American Merck and German Merck's TM battle doesn't involve covered "advertising injury"

EMD Millipore Corp. v. HDI-Gerling Am. Ins. Co., 2021 WL 66441, No. 20-cv-10244-ADB (D. Mass. Jan. 7, 2021)

Is trademark infringement (or similar) “advertising injury” because a trademark is an advertising idea? I’ve always thought that’s the core of what a trademark is, which makes many insurance policies seem conflicting to me, but the exclusions for trademark are often pretty clear. In this case growing out of underlying German Merck v. US Merck litigation, the court finds that the TM-like claims don’t involve covered advertising injury because the parties’ campaigns weren’t allegedly similar, only their names.

One of the plaintiffs here is Merck KGAA (aka MKGD), the German Merck (the US government split US Merck off in WWI). The relevant policies covered “personal and advertising injury,” including “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services” and “[t]he use of another’s advertising idea in [an insured’s] ‘advertisement.’ ” The policies didn’t define “disparage” or “advertising idea.” There was also an exclusion for “‘personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” The exlusion further states that “such other intellectual property rights do not include the use of another’s advertising idea in [an insured’s] ‘advertisement,’ ” and that the exclusion “does not apply to infringement, in [an insured’s] ‘advertisement,’ of copyright, trade dress or slogan.”

US Merck sued MKGD for trademark infringement, trademark dilution, unfair competition, false advertising, and cybersquatting, and New Jersey state law claims for trademark infringement, trademark dilution, unfair competition, deceptive trade practices, and breach of contract. The two Mercks have entered into coexistence agreements around the world, under which MKDG cannot use the trademark “MERCK,” or attempt to acquire rights in any trademark containing “MERCK,” in the United States or Canada. They’ve fought over this agreement for internet and other uses.

MKDG is permitted to use the word “Merck” as part of a firm or corporate name in the United States but only in the phrase “E. Merck, Darmstadt, Germany,” and only if the four words are given equal prominence. Nevertheless, MKDG allegedly used the trade names “MERCK,” “Merck KGaA,” and “Merck KGaA, Darmstadt, Germany” in the United States, including on a website and social media, and allegedly used “Merck KGaA” and “MERCK” in ways so “prominent and widespread that they function as a trademark.” This included promotion and sale of products called “SedalMerck®,” “Merckognost®,” and “MRCKβ Protein,” as well as signs at kiosks at multiple industry conferences.

Merck also alleged that MKDG engaged in two marketing campaigns “specifically intended to confuse consumers as to MKDG’s history”: MKDG’s “Original” campaign, referring to MKDG as “the Original Merck” and Merck as MKDG’s “younger brother/sister.” Likewise, its “125 Years” campaign allegedly touted that it has been in the United States for 125 years, even though, in reality, MKDG has been re-established in the United States only since 1971. Finally, MDKG allegedly registered a number of domain names virtually identical to Merck’s registered “THE MERCK MANUAL.”

Prior Massachusetts cases have interpreted “advertising idea” broadly, including use of the name of an athlete: A “wide variety of concepts, methods, and activities related to calling the public’s attention to a business, product, or service constitute advertising ideas.” Here, MKDG argued that the advertising idea was using the “MERCK” name, in connection with the “Original” and “125 Years” campaigns, to draw attention to the business and attract customers. But the court agreed with the insurer that Merck didn’t allege that it had used either “Original” or “125 Years,” and thus the advertising idea allegedly used was not “another’s.” “To the contrary, the few allegations in the NJ Litigation complaint about Merck’s advertising efforts are so vague that it is impossible to divine anything about the content of its advertisements or the style, manner, or method in which it advertises.”

Likewise, the underlying complaint didn’t plausibly allege disparagement. Most of the statements identified were about MKDG, not about Merck, and they didn’t say anything bad about Merck. A restaurant that advertised “fresh” and “delicious” food would not disparage competitors by implication. Even if “younger” was pejorative, that didn’t reference any specific good or service and thus wasn’t disparaging. Also, the policies could have included false advertising or publications that harmed another’s reputation if this kind of conduct was supposed to be covered, instead of using “disparage.” Anyway, the gravamen of the claim was false association: using Merck’s good reputation for itself. “While harm resulting from badmouthing would be an injury covered by the policies, harm resulting from falsely implying an affiliation is not.”