Court Rejects Insured’s Attempt To “Shoe-Horn” Trademark Infringement Claims Under Advertising Injury Provisions

The U.S. District Court for the Central District of California recently rejected efforts by an insured to procure coverage for allegations of trademark infringement under its “Personal and Advertising Injury” insurance coverage.  Infinity Micro Computer, Inc., et al. v. Continental Casualty Company, et al., 2016 U.S. Dist. LEXIS 134957 (C.D. Cal. Sept. 29, 2016).

In Infinity, the insured – – Infinity Micro Computer, Inc. (“Infinity”) – – was a broker of computer equipment purchased from third-party suppliers. In March 2013, Infinity received an e-mail from Cisco Systems (“Cisco”) alleging, among other things, that Infinity was wrongfully displaying Cisco’s trademarked “Premiere Certified Partner” logo on Infinity’s website. Later that year, in June 2013, Cisco further advised Infinity that Cisco believed that a significant portion of the products sold by Infinity were counterfeit and demanded $1.5 million in damages.

Infinity tendered Cisco’s demand to its insurers which denied coverage. Thereafter, in April 2014, Cisco filed suit against Infinity. Infinity tendered that suit and, again, Infinity’s insurers disclaimed coverage relying on certain policy exclusions. The decision to disclaim coverage was re-affirmed after Infinity requested reconsideration of the initial declination of coverage. The insurers concluded that Cisco’s suit did not allege a covered “advertising injury,” and was otherwise excluded from coverage.

The relevant personal and advertising injury provisions provided coverage arising out of: (1) use of another’s advertisement idea in your advertisement; and (2) infringing upon another’s copyright, trade dress or slogan in your advertisement. The policy excluded coverage for injuries arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights, except infringement in your advertisement of copyright, trade dress or slogan. Infinity then commenced a declaratory judgment action, and all parties cross-moved for summary judgment.

Infinity advanced three discrete arguments in support of its position.  First, Infinity argued that Cisco’s amended complaint alleged the “use of another’s advertising idea in your ‘advertisement.’” Infinity argued that “Cisco’s use of its Certified Premier Partner logo, and the accompanying implementation of training classes and other prerequisites to obtaining premier partner status, constituted a method used to market its products, and therefore qualifies as an ‘advertising idea.’”

The Court rejected this argument concluding that such an interpretation of the term “advertising idea” was too broad, in particular, when coupled with the fact that trademark infringement claims were expressly excluded from coverage. The Court noted that Infinity was not alleged to have copied Cisco’s training or certification programs, but merely copied its logo. The Court also noted that the allegations that Infinity improperly displayed Cisco’s logo would be considered a trademark violation, and any injury would arise out of the exclusion for infringement of a trademark.

Infinity next argued that regardless of whether Infinity allegedly used Cisco’s “advertising idea,” coverage, nevertheless, existed based on Infinity’s alleged use of the phrase “Cisco Premier Partner” which, according to Infinity, triggered coverage under the slogan infringement policy provision. The Court first observed that a slogan was “a brief attention-getting phrase used in advertising or promotion.” Turning to the merits of Infinity’s argument, the Court held that not only was there no allegation that Cisco used this particular phrase as a slogan, but also that the alleged slogan itself – – “Cisco Certified Partner” – – did not appear in the allegations cited by Infinity.

Finally, Infinity argued that coverage existed to the extent that “Cisco’s sales technique of using a blue circular logo to endorse its ‘premier partners’ constitute[d] Cisco’s trade dress” and, thus, Infinity’s alleged use of that logo triggered coverage based on Infinity’s alleged infringement of Cisco’s trade dress. The Court rejected this argument and concluded that Cisco’s logos or sales techniques do not qualify for trade dress protection and that trade dress protection, ordinarily, extends to the overall image of a product. In reaching this conclusion, the Court also observed that Cisco’s amended complaint was entirely devoid of any allegations of trade dress infringement.

In sum, the Court determined that the allegations contained in the underlying complaint are excluded from coverage or fail to allege personal and advertising injury.  The Court rejected Infinity’s effort to shoe-horn trademark infringement claims into personal and advertising injury coverage.  As a result, the Court determined that there was no obligation to defend or indemnify Infinity for the underlying action.