Nothing Comes Between Me and My Calvins…Except an Uncovered Trademark Infringement Lawsuit

CGS Indus., Inc. v. Charter Oak Fire Ins. Co.
|(2nd Cir. (N.Y.) June 11, 2013
The Second Circuit recently held that the phrase “infringement of title” in a liability policy does not encompass trademark infringement. Thus, the court found that a liability insurer was not obligated to indemnify its insured (not Calvin Klein) against a claim for allegedly copying the claimant’s rear-pocket stitching design in its jeans. The decision is noteworthy because it puts to rest policyholders’ argument, at least in New York, that trademark infringement is covered by liability policies affording coverage for advertising injury arising out of “infringement of copyright, title or slogan.”

The insured supplied jeans to Walmart for sale at its stores. The claimant sued Walmart and the insured, alleging trademark infringement based on the insured’s use of the claimant’s distinctive rear pocket stitching design on its jeans. The insured tendered its defense and indemnity to its liability insurer, which denied coverage on the ground that the policy did not cover trademark infringement claims. Specifically, the insurer contended that the alleged injury did not arise out of “infringement of copyright, title or slogan.” The district court disagreed, holding that the insurer had a duty to defend the insured.

On appeal, the Second Circuit applied its holding in Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d 608, 615 (2nd Cir. 2001) to find the terms “slogan” and “trademark” are not synonymous. Rather, the court held that “slogans” are “phrases used to promote or advertise a house mark or product mark, in contradistinction to the house or product mark itself,” and, therefore, that the design, which was not a phrase, was not a slogan.

With respect to whether the injury arose out of infringement of a “title,” the Second Circuit, for the first time, held that “title” means “the name or appellation of a product and does not cover design elements.” The court found that pocket stitching that serves as a trademark is not a “title.”  Although the court held that the insurer was not obligated to indemnify the insured for the claim, it found that the insurer was obligated to defend it. The court observed that, at the time the insured tendered its defense, there was enough legal uncertainty around the meaning of “title” to give rise to a duty to defend until the uncertainty surrounding the term was resolved.