- Advertising Injuries: Are You Covered?
- April 29, 2003 | Author: Sarah B. Knowlton
- Law Firm: McLane, Graf, Raulerson & Middleton Professional Association - Portsmouth Office
Has your business ever been sued, or threatened with suit, because your product allegedly looks too similar to another business product? You may be tempted to change your product's design, simply to avoid the cost of defending a lawsuit. But your business may be insured for this sort of claim.
Insurance coverage of advertising injuries became more likely in New Hampshire as a result of a recent decision by the U.S. District Court for the District of New Hampshire. Under EKCO Group v. Travelers Indemnity Co., insurers now must pay for the defense of trade dress and design patent infringement claims under insurance policies that cover "advertising injuries." Most broad form commercial liability policies provide coverage for advertising injuries.
The case arose out of litigation between EKCO and a company named Chantal, which manufactures tea kettles. Chantal brought suit against EKCO, claiming that EKCO's tea kettles so resembled Chantal's that they would likely cause confusion among consumers as to the source of the tea kettles. Chantal's claim - that it owned the trade dress rights in its tea kettles - was premised on the similarity of the overall appearance, visual impression, finish, size, shape, contour, fixtures, texture, color and materials of its tea kettles. The essence of Chantal's claim was that its tea kettles were so well known that consumers had come to identify the tea kettles as a symbol of the company. Thus, consumers would assume that any tea kettle with a similar design would be manufactured by Chantal.
EKCO and Chantal settled the lawsuit, and EKCO brought a claim under its commercial general liability policy with Travelers for coverage of the cost of its defense of Chantal's claims, and for the amount of the settlement. EKCO brought its claim based on language in its policy which provided for coverage of "advertising injuries." The EKCO policy provided coverage for advertising injuries arising out of (i) oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; (ii) oral or written publication of material that violates a person's right to privacy; (iii) misappropriation of advertising ideas or style of doing business; or (iv) infringement of copyright, title or slogan.
Travelers contested coverage, claiming that trade dress infringement did not constitute an advertising injury as defined by the policy. At issue in this case was the prong of the "advertising injury" policy language which provides coverage for injuries stemming from the "misappropriation of ...a style of doing business." EKCO argued that Chantal's claims of trade dress infringement arose out of EKCO's alleged misappropriation of Chantal's style of doing business - the copying of the appearance and design of the Chantal tea kettles. The court agreed with EKCO, holding for the first time that trade dress infringement is a "misappropriation of a style of doing business," and thereby an advertising injury as contemplated by the policy.
The court then considered whether EKCO had engaged in any advertising that would have caused Chantal's trade dress injuries. Since the word "advertising" was not defined in the Travelers policy, the court looked to the dictionary for the common meaning of the word, finding that "advertising" was "the act or practice of calling public attention to one's product, service, need, etc., especially by paid announcement in newspapers and magazines, over radio or television, on billboards, etc." The court then ruled that even though there was no allegation that EKCO had engaged in an advertising campaign for its product, the sale of the tea kettles alone was sufficient to call public attention to the appearance of the product, thereby meeting the definition of "advertising." As a result of the decision, Travelers was forced to provide coverage to EKCO under its policy.
Using a similar analysis, the author of this article obtained advertising injury insurance coverage on behalf of a New Hampshire client alleged to be selling a line of clothing that infringed upon the trade dress of a large national clothing supplier. The ECKO decision is important for New Hampshire businesses because it opens up insurance coverage for a broad array of trade dress and design patent claims that may not have been covered previously. Businesses faced with such claims may have their defense costs covered if a claim is made under the policy - provided that the policy covers "advertising injuries." All businesses should check their commercial general liability policies to ensure that "advertising injuries" are covered and if not, to request coverage immediately.