A Florida federal court ruled that hang tags on clothing that were part of the basis for a trademark and copyright infringement lawsuit could be construed as giving rise to an “advertising injury” triggering coverage under an insurance policy.
Scottsdale Insurance Company issued a commercial general liability policy to E.S.Y., Inc. and Yariv Shaked.
Exist, Inc. filed suit against E.S.Y. and Shaked claiming that they used its copyrighted designs and trademarks for clothing and for labels and hang tags. The parties eventually settled the case.
The insurance policy covered damages for “personal and advertising injury.” This was defined to include:
d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; * * * 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.”
The court found that hang tags are a form of printed advertisement, rather than (as Scottsdale contended) part of the garment itself:
While the hang tags provided information—at a minimum, identifying [E.S.Y.’s brand]—the hang tags’ special design presumably had the additional function of attracting consumers to the garments themselves and to the brand more generally. If the hang tags’ only purpose was to provide information, they would not need such a particular aesthetic.
The court thus found that the insurance company had a duty to defend E.S.Y. and Shaked.
The case is E.S.Y., Inc. v. Scottsdale Insurance Company.
Many business managers assume that their business insurance will cover them against any kind of commercial liability, but this is not always the case. Most general liability policies cover intellectual property claims only under very limited circumstances, often involving “advertising injury.”
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Photo Attribution: “KimballTagPinnedToGarmentPackage” by JoelShprentz – Own work. Licensed under CC BY-SA 3.0 via Commons.
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