Originally published by Shaun McParland Baldwin.
Some policyholders are seeking to recast trademark infringement claims as trade dress claims so as to fall within the “personal and advertising injury” liability coverage of the CGL policy. In that way, the claim may constitute a potentially covered offense and also fall within the exception to the Intellectual Property exclusion for infringement, in the named insured’s “advertisement,” of trade dress.
Trade dress is not defined in most policies. Trade dress broadly refers to the overall image of a product. Section 43(a) of the Lanham Act (Federal Trademark Act), 15 U.S.C. §1051, et seq., establishes a cause of action for unregistered trade dress infringement. In determining whether the allegations of the underlying complaint constitute trade dress infringement, courts have referenced the elements required for a trade dress claim under the Lanham Act. In Greenwich Ins. Co. v. RPS Prods., Inc., 882 N.E.2d 1202, 1211 (Ill. App. Ct. 2008), for example, the court described trade dress as follows:
“The trade dress of a product is essentially `its total image and overall appearance.’” “The total image of a product `may include features such as size, shape, color or other combinations, texture, graphics, or even particular sales techniques.’”…. Trade dress recognizes that the “design or packaging of a product may acquire a distinctiveness which serves to identify the product [by the consumer] with its manufacturer or source.” …. “[A] design or package which acquires this secondary meaning, assuming other requisites are met, is a trade dress, which may not be used in a manner likely to cause confusion as to the origin, sponsorship, or approval of the goods.” (citations omitted).
In 2015, policyholders batted 50-50 in categorizing claims that were not identified as such to be trade dress infringement claims falling potentially within the “personal and advertising injury” coverage. On the policyholder success side are:
- West Trend, Inc. v. AMCO Ins. Co., No. CV 14-06872, 2015 WL 263934 (C.D. Cal. 2015) (applying California law). The insured was sued for trademark infringement, false designation of origin and unfair competition, based on the insured’s sale and marketing of long-sleeved shirts bearing the claimant’s “Spirit Jersey Mark.” The complaint alleged that the “Spirit Jersey Mark” consisted of “a unique and recognizable combination of stitching, lettering and sleeve placement ….” The court held that allegations potentially implicated the offense of “infringing upon another’s trade dress in your ‘advertisement.’”
- E.S.Y., Inc. v. Scottsdale Ins. Co., No. 15-21349-CIV, 2015 WL 6164666 (S.D. Fla. October 14, 2015) (applying Florida law). The insured was sued by a competitor for copyright infringement, trademark infringement, unfair competition and false designation of origin, based on the insured’s sale of clothes bearing designs, labels and hang tags that infringed the claimant’s copyrighted design and trademark. The court found that the claimant’s hang tags constitute trade dress. The court therefore determined that the insured’s unauthorized use of the claimant’s hang tags implicated the “infringing upon another’s … trade dress … in your ‘advertisement’” offense.
The Policyholders were not successful in:
- AU Electronics, Inc. v. Harleysville Group, Inc., 82 F. Supp. 3d 805 (N.D. Ill. 2015) (applying Illinois law). The insured bought Sprint and T-Mobile cell phones and reprogrammed them so they were no longer tethered to the carriers’ network. Sprint and T-Mobil sued the insured for trademark infringement for its use of the “Sprint” and “T-Mobile” marks on the reprogrammed phones. The court observed that the complaint did not allege that the size, shape, color, or “look and feel” of the cell phones were misappropriated by the insured. Thus, the complaint did not implicate the infringement of trade dress offense or trigger a duty to defend.
- Test Masters Educational Services, Inc. v. State Farm Lloyds, 791 F.3d 561 (5th Cir. 2015) (applying Texas law). The insured was sued for its operation of a website “confusingly similar” to the claimant’s website, based on the insured’s use of the “Testmasters” name and mark on the website and the insured’s false representations that it offered courses nationwide. The court held that the infringement of trade dress offense was not implicated, because the counterclaim did not allege the insured misappropriated the “look and feel” of the claimant’s website, but instead focused on the insured’s use of Testmasters’ mark and the misrepresentations.
Policyholders are starting off in the loss column in 2016:
- In Evanston Ins. Co. v. CLARTRE, INC., Case No. 14-CV-0085-BJR. (WD Wash., Jan. 21 2016), the court made short shrift of the policyholder’s claim that the complaint alleged infringement of trade dress in the named insured’s “advertisement,” stating:
There are no allegations in the Underlying Complaint that Defendants attempted to emulate the “look and styling” of Global’s product, or infringed on the “color scheme and graphics” of Global’s logo. Nor is there any allegation that Defendants infringed on the “overall appearance” of Global’s product. There are certainly no allegations that Defendants infringed on trade dress in any advertisement, i.e., any “notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or support[er]s.”
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