Trademark Case Gets Defense, Indemnity under CGL and Umbrella Policies
In General Cas. Co. of Wisconsin v. Wozniak Travel, Inc., 2009 WL 702437 (Minn.), Tolkien Enterprises sued Wozniak Travel, Inc. d/b/a Hobbit Travel, alleging trademark infringement, trademark dilution, and unfair competition arising from the wrongful use of the word “hobbit” in Hobbit Travel's business name.
Hobbit Travel had been operating under that name since 1976. Tolkien Enterprises owns the right to use and license trademarks relating to J.R.R. Tolkien's “The Hobbit” and “Lord of the Rings” trilogy, as Professor Tolkien had created the term “hobbit” in the 1930s to describe fictional, three-foot-tall characters featured in the novels.
Tolkien claimed Hobbit Travel was wrongfully appropriating Tolkien's “hobbit” trademark, confusing the public about Hobbit Travel's association with Tolkien, and capitalizing on Tolkien's goodwill. Tolkien, through its licensees, utilized the term “hobbit” and the corresponding characters for its own advertising and merchandising of the Tolkien works. Some marketing specifically combined the “hobbit” mark with the theme of travel, as the journeys of hobbits, and the term “hobbit” was licensed for travel-specific products. One licensee made an agreement with an airline to market itself as “Airline to Middle-earth” and paint the hobbits on its jets; another arranged for an online travel ticketing service to promote travelling to London and Canada for a stage musical adaption of The Lord of the Rings. Tolkien, arguing that its market for these and other services was “irreparably harmed” by Hobbit Travel's use of “hobbit,” asked for injunctive relief, monetary damages, and attorney fees.
After Tolkien Enterprises filed suit in California , General Casualty, which had general and umbrella policies covering Hobbit Travel, sought declaratory relief in the U.S. District Court for the District of Minnesota from its duty to defend and indemnify Hobbit Travel. General Casualty argued that the Tolkien lawsuit was not an enumerated “advertising injury” under the policies.
The court certified two questions to the Supreme Court of Minnesota:
(1) Does trademark infringement fall within the scope of “misappropriation of advertising ideas or style of doing business” or constitute “infringement of copyright, title or slogan” as set forth in the CGL policy?
and
(2) Is a trademark an “advertising idea” or does trademark infringement constitute “infringing upon another's copyright, trade dress or slogan” as set forth in the CUL policy?
The court turned first to the CGL policy and concluded that its absence of the word “trademark” in the policy did not foreclose the possibility that trademark infringement fell within the scope of the policy's advertising-injury definitions. First, the policy provided coverage for injuries “arising out of” the advertising-injury definitions, which expanded the scope of the policy language since the state supreme court had defined “arising out of” broadly as “originating from,” “growing out of,” or “flowing from.” Second, Minnesota insurance law required policies to be read in favor of finding coverage, and required courts to look past the legal nomenclature to the underlying allegations. Finally, the duty to defend applied to claims that “arguably” fell within the policy, and if insurance policy language was susceptible of more than one meaning, it must be given the meaning favoring coverage.
The court then examined whether Tolkien's damages arose out of one of the advertising-injury definitions. General Casualty argued that all of the policy terms had unambiguous definitions that did not include allegations of trademark infringement. Hobbit Travel contended that, at a minimum, the underlying allegations plainly fell within the scope of “infringement of title” from the “infringement of copyright, title or slogan” provision.
The court determined that the damages claimed by Tolkien fell within the advertising injury definitions, noting that that view was held by a substantial majority of other courts. The court followed the reasoning of the Wisconsin Supreme Court, which found that trademark infringement fell within the plain and ordinary meaning of infringement of title.
The court then turned to the question of coverage for an advertising injury under the umbrella policy, which required it to define the term “advertising.” The court explained that General Casualty's CUL policy defined “advertising injury” in part as injury arising out of the “use of another's advertising idea in your 'advertisement.'” And, as “advertising” was not definitively defined by General Casualty's policies, the court must define the term to determine whether Tolkien's damages arose out of that advertising-injury definition.
General Casualty, relying on the commonly understood interpretation of “advertising” as referring to “a device for the solicitation of business,” asked the court to conclude that trademarks were not such a device because they were only names for goods or services. Hobbit Travel, on the other hand, argued that the definition of advertising could be construed as broadly as “the action of calling something to the attention of the public.”
The court held that because either of these definitions was a reasonable interpretation of the term “advertising,” the term must be interpreted liberally in favor of finding coverage. Therefore, the court interpreted the term “advertising” in favor of finding coverage and adopted the standard broad definition as: “any oral, written, or graphic statement made by the seller in any manner in connection with the solicitation of business.”
Tolkien also alleged that Hobbit Travel used the word “hobbit” in its domain name and on its website to attract the national public's attention to its travel agency, and capitalize on the goodwill surrounding the Tolkien works. According to the court, these uses of the word “hobbit” by Hobbit Travel were made in connection with the solicitation of travel business within the adopted broad reading of “advertisement”; thus, Tolkien's damages arose out of Hobbit Travel's “use of another's advertising idea in its 'advertisement.'”
Therefore, the court held that trademark was an “advertising idea” as set forth in the CUL policy, thereby triggering General Casualty's duty to defend.