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INSURANCE NOTES

Prior Publication Exclusion Barred Coverage for Trademark Infringement Claim

12.15.2009

In Kim Seng Co. v. Great American Ins. Co. of New York, __ Cal.Rptr.3d __, 2009 WL 3791874 (2009), as modified, __ Cal.Rptr.3d __, 2009 WL 4561734, the Court of Appeal held that the “prior publication” exclusion to “advertising injury” precluded defense and indemnity for a trademark infringement claim.

Great River Food had sued Kim Seng Company for using the term “Que Huong” (a Vietnamese term meaning “native land”) on food products, in alleged violation of Great River’s trademark, “Que Huong,” used on its food products.  

In 1997, Kim Seng had registered the “Que Huong” trademark with the U.S. Patent and Trademark Office for certain food products and stated that the company had begun using the mark in March 1993. During the period of Great American Insurance Company’s policy (October 6, 1997-October 6, 1998), Kim Seng began using various other trademarks using the words “Que Huong” (e.g., “Old Man Que Huong Brand,” “Bun Tuoi Que Huong Brand” and a logo with the words “Que Huong”). In 2000, Kim Seng registered “Old Man Que Huong Brand” for various food products.

Great River alleged that it had been using the “Que Huong” mark since 1986 and that Kim Seng infringed the mark by the use of “Que Huong” and similar marks. At trial, the jury found that only Kim Seng’s use of the stand-alone “Que Huong” infringed on Great River’s trademark.

Great American issued a primary and an umbrella primary policy with “advertising injury” coverage and declined to defend Kim Seng based on the “prior publication” exclusion. Two other insurers had agreed to defend Kim Seng. This coverage action ensued. The trial court granted summary judgment to Great American (represented by Musick Peeler), finding the exclusion “clearly excluded” coverage. Kim Seng appealed.

The Great American “prior publication” exclusion precluded coverage for “advertising injury” that arises out of “oral or written publication of material whose first publication of material took place before the beginning of the policy period.” On appeal, Kim Seng argued that the exclusion applied only to libel, slander and invasion of privacy and not to trademark infringement, because only the “advertising injury” offenses of libel, slander and invasion of privacy used the words “oral or written publication of material” that were also used in the “prior publication” exclusion.

While noting that courts have differed on this issue, the Court rejected the argument and held that because the exclusion applied to “advertising injury,” the exclusion applied to all of the offenses defined as “advertising injury.” Kim Seng further argued that “material” required something “tangible such as packaging” and that the exclusion did not apply to trademark used on different packaging before and during the policy period. The Court disagreed, holding that it is the “infringing trademark that is the ‘material’ covered by the prior publication exclusion,” not the medium in which it is “published.”

Finally, the Court rejected Kim Seng’s argument that the allegedly infringing marks used during the Great American policy period differed from those specifically used prior to the Great American policy period. In accord with the opinion in Ringler Assoc. Inc. v. Maryland Cas. Co., 80 Cal.App.4th 1165, 1183 (2000), the Court explained that the “test for the prior publication exclusion is whether the claimed actionable language or mark used during the policy period is substantially similar to the language or mark used prior to the policy period.”

Thus, although Kim Seng used the words “Que Huong” for different products and together with different words or image at a later time, the Court held that the use of those words was not only “substantially similar,” but were identical at both times. Further noted was that, even with the addition of words or logos, the use of that term “still suggests that the Kim Seng product is from the same source as products bearing the [infringed] original ‘Que Huong’ mark. . . .”

Having determined that publications before and during the policy period were “substantially similar,” the Court affirmed summary judgment in favor of Great American. This case joins Ringler in interpreting the exclusionary language as applying to “substantially similar” publications, not just to specific “republication” of the same material. Also significant is the Court’s rejection of the assertions that the “prior publication” exclusion is limited to defamation-type claims. [FN1]

____________________

FN1  In MGA Entertainment Inc, v. Crum & Forster Specialty Insurance Co., Inc., Case No.CV 07-08276-SGL(RNBx), arising out of the “Bratz doll” dispute, the U.S. District Court issued an unpublished Order, finding in favor of Musick Peeler’s client that the “prior publication” exclusion applied to publication of “substantially similar” material in the context of allegations of copyright, trademark, trade dress infringement and libel.
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