Insurer Required to Defend Alleged Counterfeiter
In Allied Insurance Co. v. Bach, decided on February 27, 2007 and reported at 2007 WL 627635, the federal court for the Northern District of Illinois addressed the obligation of an insurer to defend its insured against counterfeiting and related claims under the Advertising Injury provision of the insured’s policy. The policy at issue defines "Advertising Injuries" to include "infringement upon another's copyright, trade dress or slogan in your 'advertisement.'" Excluded from coverage are advertising injuries "[c]aused 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.”
The insured, Cam Golf, was sued by Acushnet Company which alleged that Cam and others had marketed counterfeits of Acushnet's well known Titlest Pro VI golf ball. The Complaint alleged eight counts including: (1) federal trademark infringement; (2) federal trademark infringement based on false designation of origin; (3) federal anti-dilution of a famous trademark; (4) Illinois unfair competition; (5) Illinois deceptive trade practice violation; (6) Illinois consumer fraudulent practice; (7) Illinois anti-dilution of a famous trademark; and (8) copyright infringement. It expressly charged Cam with "willful and intentional violation of Acushnet's marks.”
Allied took the position that it had no duty to defend Cam because willful or knowing acts are expressly excluded from coverage under the Advertising Injuries provisions of the policy. It sued for a declaratory judgment to this effect.
The Court acknowledged that Allied would not have had an obligation to defend Cam if the claims asserted in the Complaint actually required a finding of willfulness. However, it rejected Allied’s argument that the mere inclusion of allegations of willful and intentional misconduct relieved Allied from its obligation to defend.
Under the Lanham Act, Cam could be found liable for trademark infringement and unfair competition regardless of its intent or knowledge, although it would not be liable for enhanced statutory damages or mandatory treble damages that are only available where the defendant willfully or intentionally traffics in counterfeits. Even though Acushnet’s Complaint alleged willful and intentional violation of Acushnet’s marks, because Acushnet could prevail against Cam without proving knowledge or intent, the Court concluded that Allied could not avoid its duty to defend.
The insured, Cam Golf, was sued by Acushnet Company which alleged that Cam and others had marketed counterfeits of Acushnet's well known Titlest Pro VI golf ball. The Complaint alleged eight counts including: (1) federal trademark infringement; (2) federal trademark infringement based on false designation of origin; (3) federal anti-dilution of a famous trademark; (4) Illinois unfair competition; (5) Illinois deceptive trade practice violation; (6) Illinois consumer fraudulent practice; (7) Illinois anti-dilution of a famous trademark; and (8) copyright infringement. It expressly charged Cam with "willful and intentional violation of Acushnet's marks.”
Allied took the position that it had no duty to defend Cam because willful or knowing acts are expressly excluded from coverage under the Advertising Injuries provisions of the policy. It sued for a declaratory judgment to this effect.
The Court acknowledged that Allied would not have had an obligation to defend Cam if the claims asserted in the Complaint actually required a finding of willfulness. However, it rejected Allied’s argument that the mere inclusion of allegations of willful and intentional misconduct relieved Allied from its obligation to defend.
Under the Lanham Act, Cam could be found liable for trademark infringement and unfair competition regardless of its intent or knowledge, although it would not be liable for enhanced statutory damages or mandatory treble damages that are only available where the defendant willfully or intentionally traffics in counterfeits. Even though Acushnet’s Complaint alleged willful and intentional violation of Acushnet’s marks, because Acushnet could prevail against Cam without proving knowledge or intent, the Court concluded that Allied could not avoid its duty to defend.