The California Court of Appeal has held that a general liability policy’s “first publication” exclusion relieved an insurer of any duty to defend an insured in a suit for trademark infringement. ( Kim Seng Company v. Great American Insurance Company of New York (2009) WL 3791874)
Facts
Derek and Constance Lee Corporation dba Great River Food (Great River), an Asian food wholesaler, filed a trademark infringement lawsuit against Kim Seng Company (Kim Seng), another Asian food wholesaler. Great River alleged that Kim Seng had infringed on Great River’s “Que Huong” trademark.
Kim Seng had previously registered the trademark “Old Man Que Huong Brand,” stating in its trademark application that it had used that mark since March 1988 . Kim Seng had also previously registered the trademark “Que Huong,” stating in its application that it had used that mark since January 1993 .
Kim Seng tendered defense of the trademark lawsuit to Great American Insurance Company of New York (Great American) under a commercial general liability policy which had became effective on October 6, 1997. The Great American policy covered various “advertising injury” offenses, including “misappropriation of advertising ideas or style of doing business.” However, the policy also excluded coverage for advertising injury “arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.” Based on the “first publication” exclusion, Great American refused to defend Kim Seng in the trademark infringement lawsuit brought by Great River.
Thereafter, Kim Seng filed a declaratory relief action against Great American, seeking a ruling that Great American was obligated to defend Kim Seng in the underlying trademark infringement lawsuit. The trial court ruled in favor of Great American, finding that the Great American policy’s first publication exclusion clearly excluded coverage. Kim Seng appealed.
Holding
The Court of Appeal affirmed the judgment in favor of Great American.
Kim Seng argued that the first publication exclusion only applies to advertising injury offenses involving defamation and invasion of privacy, and not to advertising injury offenses involving infringement. The appellate court disagreed, holding that the first publication exclusion applies to all advertising injury offenses – including advertising injury offenses involving infringement.
Kim Seng also argued that it had begun using new “Que Huong” marks with additional words or logos during the Great American policy period. Kim Seng argued that the “Que Huong” marks adopted during the policy period were different from the “Que Huong” marks used before the policy period, and that the first publication exclusion therefore did not relieve Great American of the duty to defend. The appellate court disagreed, finding that all of the underlying trademark infringement claims against Kim Seng’s were based on Kim Seng’s use of the words “Que Huong.” Kim Seng’s use of the term “Que Huong” during the policy period was substantially similar – and indeed identical – to its use of the term “Que Huong” before the policy period. Thus, the first publication exclusion relieved Great American of any duty to defend Kim Seng in the underlying trademark infringement lawsuit.
Comment
The Kim Seng case is consistent with the Ninth Circuit Court of Appeals’ recent decision in United National Insurance Co. v. Spectrum Worldwide, Inc. (9th Cir. 2009) 555 F.3d 772. In both cases the courts held that under California law a “first publication” exclusion can relieve a general liability insurer of any duty to defend an insured against claims of trademark infringement where the alleged infringement began prior to the policy period.