Unauthorized Use Of Trademarked Logo On Insured’s Website Not Covered Advertising Injury
Infinity Micro Computer, Inc. v. Cont’l Cas. Co., 2016 U.S. Dist. LEXIS 134957 (C.D. Cal. Sept. 29, 2016)
Categories: Duty to Defend – Advertising Injury Coverage – Unauthorized Use of Trademarked Logo – “Advertising Idea” – “Trade Dress” – “Slogan” – Trademark Infringement Exclusion
In Infinity Micro Computer v. Continental Casualty Company, the district court concluded that a dispute involving the insured’s alleged unauthorized display on its website of another company’s trademarked “Premier Certified Partner” logo in connection with the insured’s sale of allegedly counterfeit products did not present any potentially covered advertising injury liability triggering a duty to defend under a policy with a trademark infringement exclusion.
Insured Infinity Micro Computer, Inc. (“Infinity”) acted as a broker of computer equipment purchased from third-party suppliers who would then ship the equipment directly to Infinity’s customers. Infinity operated its business primarily through advertising on its website.
Continual Casualty Company (“Continental”) issued a business liability insurance policy to Infinity that covered damages for “personal and advertising injury,” defined to include “an injury…arising out of…the use of another’s advertising idea in your ‘advertisement’… [or] infringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’” The policy excluded coverage for injuries “[a]rising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights,” subject to an exception for infringement in “your advertisement of copyright, trade dress or slogan.”
Infinity received cease-and-desist correspondence from Cisco Systems (“Cisco”) stating that Infinity was wrongfully displaying Cisco’s trademarked Premier Certified Partner logo on its website; that only authorized Cisco resellers are allowed to advertise themselves as Cisco partners and use Cisco’s trademarked logos; that Infinity’s use of Cisco’s logo was a violation of Cisco’s trademark rights; and that because Infinity was not a Cisco partner, use of Cisco Reseller Certified logos and advertising by Infinity is considered by Cisco to be false and misleading. Cisco later informed Infinity that it had determined that a significant number of Cisco products purchased and sold by Infinity were undoubtedly counterfeit; that the products were failing at an alarmingly high rate; and that the known facts suggested that Infinity knew that it was selling counterfeit Cisco products. Cisco demanded over $1.5 million from Infinity for selling counterfeit products. Infinity tendered the demand to Continental, who denied coverage.
Cisco ultimately filed suit against Infinity based on claims that Infinity (1) purchased and sold counterfeit Cisco products and also (2) displayed Cisco’s trademarked logo (along with the phrase “Cisco Premiere Certified Partner”) on Infinity’s website in violation of Cisco’s trademark rights. Cisco brought claims against Infinity for, among other things, trademark infringement, trademark counterfeiting, and false advertising. Infinity tendered the suit to Continental, which again denied coverage, asserting Cisco’s claim did not involve a covered “advertising injury.”
As a result, Infinity sued Continental and the parties filed cross-motions for summary judgment concerning whether or not Continental had a duty to defend Infinity against Cisco’s claim. The district court granted Continental’s summary judgment motion, rejecting Infinity’s arguments.
Infinity argued that the policy’s coverage for injury arising out of the use of another’s “advertising idea” in Infinity’s advertisement was triggered by Cisco’s allegations that Infinity’s website improperly displayed Cisco’s trademarked logo. Infinity argued that Cisco’s use of its Certified Premier Partner logo, and accompanying implementation of training classes and other prerequisites to obtaining premier partner status, constituted a method used to market its products, and thus qualifies as an “advertising idea.” But the court rejected this argument, noting that Infinity “was not alleged to have copied Cisco’s training or certification program, but simply to have copied the logo. At some level, everything a business does to market a product is an ‘idea.’ To read the term ‘advertising idea’ so broadly as to cover any act taken in the course of marketing, including the use of a logo, would render the term almost meaningless. It remains unclear to the court how [Infinity’s] decision to say that it was an authorized Cisco reseller, when in fact it was not, is a ‘marketing idea’ and not simply a misrepresentation.” The court distinguished cases Infinity relied on in arguing for a reading of “advertising injury” that would encompass its alleged trademark infringement, including Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group, 50 Cal. App. 4th 548 (1996) and Sentex Systems Inc. v. Hartford Acc. & Indem. Co., 93 F.3d 578 (9th Cir. 1996). Among other things, the court noted that the policy language at issue was different: while the policy here refers to “use” of an advertising idea, the policies in Lebas and Sentex referred to “misappropriation” of an advertising idea. Moreover, the court reasoned, while the policy here does not define “advertising idea,” construing the policy as a whole, Infinity could not have reasonably expected coverage, emphasizing the exclusion for injuries “[a]rising out of the infringement of … trademark ….”
Infinity further argued that even if its use of the Cisco’s Premiere Certified Partner logo did not trigger the policy’s advertising-idea-related coverage, Cisco’s “sales technique of using a blue circular logo to endorse its ‘premier partners’” constitutes Cisco’s trade dress, thereby implicating the policy’s trade-dress-infringement-related coverage. The court stated that “[t]rade dress refers to the overall appearance of the product design, rather than its mechanics or a specific logo.” Acknowledging that the “total image of a product” may include “particular sales techniques,” the court stated that Infinity “does not cite, nor has the court discovered, any authority for the proposition that sales technique alone can define a product’s overall image. Nor is the court aware of any instance in which use of a logo, by itself, has been held to constitute a ‘sales technique’ or trade dress. … Like [Infinity’s] propounded interpretation of ‘advertising idea,’ a definition of ‘sales technique’ broad enough to encompass mere use of a logo would necessarily subsume virtually every act of advertising a good or service.”
Infinity additionally argued that its use of the words associated with Cisco’s “Premiere Certified Partner” logo triggered the policy’s slogan-infringement-related coverage. But the court rejected this argument too, citing the Ninth Circuit’s holding in Street Surfing, LLC v. Great Am. E & S Ins. Co., 776 F.3d 603, 608-609 (9th Cir. 2014), which it stated as: “absent any evidence that the third party used an alleged slogan as such, there could be no inference that the third party’s trademark and unfair competition claim would implicate slogan infringement.”
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