Opinion ID: 205546
Heading Depth: 2
Heading Rank: 2

Heading: The Allegations In The Underlying Tort Action

Text: Next we address the second Pryseski inquiry, which we use to determine whether the allegations in the underlying action potentially fall within the scope of coverage for “advertising injury,” as limited by the Intellectual Property Rights Exclusion. In the underlying suit, P&W alleged “unfair competition by infringement of common-law rights” (Count One) as well as dilution and diminishment of P&W’s “famous mark” in violation of the Lanham Act (Count Two). MJP concedes that Count Two did not trigger Hartford Insurance’s duty to defend but contends that Count One did. Specifically, MJP argues that the complaint 9 alleged an unfair competition cause of action that (1) arose from MJP’s internet marketing activities—thus qualifying as “advertising injury,” and (2) did not arise from a violation of P&W’s intellectual property rights—and therefore did not fall under the Intellectual Property Rights Exclusion. To determine the merit of MJP’s argument, it is useful to examine the nature of unfair competition claims under Maryland law before considering whether such a claim was raised in P&W’s complaint. Unfair competition is generally defined in Maryland as “damaging or jeopardizing another’s business by fraud, deceit, trickery or unfair methods.” Baltimore Bedding Corp. v. Moses, 182 Md. 229, 237, 34 A.2d 338, 342 (1943). It consists of attempting to pass the goods or business of one person off as those of another, either by an express or implied public representation to that effect. Edmondson Vill. Theatre v. Einbinder, 208 Md. 38, 44, 116 A.2d 377, 380 (1955). 5 To 5 The Einbinder court explained: Like most doctrines of the common law, the law of unfair competition is an outgrowth of human experience. The rules relating to liability for harm caused by unfair trade practices developed from the established principles in the law of torts. These rules developed largely from the rule which imposes liability upon one who diverts custom from another to himself by fraudulent misrepresentation that the goods he is offering are the goods produced by the other. 208 Md. at 43, 116 A.2d at 379. 10 constitute unfair competition, “the acts complained of must be of such a nature as to mislead and deceive the public, so that the defendant is in effect taking advantage of the good will and business reputation which the complainant has built up through service or advertising or in any manner regarded as lawful and proper.” Id. As recognized by Maryland courts, the doctrine of unfair competition is not limited to actions based on a violation of trademark. Moses, 182 Md. at 236, 34 A.2d at 342; see also Einbinder, 208 Md. at 45, 116 A.2d at 380 (“While the law of trade-marks is a part of the doctrine of unfair competition, there is a difference between them.”). 6 However, the mere 6 The doctrine was expanded beyond trademark violation at least in part on the theory that, even when there has not been a technical trademark violation, the law must protect Business A from Business B’s improper appropriation of the goodwill associated with a word, mark, or symbol of Business A. The Einbinder court stated: The infringement of a trade-mark is a violation by one person of an exclusive right of another person to the use of a word, mark or symbol. On the other hand, where two rivals in business have an equal right to use the same words on similar articles sold by them, but such words were used by one of them before the other and by association have come to indicate to the public that the goods to which they applied were produced by the former, the latter will not be permitted to use them in such a manner as to deceive or be capable of deceiving the public as to the origin, manufacture or ownership of the goods to which they are applied. 208 Md. at 45, 116 A.2d at 380 (citation omitted). 11 possibility that an unfair competition claim can exist independent of an allegation of trademark violation does not mean that an independent claim was raised in P&W’s complaint. Turning now to an examination of the underlying tort action, we focus initially on MJP’s contention that the complaint and excerpts from deposition testimony 7 combine to evidence a claim for unfair competition based on the misappropriation of the “style of advertising of P&W” rather than a violation of P&W’s intellectual property rights. P&W’s complaint alleged that in December 1993, MJP formally transferred its furniture dealing business to P&W. Before the transfer to P&W, MJP operated as both a furniture manufacturer’s representative and a furniture dealer. As explained in P&W’s complaint, “[a] furniture manufacturer’s representative is merely an agent (generally paid on commission) for a furniture 7 Maryland law permits the consideration of extrinsic evidence proffered by the insured when necessary to determine if there is a potentiality of coverage under an insurance policy. Aetna, 337 Md. at 111-12, 651 A.2d at 866; Walk v. Hartford Cas. Ins. Co., 382 Md. 1, 12, 852 A.2d 98, 104 (2004) (“[I]n Maryland, an insurer’s duty to defend is not determined solely by the eight corner rule (reviewing the complaint and policy) but rather includes consideration of extrinsic evidence.”); see also Montgomery Cnty. Bd. of Educ. v. Horace Mann Ins. Co., 383 Md. 527, 538, 860 A.2d 909, 915 (2004) (stating that “at least where the underlying complaint in the tort action neither conclusively establishes nor conclusively negates a potentiality of coverage, an insurer must examine any relevant extrinsic evidence brought to its attention that might establish a potentiality of coverage”). 12 manufacturer which contracts in its own name. A furniture dealer contracts and sells furniture in its own name.” The 1993 transfer was of the “furniture dealer” portion of MJP’s portfolio; MJP retained certain “manufacturer’s representative” contracts. As part of the transfer, P&W became the owner of the assets of the furniture dealing business, including the trade name “Marvin J. Perry & Associates.” The complaint noted that since the transfer, P&W has continued to do business with the federal government using the trade name “Marvin J. Perry & Associates.” P&W has also registered its logo, including the trade name “Marvin J. Perry & Associates” as a trademark in Maryland. Further, according to the complaint “[s]ince 1993, [P&W] has spent considerable sums of money and devoted great effort to advertise and publicize the trade name ‘Marvin J. Perry & Associates’ to its primary customer, the federal government.” The complaint also alleged that in 1999 P&W registered the internet domain name “marvinjperry.com” and used it to operate a website for Marvin J. Perry & Associates. Because the federal government required internet publication of the price lists of the manufacturers represented by MJP, and because MJP did not yet have a website, P&W allowed MJP to post the price lists for the manufacturers MJP represented on marvinjperry.com. However, in 2002, an MJP employee “updated the website in a way 13 that gave the appearance that there was one entity, Marvin J. Perry & Associates, which was engaged in both furniture dealer and manufacturer’s representative business.” Despite P&W’s objections, no changes were made to differentiate the businesses. Later, in 2005, an employee of MJP allegedly “accessed the marvinjperry.com website without authorization and unlawfully removed all contact information for [P&W’s] business, operating as Marvin J. Perry & Associates, and substituted contact information for [affiliates of MJP], as if they were the business trading as ‘Marvin J. Perry & Associates’ and owner of the website.” The complaint, in Count One, stated that “[t]he mark ‘Marvin J. Perry & Associates’ has come to indicate to purchasers that they are purchasing goods and services from the company that has used the name and been an authorized government contractor in that name since the mid-1970s, and in fact that they are purchasing the goods and services from [P&W] doing business as Marvin J. Perry & Associates.” P&W further alleged that “as indicated by defendants’ alterations to the website . . . defendants are attempting to deceive purchasers by their use of the name ‘Marvin J. Perry & Associates.’” Notwithstanding that the common theme of the complaint is P&W’s frustration at MJP’s attempts to use the Marvin J. Perry & Associates trade name and registered trademark, MJP contends 14 that Count One asserted an unfair competition action that was based on MJP’s misleading use of “P&W’s style of advertising” on the internet. Hartford Insurance concedes that an injury arising from MJP’s web advertising would qualify as an “advertising injury” under the policy. Thus, the dispositive question for this Court is whether P&W asserted an unfair competition claim that did not arise out of a violation of P&W’s trademark or trade name. Notably, Count One is captioned “Unfair Competition by Infringement of Common-Law Rights” and includes six separate paragraphs discussing the “Marvin J. Perry & Associates” mark. Nonetheless, MJP points out that under Count One, P&W alleged that the “acts of [MJP] constitute unfair competition and an infringement of plaintiff’s common-law rights in the mark ‘Marvin J. Perry & Associates.’” MJP asserts that the use of the conjunction “and” indicated that P&W was raising unfair competition claims independent of its trademark infringement claim. MJP argues that P&W was concerned, at least in part, with how the “style” of advertising, rather than the use of the trademark “Marvin J. Perry & Associates,” deceived consumers into thinking the two businesses were one entity. Specifically, MJP contends that P&W’s complaint asserted a claim for unfair competition arising out of MJP’s use of a website to advertise 15 “in the same style as [P&W’s], ‘project categories,’ ‘contract categories,’ separate contact information, and companies represented by each litigant.” This contention is belied by the clear language of the complaint indicating that P&W was concerned with how, by making “alterations to the website, . . . defendants [were] attempting to deceive purchasers by their use of the name ‘Marvin J. Perry & Associates.’” Indeed, the complaint itself makes no reference to project categories, contract categories, or the specific companies represented by each litigant. Furthermore, there is no indication as to how the style of P&W’s website had developed a meaning such that utilizing a similar style would constitute unfair competition. Instead, the complaint makes clear that the reason that the web presentation was potentially confusing to customers was because the trade name “Marvin J. Perry & Associates” and trademarked logo containing the same were utilized throughout the website. MJP’s citation of the deposition testimony of Malcolm Wilson, P&W’s designee, does little to advance its argument to the contrary. When asked why he was dissatisfied with the marvinjperry.com website after it was altered by an MJP employee, Wilson replied “[b]ecause it created a vision that we were all one company.” Wilson reiterated that even after some changes in 2004, the website “still didn’t adequately separate 16 the two companies.” This testimony merely reinforces the notion that the claims arose out of a concern about confusion in the market. Nothing in Wilson’s testimony indicated whether the feared confusion arose from the general “style” of the website or instead from the use of the Marvin J. Perry & Associates name throughout the website. MJP also referenced the deposition testimony of Howard Yeager, its own managing director, as support for the contention that similarity in website style created the market confusion giving rise to P&W’s unfair competition claim. Brief of Appellant at 8. Yeager testified as to how a consumer visiting P&W’s website could access information regarding various project categories and contract categories in which P&W or MJP were involved. But nothing in Yeager’s testimony indicates that the market confusion complained of by P&W arose out of anything other than a violation of P&W’s intellectual property rights. Likewise, MJP’s reference to the settlement agreement between the parties in the underlying suit provides scant support for its argument. MJP attempts to distinguish the supposed “website style” claims from the trademark claims by noting that, in the settlement agreement, there were separate paragraphs detailing the transition of the domain name to MJP’s website. Yet the fact that the settlement contemplated reassignment of the domain name “MarvinJPerry.com” only 17 underscores that the underlying suit was not about “website style” but rather an infringement on right to use the trade name “Marvin J. Perry & Associates.” 8 Indeed, the bulk of the settlement agreement concerned the allocation of rights to names related to “Marvin J. Perry.” For instance, one provision indicated that MJP would be the new owner of “a family of ‘Marvin J. Perry’ marks and trade names, including but not limited to Marvin J. Perry, Marvin J. Perry, Inc., and Marvin J. Perry & Associates” while another discussed a royalty-free license for P&W to use the trade name “Marvin J. Perry & Associates” for a period of 10 years. Also, there was little mention in the settlement agreement about restrictions on the style or presentation of advertisement on the internet other than a restriction on the use of certain trade names/trademarks and domain names. Further, the settlement agreement called the underlying suit “a trademark infringement action.” Ultimately, as the district court stated, “the independent unlawful conduct that caused P&W’s business injury, which is the gravamen of P&W’s underlying complaint and an element of the tort [of unfair competition] is based upon MJP’s use of its 8 This Court, in a case arising out of Maryland, has held that the unauthorized use of a trademark in an internet domain name can constitute trademark infringement when the domain name is intended to confuse internet users. See People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359 (4th Cir. 2001). 18 trade name, trademark, logo, and website . . . in violation of P&W’s registration and ownership of that name and mark[.]” As such, any allegation of unfair competition would necessarily be excluded from coverage as a claim “arising out of any violation of any intellectual property rights, such as . . . trademark, trade name . . . or other designation of origin or authenticity.”