Who's the BOSS? 2nd Circuit Rules on Insurance Coverage for Infringement of Trademarked Slogans
October 23, 2001
The Second Circuit recently dealt a blow to insureds that seek coverage for
trademark infringement claims under their commercial general liability (CGL)
insurance policies. Hugo Boss Fashions, Inc. v. Federal Insurance Co.,
252 F.3d 608 (2d Cir. 2001)
Most CGL policies provide protection for "advertising injury" that
arises out of conduct that is claimed to infringe another's "trademarked or
service marked titles or slogans." Often, however, those policies do not
provide a definition of "trademarked or service marked titles or
slogans," which can create disputes between the insurer and insured when
coverage becomes an issue, as it did in the case of Hugo Boss. In Hugo
Boss, the Second Circuit established the Second Circuit's definition for
"trademarked slogans," finding that "trademarked slogans"
means a phrase used to promote or advertise a house or product mark, not the
house or product mark itself.
The history of the Hugo Boss case starts in 1997, when Hugo Boss
Fashions, Inc., the well-known designer and manufacturer of men's clothing and
accessories, found itself in a trademark infringement suit filed by The Boss
Manufacturing Company (BMC). BMC is a manufacturer of industrial and outdoor
clothing and accessories, including boots and gloves. BMC filed a lawsuit
against Hugo Boss in the United States District Court for the Southern District
of New York after it learned that Hugo Boss was violating a concurrent use
agreement that the parties had reached years earlier. Under that agreement, Hugo
Boss' parent company in Germany had agreed that it would not "sell or
license to others to sell gloves, mittens or boots with a mark that incorporates
the word "BOSS." BMC later discovered, however, that Hugo Boss was
selling gloves and boots with "BOSS" on them.
Once Hugo Boss was served with the suit, it notified its CGL carrier, Federal
Insurance Co. (Federal), and requested that Federal provide coverage. Federal
denied Hugo Boss' request on several grounds, including that "BOSS"
did not qualify as a "trademarked slogan." Hugo Boss then filed a suit
against Federal seeking a declaration that Federal had a duty to defend Hugo
Boss and to indemnify it for damages incurred in the underlying case with BMC.
Of critical importance was the court's analysis of the meaning of
"trademarked slogan." Federal's CGL policy covered only those
advertising injuries that arose out of conduct claimed to be an infringement of
a "trademarked or service marked title or slogan." The policy
specifically excluded from coverage advertising injury arising from conduct
claimed to be an infringement of trademark or service mark rights. However, the
policy did not provide a definition of "trademarked slogans." (Whether
BOSS qualified as a trademarked title earlier was ruled out as a possibility by
the lower court reviewing the case.)
Federal argued that coverage would not apply, because, among other reasons,
"BOSS" did not constitute a slogan that it believed to be "a phrase
with a secondary or a distinctive meaning." Hugo Boss argued that coverage
did apply because a "trademarked slogan" is a "trademark that
conveys messages regarding characteristics of a product to the consumer and the
term "BOSS" does exactly that."
Although no definition for "trademarked slogan" existed in either
the insurance policy, the body of New York state law, or within customary
industry terminology, the court ruled that "where parties use terms that
are firmly rooted in federal law, i.e., a trademarked slogan, and where no
explicit signal to the contrary existed, the prevailing federal definition
controlled." The court pointed to relevant cases from several circuits and
concluded that case law indicates that "trademarked slogans" are
"phrases used to promote or advertise a house mark or product mark, in
contradistinction to the house or product mark itself." The court further
stated that a "slogan" must be something other than the house mark or
product mark itself that reminds the consumer of the brand. Based on that
analysis, the court found that Federal had no duty to indemnify Hugo Boss
against BMC's infringement claims because the term "BOSS" did not
qualify as a "trademarked slogan" covered by the CGL policy. The court
did note, however, that because there was some ambiguity in the language of the
policy, Federal did have a duty to defend Hugo Boss against BMC's claims and
thus was required to reimburse Hugo Boss for the reasonable legal expenses that
it had incurred.
The federal decisions in this area of the law are far from unanimous. There
are a number of reported decisions in which courts have found that the
"advertising injury" provision offers coverage for and a duty to
defend against trademark infringement claims, but there are still other cases
that find neither coverage nor a duty to defend. In light of this uncertainty,
organizations that expect to face trademark infringement claims may wish to
consider whether it is worth purchasing additional coverage through a policy
tailored specifically for trademark infringement. But a company that finds
itself the subject of an unexpected trademark infringement claim would do well
to review its insurance policy to determine if it may have some coverage.
For more information, contact Deborah Kramm or Selwa Masri at 1-888-688-8500
or via e-mail at dkramm@hklaw.com or smasri@hklaw.com, respectively.
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