Superformance Intl v. Hartford Casualty

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SUPERFORMANCE INTERNATIONAL, 
INCORPORATED,
Plaintiff-Appellant,
v.  No. 02-1718
HARTFORD CASUALTY INSURANCE
COMPANY,
Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Virginia, at Newport News.
Jerome B. Friedman, District Judge.
(CA-01-113-4)
Argued: February 27, 2003
Decided: June 11, 2003
Before WIDENER, WILKINSON, and NIEMEYER, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion,
in which Judge Widener and Judge Wilkinson joined.
COUNSEL
ARGUED: David A. Gauntlett, GAUNTLETT & ASSOCIATES,
Irvine, California, for Appellant. Stacey Ann Moffet, ECCLESTON
& WOLF, P.C., Baltimore, Maryland, for Appellee. ON BRIEF:
James A. Lowe, GAUNTLETT & ASSOCIATES, Irvine, California;
Douglas E. Miller, PATTEN, WORNOM, HATTEN & DIAMON-
2 SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY
STEIN, Newport News, Virginia, for Appellant. Matthew W. Lee,
ECCLESTON & WOLF, P.C., Washington, D.C., for Appellee.
OPINION
NIEMEYER, Circuit Judge:
Superformance International, Inc. ("Superformance") contends that
Hartford Casualty Insurance Company ("Hartford"), as its insurer
under a commercial general liability policy, owes it a defense and
indemnity in a trademark infringement action brought against Super-
formance in the District of Massachusetts by Carroll Shelby, Carroll
Shelby Licensing, Inc., Shelby American, Inc., and Ford Motor Com-
pany. The district court granted summary judgment to Hartford, rul-
ing essentially that the policy did not cover injuries arising from
conduct that preceded the policy’s issuance and that the underlying
complaint did not allege claims falling within coverage for advertis-
ing injury. For reasons that differ somewhat from those given by the
district court, we affirm.
I
Superformance, an Ohio corporation with its principal place of
business in Newport News, Virginia, is a manufacturer of specialty
motor vehicles, including replicas of classic cars or "replicars," kit
cars, and related parts and accessories. Among the replicars it manu-
factures and promotes for sale are race cars and roadsters modeled
after the "Cobra" and "Shelby Cobra" designs, and in connection with
their sale, Superformance employs the use of the names Cobra and
Ford and allegedly other trademarks connected with the original
Cobra vehicles.
The Cobra racing cars, after which Superformance’s replicars are
modeled, were designed and manufactured in the 1960s by Carroll
Shelby in collaboration with the Ford Motor Company, and the vehi-
cles used the trade name "Cobra" and designs depicting the cobra
snake. Ford, which owns numerous trademarks that include "Cobra"
and the snake, has granted Carroll Shelby and his businesses, Carroll
SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY 3
Shelby Licensing, Inc. and Shelby American, Inc., an exclusive
license to use the trademarks relating to Cobra and the cobra snake
designs for the vintage automobiles created, designed, and manufac-
tured by Shelby. Carroll Shelby owns numerous trademarks that
include "Shelby."
In December 2000, Shelby commenced a trademark infringement
action against Superformance in the District of Massachusetts (the
"Massachusetts Litigation"). As originally filed, Shelby’s complaint
alleged, in six counts, trademark infringement and dilution under
§§ 32 and 43 of the Lanham Act (15 U.S.C. §§ 1114 and 1125) and
State common law, as well as unfair competition under State common
and statutory law. In August 2001, Shelby amended its complaint to
allege a seventh count for violation of the United States import stat-
utes prohibiting the importation of counterfeit products, particularly
motor vehicles using Shelby’s trademarks. Three months later, in
November 2001, Ford Motor Company intervened in the Massachu-
setts Litigation, filing its own complaint in six counts that parallel
Shelby’s original six counts. It is in connection with this Massachu-
setts Litigation that Superformance seeks coverage from Hartford
under the insurance policy issued by it.
Superformance did not purchase its policy from Hartford until
three months after Shelby commenced its action in the Massachusetts
Litigation. Specifically, on March 10, 2001, Superformance pur-
chased a one-year commercial general liability policy to cover liabil-
ity for, among other types of injury, personal and advertising injury.
The policy was an "occurrence" policy, which means that it covered
only personal and advertising injury "if the offense [was] committed
in the ‘coverage territory’ [which includes the United States] during
the policy period" of March 9, 2001, to March 9, 2002. After Super-
formance purchased this policy from Hartford, Shelby added the sev-
enth count to its complaint in the Massachusetts Litigation relating to
Superformance’s imports of counterfeit vehicles and Ford intervened
to file its complaint asserting trademark infringement, trademark dilu-
tion, and unfair competition claims.
The insurance policy defines "personal and advertising injury" in
relevant part as injury "arising out of one or more of the following
offenses":
4 SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY
d. Oral or written publication of material that slanders or
libels a person or organization or disparages a person’s
or organization’s goods, products or services; [or]
e. Oral or written publication of material that violates a
person’s rights of privacy; or
f. Copying, in your "advertisement", a person’s or organi-
zation’s "advertising idea" or style of "advertisement";
[or]
g. Infringement of copyright, slogan, or title of any literary
or artistic work, in your "advertisement."
The policy excludes coverage for injury:
(2) Arising out of oral or written publication of material
whose first publication took place before the beginning
of the policy period; [or]
***
(9) Arising out of the infringement of trademark, trade
name, service mark or other designation of origin or
authenticity.
Several months after Superformance purchased the policy from
Hartford, it tendered the defense of the Massachusetts Litigation to
Hartford, characterizing the suit as one for "Federal Trademark
Infringement, Federal and State Trademark Dilution and related
causes of action." Hartford denied coverage under the policy, summa-
rizing its position:
Plaintiff’s complaint does not state any claim that could
even arguably meet the definition of "Occurrence", "Bodily
Injury", "Property Damage" or "Personal and Advertising
Injury" as stated in the policy. In addition, trademark related
claims are specifically excluded [from coverage]. Moreover,
to the extent any "Personal and Advertising Injury" occurred
SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY 5
prior to March 9, 2001, the policy expressly excludes cover-
age for material first published before the beginning of the
policy period. With respect to "Advertising Injury", plaintiff
does not allege any injury sustained from an "advertise-
ment" of the insured.
Superformance thereafter commenced this action for breach of the
insurance contract, seeking a declaratory judgment that Hartford’s
insurance policy covers the claims alleged in the Massachusetts Liti-
gation and that Hartford breached its duties under the policy. The
complaint also seeks money damages, including the costs incurred in
defending the Massachusetts Litigation.
On cross-motions for summary judgment, the district court entered
judgment in favor of Hartford, holding that "any potential claim [is]
precluded under the Policy’s first publication exclusion." The court
found that the Shelby complaint as amended and the Ford complaint,
both of which were filed in the Massachusetts Litigation after the
issuance of the policy, were subject to the first-publication exclusion
because they used the same language as the original Shelby complaint
that preceded the policy and the gravamen of the complaints was the
same. The court characterized Superformance’s claim against Hart-
ford as "an attempt to obtain retroactive insurance," which the policy
prohibited by limiting coverage to occurrences during the policy
period and by including the first publication exclusion. The court also
held that even if the first-publication exclusion was not applicable to
all of the allegations in the Massachusetts Litigation, most of the
offenses asserted against Superformance did not qualify as "personal
and advertising injury" as defined by the policy. As to claims of trade
dress infringement, which the district court found would be covered
by the Hartford policy, the court concluded that the allegations failed
to state facts sufficient to support any such claims.
From the district court’s judgment granting Hartford’s motion for
summary judgment and denying Superformance’s motion, Superfor-
mance filed this appeal.
II
Superformance concedes on appeal that Counts I through VI of the
Shelby complaint do not implicate Hartford’s duty to defend because
6 SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY
these counts were alleged prior to the policy period and therefore of
necessity related to offenses committed before the policy period. It
contends, however, that Count VII of the Shelby complaint and all of
the counts of the Ford complaint, which were added to the Massachu-
setts Litigation after Superformance secured the insurance policy,
allege violations that were committed during the policy period and
therefore require a defense under the policy.
Because we cannot, as a matter of law, foreclose the possibility that
Count VII of the Shelby complaint and the entire Ford complaint
allege some conduct occurring during the policy period, we agree that
coverage for these counts cannot categorically be barred by invoca-
tion of the policy period — i.e., March 9, 2001, to March 9, 2002.
Accordingly, with respect to those counts — Count VII of the Shelby
complaint and the six counts of the Ford complaint — we turn to the
language of the policy to determine whether it affords a defense to
Superformance.
Superformance contends that there are "three distinct pathways to
a defense herein." First, it argues that the claims for trademark dilu-
tion and unfair competition amount to disparagement of a competi-
tor’s goods and therefore fall within the provision of the policy
covering injury arising out of any "written publication of material that
. . . disparages a person’s or organization’s goods, products or ser-
vices." Superformance contends that trademark dilution and unfair
competition are not the same as trademark infringement and therefore
are not barred by the trademark infringement exclusion. Second,
Superformance contends that even though the complaint does not use
the term "trade dress," the complaint in fact alleges trade dress viola-
tion by alleging a trademark "in a particular body, chassis, etc."
Asserting trade dress infringement as distinct from trademark
infringement, Superformance contends that a trade dress claim falls
within the coverage of advertising injury arising out of "[c]opying, in
your ‘advertisement’, a person’s or organization’s ‘advertising idea’
or style of ‘advertisement.’" Third, Superformance contends that
Ford’s complaint about Superformance’s manufacture of vehicles rep-
licating the Cobra amounts to "false advertising," also a claim that
falls within the definition of advertising injury.
At the outset of our analysis, we note that because this case is
based on diversity jurisdiction, we apply Virginia law because this
SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY 7
action was commenced in the Eastern District of Virginia and Hart-
ford issued its policy to Superformance at Superformance’s principal
place of business in Newport News, Virginia. See Klaxon Co. v. Sten-
tor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941) (holding that a fed-
eral court sitting in a diversity-jurisdiction case must apply the
choice-of-law principles of the State in which the federal court is
located); Buchanan v. Doe, 431 S.E.2d 289, 291 (Va. 1993) ("[T]he
law of the place where an insurance contract is written and delivered
controls issues as to its coverage").
Under Virginia law, the determination of whether an insurer must
defend an underlying action depends on comparison of the policy lan-
guage with the underlying complaint "to determine whether any
claims alleged [in the complaint] are covered by the policy." Fuisz v.
Selective Ins. Co. of Am., 61 F.3d 238, 242 (4th Cir. 1995). In addi-
tion, "[t]he insurer’s obligation to defend is broader than its obligation
to pay. The obligation to defend arises whenever the complaint
against the insured alleges facts and circumstances, some of which,
if proved, would fall within the risk covered by the policy." Brenner
v. Lawyers Title Ins. Corp., 397 S.E.2d 100, 102 (Va. 1990) (internal
citations omitted); see also Solers, Inc. v. Hartford Cas. Ins. Co., 146
F. Supp. 2d 785, 791 (E.D. Va. 2001). Thus, in this case we must
review the Shelby and Ford complaints to determine whether there is
a potentiality that they state a claim that, if proved, could be covered
by the policy issued by Hartford.
The Hartford policy provides coverage to Superformance for "per-
sonal and advertising injury," which is defined in relevant part as
injury arising out of any "written publication of material that . . . dis-
parages a person’s or organization’s goods, products or services" and
any "[c]opying, in your ‘advertisement’, a person’s or organization’s
‘advertising idea’ or style of ‘advertisement.’" The term "advertise-
ment" is defined as "a dissemination of information or images that has
the purpose of inducing the sale of goods, products or services . . . .
However, ‘advertisement’ does not include the design, printed mate-
rial, information or images contained in, on or upon the packaging or
labeling of any goods or products." But the policy excludes from cov-
erage of personal and advertising injury any injury arising out of
either "written publication of material whose first publication took
place before the beginning of the policy period" or "the infringement
8 SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY
of trademark, trade name, service mark or other designation of origin
or authenticity." We must lay these insurance policy provisions beside
Count VII of the Shelby complaint and the six counts of the Ford
complaint, for which Superformance seeks coverage, to determine
whether the policy affords coverage for the claims made in the com-
plaints.
Count VII of the Shelby complaint, asserting a violation of import
statutes, alleges that Superformance imported into the United States
"vehicles which infringe, dilute and counterfeit [Shelby’s] valid and
enforceable, federally registered United States trademarks and feder-
ally protected common-law trademarks and designs" without Shelby’s
consent. In this count, Shelby alleges in essence that Superformance
imports vehicles manufactured in South Africa bearing labels and
marks that infringe on marks owned by or licensed to Shelby.
Ford’s complaint, alleged in six counts, may be summarized as fol-
lows:
Count I, entitled "Infringement of Federally Registered Trade-
marks," alleges the likelihood that Superformance’s use of Ford’s
marks "has . . . intended to cause, has caused and is likely to continue
to cause confusion, or to cause mistake or to deceive the public." It
also alleges that Superformance "is likely to mislead prospective pur-
chasers as to the affiliation, connection or association of Superfor-
mance . . . with Ford . . . or as to the origin, sponsorship, or approval
of Superformance’s Infringing Automotive Products or its web site by
Ford."
Count II, entitled "Trademark Counterfeiting," alleges that Super-
formance’s use of Ford’s marks "constitutes use of spurious designa-
tions identical with, or substantially indistinguishable from, Ford’s
federally registered COBRA, COBRA Snake Design and FORD
trademarks, and is without Ford’s consent or authorization." It further
alleges that Superformance’s acts "have been willful, intentional, or
in reckless disregard of Ford’s aforesaid rights."
Count III, entitled "Federal Trademark Dilution," alleges that
Superformance’s use of Ford’s marks has "intended to cause, has
caused and is likely to continue to cause dilution of the distinctive
SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY 9
quality of the Marks in violation of 15 U.S.C. § 1125(c)." It alleges
that "Superformance’s aforesaid acts are likely to tarnish or injure
Ford’s business reputation."
Count IV, entitled "Trademark Dilution Under Massachusetts
Law," alleges dilution under the state analogue. It alleges that "Super-
formance’s aforesaid acts are likely to injure Ford’s business reputa-
tion."
Count V, entitled "Unfair Competition," alleges that Superfor-
mance’s use of Ford’s marks "is likely to continue to cause confusion
or to cause mistake or to deceive the public" and "is likely to mislead
prospective purchasers, distributors and retailers as to the affiliation,
connection, or association of Superformance, its Infringing Automo-
tive Products, or its web site with Ford or Ford’s Automotive Goods,
or as to the origin, sponsorship, or approval of Superformance’s
Infringing Automotive Products or its web site by Ford, intending to
cause purchasers to rely thereon," in violation of state common law
of unfair competition and § 43(a) of the Lanham Act, 15 U.S.C.
§ 1125(a).
Count VI, entitled "Unfair Competition in Violation of Massachu-
setts Unfair Business Practices Act," alleges violation of the state stat-
utory analogue of unfair competition.
For the reasons that follow, we read Count VII of the Shelby com-
plaint and all of the Ford complaint as alleging straightforward trade-
mark violations and unfair competition based on those violations.
Count VII of the Shelby complaint alleges that Superformance vio-
lated various import statutes through the importation of its replicars
manufactured in South Africa that bear Shelby’s marks without its
consent. That count relies on the violation of Shelby’s rights as the
owner or licensee of trademarks.
With respect to Ford’s complaint, Counts I and II allege the neces-
sary elements of a straightforward trademark infringement action
under the Lanham Act, which requires a showing of a likelihood of
confusion. See 15 U.S.C. §§ 1114, 1125. Under that Act, individuals
are prohibited from using registered trademarks without permission
"in connection with the sale, offering for sale, distribution, or adver-
10 SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY
tising of any goods or services on or in connection with which such
use is likely to cause confusion or to cause mistake, or to deceive."
Id. § 1114(1)(a). To recover, a plaintiff must prove that the defen-
dant’s acts were "committed with knowledge that such imitation is
intended to be used to cause confusion, or to cause mistake, or to
deceive." Id. § 1114(1). Section 43(a) of the Lanham Act prohibits
similar conduct with respect to unregistered marks. Id. § 1125(a).
Counts III and IV allege straightforward claims of trademark dilution,
which is again actionable under the Lanham Act, 15 U.S.C. § 1125(c).
A violation for trademark dilution exists where the alleged infringer
uses the mark after it "has become famous and causes dilution of the
distinctive quality of the mark," and the statute identifies several fac-
tors to consider in determining whether a mark is distinctive and
famous. Id. § 1125(c). Finally, Counts V and VI allege straightfor-
ward claims of unfair competition through Superformance’s use of
the Ford name on products it enters into commerce.
All of these claims — Count VII of the Shelby complaint and all
six counts of the Ford complaint — thus allege various sorts of trade-
mark violations and related unfair competition based on those viola-
tions. None of the allegations go any further than the scope of the
Lanham Act’s purpose, which the Act defines as follows:
The intent of this chapter [Chapter 22, consisting of the Lan-
ham Act] is to regulate commerce within the control of Con-
gress by making actionable the deceptive and misleading
use of marks in such commerce; to protect registered marks
used in such commerce from interference by State, or terri-
torial legislation; to protect persons engaged in such com-
merce against unfair competition; to prevent fraud and
deception in such commerce by use of reproductions, cop-
ies, counterfeits, or colorable imitations of registered marks;
and to provide rights and remedies stipulated by treaties and
conventions respecting trademarks, trade names, and unfair
competition entered into between the United States and for-
eign nations.
15 U.S.C. § 1127. And complaints falling within the scope of the Lan-
ham Act are precisely the type excluded from coverage by the terms
of the Hartford policy. That policy excludes from coverage any per-
SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY 11
sonal or advertising injury "[a]rising out of the infringement of trade-
mark, trade name, service mark or other designation of origin or
authenticity."
Superformance argues that trademark dilution and trade dress
infringement are conceptually distinct from straightforward trademark
violations. It maintains that "the law of trademark dilution protects
distinct interests from the law of trademark infringement" and that
"[t]rade dress is inherently more expansive in its scope than trade-
mark." Based on these distinctions, Superformance contends that the
trademark exclusion in the Hartford policy does not cover much of
Ford’s complaint which, it asserts, may be characterized as a claim
for trademark dilution or trade dress infringement.
The conceptual distinctions that Superformance seeks to make,
however, are unsupportable. Although there are, to be sure, different
legal avenues available under the Lanham Act to pursue a trademark
claim, at bottom all protect the owner of a trademark against loss of,
or damage to, his trademark interests. And claims for trademark dilu-
tion and trade dress infringement are expressly among those trade-
mark claims recognized by the Lanham Act. See 15 U.S.C. § 1125(a)
(claims of trademark and trade dress infringement); *id. § 1125(c)
(claims of trademark dilution). Moreover, as to trade dress infringe-
ment, the Supreme Court has clearly stated that trade dress and trade-
mark infringement are very close cousins, both seeking to protect a
designation of origin. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S.
*Trade dress concerns the distinctive design, image, or packaging of
a product. See TrafFix Devices, Inc. v. Marketing Displays, Inc., 532
U.S. 23, 28 (2001). It consists of a product’s "total image and overall
appearance, including its size, shape, color or color combinations, tex-
ture, graphics, or even particular sales techniques." Ashley Furn. Indus.
v. SanGiacomo N.A., 187 F.3d 363, 368 (4th Cir. 1999) (internal quota-
tion marks omitted). As such, a trade dress infringement action "prohibits
a manufacturer from ‘passing off’ his goods or services as those of
another maker by virtue of substantial similarity between the products."
Blue Bell Bio-Medical v. Cin-Bad, Inc., 864 F.2d 1253, 1256 (5th Cir.
1989). Understandably therefore Congress has located trade dress protec-
tion within the Lanham Act’s general trademark infringement provision.
See 15 U.S.C. § 1125(a)(3) (referring to civil actions for trade dress
infringement); TrafFix, 532 U.S. at 29.
12 SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY
763, 773 (1992) (stating that "§ 43(a) provides no basis for distin-
guishing between trademark and trade dress. . . . There is no persua-
sive reason to apply different analysis to the two"). And on trademark
dilution, while the Supreme Court has noted that, "[u]nlike traditional
infringement law, the prohibitions against trademark dilution are not
the product of common-law development, and are not motivated by
an interest in protecting consumers" but rather by an interest in pro-
tecting the uniqueness of a mark, Moseley v. V Secret Catalogue, Inc.,
123 S. Ct. 1115, 1122 (2003), the differing motivations do not make
trademark dilution something other than a trademark claim prosecut-
able under the Lanham Act.
The Hartford policy excludes injury arising out of infringement of
"trademark, trade name, service mark or other designation of origin
or authenticity." All of the claims made in the complaints against
Superformance — trademark infringement, trade dress infringement,
and trademark dilution, as well as unfair competition based on those
violations — are varieties of trademark claims protected by the Lan-
ham Act and State analogues.
We point out that in rejecting Superformance’s conceptual distinc-
tion between trademark dilution and trade dress, on the one hand, and
trademark infringement, on the other, when defining the category of
trademark injury excluded from coverage of the Hartford policy, we
overrule the district court’s conclusion that trade dress infringement
constitutes an "advertising injury" that is not excluded by the trade-
mark exclusion.
Superformance also argues that coverage should be provided
because the complaints can be construed as alleging claims of product
"disparagement" and "false advertising," both of which, it argues, are
included in the Hartford policy’s definition of "personal and advertis-
ing injury." We cannot, however, read Ford’s complaint to allege dis-
paragement of Ford’s products, except as the result of the alleged
dilution of its trademarks. Similarly, even though Superformance’s
marketing of its motor vehicles as Cobras could possibly be seen as
a form of deceit underlying false advertising, the complaint does not
allege false advertising but rather trademark infringement, trade dress
infringement, trademark dilution, and related unfair competition.
SUPERFORMANCE INTERNATIONAL v. HARTFORD CASUALTY 13
Even if these claims could arguably be characterized as claims for
"disparagement" and "false advertising" that further satisfy the defini-
tion of "personal and advertising injury," they would still be properly
excluded by the trademark exclusion. In addition, by characterizing
the underlying claims as ones for disparagement and false advertising
in an effort to bring them under the definition of "personal and adver-
tising injury," Superformance would also bring them under the exclu-
sion that their first publication occurred before the effective date of
the policy. The policy denies coverage for any injury arising out of
a "written publication of material whose first publication took place
before the beginning of the policy period." The facts alleged in the
original Shelby complaint, which were raised before the policy issued
and which also serve as the basis for Count VII of the Shelby com-
plaint and the Ford complaint, make clear that any false advertising
or disparagement that can be inferred from the trademark infringe-
ment claims first occurred before the policy period.
In summary, when reading Count VII of the Shelby complaint and
the entire Ford complaint and comparing the allegations made in them
with the policy language, we find that none of the claims are covered
by the insurance policy issued by Hartford to Superformance. Thus,
albeit for reasons different from those advanced by the district court,
we affirm the judgment of the district court.
AFFIRMED