Bridge Metal Industries, L.L.C. v. Travelers Indem. Co., 812 F. Supp. 2d 527 (S.D.N.Y. 2011)
Bridge Metal sought a declaratory judgment that Travelers was required to reimburse it for costs and expenses of defending two lawsuits by National Lighting Co. alleging infringement of trade dress and related claims (dilution, false advertising, etc.). National (contrary to governing law, but that has no bearing on this case) alleged that its light fixtures were inherently distinctive by virtue of their trade dress, and further alleged that Bridge Metal exploited confidential information in violation of its agreement with National to “clone” National’s fixtures.
Bridge Metal’s policy covered advertising injury and property damage. Advertising injury was defined, in relevant part, as “injury, arising out of ... [i]nfringement of copyright, title or slogan, provided that claim is made or ‘suit’ is brought by a person or organization claiming ownership of such copyright, title or slogan.” Copyright, title, and slogan were not defined in the policy. Knowing infliction of advertising injury and advertising injury arising out of a breach of contract were excluded. The original policy language covered “trade dress” instead of “title,” but an endorsement completely replaced that provision. The prior provision specifically excluded advertising injury “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights[;] [h]owever, this exclusion does not apply to infringement, in your ‘advertisement,’ of copyright, trade dress or slogan,” also missing in the applicable version, as was a definition of “advertisement.”
The policy also covered “property damage,” defined as “Loss of use of tangible property that is not physically injured.”
Travelers denied Bridge Metal’s requests for coverage. Under NY law, the duty to defend is broader than the duty to indemnify and arises if any allegations fall within the scope of the risks undertaken by the insurer. The question was whether National’s allegations, liberally construed, were within the policy.
Bridge Metal argued that the trade dress and unfair competition claims alleged title infringement. Travelers responded that reading “trade dress” and “title” as synonyms would render the modification of the policy meaningless. Bridge Metal countered that the terms aren’t synonyms, but that title is broader. In the absence of a policy definition, the court first turned to an older edition of Black’s Law Dictionary, which says title is “A mark, style or designation; a distinctive appellation; the name by which anything is known.” National’s complaints did allege conduct within this definition: copying of a distinctive overall image, which could constitute the “style or designation” by which the product was known. But the eighth edition of Black’s Law, published in 2004 and in effect during the period covered by the policy, didn’t include that definition; instead none of the definitions encompassed trade dress.
Comment: The two closest definitions in the more recent editions, “The union of all elements (as ownership, possession, and custody) constituting the legal right to control and dispose of property; the legal link between a person who owns property and the property itself”; and “Legal evidence of a person's ownership rights in property; an instrument (such as a deed) that constitutes such evidence,” don’t identify title as something that can be infringed, though it could be clouded or disparaged. Thus, I’d be inclined to say that using the current Black’s Law definitions would render “title” a nullity in this policy, since none of the definitions made sense in the IP context.
The court went on to conclude that the removal of that particular definition didn’t relieve Travelers of its duty to defend, since legal uncertainty means a duty to defend. There was case law raising the possibility that claims of trade dress infringement constituted “infringement of title.” Thus, Travelers had a duty to defend.
Was the injury caused in the course of advertising Bridge Metal’s goods/services? Travelers argued that the alleged infringement was the manufacturing and sale of the lighting fixtures, not advertising. Some courts have found allegations that the insured advertised infringing goods insufficient without allegations that the ads themselves caused injury. But other courts found a duty to defend. The court concluded that separate physical advertising materials weren’t required to find a causal connection between the advertising and the injury here. “The common, everyday meaning of ‘“[a]dvertising” is action intended to make something known to the public or to call public attention to something by emphasizing its desirable qualities so as to arouse a desire to buy.’” The relevant causation question is whether the advertising contributed materially to the injury. The underlying complaints alleged that Bridge Metal copied National’s distinctive trade dress to confuse consumers. Thus, National complained of injury caused by marketing and portrayal of goods to the public; trade dress infringement necessarily includes some communication between seller and consumer.
Travelers argued that the breach of contract exclusion applied, but the trade dress claims weren’t founded in a contractual duty and so the duty to defend arose, since the duty to defend arises if any claim is within the policy. Likewise, the exclusion for knowing infliction of advertising injury didn’t apply, despite the scienter allegations of the complaints, because Bridge Metal could have been found liable without any finding of intentional conduct.
Finally, the property damage provision didn’t apply, even though National alleged a conversion claim based on Bridge Metal’s retention of certain manufacturing materials including drawings and sample products. The harm alleged was that Bridge Metal was using this property for its own benefit, not that National was deprived of the use of the same property, and thus it wasn’t within the policy language. However, since there was a duty to defend anyway, that didn’t matter.