Seattle Trademark Lawyer

Ex-members of The Doors and surviving relatives of Jim Morrision sued Ray Manzarek, a founding member of The Doors, and Doors Touring, Inc., in two lawsuits, alleging that Mr. Manzarek and his new band were liable for infringing THE DOORS name, trademark, and logo in conjunction with their planned national and international tours. Mr. Manzarek’s defense fees and costs in those suits exceeded $3 million.

St. Paul Fire & Marine Insurance Co. insured Mr. Manzarek under a commercial general liability policy and Mr. Manzarek, DTI, and another band member under a second CGL policy. Mr. Manzarek and the other insureds claimed they were entitled to coverage under the policies’ “advertising injury” provisions.

Mr. Manzarek and DTI sued St. Paul in California state court after St. Paul refused to defend or indemnify them based on a “Field of Entertainment Endorsement” (FELE) that excepted from coverage advertising injury within the policyholders’ “field of entertainment business.” St. Paul removed the action to the Central District of California and then moved to dismiss for failure to state a claim. The court granted the motion, finding the Field of Entertainment Endorsement was conspicuous, unambiguous, and enforceable.

On March 25, the Ninth Circuit reversed this finding. It found:

“The fundamental problem with the district court’s decision is that it fails to apply the language of the FELE to the factual allegations contained in the complaints in the Underlying lawsuits. The FELE excludes coverage for ‘advertising or publicizing for, any Properties or Programs which are within your Field of Entertainment Business.’ Contrary to the interpretation adopted by the district court, the definition of Field of Entertainment Business is not broad enough to cover the entirety of the allegations in the Underlying Lawsuits.”

The court concluded:

“In this case, the Underlying Lawsuits allege that Manzarek and DTI marketed products and merchandise at their concerts and on The Doors official website. The Underlying Lawsuits, however, are silent about what type of products and merchandise that Manzarek and DTI produced and marketed. For all St. Paul knew when it denied coverage, the products marketed by Manzarek and DTI included guitars, t-shirts, and perhaps (although we realize it is not likely) salad dressing bottles with The Doors logo and/or Morrison’s likeness affixed to them. These allegations raised the potential for coverage under the Policies and, for that reason, the district court erred by summarily dismissing Manzarek’s and DTI’s breach of contract claim.”

For the same reasons, the court also concluded the district court erred by summarily dismissing the insureds’ claim for breach of the implied covenant of good faith and fair dealing.

The case cite is Manzarek v. St. Paul Fire & Marine Ins. Co., __ F.3d __, 2008 WL 763385, No. 06-55936 (9th Cir. March 25, 2008).

On August 31, Western District Judge Thomas Zilly entered a stipulated injunction in favor of plastic surgery clinic Hypatia Aesthetic & Laser Treatment Clinic, PLLC, against competing plastic surgery clinic Sam Naficy, MD, PS. The injunction concludes Hypatia’s dispute with Sam Naficy over the latter’s purchase of HYPATIA as a keyword in users’ Google searches.

Hypatia’s complaint reads like a Google testimonial. It alleged that Hypatia markets its “minimally invasive and non-invasive cosmetic medical therapies primarily on the Internet.” In the 1.5 months preceding Hypatia’s filing of its complaint in September 2006, Hypatia alleged the Sam Naficy clinic “purchased from www.google.com, the right to have a sponsored link to its website at the top or the top right side of the search results page when anyone performs a Google search for the term ‘hypatia.’” Sam Naficy’s ad allegedly stated, “Rejuvenation Center seattleface.com Non-surgical treatments for healthy & beautiful skin with no down time,” and contained a link that would transfer a user to Sam Naficy’s Web site. During this period, Hypatia stated, it experienced a “drastic drop” in the number of Internet inquiries from new customers.

Hypatia alleged that Sam Naficy’s use of Hypatia’s common law trade name and trademark was “purchased to confuse Hypatia customers and prospects seeking Hypatia’s website into viewing the [Sam Naficy] website and diverting customers and prospects to [Sam Naficy] for their cosmetic medical needs, with the purpose of taking Hypatia’s customers, prospects and market share.” The complaint alleged that these facts supported claims of false designation of origin, common law trademark infringement, trade dress infringement, trade name infringement, violation of Washington’s Consumer Protection Act, and common law unfair competition.

The stipulated order dismisses Hypatia’s claims and permanently enjoins Sam Naficy and its shareholders, directors, officers, and employees from “sponsoring, creating, purchasing or otherwise directing any Internet-based link, connection, directive or methodology of diverting users that has as its basis the inputting by any user” of the terms “Hypatia,” “Hypatia Laser & Aesthetic Clinic,” Hypatia’s address, and Hypatia’s telephone number. The parties agreed that each would bear its own fees and costs.

Given the uncertainty as to whether purchasing a competitor’s trademark as a search engine keyword even constitutes infringement, this result seems extreme. Suffice it to say, the outcome could have been quite different had the case been decided on its merits. Not necessarily, but it sure could have been.

The case cite is Hypatia Aesthetic & Laser Treatment Clinic, PLLC v. Sam Naficy, MD, PS, No. 06-01366 (W.D. Wash.).

An insurer has a duty to defend its insured despite the presence of a trademark exclusion, even when most of the claims involve trademark issues, the Ninth Circuit has held. The case is Western Intern. Syndication Corp. v. Gulf Ins. Co., No. 05-55092, 2007 WL 625264 (9th Cir.) (unpublished) (no opinion online).

In December 2002, the Apollo Theater Foundation filed a lawsuit against Western International Syndication Corp. in the Southern District of New York. Apollo alleged that Western had embarked on a systematic campaign of misconduct, including making misrepresentations about Apollo’s TV show, “It’s Showtime at the Apollo,” and using Apollo’s trademarks in connection with a competing program. In March 2004, Western notified Gulf Insurance Co. about the action and requested defense and indemnity pursuant to its commercial insurance policy. Gulf refused, so Western filed a declaratory action in California state court, which Gulf removed to the Central District of California.

The Central District held that Gulf had a duty to defend Western against Apollo’s deceptive acts and practices claim under New York law. On February 26, the Ninth Circuit affirmed.

It found: “In the Underlying Action, Apollo alleged that Western requested extensions from the United States Patent and Trademark Office to oppose Apollo’s trademark registration applications; that it did so solely for the purpose of disrupting the production financing of the Apollo Show; and that Western, for the purpose of placing a cloud on the title of the Apollo Show trademark, informed banking institutions that the ownership rights of the trademark were contested. According to Apollo, Western’s actions succeeded in making it difficult for Apollo to obtain insurance necessary to secure production financing. Apollo further alleged that Western made ‘statements to television stations and broadcasters to the effect that … the Apollo Show w[ould] not be distributed for the 2003/2004 broadcast season.’”

Western’s policy excludes from coverage personal injuries regarding “infringement of copyright or trademark.” The Ninth Circuit nonetheless found: “While the vast majority of Apollo’s claims do involve trademark issues, the allegations that Western made disparaging statements are distinct….”

“Apollo alleges not only that Western contested Apollo’s ownership rights but also that it informed banking institutions of this dispute, creating the false impression that Apollo’s ownership was in doubt. Apollo also alleged that Western disseminated false information to advertisers regarding limited distribution of the Apollo Show. These factual allegations go beyond the elements of a trademark claim and exceed the scope of the trademark exclusion.”

Costco purchased shampoo bearing the trademark “TIGI” from its supplier, K&M Industries. Tigi USA notified Costco that the products were likely counterfeit.  In response, Costco pulled the shampoo from its shelves and demanded that K&M provide evidence of its authenticity. K&M failed to do so. Because the Lanham Act prohibits trafficking in counterfeit goods, Costco destroyed the products and sued K&M.  In an uncontested arbitration, Costco was awarded $2.4 million, including attorneys’ fees.

Presumably unable to collect its award, Costco then filed a complaint against Hartford Casualty Insurance Company, K&M’s insurer. On cross-motions for summary judgment, King County Superior Court Judge Michael Fox ruled that Hartford’s policy covered K&M for Costco’s loss.

The Washington State Court of Appeals reversed. It found that Costco’s loss was excluded under the policy’s exclusion for damage to “your product.” The exclusion provided that “This insurance does not apply to … ‘Property damage’ to ‘your product’ arising out of it or any part of it.” The policy defined “Your product” as “Any goods … distributed” by you. The Court of Appeals found that “The shampoo distributed by K&M falls unambiguously within that definition.” 

The Court concluded that “Costco’s property damage — its loss of use of the shampoo — arose out of the shampoo. Because the shampoo was counterfeit, Costco was unable to sell it or make any other use of it. When an insured becomes liable for damage to its own tangible product that occurs either by physical injury or loss of use, and such damage arises out of the product, the insured is not covered.” Therefore, the Court found that Hartford was not responsible for covering K&M’s liability to Costo. 

The published decision, National Clothing v. Hartford Casualty, 145 P.3d 394 (Wn. App. October 23, 2006), is available here.