DOES YOUR INSURANCE COVER YOU FOR INFRINGEMENT
OF TRADEMARKS AND SLOGANS?

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The number of trademarks and slogans is staggering and ever growing. For those unfamiliar (and familiar) with trademark law, the selection of a new trademark or slogan often starts with looking at competitors' trademarks or slogans for a "new" idea. That can be a deadly first step to receiving a cease and desist letter. Worse yet, it can lead to a lawsuit for infringement.

Your commercial general liability (CGL) insurance policy may provide coverage for the cease and desist letter or lawsuit. Or maybe not.

Whether your CGL policy covers you for claims of trademark infringement or slogan infringement - or whether you, as an insurance carrier, are obligated to provide coverage - will depend on the particular policy language in your policy. There can be a lot of "standard" language used in policies from different insurance carriers. However, there can also be subtle differences, even in policies from the same insurance carrier, over time.

One area of the policy in which coverage might exist is in the definition of an "advertising injury". However, care should be taken to understand what exceptions likely exist for advertising injury coverage.
The following case decisions illustrate what can be important to determine the existence of insurance coverage.

In North Coast v. Hartford, the policy defined advertising injury as "[i]nfringement of copyright, slogan, or title of any literary or artistic work in your 'advertisement.'" However, an Intellectual Property Exclusion excluded coverage for "infringement or violation of any intellectual property right, such as . . . trademark, trade name . . . [or] service mark. . . ." But the policy also said the "exclusion does not apply if the only allegation in the claim or suit involving any intellectual property right is limited to . . . infringement, in your 'advertisement' of 'slogan'".

The underlying lawsuit was for trademark infringement, false designation of origin, unfair competition and consumer fraud. The name at issue was "THERA-PUTTY".

The insurance coverage lawsuit centered on whether the underlying lawsuit was for infringement of a trademark or infringement of a slogan. The court explained that, in California, a slogan is a "brief attention getting phrase used in advertising or promotion or a phrase used repeatedly, as in promotion." Further, "the infringing use of a trademark this is merely a word in a phrase used as a slogan is not the same as the infringing use of a slogan." The court found that "THERA-PUTTY" was a "single word" and thus not a slogan. Not being a slogan, the court found that the Intellectual Property Exclusion applied; thus no coverage.

In another California case, actress Reese Witherspoon initiated an underlying lawsuit against Marketing Advantage for using her name and image in advertisements. Her claims were for violation of right of privacy, trademark/trade name infringement, trade dress infringement, and slogan infringement. The insurance carrier for Marketing Advantage initiated the coverage lawsuit in Maryland Casualty v. Witherspoon.

An Intellectual Property Exclusion excluded coverage for advertising injury arising from the "infringement of copyright, patent, trademark, trade secret or other intellectual property rights." However, the exclusion did not apply to "infringement, in your 'advertisement' of copyright, trade dress, or slogan."

The court pointed out that the underlying lawsuit was for trade dress and slogan infringement at least arguably within the language of what is covered. However, the court found that the issue of coverage would require it to decide whether the underlying lawsuit asserted damages that are potentially covered under the insurance policy. Therefore, the court determined that it should not decide the coverage issue because doing so "entangles" the court with the underlying state court lawsuit.

In a trade dress context, the policy in West Trend v. AMCO contained an Intellectual Property Exclusion that excluded coverage for injury arising from the "infringement of copyright, patent, trademark, trade secret or other intellectual property rights." However, the exclusion did not apply to "infringement in [the] advertisement of copyright, trade dress or slogan."

The policy also included a Printers Errors and Omissions Liability endorsement that excluded coverage for "infringement of copyright, trademark, service mark or trade name (other than titles or slogans)."

The court explained that in California infringement in an advertisement is determined by a two-part test. One, the promotion of the product or service must be an "advertisement". Two, the advertisement must have caused the advertising injury.

Using the above test, the court found that the underlying lawsuit alleged advertising by reference to allegations of "marketing and advertising" and "market its goods." The prayer for relief in the underlying complaint also sought an injunction for "advertising." The court rejected AMCO's argument that the advertising merely exposed the infringing conduct and did not cause it.
Finally, the court found that coverage existed because the underlying lawsuit alleged facts that could support a claim for trade dress infringement.

COMMENT:
Allegations and claims based on the improper use of a "name" can potentially raise issues of trademark infringement, trade name infringement, slogan infringement, product disparagement, and others. While identical and/or similar language exists in CGL policies that may provide coverage or may exclude coverage, one should not assume that all policies have the same coverage result.

© Michael A. Shimokaji 2015

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