The US Court of Appeals for the First Circuit affirmed the dismissal of a dental product manufacturer’s suit against its insurer, holding that the IP exclusion in the policy expressly excluded the trademark claims over which the insured sought coverage. Sterngold Dental, LLC v. HDI Global Insurance Company, Case No. 18-2084 (1st Cir. July 2, 2019) (Selya, J).

Intra-Lock sued Sterngold, alleging that Sterngold had infringed Intra-Lock’s OSSEAN trademark by using the marks OSSEO and OSSEOs for a nearly identical product. Sterngold asked HDI to defend the lawsuit and provide indemnification, but HDI refused. After Sterngold settled the underlying lawsuit, it again requested that HDI indemnify it. HDI again refused, and Sterngold sued. The district court granted HDI’s motion to dismiss, holding that Sterngold’s insurance policy from HDI did not provide coverage for the lawsuit. Sterngold appealed.

Sterngold’s policy provided coverage for “personal and advertising injury[,]” defined as “the use of ‘another’s advertising idea’ or ‘[i]nfringing upon another’s copyright, trade dress or slogan in [an] advertisement.’” The policy had an IP exclusion that provided:

This insurance does not apply to: . . . “Personal and advertising injury” arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your “advertisement”.

However, this exclusion does not apply to infringement, in your “advertisement”, of copyright, trade dress or slogan.

The First Circuit assumed without deciding that Intra-Lock’s claim alleged infringement of an “advertising idea” and thus constituted a covered “personal and advertising injury.” It went on to address the IP exclusion, which it described as Sterngold’s “most formidable obstacle.” The Court framed the question before it as “whether the advertising injury alleged in Intra-Lock’s complaint arose out of the claimed infringement of Intra-Lock’s trademark,” and concluded that it clearly did.

Sterngold’s argument for coverage focused primarily on the second sentence of the exclusion, which Sterngold argued took trademark infringement claims that did arise out of the use of another’s advertising idea out of the exclusion. The First Circuit disposed of this claim by concluding that the phrase “other intellectual property rights,” repeated in the first and second sentence of the exclusion, means that the second sentence only applies to those “other” rights—not to trademark infringement, which is independently listed in the first sentence. “Any other reading would render nugatory the plain language contained in the first sentence of the IP exclusion[,]” the Court stated.

Sterngold then argued that its OSSEO marks, used in internet advertising, were “slogans” and thus were expressly excluded from the IP exclusion by its third sentence. The First Circuit disposed of this argument by looking to Intra-Lock’s complaint, which never alleged that its OSSEAN marks were slogans or used the word “slogan,” and by considering the “plain and ordinary meaning” of the word “slogan.” Both paths foreclosed Sterngold’s argument that Intra-Lock had alleged the infringement of a “slogan.”

Practice Note: It is worthwhile for trademark infringement defendants to comb through their general liability policies to determine if there is any basis to seek defense or indemnification. However, defendants should be judicious about pursuing a suit for coverage where the “plain language” of their policy forecloses relief.