Trademark claims related to patent claims, not covered by insurance

Blue Sky Bio, LLC v. Federal Insurance Company, 2010 WL 5288160 (N.D. Ill.)

Nobel Biocare sued its competitor in the dental implant industry, Blue Sky, for patent and trademark infringement, dilution, unfair competition, and false advertising. In particular, Nobel alleged that Blue Sky used Nobel’s registered marks to promote Blue Sky products, and also infringed three patents. Blue Sky ultimately settled; it sought recovery from its insurer only for defense costs, not for indemnification.

Blue Sky’s policy with Federal defined advertising injury as, among other things, injury caused by infringement of someone else’s “registered service mark or other registered trademarked name, slogan, symbol or title.” Now comes an exclusion only an insurance lawyer could love: the policy excluded any injury arising out of infringement “of any intellectual property law or right” unless the injury “is caused by an offense described in the definition of advertising injury; and does not arise out of, give rise to or in any way relate to any actual or alleged assertion, infringement or violation of any intellectual property law or right, other than one described in the definition of advertising injury.”

Federal conceded that the trademark infringement was advertising injury, but argued that the exclusion applied because the trademark infringement was related to the patent infringement claims, and further that they were necessarily related because they were both in the same complaint. (Note that under this reasoning, any policy with such an exclusion is likely to be worthless for trademark coverage because it is exceedingly rare for a plaintiff to allege only infringement of a registered mark. Instead, the complaint will also allege violation of common-law rights, unfair competition, right of publicity violations, etc. The hallmark of modern IP is overlapping protection and an ability to allege multiple claims. I remain somewhat confused about what “advertising injury” coverage does cover.)

Blue Sky argued that trademark and patent infringement claims have different legal elements and were therefore unrelated.

The court examined the underlying complaint, in which Nobel alleged that it owned patents for tapered dental implants and several trademarks for implants, and asserted trademark and patent infringement claims “in this sparse context.” Continuing the sparseness, the court concluded without further explanation that the patent and trademark infringement claims were related.

The court, however, rejected Federal’s argument that the exclusion for expected or intended injury applied. Though the complaint alleged intentional infringement, intent was not required for success on the underlying claims. Nobel’s claims of intentional and willful infringement might have just been included to obtain treble damages. Thus, the complaint stated trademark infringement claims that were potentially covered by the insurance policy.

Judgment on the pleadings for the insurer.