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Citizens Insurance Company of America v. Uncommon

August 31, 2011

CITIZENS INSURANCE COMPANY OF AMERICA, PLAINTIFF,
v.
UNCOMMON, LLC; SG VENTURES, LLC; JOHN HONG D/B/A SG VENTURES, LLC; AND S.G. VENTURES, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge Feinerman

MEMORANDUM OPINION AND ORDER

Citizens Insurance Company of America filed this diversity action against three entities and an individual, referred to here collectively as "Uncommon," seeking a declaration that it has no duty to defend or indemnify Uncommon against counterclaims brought by UncommonGoods, LLC, in Uncommon, LLC v. UncommonGoods, LLC, No. 10 C 4818 (N.D. Ill.). Uncommon counterclaimed, seeking a declaration that two insurance policies issued by Citizens obligated it to defend and indemnify Uncommon, damages for breach of contract, and statutory remedies under 215 ILCS 5/155 for Citizens' alleged bad faith refusal to provide a defense. Uncommon moved for summary judgment, and Citizens moved for judgment on the pleadings. Citizens' motion is granted and Uncommon's motion is denied.

Background

Uncommon operates a website, www.getuncommon.com, through which it sells high-end, customizable design cases for cellular phones. In the underlying lawsuit, Uncommon sought a declaration that it did not infringe UncommonGoods' trademarks; that it had not engaged in unfair competition, false designation of origin, or unfair competition; and that there was no likelihood of confusion between Uncommon's products and those of UncommonGoods. Doc. 24-3 at 2-14. Uncommon filed that suit after receiving letters and notices from UncommonGoods charging that Uncommon's use of the name "Uncommon" infringed UncommonGoods' trademarks. Id. at 10-11. UncommonGoods answered and filed counterclaims against Uncommon alleging: (1) trademark infringement under the Lanham Act,

15 U.S.C. § 1114; (2) common law trademark infringement; (3) unfair competition under the Lanham Act, 15 U.S.C. § 1125(a); (4) common law unfair competition; (5) deceptive trade practices under the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq.; (6) tortious interference with business practices; (7) fraud on the Patent and Trademark Office ("PTO"); and (8) unjust enrichment. Id. at 17-34. The claims and counterclaims in the underlying action have been settled and dismissed with prejudice. See Uncommon, LLC v. UncommonGoods, LLC, No. 10 C 4818, Stipulated Order of Dismissal (N.D. Ill. Aug. 30, 2011).

The factual allegations upon which UncommonGoods' counterclaims rested may be summarized as follows. UncommonGoods operates a website, www.uncommongoods.com, and publishes a catalog offering a variety of merchandise, including "furniture and furniture-related goods, jewelry, apparel and apparel accessories, carrying cases and bags designed for storage and transportation of consumer electronics, cellular phone cases, media players, and laptop computers." Id. at 19 (¶ 14). UncommonGoods owns valid U.S. trademarks for "UNCOMMONGIFTS," "UNCOMMON GIFTS," "UNCOMMON GOODS," and "UNCOMMONGOODS" for use in the online, mail-order, and gift store markets. Id. at 19-20 (¶¶ 15-19). The counterclaims alleged that Uncommon's "use of the UNCOMMON trademark suggests association, affiliation, or sponsorship with [UncommonGoods] and is without the authorization, approval, and permission of [UncommonGoods], so as to cause, or be likely to cause, confusion or mistake, or to deceive consumers as to the origin of [Uncommon's] goods and/or services." Id. at 26 (¶ 48). Uncommon's unauthorized use of the UNCOMMON trademarks, the counterclaims added, interferes with UncommonGoods' "reasonable expectation of a future business relationship with its customers and future customers . [and its] reasonable expectation of exclusive use of its UNCOMMON trademarks," and has resulted in Uncommon "unjustly retain[ing] the benefit of [UncommonGoods'] trademarks and services." Id. at 27, 31 (¶¶ 55--56, 73).

Uncommon holds two insurance policies issued by Citizens, which are materially identical and thus for ease of reference will be treated as one. The policy provides Uncommon with coverage for "bodily injury," "property damage," and "personal and advertising injury." Doc. 24-8 at 14-23. Coverage for "personal and advertising injury" is subject to the following exclusion, referred to here as the "IP exclusion":

This insurance does not apply to:

a. "Personal and advertising injury": * * *

(9) Infringement of Copyright, Patent, Trademark or Trade Secret Arising out 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. Id. at 19.

Upon filing the underlying lawsuit against UncommonGoods, Uncommon notified Citizens, and Citizens denied coverage. Doc. 26-1. After UncommonGoods counterclaimed in the underlying action, Uncommon again notified Citizens, and Citizens again denied coverage. Doc. 26-2. Citizens commenced this coverage litigation two months later, after an exchange of correspondence between the parties' attorneys. Docs. 26-3, 26-4.

Discussion

The parties agree that Illinois law governs the policies. The Seventh Circuit recently summarized Illinois law as it pertains to the ...


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