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Ninth Circuit Finds Insurer Had Duty to Defend Trademark Infringement Claim

The Pittsburgh Steelers’ “Steel Curtain”: “Mean” Joe Greene,
L.C. Greenwood, Ernie Holmes, and Dwight White

Last week, the Ninth Circuit decided a relatively rare insurance coverage case involving claims of trademark infringement.

Its decision, however, isn’t surprising given precedent that an insurer has a duty to defend any suit that potentially seeks damages covered by a policy, resolving any ambiguity in the policy in favor of finding coverage.

In NFL Properties LLC v. All Authentic Corp., NFL Properties sued All Authentic for allegedly selling counterfeit NFL jerseys that contained the words “Steel Curtain.” The Pittsburgh Steelers have used STEEL CURTAIN as a trademark and own a state registration for that mark. The complaint alleged causes of action for trademark infringement, counterfeiting, dilution, unfair competition, and deceptive acts and practices.

Hudson Insurance Company defended All Authentic in the case under its insurance policy with All Authentic. Colony Insurance Company, however, argued its policy did not cover the claims against All Authentic and refused to defend the suit because its policy excluded trademark infringement other than infringement as part of the insured’s “slogan” — something Colony argued NFL Properties did not allege.

In the follow-on lawsuit between the insurers, Hudson sought equitable contribution from Colony for Hudson’s costs of defending All Authentic. The Central District of California granted Hudson’s motion for summary judgment, finding that Hudson was entitled to equitable contribution because Colony had a duty to defend All Authentic but failed to do so.

Colony appealed.

On Nov. 5, the Ninth Circuit affirmed, taking the lead from a similar case out of the Sixth Circuit.

“In Cincinnati Insurance Co. v. Zen Design Group, Ltd.[, 329 F.3d 546, 550, 556 (6th Cir. 2003)], the Sixth Circuit concluded that the underlying complaint potentially stated an action for slogan infringement because the complaint stated that the third-party plaintiff ‘marketed and advertised its LED handheld flashlights using the widely-recognized trademarks ‘WEARABLE LIGHT’ and ‘SAPPHIRE.” Just as in this case, the insurance policy covered slogan infringement but not trademark infringement. The Sixth Circuit held that it did not matter that it was doubtful whether WEARABLE LIGHT could legally be a slogan or that the complaint ‘never refer[red] to WEARABLE LIGHT as a slogan.’ Because ‘[a]ny doubt as to the insurer’s liability must be resolved in favor of the insured,’ the court concluded that ‘the complaint’s failure to refer to ‘The Wearable Light’ as a slogan and its failure to include infringement of slogan as a specific claim does not alleviate [the] duty to defend.’ Similarly here, it does not matter that the NFL complaint never referred to ‘steel curtain’ as a slogan and never listed slogan infringement as a cause of action.

The court added that ”… NFL Properties did not unambiguously concede in its complaint that it had no standing to bring a slogan infringement claim for ‘Steel Curtain,’ and NFL Properties did not expressly disclaim a slogan infringement claim or standing to bring such a claim. The NFL Complaint states that ‘NFL Properties is jointly owned in equal shares by the Member Clubs of the NFL…. NFL Properties promotes the intellectual property of the NFL and the Member Clubs … and protects the marks owned by the Member Clubs against misuse in various forms.’ Then the complaint states that ‘[t]he Steelers [an NFL Member Club] have strong common law rights in the mark ‘Steel Curtain.”

“Rather than unambiguously conceding the element of ownership or disclaiming standing, these statements argue that NFL Properties does have standing to enforce the Steelers’ rights to the phrase ‘Steel Curtain.’ Because any ambiguity in the complaint or doubt regarding the duty to defend must be resolved in favor of coverage, NFL Properties’ ambiguous statements potentially support standing to sue for slogan infringement.”

For these reasons, the court found: “The district court correctly concluded there was a duty to defend based on a potential slogan infringement claim. Because the NFL complaint potentially stated a cause of action for slogan infringement, Colony had a duty to defend All Authentic in the NFL Action, and Hudson is entitled to equitable contribution.”

The case cite is Hudson Ins. Co. v. Colony Ins. Co., __ F.3d __, 2010 WL 4367014, No. 09-55275 (9th Cir. Nov. 5, 2010).

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