Seattle Trademark Lawyer

On Feb. 2, the Ninth Circuit addressed whether the “first publication” exclusion contained in an insurer’s excess insurance policy applied to an insured’s injury arising from a third party’s trade dress claim.

Sunset Health Products, Inc., hired Spectrum Worldwide, Inc., to advertise and distribute Sunset’s HOLLYWOOD 48-HOUR MIRACLE DIET drink. Soon thereafter, two of Spectrum’s executives formed their own company, Celebrity Products, Inc., and began selling and marketing a similar product, THE ORIGINAL HOLLYWOOD CELEBRITY DIET drink. Spectrum then terminated its contract with Sunset and began marketing its competing product.

In December 1998 and March 1999, Sunset demanded that Spectrum cease infringing its MIRACLE DIET trademark. In October 2001, Sunset filed a trade dress infringement claim against Spectrum, alleging that Spectrum deliberately made the packaging of Spectrum’s CELEBRITY DIET drink confusingly similar to the packaging of Sunset’s MIRACLE DIET drink.

In 2001, Spectrum purchased a $1 million excess third party liability policy from United National Insurance Co. The policy contained a clause indemnifying Spectrum for “advertising injury” liability, including “misappropriation of advertising ideas or style of doing business.” The policy also contained an exclusion for “advertising injury … arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.”

After cross-motions for summary judgment, the parties were left with Sunset’s core trade-dress infringement claim. Spectrum and Sunset settled for $3.2 million, of which United contributed $420,000.

United then sued for reimbursement of the amount it paid pursuant to the “first publication” exclusion. The Central District of California eventually granted summary judgment in its favor.

The Ninth Circuit affirmed the decision. It found: ”[T]he United Policy’s first publication clause is clear and explicit, and must be given its proper effect.” Thus, the court found the exclusion applied to trade dress infringement injury that “arose from an oral or written publication of material first published before the policy became effective.”

The case cite is United National Ins. Co. v. Spectrum Worldwide, Inc., __ F.3d. __, 2009 WL 224520, No. 07-55833 (9th Cir. Feb. 2, 2009).