A federal appeals court upheld a verdict in favor of State Farm Fire & Casualty Co., in a decision based on the sometimes subtle distinction between dress code and trademark infringement.
Two commercial policies issued by State Farm to Fairfield, New Jersey-based Dedicated Business Systems International LLC covered damages arising from clothing but excluded those arising from trademark infringement, according to Friday’s ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in State Farm Fire and Casualty Co. v. Jason Hines; Dedicated Business Systems International LLC; Tri-State Communication Services LLC.
For a time, DBSI was an authorized reseller of the communications technology of Durham, North Carolina-based Avaya Inc., which has trademarks registered with the US Patent and Trademark Office, according to the ruling.
The authorized reseller arrangement ended in 2013, but DBSI and one of its officers allegedly continued to access Avaya’s software license portals without Avaya’s permission, earning a “nice profit,” the ruling said.
Avaya sued DBSI and the officer, alleging trademark and copyright infringement. In response, State Farm appointed counsel to defend the company and the officer, but reserved the right to withdraw if it determined the claims were outside the policy’s scope.
It subsequently sued the company and the officer in US District Court in Newark, New Jersey, seeking a declaratory judgment that it did not have to defend or indemnify the defendants because its policies did not cover Avaya’s trademark or copyright infringement claims.
The district court ruled in favor of the insurer and was upheld by a three-judge appeals panel.
“The concepts of trademark and clothing have much in common, with clothing often being treated as a subspecies of trademark,” the ruling said.
But the claims for each “have distinct elements,” the ruling said. A trademark infringement claim must involve a valid and legally protectable trademark owned by the plaintiff that, when used by the defendant, is likely to cause confusion, it said.
In this case, the ruling said, “the operative complaint never mentions ‘trade dress'”. Nor does it provide any basis for reasonably being able to draw conclusions about such a claim,” it says, confirming the lower court’s ruling.
Attorneys in the case did not respond to requests for comment.