In Acuity v. Bagadia, 2008 WL 2439653 ( Wis. ), the Supreme Court of Wisconsin ruled that Acuity Mutual Insurance Co. must pay an almost $1 million claim by Unik Associates. Unik and its owner, Kishan Bagadia, were ordered by a federal court in Oregon in 2005 to pay $958,253.40 to Symantec Corp. for unauthorized distribution of some computer programs owned by Symantec.
Acuity, which provided Unik with business insurance, claimed it was not responsible for paying the judgment because the policy covered advertising, and the actions Unik engaged in did not include that. In particular, it claimed that samples sent out by Unik to potential clients did not meet the definition of advertising.
The lower courts disagreed with Acuity and ordered it to pay the claim. The supreme court upheld the decision.
To determine whether UNIK had engaged in “advertising activity” resulting in “advertising injury,” thus obligating Acuity to indemnify UNIK, the court employed the three-step test articulated in Fireman's Fund Ins. Co. of Wis, v. Bradley Corp, 261 Wis 2d 4 (2003): (1) Does UNIK's conduct fit within an offense the policy enumerates? (2) Did Unik engage in advertising activity (3) Is there a causal connection between UNIK's advertising activity and the damages?
The court first determined that coverage for “infringement of title” in the “advertising injury” provision of the policy extended to trademark infringement. The term “advertising,” as it was used in the “advertising injury” provision of the CGL policy, was ambiguous and would be broadly defined to mean any oral, written, or graphic statement made by the seller in any manner in connection with the solicitation of business.
Secondly, the court held that UNIK was engaged in “advertising” activity, within the meaning of the “advertising injury” provision in the policy, with respect to Symantec's copyrights, as it solicited business by supplying sample software disks to interested buyers, and, by this method, it sold over 117,000 disks containing the company's copyrights within less than three years.
In addition, the court found that UNIK was engaged in “advertising” activity, within the meaning of the “advertising injury” provision of the policy, with respect to the company's trademarks, as it placed in trade magazines advertisements showing Symantec's trademarked name.
Finally, the court explained that in order to constitute a causal connection between the advertising and the harm, for purposes of the “advertising injury” provision in the policy, the advertising need not be the sole cause of the harm, rather, it must merely “contribute materially” to the harm.
The court held that UNIK's advertising activity contributed materially to its infringement of Symantec's copyrights, thus supporting the finding of coverage under the “advertising injury” provision of the policy. Also, UNIK's advertising activity contributed materially to its infringement of Symantec's trademarks, as it used the trademarks in a manner that was likely to cause consumer confusion, and the advertising resulted in the purchase of disks containing software bearing the company's trademarked titles.