury” liability, including “misappropriation of advertising ideas or style of doing business.” The policy also contained an exclusion for “advertising injury … arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.”

After cross-motions for summary judgment, the parties were left with Sunset’s core trade-dress infringement claim. Spectrum and Sunset settled for $3.2 million, of which United contributed $420,000.

United then sued for reimbursement of the amount it paid pursuant to the “first publication” exclusion. The Central District of California eventually granted summary judgment in its favor.

The Ninth Circuit affirmed the decision. It found: ”[T]he United Policy’s first publication clause is clear and explicit, and must be given its proper effect.” Thus, the court found the exclusion applied to trade dress infringement injury that “arose from an oral or written publication of material first published before the policy became effective.”

The case cite is United National Ins. Co. v. Spectrum Worldwide, Inc., __ F.3d. __, 2009 WL 224520, No. 07-55833 (9th Cir. Feb. 2, 2009).

Crocs sued Australia Unlimited for trade dress infringement.
Australia then sued its insurer for failing to provide a defense.

On Dec. 15, the Washington Court of Appeals decided a rare trademark case, finding in part that claims of trade dress infringement triggered an insurer’s duty to provide its insured with a defense.

Seattle-based Australia Unlimited, Inc., filed suit against its insurer, Hartford Casualty Insurance Co., in King County Superior Court claiming breach of contract, bad faith, and violation of Washington’s Consumer Protection Act based on Hartford’s refusal to defend it in three lawsuits.

The lawsuits stemmed from Australia’s producing, importing, and distributing NOTHINGZ-brand shoes. Competing shoe maker Crocs, Inc., alleged claims for trade dress infringement and, after the cases settled, for breach of the parties’ settlement agreement. Australia tendered defense in each instance to Hartford under its commercial general liability and umbrella policies, which Hartford denied.

King County Superior Court Judge Steven Gonzalez granted summary judgment in Hartford’s favor, and Australia appealed.

The Court of Appeals affirmed in part, reversed in part, and remanded for further proceedings.

In summary, the court found: “An insurer’s duty to defend arises ‘if the insurance policy conceivably covers the allegations in the complaint, whereas the duty to indemnify exists only if the policy actually covers the insured’s liability.’ Here, the complaint filed by Crocs, Inc., in the federal lawsuit in Colorado against Australia Unlimited (AU) alleges trade dress violations that are conceivably covered by the umbrella policy issued by The Hartford Casualty Insurance Co. [covering advertising injury]. Thus, Hartford had a duty to defend AU in that action. However, Hartford had no duty to defend AU either in the International Trade Commission proceeding seeking injunctive relief or the second lawsuit in Colorado by Crocs for breach of contract.” 

The case cite is Australia Unlimited, Inc. v. Hartford Casualty Ins. Co., __ P.3d. __, 2008 WL 5234761, No. 61113-5 (Wn. App. Dec. 15, 2008).

As the Trademark Blog reports, American Guarantee & Liability Insurance Co. is balking at the prospect of paying any part of the $305M judgment Adidas America, Inc., obtained against Payless Shoesource, Inc., earlier this year. The insurer filed suit on July 24 in the District of Kansas for a declaration that it is not liable under any of its policies. 

Here’s a sampling of the reasons why the insurer says it need not pay Payless’ claim:

• “The jury’s verdict in favor of adidas in the Underlying Lawsuit is not for damages for ‘advertising injury’ or ‘personal advertising injury under any of the American Guarantee Excess Policies as defined in the relevant policy provisions.”
• “None of the damages awarded by the jury are damages caused by advertising, Advertising Injury or Personal Advertising Injury; thus the awarded damages do not have the necessary causal connection to be covered under the policies.”
• “The jury’s specific findings in favor of adidas on its claims for dilution of both trademark and trade dress and on its claims for unfair and deceptive practices, as well as its finding that Payless acted willfully and its award of Payless’ profits to adidas, and its award of punitive damages to adidas, all establish that the jury found Payless’ conduct to be knowing and intentional within the meaning of [the policies’] exclusions.”
• “The jury’s findings and verdict in favor of adidas in the Underlying Lawsuit was for infringement of adidas’s trade dress and trademark rights and are therefore excluded under the Policies.”
• “The jury’s findings and verdict in favor of adidas in the Underlying Lawsuit arises out of and relates to infringing conduct by Payless that began, at the latest, in 1994 when adidas sued Payless for infringement and reached a settlement of that litigation, and Payless was producing two-stripe and four-stripe shoes,” so the award is not covered under the “known-loss doctrine.”
• “Even if the jury’s verdict in favor of adidas in the Underlying Lawsuit fell within the insuring provisions for ‘advertising injury’ or ‘personal and advertising injury’ and was not excluded by any relevant policy provisions under the American Guarantee Policies or barred from coverage by the known-loss doctrine or public policy, the award of damages, when properly allocated among the policy periods, does not trigger any American Guarantee Policy.”

I’m tempted to be quite snarky about how insurance companies never seem to be there when you need them (to put it politely), but if Payless intentionally ripped off Adidas’ trademark, I don’t see why an insurer should be required to foot the bill. Assuming its policies excluded intentional acts, of course.

The case cite is American Guarantee & Liability Ins. Co. v. Payless Shoesource, Inc., No. 08-2337 (D. Kan.).