Summary
This Third Circuit opinion determines whether a Commercial General Liability policy and an Excess Umbrella policy provide coverage for trademark infringement claims brought by a fragrance manufacturer against its licensees. The court evaluates whether the infringement constitutes "advertising injury" under the policies and analyzes exclusions for "trademarked titles" and "breach of contract." Applying New Jersey law, the court concludes that trademark infringement qualifies as an advertising injury and reverses the district court's grant of summary judgment in favor of the insurers.
Topics
Practice areas
Questions Presented
- Whether alleged infringement of Houbigant's trademarks constituted advertising injury under the Federal commercial general liability policy.
- Whether the commercial general liability policy's exclusion for advertising injury arising out of breach of contract excluded coverage for Houbigant's tort claims.
- Whether the umbrella policy's excess-follow-form Coverage A covered the claims because the underlying commercial general liability policy covered them.
- Whether the umbrella policy's Coverage B covered the claims for infringement of trademarks that were not copyrighted.
- Whether the bankruptcy court's approval of the settlement bound Federal or established that the settlement was reasonable and entered into in good faith.
Holdings
- A trademarked title includes any name, appellation, epithet, or word used to identify and distinguish the trademark holder's goods from goods manufactured or sold by others. Houbigant's house mark and product marks, including Chantilly, fell within that definition.
- The injury caused by the insureds' infringement of Houbigant's trademarks constituted advertising injury under the policy.
- The commercial general liability policy's exclusion for advertising injury arising out of breach of contract did not exclude Houbigant's tort claims.
- Coverage A of the umbrella policy covered Houbigant's claim because it was an excess-follow-form policy and the underlying commercial general liability policy covered the claim.
- Coverage B did not apply because the phrase 'copyrighted' modified 'other advertising materials,' and none of the trademarks at issue was copyrighted.
- The bankruptcy court's approval of the settlement did not bind Federal or establish that the settlement was reasonable and entered into in good faith.
Key quotations
“Thus, we accept the more straightforward definition of “title” set forth in Villa, and define trademarked title as any name, appellation, epithet, or word used to identify and distinguish the trademark holder’s goods from those manufactured or sold by others.” (at -9-)
“Instead, we hold that the injury caused by the Insureds’ infringement of Houbigant’s trademarks is an advertising injury.” (at -11-)
“Based on the foregoing analysis, we will reverse the judgment of the district court and remand the case for a plenary hearing to determine whether the bankruptcy settlement was reasonable and entered into in good faith.” (at -16-)
Factual background
Houbigant licensed fragrance manufacturing and trademark rights to Dana Perfumes Corporation and Establishment Houbigant. Houbigant alleged that the licensees sold diluted versions of Houbigant fragrances, transferred manufacturing know-how to unlicensed producers, used the Houbigant name to sell non-Houbigant products, and misrepresented that the Chantilly fragrance was produced by the licensees. After the licensees entered bankruptcy, Houbigant settled its tort claims for an unsecured $50 million claim and sought indemnification from Federal under commercial general liability and umbrella policies.
Procedural history
Houbigant obtained an assignment of claims arising from a bankruptcy settlement with its licensees and sued Federal for insurance coverage. The District of New Jersey held that neither policy provided coverage and that Federal was not bound by the bankruptcy court's approval of the settlement. The Third Circuit reversed and remanded for further proceedings; the appeal concerning Fireman's Fund was moot because that dispute had settled.
Remand instructions
The district court must conduct a plenary hearing to determine whether the bankruptcy settlement was reasonable and entered into in good faith, and must articulate the basis for its determination.