State Farm does not have to defend the company in a trademark case

A federal appeals court upheld a ruling in favor of State Farm Fire & Casualty Co., in a decision based on the sometimes subtle distinction between trade dress and trademark infringement.

Two commercial insurance policies issued by State Farm in Fairfield, New Jersey, Dedicated Business Systems International LLC covered injuries resulting from commercial dress but excluded those resulting from trademark infringement, according to the ruling released Friday by the 3rd US Circuit Court of Appeals in Philadelphia. in State Farm Fire and Casualty Co. vs. Jason Hines; Dedicated Business Systems International LLC; Tri-State Communications Services LLC.

For a time, DBSI was an authorized reseller of communications technology from Avaya Inc., based in Durham, North Carolina, which has trademarks registered with the US Patent and Trademark Office, according to the ruling.

The authorized reseller agreement ended in 2013, but DBSI and one of its executives, Jason Hines, allegedly continued to access Avaya’s software licensing portals without Avaya’s authorization, making a “handsome profit “, according to the decision.

Avaya sued DBSI and the officer, charging trademark infringement and copyright infringement. In response, State Farm appointed an attorney to defend the company and the executive, but reserved the right to opt out if it determined the claims were outside the scope of the policies.

He then sued the company and the officer in the U.S. District Court in Newark, New Jersey, seeking declaratory relief that he did not have to defend or indemnify defendants because his policies did not cover the Avaya trademark or copyright infringement claims.

The District Court ruled in favor of the insurer and was upheld by a three-judge panel of the Court of Appeal.

The “concepts of branding and trade dress have much in common, with trade dress often being treated as a subspecies of branding,” the ruling said.

But the claims of each “have distinct elements”, according to the decision. A trademark infringement claim must involve a valid, legally protectable trademark owned by the plaintiff that, when used by the defendant, is likely to cause confusion, he said.

In this case, according to the ruling, the “operational complaint never mentions ‘business dress.’ Nor does it provide a basis for reasonably inferring such a claim,” he said, affirming the lower court’s decision.

Insured’s attorney Eugene Killian Jr., of The Killian Firm PC in Iselin, New Jersey, said in a statement, “I do not believe the ruling is correct, as the term trade dress is inherently ambiguous and should have encompassed the allegations made against Jason” and the appeal panel “did not give the policyholder the benefit of the doubt as required”.
The insurer’s attorney did not respond to a request for comment.

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