3 August 2017Trademarks

Insurers may have to cough up over TM settlement

Three insurers may need to indemnify their policyholder for a trademark settlement with an agricultural pesticide distributor

On Tuesday, August 1, the US Court of Appeals for the Ninth Circuit reversed and remanded a decision by a lower court which had found that the insurers weren’t obliged to defend the policyholder, Willowood USA, in a trademark infringement lawsuit.

The insurers—Allied World, Colony Insurance and Crum & Forster Specialty Insurance—were granted summary judgment twice by the US District Court for the District of Oregon, which found that the insurers had no duty to defend the suit or provide indemnification for the settlement.

Repar, a distributor of agricultural pesticides, began selling a pesticide containing tebuconazole under the trade names ‘Tebucon 45 DF’ and ‘Tebucon 3.6F’ in 2008.

Three years later, in August 2011, Repar obtained “trademark registration number 4,015,686 for the ‘Tebucon’ mark for various types of pesticide products”.

Willowood, also a distributor, was formed in December 2009.

Brian Heinze, president of Willowood, contacted Bhushan Mandava, president of Repar, to discuss a potential business relationship.

Willowood subsequently agreed to “maintain the confidentiality of any confidential or proprietary information” and  to not use the name ‘Tebucon’ except for sales authorised under a US Environmental Protection Agency (EPA) Form 8570-5 agreement, according to a prior ruling outlining the facts of the case.

Repar said it was allowed to “be the exclusive supplier of technical grade tebuconazole for both products” to Willowood.

As a result of this agreement, Repar granted Willowood a licence to distribute and sell products in connection with the ‘Tebucon’ mark, according to Repar.

Repar alleged that Willowood then sought permission to cite Repar’s product chemistry data in support of Willowood’s primary EPA registration applications for the 45 DF and 3.6F tebuconazole formulations.

However, after Willowood submitted its applications, Repar said that it was informed that Willowood “would not be purchasing tebuconazole from Repar in the future” and had “entered into subregistration agreements with another registration of the two tebuconazole formulations”.

Willowood subsequently began using Repar’s ‘Tebucon’ mark in connection with the sale and distribution of its own tebuconazole products, according to Repar.

Repar sued Willowood for trademark infringement.

Willowood then argued that all three insurers must defend Willowood because Repar’s allegations “fall squarely within the coverage for ‘personal and advertising injury’ provided by each of the policies”.

In its decision earlier this week, the Ninth Circuit held that “Repar’s second amended complaint specifically alleged injury from Willowood’s use of Repar’s advertising idea … in Willowood’s advertising”.

According to the court, this allegation was sufficient to put the insurers on notice of the possibility of covered liability and to trigger the obligation to defend Willowood.

The court added that the facts that form the basis for the subsequent settlement between the parties determine whether the insurers must indemnify.

In this case, Willowood had provided a declaration from trial counsel, a letter from counsel to Willowood’s CEO, and the declaration from the CEO.

All of these indicated that the Repar settlement was “at least in part based on covered breach of implied contract claims”, so this was sufficient to create a triable issue on whether the settlement was for a covered claim.

The suit was reversed and remanded for the lower court to decide the issue.

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