Insurance Alert: Intellectual Property Exclusion Bars Coverage for Unauthorized Use of Famous Inventor’s Name to Sell Toys

In Alterra Excess & Surplus v. Estate of Buckminster Fuller (No. A140453, filed 3/9/15), a California Appeals Court held that an ISO policy’s exclusion for intellectual property unambiguously barred coverage for a Lanham Act, privacy and unfair competition lawsuit arising from the unauthorized use of inventor R. Buckminster Fuller’s name for desk toys called Buckyballs.

R. Buckminster “Bucky” Fuller, who died in 1983, was a celebrated designer, author, and inventor, particularly well known for popularizing the geodesic dome. Alterra’s insured manufactured and sold the Buckyballs, which were admittedly named after Fuller based on their similarity to the geodesic domes Fuller was best known for. The Estate was the registered holder of all of Fuller’s rights, and had previously licensed the rights on numerous occasions. However, the Estate alleged that the commercial use of Fuller’s name on Buckyballs and several other products had not been authorized. The Estate sued Alterra’s insured alleging causes for (1) unfair competition in violation of 15 United States Code section 1125(a)—Lanham Act; (2) invasion of privacy (appropriation of name and likeness); (3) unauthorized use of name and likeness in violation of California Civil Code section 3344.1; and (4) violation of California Business and Professions Code section 17200 et seq.

Alterra’s policy included Coverage B Personal and Advertising Injury Coverage, defined as: “e. Oral or written publication, in any manner, of material that violates a person’s right of privacy; f. The use of another’s advertising idea in your ‘advertisement;’ or g. Infringing upon another’s copyright, trade dress or slogan in your ‘advertisement’.” Coverage B also contained an exclusion for “’Personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your ‘advertisement’…. However, this exclusion does not apply to infringement, in your ‘advertisement,’ of copyright, trade dress or slogan.”

The appeals court first rejected an argument that the exclusion was not conspicuous, plain and clear. The policy was based on the ISO CG 00 01 12 07 form and the court stated that “[i]t is noteworthy that every California case that has discussed the exclusion (or one like it) has found it applicable, without any concern that it was not clear or conspicuous.”

The court then rejected the contention that an exclusion entitled “Infringement of Copyright, Patent, Trademark or Trade Secret” cannot reasonably be understood to apply to any and all “intellectual property rights.” The court quoted extensively from Aroa Marketing, Inc. v. Hartford Ins. Co. of the Midwest (2011) 198 Cal.App.4th 781, a lawsuit brought by a model for unauthorized use of her image and likeness:

“The right of publicity, like copyright, protects a form of intellectual property that society deems to have some social utility. [] Thus, the right of publicity is an intellectual property right, and right of publicity claims would be excluded from coverage under the intellectual property rights exclusion…. Aroa contends the intellectual property rights exclusion does not apply to right of publicity claims because the right of publicity is not specifically listed in the exclusion. We disagree. The exclusion applies when the injury arises out of ‘any violation of any intellectual property rights.’ Even if this language is interpreted narrowly against the insurer, it clearly applies to bar claims based on the right of publicity, as that right has been held to be an intellectual property right. Furthermore, the fact that the right of publicity is not specifically listed after the phrase ‘any intellectual property rights’ does not suggest the exclusion does not apply. The exclusion provides that intellectual property rights are those ‘such as copyright, patent, trademark, trade name, trade secret, service mark or other designation of origin or authenticity.’ Thus, by its terms, the list is expressly nonexclusive. [] in statutory construction, ‘the phrase ‘such as’ is not a phrase of strict limitation, but is a phrase of general similitude indicating that there are includable other matters of the same kind which are not specifically enumerated.’ [] Moreover, to the extent Radcliffe is claiming use of her likeness constituted an endorsement, that too falls within the category of intellectual property claims listed in the exclusion, such as trademark.”

The Alterra court found that reasoning dispositive, and dismissed an objection to the casual use of “intellectual property exclusion” or “IP exclusion” in referring to the exclusion. Despite the title “Infringement of Copyright, Patent, Trademark or Trade Secret,” the court said that such references are common in both industry and case law, and noted again that “the list is expressly nonexclusive.” As a result, the court held that the “intellectual property exclusion” applied to bar coverage, and affirmed summary judgment for the insurer.

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March 10, 2015