Trademark Infringement Insurance Coverage
Two recent trademark cases analyzing trademark infringement coverage properly found a duty to defend.
Capitol Indem. Corp. v. Elston Self Service Wholesale Groceries, Inc., No. 04 C 6536, 2008 WL 696919 (N.D. Ill. March 13, 2008)
Analyzing the meaning of “infringement of title” under Illinios law, the court found that “infringement of title” can include improper use of a business name, citing Charter Oak Fire Ins. Co. v. Hedeen & Cos., 280 F.3d 730, 736 (7th Cir. 2002). At issue were allegations of advertising falsely labeled counterfeit cigarettes under the Newport brand. The court found that affirmative self-promotion of the actor’s goods or services was implicated by labeling of the cigarettes with the Newport mark characterizing earlier Michigan precedent from the 6th Circuit in the Advanced Watch case as anomalous. See Peterson Tractor Co. v. Travelers Indem. Co., 156 Fed. Appx. 21, 23 (9th Cir.2005). Id. at *9. It also rejected application of two exclusions, the first for “knowledge of falsity” which it mixed characterized as an intentional conduct exclusion noting that Trademark Infringement claims did not depend on either intentional or knowingly false conduct. Indeed a defendant could be liable for trademark infringement without proof that it engaged in an intentional or willful conduct to prevail. See Utica Mut. Ins. Co. v. David Agency Ins., Inc., 327 F.Supp.2d 922, 927 (N.D.Ill.2004). The court’s “knowledge of falsity” analysis properly applying Illinois law which an earlier Seventh Circuit decision misapplied.
In Del Monte Fresh Produce N.A., Inc. v. Transportation Ins. Co., 500 F.3d 640, 646 (7th Cir. (Ill.) 2007) the panel held that the “knowledge of falsity” exclusion was implicated because the allegations against Del Monte are not grounded in any theory of relief except fraud, transforming the exclusion into a more “intentional acts” exclusion.
The court also found the “first publication” inapplicable. The absence of any fact allegations asserting when the alleged counterfeit cigarette bearing the Newport® trademark were used, or when fliers of the insured allegedly advertises cigarettes and circulated them led the court to find the exclusion is inapplicable because it was unclear whether the claimant asserts that the infringing and fraudulent activity began. It reasoned:
While advertising may be cumulative, the court doubts that advertisements circulated before Capitol Indemnity began insuring Elston in 1993 had a discernable impact in 2003. Thus, the court will not invoke the first-publication exclusion simply because Elston’s advertising remained the same between 1983 and 2003.
Id. at *14.
Manzarek v. St. Paul Fire & Marine Ins. Co., ___ F.3d ___, 2008 WL 763385 (9th Cir. (Cal.) March 25, 2008)
Analyzing a “field of entertainment limitation endorsement” (“FELE”) the court found it did not exclude otherwise available coverage for “advertising injury” for alleged wrongful use of The Doors name, trademark and logo in connection with the planned national and international tour.
The court noted that coverage could well exist even outside the scope of the field entertainment limitation endorsement if The Doors own line of salad dressing, T-shirts or electric cars were promoted. There was no evidence that the specific content of The Doors memorabilia was identified in the complaint and absent same, the court did not discern that there was coverage necessary falling within the pertinent exclusion.
Also intriguing, the court found that bodily injury coverage was implicated because an alleged loss to a Doors’ band member “reputation and stature by causing people to believe that he was not, and is not, an integral and respected part of The Doors band, or is one member who easily can be replaced by another drummer.” Id. at *7.
“Bodily injury” coverage included emotional distress as part of its definitional perimeter. Mere economic loss arising from reputational harm is certainly been easily flowed within “personal injury” coverage for liable/slander/defamation and related offenses. The courts have often been more restrictive in looking at bodily injury coverage. This case suggests that a different approach is appropriate here.
Capitol Indem. Corp. v. Elston Self Service Wholesale Groceries, Inc., No. 04 C 6536, 2008 WL 696919 (N.D. Ill. March 13, 2008)
Analyzing the meaning of “infringement of title” under Illinios law, the court found that “infringement of title” can include improper use of a business name, citing Charter Oak Fire Ins. Co. v. Hedeen & Cos., 280 F.3d 730, 736 (7th Cir. 2002). At issue were allegations of advertising falsely labeled counterfeit cigarettes under the Newport brand. The court found that affirmative self-promotion of the actor’s goods or services was implicated by labeling of the cigarettes with the Newport mark characterizing earlier Michigan precedent from the 6th Circuit in the Advanced Watch case as anomalous. See Peterson Tractor Co. v. Travelers Indem. Co., 156 Fed. Appx. 21, 23 (9th Cir.2005). Id. at *9. It also rejected application of two exclusions, the first for “knowledge of falsity” which it mixed characterized as an intentional conduct exclusion noting that Trademark Infringement claims did not depend on either intentional or knowingly false conduct. Indeed a defendant could be liable for trademark infringement without proof that it engaged in an intentional or willful conduct to prevail. See Utica Mut. Ins. Co. v. David Agency Ins., Inc., 327 F.Supp.2d 922, 927 (N.D.Ill.2004). The court’s “knowledge of falsity” analysis properly applying Illinois law which an earlier Seventh Circuit decision misapplied.
In Del Monte Fresh Produce N.A., Inc. v. Transportation Ins. Co., 500 F.3d 640, 646 (7th Cir. (Ill.) 2007) the panel held that the “knowledge of falsity” exclusion was implicated because the allegations against Del Monte are not grounded in any theory of relief except fraud, transforming the exclusion into a more “intentional acts” exclusion.
The court also found the “first publication” inapplicable. The absence of any fact allegations asserting when the alleged counterfeit cigarette bearing the Newport® trademark were used, or when fliers of the insured allegedly advertises cigarettes and circulated them led the court to find the exclusion is inapplicable because it was unclear whether the claimant asserts that the infringing and fraudulent activity began. It reasoned:
While advertising may be cumulative, the court doubts that advertisements circulated before Capitol Indemnity began insuring Elston in 1993 had a discernable impact in 2003. Thus, the court will not invoke the first-publication exclusion simply because Elston’s advertising remained the same between 1983 and 2003.
Id. at *14.
Manzarek v. St. Paul Fire & Marine Ins. Co., ___ F.3d ___, 2008 WL 763385 (9th Cir. (Cal.) March 25, 2008)
Analyzing a “field of entertainment limitation endorsement” (“FELE”) the court found it did not exclude otherwise available coverage for “advertising injury” for alleged wrongful use of The Doors name, trademark and logo in connection with the planned national and international tour.
The court noted that coverage could well exist even outside the scope of the field entertainment limitation endorsement if The Doors own line of salad dressing, T-shirts or electric cars were promoted. There was no evidence that the specific content of The Doors memorabilia was identified in the complaint and absent same, the court did not discern that there was coverage necessary falling within the pertinent exclusion.
Also intriguing, the court found that bodily injury coverage was implicated because an alleged loss to a Doors’ band member “reputation and stature by causing people to believe that he was not, and is not, an integral and respected part of The Doors band, or is one member who easily can be replaced by another drummer.” Id. at *7.
“Bodily injury” coverage included emotional distress as part of its definitional perimeter. Mere economic loss arising from reputational harm is certainly been easily flowed within “personal injury” coverage for liable/slander/defamation and related offenses. The courts have often been more restrictive in looking at bodily injury coverage. This case suggests that a different approach is appropriate here.
