Prior Publication Exclusion Bars Coverage in Trademark Infringement Action
In Kim Seng Company v. Great American Insurance Co. of New York, 2009 WL 3791874 (Cal.App. 2 Dist.), the insurers and the insured disputed whether the insurers providing advertising injury coverage had a duty to defend in a trademark infringement action and to indemnify the insured in connection with that action. The trial court granted summary judgment for the insurers based on the prior publication exclusion in the applicable policies.
On appeal, the insured asserted that the insurers had a duty to defend it in the underlying trademark infringement action because of the possibility that the prior publication exclusion did not apply. The insured based its contention on three theories: (i) the prior publication exclusion did not apply to a trademark infringement but rather was limited to libel, slander, and invasion of privacy claims; (ii) the word “material” used in the policy definition of “advertising injury” rendered the prior publication exclusion inapplicable to the trademark infringement claims in the case; and (iii) the prior publication exclusion did not apply because the trademarked words in question used prior to the policy period were used with different words and a new logo during the term of the policy.
Rejecting the first argument, the court of appeal explained that advertising injury was defined in the policies to include “misappropriation of advertising ideas or style of doing business” and “infringement of copyright, title or slogan.” The exclusion, in turn, applied to advertising injury “arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.” The insured argued that because the exclusion used the words “oral or written publication” it referred only to injury arising out of an “oral or written publication” that constituted defamation or violation of the right of privacy. The court disagreed, however, explaining that advertising injury was a defined term in the policies and it should be read in the exclusion just as it was read elsewhere in the policy.
Next, the court rejected the insured's argument that the use of the term “material” meant that the exclusion only applied to something tangible, such as packaging, and that, without prior publication in this sense, the exclusion did not apply. The court found no reason to restrict the meaning of “material” in this way, and that it made no sense to apply the exclusion only to a specific item of tangible material and not to the underlying trademark infringement.
Finally, the court addressed the insured's argument that the different words and logo used during the subject policy period were sufficient to bar application of the exclusion. The court noted that because previously copyrighted work was simply being republished as a part of larger work, the prior publication exclusion should apply. Further, the underlying action had focused on specific words rather than on an idea, and there were no “fresh wrongs” present which would bar application of the prior publication exclusion.
The lower court's judgment was therefore affirmed.
Editor's Note: Under this decision, in California the prior publication exclusion will apply to trademark infringement claims where the alleged offending words in the underlying action both before and during the policy period are identical. Thus, trademarks in use when a business changes insurers would not be covered by a new policy unless the business's owner is aware of the problem and adds necessary coverage.