(Article from Insurance Law Alert, February 2015)
For more information, please visit the Insurance Law Alert Resource Center.
An Illinois appellate court ruled that an insurer was obligated to defend an intellectual property infringement suit, finding that the claims alleged covered “advertising injury.”
Selective Ins. Co. of the Southeast v. Creation Supply, Inc., 2015 WL 522247 (Ill. App. Ct. Feb. 9, 2015).
Creation Supply was sued for trademark infringement and Lanham Act violations, among other claims, in connection with its sale of square-shaped colored markers. Selective Insurance sought a declaration that it had no duty to defend because the complaint did not allege advertising injury. Specifically, Selective argued that there was no causal connection between Creation Supply’s advertising activities and the damages alleged in the underlying case because the claims were based on Creation Supply’s sale of the markers, not its advertising activities. Both sides moved for summary judgment. An Illinois trial court ruled in Creation Supply’s favor, and the appellate court affirmed.
The policy defined “advertisement” as “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.” The court concluded that Creation Supply’s in-store retail display, which depicted the shape and design of the markers, constituted an advertisement. In so ruling, the court noted that the placards were “more than the mere display of the product itself and affirmatively serve to attract customers.” The court therefore reasoned that the retail display served as “an announcement disseminating the product to the public.”
Importantly, the court emphasized that not all retail product displays constitute advertising. The court distinguished an in-store retail display that does not depict the infringing product, such as a “large bin containing the markers and nothing more,” noting that under such circumstances, “Selective would have a valid argument that the retail product display did not constitute advertising as contemplated by the policy.” Illinois precedent also illustrates that product displays do not constitute advertising if they are not disseminated to the public.
See Santa’s Best Craft, LLC v. Zurich American Ins. Co., 941 N.E.2d 291 (1
st Dist. 2010) (product displays presented to 75-100 retailers by invitation in policyholder’s showroom did not constitute advertising) (discussed in February 2011 Alert).