South Carolina Supreme Court Holds Coverage For Advertising Injuries Includes Trademark Infringement Claims

Super Duper, Inc. v. PennsylvaniaNat. Mut. Ins. Co., et. al..

(Supreme Court of South Carolina, September 14, 2009)

As an issue of first impression in South Carolina was whether a policy’s inclusion of an advertising injury also encompassed trademark infringement claims pertaining to educational materials for children.  Mattel Inc. challenged the insured’s registration of four trademarks and the insured subsequently brought a declaratory judgment action in federal district court to determine if its trademark infringed on Mattel’s trademarks.  Super Duper was insured by Travelers and Pennsylvania Nat. Mut. Ca. Ins. Co. (Penn National) under commercial general liability insurance policies for “advertising injury;” however, both insurers denied coverage and refused to provide a defense.   The insured defended itself, subsequently loosing on its trademark infringement claims.  Thereafter, the insured bought the subject action seeking a declaratory judgment and damages for failure to defend and indemnify, breach of contract, and bad faith.

While the court did not provide a determination on the ultimate coverage questions, it did rule on the four certified questions presented by the federal district court regarding the policies.  As to the Travelers’ policy, the issue was whether an underlying suit premised upon trademark infringement by the insured qualifies as injury arising out of the offense of “misappropriation of advertising ideas or style of doing business.”  Relying heavily on the precedent of State Auto Property & Casualty Insurance Co. v. Travelers Indemnity Co. of America, 343 F.3d 249 (4th Cir. 2003), which interpreted the same policy provision, the Supreme Court rejected the insurers’ argument that “misappropriation” refers to the common law tort of misappropriation, and instead applied the common meaning of misappropriation (i.e., to appropriate dishonestly for one’s own use), thereby concluding that trademark infringement fits squarely within this definition.  Again, based primarily on State Auto, supra, the court also held that a trademark can qualify as an “advertising idea or a style of doing business,” and thus joined the majority of courts in holding that misappropriation may include a claim related to the wrongful use of a trademark under a CGL policy.  Likewise, the court affirmatively answered the second certified question that that trademark claims qualify under the policy as injury arising out of the offense of “infringement of copyright, title or slogan,” concluding that the terms “title and slogan” are generally synonymous with a trademark. 

 

As to Penn National’s policies, which included a definition of “advertisement,” the Supreme Court also answered the two certified questions in the affirmative.  Specifically, the court held that use of another’s advertising idea may include trademark infringement because a trademark is an advertising device.  Lastly, the court held that a trademark may also include a product’s slogan, and therefore, trademark infringement potentially relates to the improper use of another’s slogan, which is a term contained within the policy provision.

 

For a copy of the decision, click here

 

By Paul C. Steck and Daniel W. Gerber

http://www.goldbergsegalla.com/attorneys/Steck.html

http://www.goldbergsegalla.com/attorneys/Gerber.html

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