If the Glove Fits, You Must Defend

Originally published on CyberInquirer.

Trade dress insurance coverage is alive and well. At least in Wisconsin. In Acuity v. Ross Glove Company, 2012 WL 1109035 (Wis. Ct. App. April 4, 2012), the Wisconsin Court of Appeals held that an insurer's duty to defend was triggered under advertising injury liability coverage where the underlying complaint set forth allegations of trade dress infringement.

In the Acuity case, Ross Glove purchased a commercial general liability policy from Acuity, which included advertising injury liability coverage. The policy at issue defined "advertising injury", in part, as "infringing upon another's copyright, trade dress or slogan in your advertisement."

Ross Glove is a manufacturer of cold weather neck and face protectors. In 2009, Seirus Innovative Accessories, Inc. filed suit against Ross Glove for alleged patent infringements and trade dress infringement, alleging that Ross Glove "unlawfully and without license or right, copied, imitated, and otherwise created a collection of" trade dress products. Seirus further alleged that Ross Glove also packaged the accused trade dress products "to emulate, imitate, palm off as, and pass off its products as the Seirus products."

Ross Glove notified Acuity of Seirus' claims and requested that it be defended and indemnified under the CGL policy. Acuity denied any obligation to defend or indemnify Ross Glove under the policy and commenced a declaratory judgment action. The trial court found that Acuity did not have a duty to defend. The Wisconsin Court of Appeals reversed, finding that it was reasonable to infer that the Seirus Complaint alleged injury arising from trade dress infringement.

In reversing the trial court, the Court of Appeals analyzed and applied the three conditions set forth in Fireman's Fund Ins. Co. v. Bradley Corp., 261 Wis.2d 4 (2003) to the facts of this case: "(1) Does Seirus' complaint state an offense covered under the advertising injury provision of Acuity's policy? (2) Does Seirus' complaint allege that Ross Glove engaged in advertising activity? (3) Does Seirus' complaint allege a causal connection between the injury alleged and Ross Glove's advertising activity?"

In applying these conditions the Court first held that the Seirus Complaint stated an offense covered under the "advertising injury" provision of Acuity's policy. The Court reasoned that Seirus alleged trade dress infringement by Ross Glove in violation of the federal Lanham Act, which was " 'designed to create a new federal remedy for the particular kind of unfair competition that results from false designation of origin or other false representation used in connection with the sale of a product.'" Seirus' allegations that Ross Glove's products emulated and imitated Seirus' products, therefore causing "confusion, mistake, and deception as to the source and origin" of the products sufficiently alleged an "advertising injury."

Second, the Court found that the Seirus Complaint alleged that Ross Glove engaged in advertising activity since the Complaint sought to hold Ross Glove liable for infringement in its advertisement—a notice published to the general public about the product in an effort to attract customers. The Court held that the third condition was also satisfied—that the Seirus Complaint alleged a causal connection between its alleged injury and Ross Glove's advertising activity. Specifically, the Complaint alleges that Ross Glove created packaging for products that misled the public as to their source of origin. The Court found that it was reasonable to infer that a causal connection existed between the alleged injury and the advertising injury.

Insurers providing "advertising liability insurance" should take note of the factors being considered by courts when determining whether their policy obligations have been triggered. The Acuity case provides insight into at least one court's analysis, and, perhaps, predisposed leanings to find in favor of insurance coverage.

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