Trademark Exclusion Precluded Coverage, Sixth Circuit Rules

September 21, 2016 | Insurance Coverage

The U.S. Court of Appeals for the Sixth Circuit has ruled that a trademark exclusion in a commercial general liability (“CGL”) insurance policy precluded coverage for a trademark infringement lawsuit where that suit did not allege any potentially covered claims of disparagement and trade dress infringement.

The Case

Eden Foods, Inc., sued S. Bertram, Inc., after the Food and Drug Administration recalled some apple juice sold by Bertram that Bertram labeled “Eden Quality Products.” Eden Foods, which had registered “Eden” as a trademark for its own food products, alleged claims for trademark infringement, unfair competition, trade name infringement, and trademark dilution by tarnishment. Eden Foods contended that Bertram’s use of the “Eden Quality Products” label had caused consumers to confuse Bertram’s products with Eden Foods’ products and had harmed Eden Foods’ reputation because consumers had mistakenly attributed Bertram’s recalled apple juice to Eden Foods.

Bertram asked Citizens Insurance Company of America, which had issued a CGL insurance policy to Bertram, to defend and indemnify it against Eden Foods’ lawsuit.

Citizens declined, explaining that all of Eden Foods’ claims were based on trademark infringement and that the policy excluded coverage for claims arising out of trademark infringement.

Bertram settled with Eden Foods, stopped using the “Eden Quality Products” label, and sued Citizens.

The U.S. District Court for the Eastern District of Michigan granted summary judgment in Citizens’ favor. Bertram appealed to the U.S. Court of Appeals for the Sixth Circuit, asking it to hold that Citizens had a duty to defend Bertram against Eden Foods’ lawsuit. It asserted that the Citizens policy covered two potential claims that fell outside the trademark infringement exclusion: disparagement and trade dress infringement.

The Sixth Circuit’s Decision

The circuit court affirmed, ruling that the Eden Foods lawsuit did not include any potential grounds for liability that were covered by the Citizens policy.

In its decision, the Sixth Circuit found that the Eden Foods lawsuit had not included any actual or potential claims for disparagement against Bertram – and that the word “disparagement” (or “disparage”) had not even appeared in Eden Foods’ complaint. Moreover, it continued, neither the Eden Foods complaint nor discovery responses potentially supported a disparagement claim.

In any event, the Sixth Circuit ruled, Eden Foods had not alleged in its complaint or discovery responses that Bertram had made any statements about Eden Foods’ products, disparaging or otherwise, which would have been necessary for Eden Foods to have asserted a disparagement claim.

The circuit court also found that Eden Foods had never alleged a trade dress infringement claim against Bertram – or “anything that could conceivably support a claim for trade dress infringement.” According to the Sixth Circuit, Eden Foods had not alleged any visual similarity between its products and Bertram’s products aside from the use of the word “Eden” on the label, and Bertram’s label was similar only because it used Eden Foods’ trademarked word “Eden.” Thus, the circuit court concluded, the Eden Foods complaint stated nothing more than “fairly typical” claims for trademark infringement.

The case is S. Bertram, Inc. v. Citizens Ins. Co. of America, No. 15-2552 (6th Cir. Aug. 26, 2016).

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