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Erie Ins. Exch. v. Compeve Corp.

Court of Appeals of Illinois, First District, Fifth Division

May 8, 2015

ERIE INSURANCE EXCHANGE, Plaintiff-Appellee,
v.
COMPEVE CORPORATION and SLAVA PACKOVSKIS, Defendants-Appellants

Page 161

Appeal from the Circuit Court of Cook County. No. 13 CH 23607. The Honorable Kathleen G. Kennedy, Judge Presiding.

For Appellants: David J. E. Roe, Mount Prospect, Illinois.

For Appellee: Bruce M. Lichtcsien, Hinkhouse Williams Walsh LLP, Chicago, Illinois.

JUSTICE GORDON delivered the judgment of the court, with opinion. Presiding Justice Palmer and Justice McBride concurred in the judgment and opinion.

OPINION

GORDON, JUSTICE

Page 162

[¶1] Defendants, Compeve Corporation (Compeve) and Slava Packovskis, appeal from the trial court's entry of summary judgment in favor of plaintiff Erie Insurance Exchange (Erie). The trial court found that Erie had no duty to defend defendants in a lawsuit filed against them by Microsoft Corporation (Microsoft), which alleged that defendants violated Microsoft's intellectual property rights by selling computers loaded with unauthorized copies of Microsoft's software. For the reasons that follow, we affirm.

[¶2] BACKGROUND

[¶3] On October 18, 2013, Erie filed a complaint for declaratory judgment, alleging that Compeve was the named insured on an insurance policy issued by Erie. Compeve and Packovskis, Compeve's owner, had been named in a lawsuit initiated by Microsoft in the United States District Court for the Northern District of Illinois, in which Microsoft alleged that Compeve installed counterfeit Microsoft software in the computers that it sells and that by selling the counterfeit software, Compeve infringed upon Microsoft's copyrights and trademarks. Erie sought a declaratory judgment that under the terms and conditions of the insurance policy, Erie had no obligation to defend or indemnify Compeve or Packovskis against any of the allegations in the Microsoft litigation.[1]

Page 163

[¶4] The Microsoft complaint, filed on September 16, 2013, alleged that Compeve and Packovskis " engaged in copyright and trademark infringement; false designation of origin[; ] false description and representation; and unfair competition." Microsoft's complaint alleged that Compeve was engaged in the business of advertising, marketing, installing, offering, and distributing computer hardware and software, " including purported Microsoft software."

[¶5] Paragraph 10 of Microsoft's complaint alleged that " [d]efendants advertised, marketed, installed, offered and distributed unauthorized copies of Microsoft software, infringing Microsoft's copyrights, trademarks and/or service mark." Paragraph 11 alleged that " On information and belief, Defendants advertise that the computers they sell come installed with Microsoft software, and in their advertisements, Defendants misappropriate and/or infringe Microsoft's copyrights, advertising ideas, style of doing business, slogans, trademarks and/or service mark."

[¶6] Microsoft's complaint alleged that in March 2013, defendants sold a Microsoft investigator several computers with unauthorized copies of Windows XP installed. In June 2013, Microsoft asked defendants to cease and desist from making and distributing infringing copies of Microsoft software on computers. Nevertheless, in July 2013, defendants again sold a Microsoft investigator several computers with unauthorized copies of Windows XP installed. The complaint alleged that " [o]n information and belief, these are not isolated incidents. Rather, Defendants have been and continue to be involved in advertising, marketing, installing, offering, and/or distributing counterfeit and infringing copies of Microsoft's software and/or related components to unidentified persons or entities." Microsoft alleged that it " ha[d] been harmed by Defendants' activities, including their advertising activities and unauthorized use of Microsoft's copyright protected material."

[¶7] The first count of Microsoft's complaint, which is the only count relevant to the instant appeal, was for copyright infringement. The count incorporated the allegations as set forth above and alleged that " Defendants have infringed the copyrights in Microsoft's software, including but not limited to Microsoft Windows XP, by advertising, marketing, installing, offering, and/or distributing infringing materials in the United States of America without approval or authorization from Microsoft." [2]

[¶8] The insurance policy at issue in the instant case was an " Ultrapack Plus" policy with a policy period of January 18, 2013, to January 18, 2014. The policy provided coverage for " personal and advertising injury," which was defined as:

" 'Personal and advertising injury' means injury, including consequential 'bodily injury', arising out of one or more of the following offenses:
* * *
g. Infringing upon another's copyright, trade dress or slogan in your 'advertisement'."

" Advertisement" was further defined as " a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters."

[¶9] The policy excluded coverage for, inter ...


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