The Ninth U.S. Circuit Court of Appeals, applying California law, affirmed a grant of summary judgment in favor of Great American E&S Insurance Co. on the ground its policy’s prior publication exclusion negated its duty to defend a lawsuit alleging trademark infringement. In Street Surfing LLC v. AG MLG Great American E&S Ins. Co., decided June 10, extrinsic evidence established the insured used the “advertising” idea in an advertisement prior to the policy.
In or around December 2004, Street Surfing began selling a two-wheeled, in-line skateboard called the “Wave” to retail stores. The Wave displayed the Street Surfing logo.
Great American provided general liability insurance to Street Surfing from August 2005 to September 2007 which covered personal and advertising injury. “Personal and advertising injury” was defined to include the “use of another’s advertising idea in your ‘advertisement.’ ” The policy contained several exclusions, including a prior publication exclusion that disclaimed coverage for “ ‘[p]ersonal and advertising injury’ arising out of oral or written publication of material whose first publication took placed before the beginning of the policy period.”
In June 2008, Rhyn Noll sued Street Surfing, alleging trademark infringement under federal and California law. Noll owned the registered trademark “Streetsurfer” since early 2005. Street Surfing had tried unsuccessfully to buy the trademark from him around the same time. Street Surfing tendered the lawsuit to Great American. Great American denied the claim, relying on various exclusions but not the prior publication exclusion.
Street Surfing initiated a declaratory relief action seeking a declaration that Great American was obligated to defend and settle the lawsuit. The parties filed cross-motions for summary judgment. The district court concluded the prior publication rule relieved Great American of any duty to defend Street Surfing and entered judgment in Great American’s favor.
On appeal, the Ninth Circuit independently determined that the Noll lawsuit potentially fell within the coverage for use of another’s advertising idea. Noll’s complaint contained allegations that Street Surfing’s uses of the “Street Surfing” logo were wrongful uses of Noll’s advertising idea, namely, his “Streetsurfer” trademark.
The Ninth Circuit then relied on extrinsic evidence to conclude the prior publication exclusion applied to relieve Great American of any potential liability. Noll alleged in his complaint that Street Surfing used his advertising idea in its advertisement “since at least on or about January 2005,” which did not conclusively establish prior publication. However, extrinsic evidence established that Street Surfing affixed its logo to the Wave in December 2004, before the policy period. Affixing its logo to the Wave constituted “advertisement” within the policy’s meaning (“a notice that is broadcast or published to the general public … about [its] goods, products or services for the purpose of attracting customers or supporters”).
The Ninth Circuit rejected Street Surfer’s contention that Great American should be estopped from relying on the prior publication exclusion because it failed to include it in its denial letter. But there was no evidence Street Surfing (1) reasonably believed that Great American would provide coverage or (2) detrimentally relied on Great American’s failure to expressly refer to the exclusion. Great American had explicitly reserved its right to “assert any and all other terms, provisions, conditions and/or exclusions set forth in its policies which may be applicable to the Noll action.”
Click here for opinion.
This opinion is not final. Though it has been certified for publication, it may be withdrawn from publication, modified on rehearing, or granted review by the U.S. Supreme Court.
This and other case bulletins, as well as other publications of Gordon & Rees LLP, may be found at www.gordonrees.com.