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Protecting your corporate client's most valuable intangible asset: its name.

Infringers are busy, even on the Internet, in taking advantage of companies' trademarks, so counsel owe their best efforts to protect and right the wrongs

A TRADEMARK or "mark" is anything that identifies and distinguishes a product and/or service. The U.S. Trademark Act of 1946, 15 U.S.C. [sections] 1127, defines a trademark "any word, name, symbol, or device, or any combination thereof (1) used by a person, or (2) which a person has a bona fide intention to use in commerce and applies to register on the principal register established by this Act, to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown." Thus, the role a designation must play to become a "trademark" is to identify the source of one seller's goods and distinguish that source from other sources.

A. What Constitutes a Trademark?

The requirements for qualification of a work or symbol as a trademark can be broken down into three elements:

* Tangible symbol: a work, name, symbol or device or any combination of these;

* Type of use: actual adoption and use of the symbol as a mark by a manufacturer or seller of goods or services; and

* Function: to identify and distinguish the seller's goods from the goods made and sold by others.

In determining what can qualify as a trademark, it is crucial that the symbol in question be so distinctive that it is capable of performing the function of identifying and distinguishing the goods that bear the symbol.(1)

Trademarks serve a number of important functions. First, they help to identify one seller's goods and distinguish them from goods sold by others. Second, they designate the source from which all goods bearing the mark come or are controlled by a single source. The traditional rule is that the buyer need not know or be able to identity the name of the source. Third, trademarks serve a quality function, indicating that all goods bearing the mark are of an equal level or quality. Fourth, they perform an advertising function by promoting and assisting in sales.(2)

Trademark law furthers a number of distinct and important policy goals--consumer protection, property rights, and economic efficiency. Of particular importance, at least for proving infringement of a trademark, is the likelihood that an infringing mark will cause the ultimate consumer confusion regarding a product.

B. Types

Among possible trademarks, words are the most well known form, but other trademarks can include logos, artistic designs, graphic symbols, colors, scents and sounds. Trademark protection also extends to the trade dress of a product, a term that includes, for example, the shape of a product or the product's container.

1. Traditional Marks

a. Letters

Like any other symbol, an individual letter or group of letters, not forming a recognizable word, can function as a mark. An arbitrary arrangement of letters may qualify for trademark protection like any other type of arbitrary or fanciful mark. Arbitrary arrangements of letters generally have been given a wide scope of protection based on the premise that it is more difficult for buyers to remember a series of arbitrarily arranged letters than marks consisting of pictures or recognizable words. Certain letter combinations, such as the YMCA, over time become recognized by the general public, but courts still experience difficulty in distinguishing new letter combinations that are not recognized abbreviations.(3)

b. Numbers

One or more numbers, alone or in combination with other symbols, can function as a trademark. A number can be used in combination with letters or words to present an arbitrary composite mark. If a number combination mark is widely recognized, it may be infringed by another's mark that uses a different number. For example, the makers of "A.1" brand steak sauce prevailed against the maker of "A.2" brand meat sauce.(4)

c. Slogans

A slogan or any other combination of words is capable of trademark significance if used in such a way as to identify and distinguish the seller's goods and services from those of others. Under common law unfair competition principles, slogans have long been protected against use by others so as to be likely to confuse purchasers. However, the longer the slogan, the less the probability that it functions as a trademark, and the greater the probability that the slogan is merely advertising. Sometimes advertising slogans are not in fact used as trademarks. Slogans often appear in such a context that they do not identify and distinguish the source of goods or services. In those instances, they are neither protectable nor registerable as trademarks.(5)

d. Symbols and Designs

Marks do not have to consist of letters, numbers or words. Any picture, design or symbol may be capable of serving the trademark function of identifying goods and services and distinguishing them from those offered for sale by others in the market. As a matter of fact, the earliest marks were not words at all, but pictorial symbols. Merely because a symbol may be pleasing to the eye and is a decorative feature does not necessarily mean that the symbol cannot also serve a trademark purpose. A symbol or design that is only incidentally ornamental and decorative can still be a trademark. But if a design is solely or merely ornamental, it cannot be a trademark. The best marks are those that combine visually attractive "ornamentality" with the trademark purpose of identification of source and quality.(6)

2. Non-traditional Marks

a. Color

Under the traditional rule, the single color of a product was not capable of protection as a trademark, but in 1995, the U.S. Supreme Court, resolving a circuit court split, held that a single color was capable of being registered and protected as a trademark. In Qualitex Co. v. Jacobson Products Co.,(7) the Court noted that shapes, sounds and even scents have been regarded as candidates for trademark status, so there was no public policy reason with sufficient weight to bar any and all product colors from trademark status. Stating that there is no rule absolutely barring the use of color alone, the Court rejected the traditional color depletion and shade confusion tests.(8)

b. Fragrance

In 1990, the Trademark Board permitted registration of a mark consisting of a fragrance applied to a seller's goods. The mark consisted of "a high impact, fresh, floral fragrance reminiscent of Plumeria blossoms" for "sewing thread and embroidery yarn." In In re Clarke,(9) a fragrance was held to have been proven to serve as a trademark for the goods over the objection that the applicant, while promoting scented yarn in her advertising, did not indicate the specific scent. The board, however, specifically noted that it was not permitting the registration of scents or fragrances of products primarily sold for their scent, such as perfumes, colognes and scented household products.(10)

c. Sound

There is no reason why a mark must be a visually perceptible symbol. While a relative rarity in the world of marks, a sound is indeed capable of being a trademark. The U.S. Trademark Rules of Procedure recognize that registration can be made of marks "not used in printed or written form" and provide for submission of an audio cassette tape recording for registration. The Trademark Board, noting that several sound marks have been registered, has said that sound marks can be fitted into the familiar categories for more traditional marks. For example, it is possible that theme music, such as that used in a motion picture or for a radio or television program, may serve as a mark for that movie or program.(11)

C. Marks Not Trademarks

Not every mark can qualify as a protectable trademark. For example, generic words can never be marks. Sometimes words that were originally trademarks can become generic, such as Aspirin. Manufacturers of today's pioneering products continue to wage war against the "genericide" of their trademarks. Another example is a product configuration that also is functional cannot be a trademark. Words and phrases that describe some aspect of a good or service or proclaim their superiority may not function as a mark right away. Of course, there are many other more unusual scenarios that could cause something that initially looks like a trademark not to be protected under trademark law.


The owner of a trademark has several avenues to pursue for the unauthorized use of its trademarks in the United States. The most common action is to make a federal trademark infringement claim, which can be brought by an owner against any party who, without the consent of the trademark owner, uses "in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution or advertising of any goods or services on or in connection with which use is likely to cause confusion, or to cause mistake, or to deceive," to use the words of 15 U.S.C. [sections] 1114(1)(a).

A. Impermissible Uses

1. Likelihood of Confusion

The test for proving infringement of a trademark is whether there is a "likelihood of confusion" on the part of a consumer with respect to the product. 15 U.S.C. [sections] 1125(a)(1)(A) describes this as use "in commerce" in a way that "is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person."

If an appreciable number of reasonable buyers are likely to be confused by the similar marks, then there is liability for trademark infringement. However, it is not clear from case law whether the confusion of an appreciable number of reasonable buyers is to be measured quantitatively or qualitatively. In most trademark cases, the measurement of the extent of likely confusion will not be an exact science, but a calculated estimate. Perhaps more important than the number of instances of confusion is the type of persons confused and the degree of their confusion.(12)

In order to prove infringement, it is required only that there is a likelihood of confusion, not actual confusion. A plaintiff must show that confusion is "probable," not merely possible. However, a plaintiff is not required to go so far as to show that there is actual confusion of consumers. In essence, "one does not have to await the consummation of threatened injury to obtain preventive relief."(13) Because proving actual confusion is so difficult, to require proof of it would unfairly penalize the trademark owner for acting promptly to protect the mark before serious damage has occurred.(14)

a. Factors

Trademark law has traditionally spelled out a list of foundational factors to be considered in determining the presence or absence of a likelihood of confusion. Sections 20-23 of the Restatement (Third) of Unfair Competition list eight foundational factors, which can be paraphrased and summarized as: (1) the degree of resemblance between the conflicting designations; (2) the similarity of marketing methods and channels of distribution; (3) the characteristics of prospective purchasers and the degree of care they exercise; (4) the degree of distinctiveness of the senior user's mark; (5) where the goods or services are not competitive, the likelihood that prospective buyers would expect the senior user to expand into the field of the junior user; (6) where the goods or services are sold in different territories, the extent to which the senior user's designation is known in the junior user's territory; (7) the intent of the junior user; and (8) evidence of actual confusion.

While all these factors are to be considered, the Restatement notes that "no mechanistic formula or list can set forth in advance the variety of elements that comprise the market context from which likelihood of confusion must be determined." Many of the federal courts of appeal, however, have established their own factors for proving likelihood of confusion. Nonetheless, most of the factors in those decisions resemble the restatement factors.(15)

b. Methods of Proof

There are at least three routes of proof of likelihood of confusion: (1) survey evidence, (2) evidence of actual confusion and/or (3) argument based on a clear interference arising from a comparison of the conflicting marks and the context of their use.

Courts increasingly are requiring survey evidence. It is deemed to be helpful in providing information about a controlled and artificial world from which one draws inferences about the real world. Helpful inferences can be drawn from a survey of randomly selected pedestrians in a shopping mall who are interrogated about pictures of two products. Generally speaking, survey evidence must be gathered, evaluated and presented by an expert.(16)

2. Types of Confusion

The most common and widely recognized type of confusion creating infringement is purchaser confusion of source at the time of purchase. This is called point of sale confusion, but it does not mark the outer boundaries of trademark infringement. The vast majority of courts also recognize other forms of confusion, for example, post-sale confusion, initial interest confusion, and reverse confusion.

a. Post-sale Confusion

Post-sale confusion occurs among those who were not confused at the time they bought the product. A leading case in the Second Circuit, Mastercrafters Clock & Radio Co. v. Vacheron & Constantin-Le Coultre Watches Inc.,(17) held that the likelihood of confusion of those other than the purchaser of an article is actionable. Therefore, even though the knowledgeable buyer knew that it was getting an imitation, viewers could be confused by the use of a mark with prestige value that is in reality a cheap copy. In such a situation, the senior user suffers a loss of sales diverted to the junior user.(18) For example, in Levi Strauss & Co. v. Blue Bell Inc., 19 the Ninth Circuit held that the trademark owner, Levi Strauss, was injured when a purchaser knowingly bought imitation Levi jeans and viewing bystanders, who were prospective purchasers, were likely to be confused.

b. Initial Interest Confusion

Infringement can be based on confusion that creates initial customer interest, even though no actual sale is finally completed as a result of the confusion. Initial interest confusion can be viewed as a variation on the practice of "bait and switch." For instance, in Grotrian v. Steinway & Sons,(20) the federal district court found that while a prospective buyer of an expensive piano is often a musical expert, that buyer may be misled into considering the purchase of a Grotrian-Steinweg piano because the prospective buyer initially is under the mistaken impression that the piano was affiliated with the famous Steinway pianos.

In addition, where the likelihood that a potential purchaser may be drawn to the product of the junior user, thinking it was the senior user, this confusion is actionable even if over the course of several months, the buyer's confusion is dissipated.(21)

c. Reverse Confusion

The traditional pattern of classic "forward confusion" occurs when customers mistakenly think that the junior user's goods or services are from the same source as or are connected with the senior user's goods or services. In "reverse confusion," customers purchase the senior user's goods under the mistaken impression that they are getting the goods of the junior user. That is, reverse confusion occurs when the junior user's advertising and promotion so swamps the senior user's reputation in the market that customers are likely to be confused into thinking that the senior user's goods are those of the junior user.

In a reverse confusion situation, rather than trying to profit from the senior user's mark, the junior user saturates the market and overwhelms the senior user.(22) "The result is that the senior user loses the value of the trademark--its product identity, corporate identity, control over its goodwill and reputation, and ability to move into new markets."(23)

B. Non-Infringing Uses

1. Comparative Advertising

The U.S. Federal Trade Commission encourages the naming of competitors in comparative advertising that names a competitor in a non-confusing and truthful comparison, which is "highly beneficial to consumers" and may convey to them valuable information that is pro-competitive. In general, the law is that it is neither trademark infringement nor unfair competition to make truthful comparisons of competing products in advertising, and in doing so, to identify by trademark, the competitor's goods.

Comparative advertising will not be permitted, however, if it is likely to confuse buyers as to exactly what they are getting. Several cases have found that a disclaimer of association coupled with the comparative trademark use can prevent customer confusion. For example, the Ninth Circuit found that the comparative advertising by Second Chance perfume of its product to Chanel No. 5 was permissible.(24) Therefore, a competitor who produces low-priced substitutes for better known, name-brand items, and uses the name-brand to tell consumers truthfully what has been copied, does not compete unfairly.(25)

2. Fair Use

Fair use is a defense to a traditional trademark infringement claim. By choosing a descriptive term, the trademark owner must live with the result that everyone else in the marketplace remains free to use the term in its original "primary" or descriptive sense. A junior user is always entitled to use a descriptive term in good faith in its primary, descriptive sense other than as a trademark. The only right of exclusion that trademark law creates in a descriptive word is in the secondary and new "trademark" meaning of the word. The original, descriptive primary meaning is always available for use by others to describe their goods in the interest of free competition.

While fair use is considered a defense, it should be viewed as merely one type of use not likely to cause confusion; hence, it is a "defense" only in that sense. A junior user's use should be deemed "fair" only if it is non-confusing.(26) For example, the Seventh Circuit found the use by Ocean Spray of "sweet-tart" to describe its juice was fair descriptive use and did not infringe the owner of the trademark "SweeTARTS," a popular candy.(27)

3. Parody

Parody is a form of artistic expression covered by the First Amendment. If a defendant charged with trademark infringement or dilution raises the claim that it merely engaged in a parody of the plaintiff or its trademark, then mixed elements of traditional trademark analysis and the policies of free speech are involved in the over-all analysis. In a traditional trademark infringement suit founded on the likelihood of confusion rationale, the claim of parody is really not a separate "defense" as such, but merely a way of phrasing the traditional response that customers are not likely to be confused as to the source, sponsorship or approval. Therefore, some parodies will constitute an infringement and others will not.

Where a defendant uses a plaintiff's mark and the difference in wording or appearance of the designation together with the context and over-all setting is such as to convey to the ordinary viewer that it is a joke, not the real thing, then confusion as to source, sponsorship, affiliation or connection is unlikely.(28)


"Trade dress" traditionally was thought to consist only of the appearance of labels, wrappers and containers used in packaging a product. However, the modern reference to "trade dress" includes the total look of a product and its packaging, even including the design and shape of the product itself. Trade dress encompasses the total image or over-all impression created by a product or its packaging. The U.S. Supreme Court in Two Pesos Inc. v. Taco Cabana Inc., defined trade dress as "the total image of a product and may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques."(29)

In the 1990s, several courts, reacting against a wave of over-expansive and inflated claims of trade dress in product shapes and features, laid down new, more stringent rules that make it considerably more difficult to assert trade dress protection in product shapes. Many of these courts were concerned because the policy of free competition dictates that trade dress law not create "back-door" patents, substituting for the strict requirements of utility in patent law. Part of this concern is reflected in the rule that the functional composite of a product shape is generally not protected. Courts do not evaluate whether the product is per se functional, but rather whether that particular feature or combination of features claimed as trade dress is functional.(30)

In 1999, the Fourth Circuit in Ashley Furniture Industries Inc. v. San Giacomo N.A. Ltd.,(31) found that the design of a bedroom set was protectable trade dress. Curiously, the court referred to and relied on Taco Cabana as a product configuration case, claiming that in that case a restaurant's decor and the atmosphere was a product. Taco Cabana is more accurately referred to as a packaging trade dress case, not a product configuration case.

Ashley Furniture criticized decisions of the Second Circuit and Third Circuit that limited trade dress protection in product configuration cases.(32) Two other circuits have limited protection for product configuration.(33)


Trademark dilution is a weakening or reduction in the ability of a mark to distinguish one source from another clearly and unmistakably. Dilution claims have become more visible because of the recent spate of disputes involving Internet domain names.

Under the Federal Trademark Dilution Act of 1995 (FTDA), 15 U.S.C. [sections] 1125(c), a trademark owner may seek injunctive relief against another party's "commercial use in commerce of a mark or trade name" if that use causes dilution of a famous mark. Dilution differs from likelihood of confusion in that the dilution doctrine is primarily concerned with granting protection to strong, well-recognized marks even in the absence of a likelihood of confusion, if a defendant's use is such as to diminish or dilute the strong identification value of the plaintiff's mark while not confusing customers as to source, sponsorship, affiliation or connection. The underlying rationale of the dilution doctrine is that a gradual attenuation or whittling away of the value of a trademark that results from use by another constitutes an invasion of the senior user's property right in its mark and gives rise to an independent commercial tort.(34)

In general, dilution can result from either "blurting" or "tarnishment." Dilution by blurring is the classic injurious impact of dilution theory. Blurring occurs where customers or prospective customers will see the plaintiff's mark used by other persons to identify other sources on a plethora of different goods and services. The unique and distinctive significance of the mark to identify and distinguish one source may be diluted and weakened, but there is no confusion as to source, sponsorship or affiliation. Dilution by tarnishment occurs when the defendant's unauthorized use of a plaintiff's mark is to tarnish, degrade or dilute the distinctive quality of the mark. For example, the mark may be used by the defendant without permission in an attempted parody context that is totally dissonant with the image projected by the mark.(35)

A. Famous Marks

The Trademark Revision Act of 1988, amending the Lanham Act, [sections] 43(c)(1), extends special protection to famous marks. In order to determine whether a mark is "distinctive and famous," the act suggests eight factors. According to the Congressional report, "Each of the factors ... should be weighed independently, and it is the cumulative effect of these considerations which will determine whether a mark qualifies for federal protection from dilution.... A court must weigh all of the factors listed to determine if a mark is eligible for federal protection."(36)

The factors are (1) the degree of inherent or acquired distinctiveness of the mark; (2) the duration and extent of use of the mark in connection with the goods or services; (3) the duration and extent of advertising and publicity of the mark; (4) the geographical extent of the trading area in which the mark is used; (5) the channels of trade for the goods or services with which the mark is used; (6) the degree of recognition of the mark in the trading areas and channels of trade used by the mark's owner and the person against whom the injunction is sought; (7) the nature and extent of use of the same or similar marks by third parties; and (8) whether the mark was registered under the act of March 3, 1881, or the act of February 20, 1905, or on the principal register.

In view of these factors, it is not surprising that some marks have been held to be famous while others have not. Examples of marks that have been found to be famous are: (1) Budweiser, for beer; (2) Candyland, for a children's game; (3) Don't Leave Home Without It, as a slogan for travelers' checks and credit cards; (4) The Greatest Show on Earth, as a slogan for a circus; (5) Porsche, for automobiles; and (6) Toys `R' Us, for toy stores. Examples of marks that have been found not to be famous are: (1) Appleseed, for a public advocacy group; (2) Authority, for a sporting goods retailer; (3) Columbia, for healthcare services; and (4) We'll Take Good Care of You, as a slogan for a retail drugstore chain.(37)

B. Proof of Harm in Dilution Cases

Two recent cases have resulted in a split in the circuits over the proof required in dilution cases. In Ringling Bros.-Barnum & Bailey Combined Shows Inc. v. Utah Division of Travel Development,(38) the Fourth Circuit affirmed the trial court's determination that the mark "The Greatest Snow on Earth" did not dilute the Ringling Bros. mark "The Greatest Show on Earth." The Fourth Circuit interpreted the FTDA as requiring proof of "actual, consummated harm," under which courts must look to evidence of an actual loss of revenues or a consumer survey as proof of actual dilution. The court rejected the use of "contextual factors (degree of mark and product similarity, etc.)" as sufficient proof of actual dilution. It also required that a senior user may seek an injunction against a junior user only after the junior user is established in the marketplace.

In Nabisco Inc. v. PF Brands Inc.,(39) the Second Circuit flatly rejected the Fourth Circuit's interpretation of the FTDA as requiring proof of actual harm. The Second Circuit found that requirement of proof of loss of revenues or use of a consumer survey to be an "arbitrary and unwarranted limitation on the methods of proof, stating that there was no need to preclude the use of contextual factors in dilution cases. The Second Circuit also rejected the requirement that a junior user be established in the marketplace prior to a senior user being permitted to seek an injunction, holding that the FTDA allows a court to grant an injunction before the harm has occurred.


In many cases, the owner of a trademark is much more interested in halting an infringing use than in recovering monetary damages. The remedy of injunctive relief always should be considered by a business faced with trademark infringement.

A. Recognized Remedy

The U.S. trademark laws authorize a court to grant injunctive relief "according to the principles of equity and upon such terms as the Court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark Office or to prevent a violation under Section 1125(a)." See 15 U.S.C. [sections] 1116(a). The statute enables injunctions to protect both registered and unregistered trademarks.

B. Establishing Preliminary Injunction

The owner of a trademark seeking a preliminary injunction will have to establish the threat of irreparable harm, likelihood of success on the merits, an inadequate remedy at law, and in some courts that the balance of harm favors granting the injunction.

1. Irreparable Harm

Independent of any demonstrable economic injury, losing control of one's name represents an irreparable injury.(40) Loss of control of one's name amounts to a loss of goodwill--goodwill that the owner of the mark has built up through years of effort and investment.(41) Loss of goodwill is also closely connected to proof of an inadequate remedy at law, in that it is widely held that loss of one's name and goodwill cannot be fully compensated by money damages.

2. Likelihood of Success

The party seeking a preliminary injunction must show that it has a reasonable (or "substantial" in some jurisdictions) chance of success on the merits. In the trademark context, this means showing a good chance of proving that the defendant's infringing use is likely to create confusion. The factors generally used to establish likelihood of confusion are (1) the strength or distinctiveness of the mark, (2) the similarity of the two marks, (3) the similarity of the good or services the mark identifies, (4) the similarity of the facilities the two parties use in their businesses, (5) the similarity of the advertising used by the parties, (6) the defendant's intent, (7) actual confusion.(42)

The court also will require the posting of a bond, as with any preliminary injunction. Section 1116(a) permits the court to require the defendant to file a report setting forth its compliance with the injunction, and this can be a useful tool for promoting the defendant's actual and complete compliance with an injunction order.

C. Practical Aspects

* Keep in mind that an injunction can reach not only the defendants, but under Rule 65(d) of the Federal Rules of Civil Procedure, others in "active concert or participation" with the defendants. Many infringements involve multiple participants, only some of whom may be targeted as party defendants. For example, a rival jewelry manufacturer may infringe a trademark for a line of jewelry, and the jewelry may be sold in stores that also carry trademark owner's line. The mark owner may not want to name the stores as defendants, but the injunction against the infringing rival will be effective against the stores. There is usually a business and diplomatic aspect to deciding whom to sue, and using an injunction to reach some entity that the mark owner wants to be bound by the injunction, but does not wish to sue, can be useful.

* Obtaining an injunction, and sometimes even filing the motion for a preliminary injunction, often leads to settlement.

* A preliminary injunction is designed to preserve the status quo and protect the movant against further harm during the pendency of the litigation. It is premised on the notion that there is some emergency. Thus, a business that becomes aware of infringement should act promptly, not tarrying unduly in seeking an injunction. Delay suggests that perhaps there is no immediate threat of harm sufficient to justify what many courts describe as the "drastic" remedy of an injunction. A related concept is that the owner of a trademark may lose rights to enforce it through inaction, or abandonment.

* Internet trademark infringement has become a major problem for many businesses, and the courts have begun to recognize an in rem action against an infringing domain name itself.


A. U.S. Federal Statutes

Under 15 U.S.C. [sections] 1117, the plaintiff in a trademark infringement case may recover (1) damages in the form of lost profits, (2) an accounting or disgorgement of the infringer's profits, (3) increase to treble damages and (4) attorney's fees and costs.

In addition to these damages stated specifically in the statute, some courts recognize a right to recover damages in the form of a sum sufficient to carry out corrective advertising, a reasonable royalty, and also prejudgment interest. It is important to note that while the text of Section 1117 refers to the damages recoverable for infringement of a federally registered mark, the statute also states that it applies to violations of 15 U.S.C. [sections] 1125, known as the Lanham Act. Since Section 1125 creates a federal right of action for deceptive use of any mark, whether registered or not, the damages set forth in Section 1117 are available to owners of marks and trade names regardless of whether they have been federally registered or not. If a defendant has violated Section 1125, then the damages provided by Section 1117 are available.

Section 1117 is not as straightforward as it perhaps may seem on first reading. For example, the text contains two important limitations. These are the provision that the award of damages is "subject to the principles of equity," and the provision that in awarding enhanced damages, "such sum ... shall constitute compensation and not a penalty."

1. Lost Profits

The courts require proof of the fact of lost profits, but they offer some leniency in proof of the amount of lost profits. The question of what quantum and quality of evidence is necessary to prove the fact of lost profits is beyond the scope of this article, but this will differ depending on such factors as whether the parties are direct competitors and whether there is a showing of actual confusion sufficient to show probable diversion of sales. The issue for the plaintiff will be whether it can show a large enough diversion to warrant the costs of the litigation.

Once the fact of damage is established, the court should accept any reasonable basis for an estimate or projection of damages, subject, of course, to the prohibition against speculation.

a. Corrective Advertising

Although not expressly provided for by statute, an award for corrective advertising has been recognized as appropriate by some courts to enable the plaintiff to repair and reclaim its name. The theory is that the infringing party should be required to pay the amount that it will take for the trademark owner to purchase the advertising necessary to clear up the confusion.

The interesting question is how this award should be calculated. Lawyers representing local or regional businesses as plaintiffs will find the seminal case of Big O Tire Dealers Inc. v. Goodyear Tire & Rubber Co.(43) of great interest. The plaintiff tire dealer operated in a 14-state area of the Midwest. Defendant Goodyear launched a nationwide advertising campaign and appropriated the plaintiff's name for a certain line of tires. The name was not registered. The court awarded the plaintiff an amount equal to 25 percent of what Goodyear had spent to advertise its own products in this 14-state region.(44)

In applying a corrective advertising award, some courts have acknowledged the Federal Trade Commission rule requiring businesses that engage in misleading advertising to spend 25 percent of its advertising budget on corrective advertising.

b. Reasonable Royalty

The plaintiff also may assert that it is owed a reasonable royalty for the defendant's unauthorized use of its name. Again, this relief is not specifically provided for by statute, but a number of courts have approved this theory. The basic idea is that the party wrongly using another's name should be required to pay a reasonable royalty, as if it had properly licensed to use the name. A good discussion of this approach to damages appears in the Seventh Circuit case, Sands, Taylor & Wood Co. v. Quaker Oats Co.(45) Expert testimony will be necessary in order to establish the royalty, but given the proper record, Sands, Taylor seems to authorize a court to make such an award to effectuate the policy goals of deterrence behind the Lanham Act.(46) Expert testimony is necessary to prove a royalty.

The theories of corrective advertising and reasonable royalty shift the focus to what the defendant has gained and, while each theory has certain elements of proof that cannot be taken for granted, they offer a business that might otherwise have been stymied by the need to prove its own lost profits with sufficient certainty, the opportunity to realize a recovery.

2. Accounting (Disgorgement)

Because of the inherent difficulties of proving lost profits to the requisite degree of certainty in trademark cases, the remedy of a disgorgement of profits by the defendant can be very attractive. This theory of recovery is provided for in 15 U.S.C. [sections] 1117(a)(1), and is available to the holder of any mark, whether registered or not. The plaintiff is required only to prove the defendant's sales. As Section 1117(a) states: "Defendant must prove all elements of cost or deduction claimed." The statute further provides that the court shall award such damages "subject to the principles of equity," and in such amounts that the award "shall constitute compensation and not a penalty."

The practical effect of the statute is to give plaintiffs that may not be able to quantify lost profits a potentially powerful theory of recovery, but one subject to the control and discretion of the court. For example, some courts have held that the "subject to the principles of equity" language means that the plaintiff must show that the defendant acted in bad faith or willfully in order to be entitled to recover the defendant's profits.(47)

There is not complete uniformity among the circuits, however. In the First Circuit, for example, while the plaintiff must show some degree of bad faith or intent if it seeks to recover the defendant's profits from sales of non-competing goods, this requirement is loosened in cases involving sales of competing goods.(48)

In the Seventh Circuit, there is also some authority to the effect that willfulness is not required in Roulo v. Russ Berrie & Co.: "Other than general equitable considerations, there is no express requirement that the parties be in direct competition or that the infringer willfully infringe ... to justify an award of profits."(49) But the state of the law is not completely settled in the Seventh Circuit. It has cautioned against diluting the standards for recovery of profits too far, lest plaintiff reap unwarranted windfalls.(50)

The general trend seems to be in the direction of requiring something more than innocent infringement before being able to recover a defendant's profits. However, the courts have recognized a myriad of circumstances as evidence of bad faith and willfulness, so the mere fact that one jurisdiction may require such a showing should not cause one to assume that a recovery of the defendant's profits is beyond reach.

3. Enhanced Damages

A court's oversight role is dramatized in this category of damages. While Section 1117 clearly provides for an award of enhanced damages, this award is to be made by the court "according to the circumstances of the case" and in such a way as to constitute "compensation, and not a penalty." It appears, therefore, that the statute envisions the court weighing a variety of considerations when considering whether to enlarge a damage award, with the enlargement being far from automatic.

These provisions are often interpreted by courts as requiring them to intervene when the plaintiff otherwise would receive inadequate compensation or an unjustified windfall. The practitioner can find a multitude of cases, however, offering a multitude of interpretations of these clauses to serve a multitude of policy goals: to punish and deter willful infringement, to account for injury that was real but unquantifiable, to punish the infringer whose lack of records thwarts more definite proof.

The courts tend to agree, however, that the prohibition against a "penalty" bars the imposition of punitive damages. However, many courts have recognized that a prime policy goal is to deter unjust enrichment, and they express the view that "monetary relief ... must be great enough to further the statute's goal of discouraging trademark infringement but must not be so large as to constitute a penalty."(51)

A variety of "circumstances" have been held to justify an increase in damages--for example, where there were gaps in the defendant's records that made a precise calculation of sales and profits impossible(52) and where the injury to the plaintiff was unquestionable, but unquantifiable.(53)

4. Attorney's Fees

Attorney's fees may be recovered by the prevailing party "in exceptional cases." The question of what constitutes an "exceptional case" thus becomes of considerable interest. "Exceptional cases" generally have been seen as cases involving bad faith, fraud, malice, and knowing infringement. An award of attorney's fees rests in the court's discretion, as the language of the statute is discretionary, not mandatory.

Some cases have recognized the importance of the attorney's fees provision as encouraging the enforcement of trademark rights where the damages might otherwise be minimal. Thus, the courts will uphold an award of fees that exceeds the actual damages.

Defendants should be aware that a prevailing defendant can also recover fees if the plaintiff's suit was unfounded or in bad faith.(54)

B. State Trademark Statutes

Most American states have enacted trademark statutes, and the damages provided may differ from those available under federal law. Therefore, counsel must consult applicable state statutes in addition to the federal statutes.


The explosion in the use of the Internet has resulted in several trademark infringement and, more particularly, trademark dilution-related cases being decided in the courts.

A. Domain Names

A word used as an Internet domain name identifies a place on the Internet where a "home page" or "website" is located. Trademark infringement under the federal Lanham Act can occur if a domain name similar to a trademark is used without permission in a commercial sense, such as in connection with the sale, offering for sale, distribution or advertising of any goods or services in a context that is likely to cause confusion, mistake or deception with a previously used mark. Commercial use of a domain name can also trigger the anti-dilution provisions of the Lanham Act.

As the popularity of the Internet has increased exponentially, interest in the legal issues surrounding domain names also has increased. Up to the present, the Internet and the allocation of domain names has been operated by a private consensus of Internet providers and technical experts, not by government regulation or ownership. This has led to a somewhat chaotic legal situation in the environment of a network privately regulated primarily by technical experts. This is a legal setting which is unfamiliar to most attorneys. However, there is no doubt that when activities in cyberspace and on the Internet violate the laws of a nation, such as the laws of trademark, there is a violation of the law. Cyberspace is not a sanctuary free from legal regulation.(55)

1. Registration of Domain Names

Until recently, Network Solutions Inc. (NSI) was the sole registrar of domain names on the internet. Two cases addressed whether NSI was liable for trademark infringement and dilution based solely on NSI's registration of domain names--Academy of Motion Picture Arts & Sciences v. Network Solutions Inc.(56) and Lockheed Martin Corp. v. Network Solutions Inc.(57) In both cases, courts rejected the plaintiffs' arguments. The courts found that NSI could not be held liable for federal trademark dilution because the registration of the domain names in the cases did not constitute "commercial use" within the meaning of the Federal Trademark Dilution Act.

The courts also rejected the infringement arguments. In the Academy case, the district court analyzed the plaintiff's claims of contributory and direct trademark infringement, and in the Lockheed Martin case, the court stated that a defendant is liable for contributory infringement if he "either intentionally induces a third party to infringe the plaintiff's mark or supplies a product to a third party with actual or constructive knowledge that the product is being used to infringe the service mark."

With regard to contributory trademark infringement, the court in the Academy case found that the plaintiff had not demonstrated that NSI had the "requisite level of knowledge or control to be held liable under this theory." Because there was no judicial determination that had the domain names at issue infringed, NSI could not have actual knowledge that the domain name owners were engaged in infringing activities.

On the issue of direct trademark infringement, the Academy court found that the plaintiff had failed to establish commercial use of the marks by NSI as required by the Lanham Act.

In the Lockheed Martin case, the Ninth Circuit affirmed the district court's grant of summary judgment on the basis that Lockheed Martin had failed to establish contributory infringement by NSI. The court did not address the issue of NSI's actual or constructive knowledge of infringement. Instead, it affirmed the district court on the basis that NSI had not supplied a "product" to third parties, but was instead a service provider akin to the United States Postal Service.

2. Use of Trademarks as Domain Names

In Avery Dennison Corp. v. Sumpton,(58) the Ninth Circuit reversed the district court's grant of summary judgment in favor of Avery Dennison Corp., which owns the trademarks "Avery" and "Dennison." The defendants registered the names and, among others, for use in their e-mail address licensing business. The district court granted Avery Dennison's motion for summary judgment as to its federal and California claims for dilution of its trademarks and entered an injunction against the defendants requiring the transfer of the registrations to Avery Dennison.

The Ninth Circuit examined the various factors needed to establish famousness and found that "Avery" and "Dennison" were not famous. In part, the court was persuaded by the fact that "Avery" and "Dennison" were widely used both on and off the Internet by businesses other than Avery Dennison. The court also held that the defendants' use of "Avery" and "Dennison" did not constitute "commercial use" as required by the FTDA, stating that the defendants used "words that happen to be trademarks for their non-trademark value."

Several other courts have addressed the use of trademarks as domain names. In some cases, courts have found that the use of the defendant's trademark as a domain name did not constitute trademark infringement.(59) In most cases, however, courts have held that the use of the domain names employing a trademark constitutes trademark infringement and/or dilution.(60)

B. Metatags

When an Internet user conducts a search, a search engine such as Yahoo often will search for a metatag, which is an HTML (hypertext markup language) code intended to describe the contents of the website. The use of trademarks as metatags has resulted in trademark infringement litigation. Most often, the plaintiff alleges that the defendant's use of the plaintiff's trademark as a metatag will result in confusion over the source of the website.

In Brookfield Communications Inc. v. West Coast Entertainment Corp.,(61) the issue was the defendant's use of the domain name "" as well as "MovieBuff" or "" in the HTML code. The plaintiff owned the trademark "MovieBuff." The Ninth Circuit found that the use of "" in metatags would result in initial interest confusion. It summarized other cases that ruled that use of the plaintiff's trademark in the defendant's metatags constitutes trademark infringement,(62) distinguishing the case before it from the use of descriptive terms as metatags, which it held was permissible.

The Ninth Circuit also distinguished its case from Playboy Enterprises Inc. v. Welles,(63) in which Playboy Enterprises sought to enjoin a former playmate from using "Playboy" and "Playmate" on her website and in her metatags. In that case, the district court denied the preliminary injunction, finding that the defendant was accurately using the terms "Playboy" and "Playmate" to describe herself as a former Playboy Playmate of the Year. Unlike Welles, the defendant in Brookfield Communications, was not using a descriptive term in its metatags--that is, "MovieBuff" was not a descriptive term. The defendant, the court said, could use the term "Movie Buff," which describes one devoted to motion pictures, but it could not eliminate the space between the words.

C. Cybersquatters

A recent trend relating to trademark law and cyberspace is actions for trademark infringement against "cybersquatters." Courts have held that cybersquatting constitutes infringement, according to the language of the Lanham Act.

In Intermatic Inc. v. Toeppen,(64) the U.S. District Court for the Northern District of Illinois described a cybersquatter as one who attempts to profit "by reserving and later reselling or licensing domain names back to the companies that spent millions of dollars developing the goodwill of the trademark." Dennis Toeppen was in the business of acquiring domain names using company names and agreeing to relinquish his rights to them in return for payment from the identified company. He reserved, among others,,, and

The Intermatic case involved the domain name, which Toeppen attempted to sell to the plaintiff Intermatic Inc. On the issue of trademark infringement, the court denied the parties' cross motions for summary judgment, finding that there were questions of fact as to a likelihood of confusion, but it granted Intermatic's motion for summary judgment on its state and federal dilution claims. Because Toeppen did not dispute that Intermatic's mark was famous, the court focused its analysis on the commercial use and dilution factors.

With regard to the commercial use requirement, the court first found that the .com registration did not alone establish commercial use. However, it went on to conclude that Toeppen's intention to arbitrage the domain name constituted a commercial use.

On the issue of dilution, the court pointed to two facts in determining that Toeppen's use diluted Intermatic's mark. First, Toeppen's registration of meant that Intermatic could not use its mark as a domain name. As a result, Toeppen's activity was said to have lessened the "capacity of Intermatic to identify and distinguish its goods and services by means of the Internet." Second, Toeppen used Intermatic's mark on the web page found at The possibility of Intermatic's name being associated with any number of possible messages on the site was sufficient to show that the mark was likely to be diluted, the court stated.

Toeppen also was involved in Panavision International L.P. v. Toeppen,(65) in which he registered and and attempted to sell them to Panavision International L.P, which owned the registrations for the marks Panavision and Panaflex. As in the Intermatic case, Toeppen did not challenge the famousness of the Panavision marks. Again, the court's analysis focused on the commercial use factor and whether Toeppen's use caused dilution in the quality of the Panavision marks.

Affirming the district court, the Ninth Circuit concluded that "Toeppen's commercial use was his attempt to sell the trademarks themselves." With regard to dilution, the court rejected Toeppen's argument that he was not diluting the capacity of Panavision to identify goods or services because Panavision could use another website address to promote its goods or services.

In Teletech Customer Care Management (California) Inc. v. Tele-Tech Co.,(66) the U.S. District Court for the Central District of California, granting the plaintiff's motion for a preliminary injunction, found that the plaintiff was likely to succeed on its claims for federal and state dilution statutes. While the defendant, Tele-Tech Co., originally obtained the domain name without the intent of selling it to the plaintiff, the court determined that, like Toeppen, Tele-Tech had demanded money from the plaintiff in order to stop using the domain name. It ruled that the Teletech trademark was likely to be found famous and that the defendant's use of the domain name likely diluted the plaintiff's mark.


A. Introduction

Most commercial liability and excess policies include "advertising injury" coverage, which cover's the insured's liability for specified business torts, such as defamation, invasion of privacy, infringement of slogan, etc., if committed in the course of the insured's advertising. Insureds have tendered the defense of a variety of intellectual property lawsuits, including trademark infringement claims, to their liability carriers, contending the claims arise from their advertising.

B. Policy Language

The concept of "advertising injury" made its first large- scale appearance in an endorsement in the 1973 standard ISO CGL policy.(67) The "advertising injury" coverage language was substantially revised in the 1986 version of the ISO policy. Another revision in 1996 made minor changes in the coverage. The language was revised again in the 1998 CGL coverage form. Although the language appears to have changed considerably between 1986 and 1998, in reality the coverage is about the same and perhaps somewhat broader under the 1998 form. Most claims currently being asserted will fall either under the 1986/96 form or the 1998 form.

1. Insuring Agreement

As with any type of policy, different insurers make their own modifications to the policy language and create their own specific endorsements. Any of these changes can have a significant impact on the coverage analysis.

a. 1996 Policy

The relevant portions of the 1996 version of the ISO CGL policy read:

      1. Insuring Agreement

      a. We will pay those sums that the insured becomes legally obligated to
   pay as damages because of "personal injury" or "advertising injury" to
   which this insurance applies. We will have the right and duty to defend the
   insured against any "suit" seeking those damages. However, we will have no
   duty to defend the insured against any "suit" seeking damages for "personal
   injury" or "advertising injury" to which this insurance does not apply....

      b. This insurance applies to: ... (2) "Advertising injury" caused by an
   offense committed in the course of advertising your goods, products or
   services; but only if the offense was committed in the "coverage territory"
   during the policy period.

b. 1998 policy

The 1998 version of the ISO CGL policy is identical to the 1996 version with the exception of two terms that refer to new definitions set out in "Section V, Definitions," which will be discussed later. First, the term "personal injury or advertising injury" is replaced by the language "personal and advertising injury'." Second, paragraph 1(b) is rewritten and now provides:

b. This insurance applies to "personal and advertising injury" caused by an offense arising out of your business but only if the offense was committed in the "coverage territory" during the policy period.

2. 1996 Definition of "Advertising Injury"

The 1996 ISO policy defines "advertising injury" as:
      "Advertising Injury" means injury that arises out of your advertising
   activities as a result of: ... (3) misappropriation of advertising ideas or
   style of doing business; or (4) infringement of copyright, title or slogan.

3. 1998 Definition of "Advertising Injury"

The 1998 ISO policy contains two new relevant definitions:
      1. "Advertisement" means a notice that is broadcast or published to the
   general public or specific market segments about your goods, products or
   services for the purpose of attracting customers or supporters....

      14. "Personal and advertising injury" means injury, including
   consequential "bodily injury," arising out of one or more of the following
   offenses: "Advertising Injury" means injury that arises out of your
   advertising activities as a result of: ... f. The use of another's
   advertising idea in your "advertisement"; or g. Infringing upon another's
   copyright, trade dress or slogan in your "advertisement".

C. Coverage Analysis

To invoke coverage under the "advertising injury" section of a CGL policy, several fundamental requirements must be met:

* The damages must arise from one of the offenses listed in the relevant definitions of "advertising injury."

* The offense must be committed during the policy period and in the coverage territory.

* The offense must occur in the course of the insured's advertising activities.

* The plaintiff in the underlying action must be seeking "damages" and not merely injunctive relief.

* The offense must not fall into one of the exclusions to coverage.

Each of these criteria, as well as the exclusions will be discussed separately, with the exception of requirement two, which is self-explanatory.

1. Do the damages arise from one of the offenses listed in the definition of "advertising injury"?

The first question that must be answered is whether the claim asserted constitutes one of the "offenses" listed under the definition of "advertising injury."

a. Included Offenses

The 1986/96 version of the ISO policy lists two offenses that arguably could be included in trademark infringement claims. They are "misappropriation of advertising ideas or style of doing business" and "infringement of copyright, title or slogan." Courts that have considered this issue have evaluated both clauses, although most of the litigation has centered on the "misappropriation" term. The 1998 policy replaced the term "misappropriation," changing the provision to cover the "use of another's advertising idea." In the 1998 policy the term "title" was dropped from the "infringement of copyright, title or slogan" provision and "trade dress" was substituted.

b. Trademark Claims

Courts have been divided on whether trademark claims are covered under the 1986/96 policy language. One line of cases holds that trademark infringement claims are covered because a trademark is an "advertising idea," broadly read as the manner by which another advertises its goods.(68) Some of these courts have held in the alternative that trademark infringement is "infringement of ... title or slogan" under the 1986/96 policy. One court has correctly noted that a slogan can be a trademark.(69) Another line of reasoning has been that the term "title" means "a distinctive appellation, the name by which anything is known."(70) That is, of course, the very essence of many trademarks.

The vanguard of the opposing line of cases is Advance Watch Co. v. Kemper National Insurance Co.,(71) in which the Sixth Circuit held that the term "misappropriation" was intended to refer exclusively to the common law tort of misappropriation, which involves the copying of an original idea. Since the tort of misappropriation does not include trademark infringement, it was not considered a covered offense under the ISO policy.(72)

The 1998 ISO policy changed "misappropriation of advertising ideas or style of doing business" to the "use of another's advertising idea" and dropped the reference to infringement of "title." One authority states that the word "title" was dropped to eliminate any interpretation of the policy to cover trademark infringement claims, stating: "Coverage of such claims, ISO asserts in its explanatory memoranda accompanying the 1998 [policy], was never intended."(73)

However, if this was the intent, the policy changes do not clearly accomplish it. Given that the main line of cases holding that the pre-1998 version of the policy did not cover trademark infringement were based on the view that the term "misappropriation" was a defined term under case law, dropping "misappropriation" in favor of "use of another's advertising idea" would appear to overrule these cases. This adds all the more authority to the cases holding that trademark infringement is covered because a trademark is an "advertising idea." The ISO policy could simply have excluded trademark infringement. Such express exclusions are found in the policies of many companies.(74)

2. Did the Offense Arise from the Insured's Advertising Activities?

The second element necessary to invoke coverage under "advertising injury" is that the offense must be committed during the course of the insured's advertising activities. That, in turn, involves two issues: Was there advertising? Was the injury caused by the insured's advertising?

a. Was There Advertising?

A question often faced by courts is whether the dissemination at issue actually constituted advertising. What scope of dissemination constitutes advertising? Is it widespread public dissemination, or are one-on-one solicitations sufficient?

Early federal case law suggested that even one-to-one communication could constitute advertising.(75) Other cases hold that "advertising" refers to the widespread distribution of promotional material to the public at large.(76)

The 1998 revisions to the ISO policy appear to have taken aim at the cases holding that limited contacts can constitute advertising. There must now be "a notice that is broadcast or published to the general public or specific market segments about your goods, products or services."

b. Advertising Activities

Finally, in order to fall within a CGL policy's definition of "advertising injury" the offense must be committed in the course of the insured's advertising activities. In other words, there must be a causal connection between the alleged injury--the offense--and the insured's advertising activities.(77)

The causal connection is greater than "but for" causation. The U.S. District Court for the Eastern District of Virginia explained the necessary causal connection:
      [The insured] attempts to argue that the advertising of the infringing
   device was a "but for" cause of the sale of the device, and therefore that
   the infringement "resulted from" the advertising of [the insured's]
   product. The Supreme Court of California, however, has recently rejected
   the theory underlying this argument. In Bank of the West v. Superior Court,
   2 Cal.4th 1254, 1274, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992), the court
   held that, under the language of a similarly worded insurance policy, there
   is no coverage unless the insured shows "a causal connection between
   `advertising activities' and `advertising injury.'" In other words, by
   inclusion of coverage for "advertising injury," it does not follow that
   "any harmful act, if it were advertised in some way, would fall under the
   grant of coverage merely because it was advertised." ... In explaining this
   concept, the Bank of the West court used patent infringement as an example.
   The court favorably cited decisions holding that patent infringement does
   not fall within the scope of "advertising injury," "even though the insured
   advertises the infringing product, if the claim of infringement is based on
   the sale or importation of the product rather than its advertisement."(78)

Thus, the presence of advertising and the presence of an offense is not sufficient. The insured must demonstrate that the offense occurred in the course of its advertising thereby causing the alleged damage.

3. Does Suit Seek Damages Rather Than Injunctive Relief?

One often overlooked requirement is that the underlying complaint actually seek damages and not merely injunctive relief or the disgorgement of profits.(79) If damages are not sought, then the insurer may argue the offense does not fall within the coverage of the policy. Similarly, if a plaintiff seeks restitution from an insured instead of damages, an insurer may argue there is no coverage. That was the reasoning employed by the California Supreme Court in Bank of the West v. Superior Court (Industrial Indemnity Co.):
      It is well established that one may not insure against the risk of being
   ordered to return money or property that has been wrongfully acquired....

      The public policy rationale that underlies these holdings, explicitly or
   implicitly, is this: When the law requires a wrongdoer to disgorge money or
   property acquired through a violation of the law, to permit the wrongdoer
   to transfer the cost of disgorgement to an insurer would eliminate the
   incentive for obeying the law. Otherwise the wrongdoer would retain the
   proceeds of his illegal acts, merely shifting his loss to an insurer.(80)

As usual, however, there are cases that go the other way, holding that under particular statutes or factual situations, coverage applied to claims for disgorgement of profits or other forms of restitution.(81)

4. Is Offense Excluded?

Assuming that a claim does fall within the insuring agreement for "advertising injury," it is possible that coverage will be precluded by one or more exclusions in the policy. Thus, it is necessary to review the exclusions in determining whether there is coverage for a claim.

The standard CGL policy contains several exclusions that potentially preclude coverage for certain advertising injury claims. The 1986 version states that the policy does not apply to:
      p. "Personal injury" or "advertising injury":

      (1) Arising out of oral or written publication of material, if done by
   or at the direction of the insured with knowledge of its falsity;

      (2) Arising out of oral or written publication of material whose first
   publication took place before the beginning of the policy period;

      (3) Arising out of the willful violation of a penal statute or ordinance
   committed by or with the consent of the insured;

      (4) For which the insured has assumed liability in a contract or
   agreement. This exclusion does not apply to liability for damages that the
   insured would have in the absence of the contract or agreement.

      q. "Advertising injury" arising out of:

      (1) Breach of contract, other than misappropriation of advertising ideas
   under an implied contract;

      (2) The failure of goods, products or services to conform with
   advertised quality or performance;

      (3) The wrong description of the price of goods, products or services;

      (4) An offense committed by an insured whose business is advertising,
   broadcasting, publishing or telecasting.

The exclusions in the 1998 policy have been reformatted but remain essentially the same, although there is one addition. Exclusion 2.a(1) now provides that the policy does not cover "personal and advertising injury" that is "caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict `personal and advertising injury.'"

There is little or no case law interpreting these exclusions in the context of advertising injury claims. As cases are litigated, their application surely will be clarified.

D. Always Ask to Review Policy

When called on to represent and defend a client from a trademark infringement claim, or an intellectual property claim of any kind, whether in a complaint, a counterclaim, or asserted in any other manner, always ask the client to submit its insurance policies for the relevant time period for review. Unless it is absolutely clear that there is no coverage for anything alleged in the complaint or which could be raised in the litigation, counsel should recommend tendering the defense at the earliest opportunity. Failure to ask the insured for its policies, to advise it of the possibility of coverage, or to fail to make a timely tender the defense, is malpractice.(82)

(1.) See 1 MCCARTHY ON TRADEMARKS AND UNFAIR COMPETITION [sections] 3:1 (West, 4th ed. 1996). This multi-volume set is cited hereinafter as MCCARTHY.


(3.) See 1 MCCARTHY, at [subsections] 7:9-10.

(4.) Nabisco Brands Inc. v. Kaye, 760 F.Supp. 25 (D. Conn. 1991). See 1 MCCARTHY, at [subsections] 7:14-15.

(5.) Id. at [sections] 7:20.

(6.) Id. at [sections] 7:24.

(7.) 514 U.S. 159 (1995), rev'g 13 F.3d 1297 (9th Cir. 1994). For the district court decision, see 21 U.S.P.Q.2d 1457 (C.D. Cal. 1991).

(8.) See 1 MCCARTHY, at [sections] 7:44.

(9.) 17 U.S.P.Q.2d 1238 (T.T.A.B. 1990).

(10.) See 1 MCCARTHY, at [sections] 7:105.

(11.) Id. at [sections] 7:104.

(12.) See 3 MCCARTHY, at [sections] 23.1.

(13.) Standard Oil Co. of New Mexico v. Standard Oil Co. of California, 56 F.2d 973 (10th Cir. 1032), quoting Pennsylvania v. West Virginia, 262 U.S. 553, 593 (1923).

(14.) See 3 MCCARTHY, at [sections] 23.12.

(15.) Id. at [sections] 23:19.

(16.) Id. at [sections] 23:2.

(17.) 221 F.2d 464 (2d Cir. 1955), cert. denied, 350 U.S. 832 (1955).

(18.) See 3 MCCARTHY, at [sections] 23:7.

(19.) 632 F.2d 817 (9th Cir. 1980).

(20.) 365 F.Supp. 707 (S.D.N.Y. 1973), aff'd, 523 F.2d 1331 (2d Cir. 1975).

(21.) See 3 MCCARTHY, at [sections] 23:6.

(22.) Id. at [sections] 23:10.

(23.) Ameritech Inc. v. American Information Technologies Corp., 811 F.2d 960, 964 (6th Cir. 1987).

(24.) Smith v. Chanel Inc., 402 F.2d 562 (9th Cir. 1968).

(25.) See 3 MCCARTHY, at [sections] 25:52.

(26.) See 2 MCCARTHY, at [subsections] 11:45-48.

(27.) Sunmark Inc. v. Ocean Spray Cranberries Inc., 64 F.3d 1055 (7th Cir. 1995).

(28.) See 5 MCCARTHY, at [subsections] 31:153-155.

(29.) 505 U.S. 763,764 (1992).

(30.) See 1 MCCARTHY, at [subsections] 8:4-.5.

(31.) 187 F.3d 363 (4th Cir. 1999), rev'g 11 F.Supp.2d 773 (M.D.N.C. 1998).

(32.) Knitwaves Inc. v. Lollytogs Ltd., 71 F.3d 996 (2d Cir. 1995), and Duraco Prods. Inc. v. Joy Plastic Enters. Ltd., 40 F.3d 1431 (3d Cir. 1994). See also Versa Prods. Co. Inc. v. Bifold Co. (Mfg.) Ltd., 50 F.3d 189 (3d Cir. 1995).

(33.) The Seventh Circuit in Thomas & Betts Corp. v. Panduit Corp., 65 F.3d 654 (7th Cir. 1995), and the Federal Circuit in Elmer v. ICC Fabricating Inc., 67 F.3d 1571 (Fed. Cir. 1995).

(34.) See 3 MCCARTHY, at [sections] 23:70.

(35.) Id. at [sections] 23:68-69.

(36.) S. REP. NO. 100-515, at 42 (1988), reprinted in 1988 U.S.C.C.A.N. 5577.

(37.) See 4 MCCARTHY, at [subsections] 24:92-92.2.

(38.) 170 F.3d 449 (4th Cir. 1999), aff'g 955 F.Supp. 605 (E.D. Va. 1997), cert. denied, 120 S.Ct. 286 (1999).

(39.) 191 F.3d 208 (2d Cir. 1999).

(40.) Lone Star Steakhouse & Saloon v. Alpha of Va. Inc., 43 F.3d 922, 938 (4th Cir. 1995).

(41.) McNeil Labs. Inc. v. Am. Home Prods. Corp., 416 F. Supp. 804 (D. N.J. 1976).

(42.) Pizzeria Uno Corp. v. Temple, 747 F.2d 1522 (4th Cir. 1984).

(43.) 408 F.Supp. 1219 (D. Colo. 1976).

(44.) See also Zazer Designs v. L'Oreal S.A., 979 F.2d 499 (7th Cir. 1992); U-Haul Int'l v. Jartram Inc., 793 F.2d 1034 (9th Cir. 1986); Adray v. AdryMart Inc., 68 F.3d 362 (9th Cir. 1995).

(45.) 34 F.3d 1340 (7th Cir. 1994).

(46.) See also Ramada Inns Inc. v. Gadsden Motel Co., 804 F.2d 1562 (11th Cir. 1986).

(47.) Nalpac Ltd. v. Corning Glass Works, 784 F.2d 752 (6th Cir. 1986); Springs Mills Inc. v. Ultracashmere House Ltd., 724 F.2d 352 (2d Cir. 1983); Maltina Corp. v. Cawy Bottling Co., 613 F.2d 582 (5th Cir. 1980); Babbitt Elecs. Inc. v. Dynascan Corp., 828 F.Supp. 944 (S.D. Fla. 1993), aff'd, 38 F.3d 1161 (11th Cir. 1994).

(48.) Aktiebolaget Electrolux v. Amatron Int'l Inc., 999 F.2d 1, 27 (1st Cir. 1993).

(49.) 886 F.2d 931,941 (7th Cir. 1989).

(50.) BASF Corp. v. Old World Trading Co., 41 F.3d 1081 (7th Cir. 1994).

(51.) Otis Clap & Jan Inc. v. Filmore Vitamin Co., 754 F.2d 738 (7th Cir. 1985).

(52.) Imagineering Inc. v. Van Klassers Inc., 851 F.Supp. 532 (S.D.N.Y. 1994); Playboy Enters. Inc. v. PK Sorren Export Co., 546 F.Supp. 987 (S.D. Fla. 1982).

(53.) Donso Inc. v. Casper Corp., 1980 WL 30363, 205 U.S.P.Q. 246 (E.D. Pa. 1980).

(54.) Scotch Whiskey Ass'n v. Majestic Distilling Co., 958 F.2d 594 (4th Cir. 1992); Noxell Corp. v. Firehouse No. 1, 771 F.2d 521 (D.C. Cir. 1985).

(55.) See 4 MCCARTHY, at [sections] 25.70.

(56.) 1997 WL 829341,45 U.S.P.Q.2d 1463 (C.D. Cal. 1997).

(57.) 985 F. Supp. 949 (C.D. Cal. 1997), aff'd, 194 F.3d 980 (9th Cir. 1999).

(58.) 189 F.3d 868 (9th Cir. 1999).

(59.) See, e.g., Playboy Enters. Inc. v. Netscape Communications Corp., 55 F.Supp.2d 1070 (C.D. Cal. 1999) (motion for preliminary injunction denied); CD Solutions Inc. v. Tooker, 15 F.Supp.2d 986 (D. Or. 1998) (no expansion of scope of trademark rights to generic descriptions); Interstellar Starship Servs. Ltd. v. Epix Inc., 983 F.Supp. 1331 (D. Or. 1997) (no likelihood of confusion).

(60.) See, e.g., Washington Speakers Bureau Inc. v. Leading Authorities Inc., 33 F.Supp.2d 488 (E.D. Va. 1999) and 39 F.Supp.2d 496 (E.D. Va. 1999); Archdiocese of St. Louis v. Internet Entertainment Group Inc., 34 F.Supp.2d 1145 (E.D. Mo. 1999); Jews for Jesus v. Brodsky, 993 F.Supp. 282 (D. N.J. 1998); Playboy Enters. Inc. v. Asiafocus Int'l Inc., 1998 WL 724000 (E.D. Va. 1998); Cardservice Int'l Inc. v. McGee, 950 F.Supp. 737 (E.D. Va.), aff'd, 129 F.3d 1258 (4th Cir. 1997); Lozano Enters. v. La Opinion Publishing Co., 1997 WL 745036, 44 U.S.P.Q. 2d 1764 (C.D. Cal. 1997); Planned Parenthood Federation of Am. Inc. v. Bucci, Playboy Enters. Inc., 1997 WL 133313, 42 U.S.P.Q.2d 1430 (S.D.N.Y. 1997), aff'd, 152 F.3d 920 (2d Cir. 1998 (summary disposition), cert. denied, 119 S.Ct. 90 (1998); Green Prods. Co. v. Independence Corn By-Prods. Co., 992 F.Supp. 1070 (N.D. Iowa 1997); Toys `R' Us Inc. v. Abir, 1997 WL 857229, 45 U.S.P.Q.2d 1944 (S.D.N.Y. 1997); Hasbro Inc. v. Internet Entertainment Group Ltd., 1996 WL 84853, 40 U.S.P.Q.2d 1479 (W.D. Wash. 1996); Toys `R' Us Inc. v. Akkaoui, 1996 WL 772709, 40 U.S.P.Q.2d 1836 (N.D. Cal. 1996).

(61.) 174 F.3d 1036 (9th Cir. 1999).

(62.) E.g., AsiaFocus, 1998 WL 724000; Niton Corp. v. Radiation Monitoring Devices Inc., 27 F.Supp.2d 102 (D. Mass. 1998); Playboy Enters. Inc. v. Calvin Designer Label, 985 F.Supp. 1220 (N.D. Cal. 1997).

(63.) 7 F.Supp.2d 1098 (S.D. Cal. 1997), aff'd, 162 F.3d 1169 (9th Cir. 1998) (unpublished disposition).

(64.) 947 F.Supp. 1227, 40 U.S.P.Q.2d 1412 (N.D. Ill. 1996).

(65.) 945 F.Supp. 1296, 40 U.S.P.Q.2d 1908 (C.D. Cal. 1996), aff'd, 141 F.3d 1316, 46 U.S.P.Q.2d 1511 (9th Cir. 1998).

(66.) 977 F.Supp. 1407, 42 U.S.P.Q.2d 1913 (C.D. Cal. 1997).

(67.) Shaun McParland Baldwin et al., Coverage for Intellectual Property Claims and Unfair Business Practices under the Advertising Injury Liability Coverage, at Defense Research Institute Coverage Practice Symposium, June 27-28, 1996.

68. J.A. Brundage Plumbing & Roto-Rooter Inc. v. Massachusetts Bay Ins. Co., 818 F.Supp. 553, 556 (W.D.N.Y. 1993), vacated on other grounds, 153 F.R.D. 36 (W.D.N.Y. 1994); Sorbee Int'l Ltd. v. Chubb Custom Ins. Co., 735 A.2d 712, 716 (Pa. Super. 1999). See also P.J. Noyes Co. v. Am. Motorists Ins. Co., 855 F.Supp. 492 (D. N.H. 1994); Energex Sys. Corp. v. Fireman's Fund Ins. Co., 1997 WL 358777 (S.D.N.Y. 1997); Poof Toy Prods. Inc. v. United States Fidelity & Guar. Co., 891 F.Supp. 1228 (E.D. Mich. 1995); B.H. Smith Inc. v. Zurich Ins. Co., 676 N.E.2d 221 (Ill.App. 1996).

(69.) J.A. Brundage, 818 F.Supp. at 558.

(70.) Energex, 1997 WL 358777 at *3.

(71.) 99 F.3d 795 (6th Cir. 1996).

(72.) See also Atlantic Mut. Ins. Co. v. Badger Med. Supply Co., 528 N.W.2d 486 (Wis. App. 1995); Prough, The Continuing Trend Against Expanding "Advertising Injury" Coverage to a Broad Range of Intellectual Property Claims, MEALEY'S THE REPORT, July 17, 1995.

(73.) Commercial Liability Insurance, Supp. No. 72, Int'l Risk Mgmt. Inst. Inc., at V.L.30.

(74.) See, e.g., Indus. Indemn. Co. v. Apple Computer Inc., 83 Cal. Rptr.2d 866, 871 (Cal.App. 1999), review granted, July 28, 1999; Feed Store Inc. v. Reliance Ins. Co., 774 S.W.2d 73 (Tex.App. 1989).

(75.) John Deere Ins. Co. v. Shamrock Indus. Inc., 696 F.Supp. 434 (D. Minn. 1988) (three letters sent to one customer). See also Nichols v. Great Am. Ins. Cos., 215 Cal.Rptr. 416 (Cal. App. 1985); Am. States Ins. Co. v. Canyon Creek, 786 F.Supp. 821 (N.D. Cal. 1991).

(76.) Bank of the West v. Superior Court (Industrial Indem. Co.), 833 P.2d 545 (Cal. 1992), rev'g 277 Cal. Rptr. 219 (Cal.App. 1991), and citing Fox Chem. Co. v. Great Am. Ins. Co., 264 N.W.2d 385 (Minn. 1978). For previous decision in Bank of the West, see 275 Cal.Rptr. 39 (Cal.App. (1990).

(77.) Bank of the West, 833 P.2d 545; Tschimperle v. Aetna Cas. & Sur. Co., 529 N.W.2d 421 (Minn.App. 1995).

(78.) St. Paul Fire & Marine Ins. Co. v. Advanced Interventional Sys. Inc., 824 F.Supp. 583, 586 (E.D. Va. 1993).

(79.) Feed Store, 774 S.W.2d 73.

(80.) 833 P.2d at 553,555.

(81.) See, e.g., Limelight Prods. Inc. v. Limelite Studios Inc., 60 F.3d 767 (11th Cir. 1995).

(82.) Darby & Darby P.C. v. VSI Int'l Inc., 678 N.Y.S.2d 482 (Sup. Ct., New York County 1998).

IADC member Mark P. Wine and Cynthia A. Lock practice at Oppenhemier Wolff & Donnelly LLP, Los Angeles. IADC member Val H. Steiglitz is a member of Nexsen Pruet Jacobs & Pollard LLP, Columbia, South Carolina. IADC member John B. Lunseth H and Michael J. McGuire are at Rider, Bennett, Egan & Arundel LLP, Minneapolis.
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Author:Wine, Mark P.; Lock, Cynthia A.; Steiglitz, Val H.; Lunseth, John B., II; McGuire, Michael J.
Publication:Defense Counsel Journal
Geographic Code:1USA
Date:Jul 1, 2000
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