Insurance Litigation Lawyer & Attorney : National Insurance Law Forum : Insurance Coverage, Bad Faith Litigation

In Acuity, A Mutual Ins. Co. v. Bagadia, 2008 WI 62 (Wis. June 18, 2008), Symantec sued the insured software company for infringing various copyrights and trademarks by selling knock off copies of Symantec’s security software through advertisements that featured the copyrights and trademarks.  The court held that this was not only "advertisiing" but  that the trademark infringement were covered as involving the infringement of a “title.    The Supreme Court reached this conclusion by comparing the dictionary definitions of "title" and "trademark" and noting that both involve descriptiions concluded that they must have the same meaning (yes, and "mud" and :"paint" both involve elements in a liquid solution, so your 3 year old daughters' class project must be a Rembrandt).

Although we have learned to expect surprising things from the Wisconsin Supreme Court of late, this new AI opinion is disappointing, as the meaning of "title" has seemed relatively settled for the last 10 years or so or at least since the California Supreme Court ruled in Palmer v. Truck Ins. Exch., 21 Cal.4th 1109, 988 P.2d 568 (1999) that coverage for “infringement of copyright or of title or of slogan” only extends to claims for infringement of the names of literary or artistic works or names that are “slogans,” not to other names. In rejecting the insured’s contention that coverage extend to unfair competition claims that the insured had wrongfully utilized colored flags, signs and slogans that the plaintiff was using for a competing real estate development. The court held that the term “title,” read in the broader context of the policy, can only mean the name of a literary or artistic work, and did not extend to any claim based on “formal right of ownership of property.” Further, although the underlying suit alleged that the insured had used a slogan in its own marketing, the Supreme Court declared that there was no indemnity obligation as the jury’s award had been based upon the insured’s infringing use of a trademark. “The infringing use of a trademark that is merely a word and a phrase used as a slogan is not the same as the infringing use of a slogan which would give rise to coverage under the policy.”

As an interesting footnote for those of you waiting for the Supreme Court to rule on allocation issues, the court ducked the issue of set-offs here.  Despite the fact that the insured had earlier settled similar claims against Continental Casualty for a payment of $165,964, the court refused to order that Acuity receive an off-set for this payment due to factual questions with respect to what CNA had paid for and why.

The claims in Employers Ins. of Wausau v. Fox Entertainment Group, 06-4652 (2d Cir. March 27, 2008) arose out of claims for copyright infringement involving music for the 1980's TV potboiler, Santa Barbara.  In 2004, a class action was brought in California against the parent companies of the show's producer (New World Entertainment) on behalf of all of the individuals who had composed music for the show.  After receiving a separate demand by various music companies, Fox Entertainment's legal department faxed a notice from its California office to its media E&O carriers, Wausau and National Casualty.  The insurers sought information concerning the relationship between Fox and their original insured.  Within weeks after receiving this confirming information, the carriers filed a DJ in federal district court in Manhattan against  various Fox entitites but not New World Entertainment.  Two weeks later, they also issued a formal denial of coverage.

Wthin weeks, Fox filed its own DJ in state court in California, including all of the New York parties, as well as New World Entertainment.  Although the insurers then added New World as a defendant in the New York case, Judge Mukasey (now our Attorney General) subsequently dismissed the DJ, holding that the defendants had established "special circumstances" warranting their claim that the California DJ should go forward even though it was not the first DJ to be filed.  The court focused on the fact that Wausau and National Casualty had filed the  DJ even before announcing their coverage position and had initially not included New World Entertainment, presumably in view of its close ties to California.  Around the same time, the federal court in California declined to transfer venue to New York.

In reversing the District Court's dismissal, the Second Circuit adopted an analysis of the "special circumstances" exception to the "first filed" rule similar to that followed by courts in assessing forum non convenients challenges.  The court held that "special circumstances" would only apply in a narrow group of cases, as where the DJ was anticipatory in nature or was filed in order to thwart  the natural selecton of forum for the controversy.  In this case, the court ruled that the insurers' DJ was not anticipatory as not having been filed in response to any direct threats of litigation or deadlines from the insureds and that the insurers were under no obligation to announce their coverage position before filing the DJ.  Further, the court ruled that the insurers' choice of New York (whose law is more favorable than California's on late notice issues (at least for now)) was not purely prompted by forum shopping.  While acknowledging that strategic considerations properly play a role in where to sue, the court found that there were, in fact, significant links between New York and this controversy. Fox TV is a New York corporation and has offices in NY, even though its headquarters is in California.  The court did not express an opinion on the relative merits of this controversy, however, and remanded the issue back to the District Court for a determination of whether New York or California was the more appropriate forum using a forum non conveniens analysis.