United States: Hunton Insurance Recovery Blog: IP Lawsuit Triggers Insurers' Duty To Defend

A federal court in Pennsylvania has held that Liberty Mutual must defend its insured, Hershey Creamery Company, in an intellectual property infringement lawsuit because the suit raises claims that potentially implicate coverage under the policies' personal and advertising injury coverages. The court further found that the alleged wrongful conduct was not subject to the policies' IP infringement exclusion.

Hershey Creamery Company v. Liberty Mutual Fire Insurance Co. arose from a suit against Hershey Creamery by a competitor in Delaware, concerning a line of frozen milkshake products that the competitor alleged was confusingly similar to the competitor's products. The underlying suit alleged that Hershey Creamery "unlawfully copied [the competitor's] self-serve milkshake machine and related marketing designs, display, and verbiage." Hershey Creamery provided notice of the claim to Liberty Mutual, and the insurer agreed to defend Hershey Creamery, subject to a reservation of rights. But after dismissal of some of the claims against Hershey Creamery, Hershey Creamery's insurers withdrew their defense because they believed the remaining trademark and copyright claims were barred by the policies' IP infringement exclusion. Hershey Creamery filed a declaratory judgment action alleging that its general liability and umbrella insurers breached their duties to defend and indemnify Hershey Creamery. The parties moved for summary judgment.

According to Hershey Creamery, the policies provide personal and advertising injury coverage subject to various exclusions, including one that bars coverage for personal and advertising injury "arising out of infringement of copyright, patent, trademark, trade secret or other intellectual property rights," except for "the use of another's advertising idea in [the policyholder's] advertisement." The exclusion also does not apply to infringement in the policyholder's "advertisement" of copyright, trade dress, or slogan.

The insurers argued that the exception to the exclusion applied only if Hershey Creamery allegedly infringed in its advertising by advertising some idea, trade dress, or slogan, but because none of the allegations in the complaint against Hershey Creamery implicated infringement in an "advertisement," the insurers argued there could not be coverage. Hershey Creamery argued that the allegations were broad enough to trigger coverage under the exception for Hershey Creamery's alleged use of advertising ideas and slogans in its advertisements.

The district court agreed with Hershey Creamery. The court first recognized that the duty to defend was broad and required only that the factual allegations present an injury that is potentially within the scope of the policy's coverage. Applying these principles, the court found that the competitor's allegations that Hershey Creamery copied the display kiosk (including its advertising slogans), the milkshake containers (including use of the competitor's slogans), and the signage atop the merchandizing sections (displaying its slogans) were sufficient to create at least a potential for coverage under the policies. Furthermore, given that the insurers were relying on an exclusion to deny coverage, it was the insurers' burden to demonstrate that the IP infringement exclusion, in fact, barred any possibility of coverage.

The court found that a potential for coverage existed on the face of the policy after concluding that the alleged trademark infringement "might or might not fall within the policy's coverage." Because the complaint makes clear that the competitor believed Hershey Creamery infringed upon its advertising ideas and slogans—and specifically did so in advertising for the competing milkshakes—there is a sufficient nexus between advertising and injury to trigger the duty to defend.

The Hershey Creamery decision is one of several recent decisions where insurers wrongfully denied coverage based upon a failure to recognize a potentially applicable exception to an exclusion. And, where the claim involves an insurer's duty to defend, a policyholder need only establish potential coverage for a single claim in a multi-count complaint to obligate the insurer to defend the entire lawsuit. Thus, when faced with a denial of coverage based on the application of a policy exclusion, whether IP-related or otherwise, policyholders should carefully consider whether there is a possibility that one of the claims against it might implicate coverage under the policy. Conversely, insurers should be mindful of their broad duty to defend and their burden of proving no possibility of coverage where they choose to decline a defense. As was the case in Hershey Creamery, this is especially important in disputes involving IP claims. Because the insurer's duty to defend is governed by the actual allegations and not mere labels or characterizations of the suit as a whole, claims that are clearly IP-related may nevertheless trigger a defense where they have a sufficient nexus to advertising ideas and slogans.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions