Intellectual Property Exclusion Barred Coverage of Claims that Insured Manufactured and Distributed Products under Trademarks It Did Not Own

March 31, 2015 | Insurance Coverage

An appellate court in California has affirmed a trial court’s ruling that an intellectual property exclusion in an insurance policy precluded coverage of claims by the estate of R. Buckminster Fuller that the insured had violated its trademarks through the manufacture and distribution of a number of products. 

The Case

The Fuller estate sued Maxfield & Oberton Holdings, LLC, in a federal district court in California, alleging that Maxfield manufactured and distributed several products under the “Buckyball” and related trademarks, which marks were owned by the estate, without permission from the estate or payment to the estate. These items allegedly included several variations on Buckyballs, Buckyballgift packs, Buckycubes, Bucky sidekick, and The Big Book of Bucky, which were “inspired and named after famous architectural engineer and inventor, R. Buckminster Fuller.”

Maxfield tendered defense of the estate’s action to its insurance company, Alterra Excess and Surplus Insurance Company, which agreed to defend under a reservation of rights. Alterra then filed an action for declaratory relief in a California state court, seeking a declaration that its policy did not provide coverage and, therefore, that Alterra had no duty to defend Maxfield.

The trial court granted judgment on the pleadings in favor of Alterra, finding that the insurer had “no obligation to defend or indemnify Maxfield” in the estate’s action given the policy’s intellectual property exclusion. The estate appealed.

The Appellate Court’s Decision

The appellate court affirmed, finding that the policy’s intellectual property exclusion applied to preclude coverage.

In its decision, the appellate court pointed out that the title of the exclusion – “Infringement Of Copyright, Patent, Trademark Or Trade Secret” – began with the word “Infringement,” in boldface, the “very conduct” that the estate alleged against Maxfield. The appellate court held that the exclusion was “conspicuous, plain, and clear” and “also applicable to bar coverage” for the estate’s claims against Maxfield.

The appellate court rejected the estate’s argument that to apply the intellectual property exclusion, Alterra had to specify each type of excluded intellectual property claim. As the appellate court noted, the estate cited no authority supporting that proposition. The appellate court decided that the exclusion applied when the alleged injury arose out of “any violation of any intellectual property rights.” It also ruled that the exclusion “clearly” applied to bar claims based on the right of publicity, as that right had been “held to be an intellectual property right.”

The case is Alterra Excess & Surplus Ins. Co. v. Snyder, No. A140453 (Cal. Ct. App. March 9, 2015).

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