Policies’ Prior Publication Exclusion Bars Coverage of Trademark Infringement Action, Ninth Circuit Decides

The U.S. Court of Appeals for the Ninth Circuit, affirming a California district court’s decision, has ruled that the prior publication exclusion in general liability insurance policies barred an insurance company’s obligation to defend its insured in an action alleging trademark infringement, unfair competition and unfair business practices under federal and California law.

The Case

Street Surfing, LLC, began selling a two-wheeled, inline skateboard called the “Wave” to retail stores around December 2004. Less than a year after Street Surfing began doing business, it already had earned about $600,000 in sales. By 2007, Street Surfing also sold and advertised accessories for the Wave, such as “Lime Green Street Surfing Wheels for The Wave” and the “New Ultimate Street Surfer Wheel Set.”

In August 2005, Street Surfing applied for general liability insurance coverage. Its application certified that its website address was “www.streetsurfing.com” and that the Wave displayed the Street Surfing logo. The application did not include a picture or any description of the logo. The insurer provided general liability insurance to Street Surfing from August 2005 until September 2007.

Rhyn Noll, who owned the registered trademark “Streetsurfer,” sued Street Surfing in June 2008, claiming trademark infringement, unfair competition, and unfair trade practices under federal and California law.

In September 2008, Street Surfing submitted a claim for coverage to its insurer and tendered Noll’s complaint. The carrier denied Street Surfing’s claim.

Street Surfing settled with Noll in December 2009 and, in July 2011, went to court seeking a declaration that its insurer was obligated to defend and to settle the Noll action. The district court concluded that the policy’s prior publication exclusion relieved the insurer of any duty to defend Street Surfing in the Noll action, and Street Surfing appealed.

The Ninth Circuit’s Decision

The Ninth Circuit affirmed.

In its decision, the circuit court held that that the policy’s prior publication exclusion, which exempted from coverage “‘[p]ersonal and advertising injury’ arising out of oral or written publication of material whose first publication took place before the beginning of the policy period,” relieved the insurer of its duty to defend Street Surfing in the Noll action.

The circuit court explained that the extrinsic evidence available to the insurer at the time of tender “conclusively” established that Street Surfing had published at least one advertisement using Noll’s advertising idea before coverage had begun. According to the circuit court, “affixing the Street Surfing logo to the Wave was an advertisement using Street Surfing’s brand name and logo.”

The Ninth Circuit then found that the new advertisements that Street Surfing published during the coverage period were “substantially similar” to that pre-coverage advertisement based on the “extreme similarity” between “Street Surfer” and “Street Surfing.” The circuit court reached that conclusion even though the advertisements were for different products, concluding that “the advertising idea being used was the same regardless of the product.”

The case is Street Surfing, LLC v. Great American E&S Ins. Co., 752 F.3d 853 (9th Cir. 2014).