Insurance Coverage in Trademark Disputes

Most companies are insured under a commercial general liability ("CGL") insurance policy, which usually contains standard coverage language drafted by the Insurance Services Office ("ISO"). The provision of ISO form CGL policies generally applicable to trademark disputes covers what is known as "advertising injury." And depending on the specific policy language and the law governing the dispute, claims for trademark infringement may be covered as advertising injuries. In Texas, for example, to be entitled insurance coverage for the cost to defend against suits for trademark infringement, insureds must prove: (1) the allegations in the underlying complaint raise a "potential" for liability under one of the covered offenses stated in the policy; (2) the insured engaged in "advertising activity" during the policy period when the alleged "advertising injury" occurred; and (3) there is a causal connection between the alleged injury and the "advertising activity."

Advertising Injury in Trademark Disputes

To establish the first prong, courts look to the policy language. Policies may be modified, and form policies are updated often, but the most common ISO form defines advertising injury as: "(a) 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; (b) oral or written publication of material that violates a person's right of privacy; (c) the use of another's advertising idea in your advertisement; or (d) infringing upon another's copyright, trade dress or slogan in your advertisement." Notably, even if a claim falls within one of these categories, it may not be covered due to specific exclusions in the policy that relieve the insurer of its obligation to defend or indemnify. And occasionally policies contain exceptions to exclusions, which may allow for coverage. Either way, depending on the specific policy language, trademark infringement suits may raise a potential for liability under the policy.

Advertising Activity in Trademark Disputes

If the first prong is satisfied, Texas courts next analyze—on a case-by-case basis—whether it is alleged the insured engaged in "advertising activity" during the policy period and whether those activities were causally related to the underlying suits' claims. If these requirements are met (and no policy exclusions operate to bar coverage), insurers may be obligated to pick up their insureds' litigation tab, which is important for both plaintiffs and defendants to keep in mind at the outset of trademark disputes.

Source: America's Recommended Mailers, Inc. v. Maryland Cas. Co., 579 F. Supp. 2d 791 (E.D. Tex. 2008).

For more information on this topic, please visit our Trademark Litigation service page.

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