Laney Chiropractic & Sports Therapy, P.A. v. Nationwide Mutual Insurance Co.

Case: 16-11183 Document: 00514093718 Page: 1 Date Filed: 07/28/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fif h Circuit
No. 16-11183 FILED
July 28, 2017
Lyle W. Cayce
LANEY CHIROPRACTIC AND SPORTS THERAPY, P.A., Clerk
Plaintiff - Appellant
v.
NATIONWIDE MUTUAL INSURANCE COMPANY,
Defendant - Appellee
Appeal from the United States District Court
for the Northern District of Texas
Before JONES, CLEMENT, and HIGGINSON, Circuit Judges.
STEPHEN A. HIGGINSON, Circuit Judge:
Defendant-Appellee Nationwide Mutual Insurance Company
(“Nationwide”) issued a series of insurance policies (collectively, the “Policy”)
to Plaintiff-Appellant Laney Chiropractic Sports Therapy, P.A. (“Laney”). In
March 2015, ART Corporate Solutions, Inc. and Active Release Techniques,
LLC (collectively, the “ART Companies”) sued Laney (the “Underlying
Complaint”). Laney sought coverage under the Policy, and Nationwide refused
to defend. In response, Laney sued, seeking a declaration that Nationwide was
required to defend it. On cross-motions for summary judgment, the district
court agreed with Nationwide. Laney appealed. We affirm.
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I
The following allegations come from the Underlying Complaint. In 1985,
Dr. Michael Leahy developed “Active Release Techniques,” or “ART.” ART is
a soft-tissue, movement-based massage technique, which includes over 500
treatment protocols. The ART Companies hold trademarks for the terms
“ART” and “Active Release Techniques.” Dr. Leahy also received several
patents for the ART system. Dr. Leahy monetized ART by training and
licensing others to use the technique.
Laney began providing ART treatments in 2004 pursuant to a licensing
agreement with the ART Companies. However, around 2011, Laney began
competing with the ART Companies by providing ART services directly to
customers outside of any licensing agreement. For a time, Laney’s website
explicitly referred to ART. But “sometime after” September 2014, Laney
changed its website to refer to non-trademarked phrases such as “soft tissue
techniques,” “STT,” or “500 unique deep tissue protocols.” Later, Laney
changed its website again to refer to “Fascial Distortion Model” or “FDM.”
Nonetheless, although the verbiage changed, “[t]he actual description of the
services provided . . . remained exactly the same.” The Underlying Complaint
alleges the following causes of action against Laney: federal trademark
infringement, false and/or misleading advertising, deceptive business
practices, unfair competition, breach of contract, and breach of the duty of good
faith and fair dealing.
Contending that the Underlying Complaint alleged facts and claims
potentially within the coverage, Laney tendered the complaint to Nationwide.
Nationwide refused to defend.
The Policy provides the following coverage:
a. We will pay those sums up to the applicable Limit
of Insurance that the insured becomes legally
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obligated to pay as damages because of “personal and
advertising injury” to which this insurance applies.
We will have the right and duty to defend the insured
against any “suit” seeking those damages for which
there is coverage under this policy. . . .
“Personal and advertising injury” is relevantly defined as follows:
“Personal and advertising injury” means injury,
including consequential “bodily injury[,”] arising out of
one or more of the following offenses: . . .
f. The use of another’s advertising idea in your
“advertisement”; or
g. Infringing upon another’s copyright, trade
dress or slogan in your “advertisement[.”]
After Nationwide denied coverage, Laney sued, seeking a declaratory
judgment that Nationwide had a duty to defend. Laney and Nationwide cross-
moved for summary judgment. The district court denied Laney’s motion and
granted Nationwide’s, finding that the Underlying Complaint did not assert a
covered claim.
II
“We review de novo a district court’s award of summary judgment,
applying the same standard as the district court.” Trinity Universal Ins. Co.
v. Emp’rs Mut. Cas. Co., 592 F.3d 687, 690 (5th Cir. 2010). Under Texas law,
which governs here, “insurance policies are construed as are contracts
generally, and must be interpreted to effectuate the intent of the parties at the
time the contracts were formed.” Mid-Continent Cas. Co. v. JHP Dev., Inc.,
557 F.3d 207, 212 (5th Cir. 2009) (citing Kelley-Coppedge, Inc. v. Highlands
Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998); Glover v. Nat’l Ins. Underwriters,
545 S.W.2d 755, 761 (Tex. 1977)). “When the words of a policy are
unambiguous, they are to be given their plain, ordinary, and generally
accepted meaning, unless the policy clearly indicates that the contractual
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terms have been used in a different or technical sense.” Id. “However, when
the language of a policy is susceptible to more than one construction, it should
be construed strictly against the insurer and liberally in favor of the insured.”
Id. (citing Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex. 1987)).
“In Texas, the insurer’s duty to defend is governed by the ‘eight corners
rule,’ which holds that the duty to defend is determined solely from the terms
of the policy and the pleadings of the third-party claimant.” Ooida Risk
Retention Grp., Inc. v. Williams, 579 F.3d 469, 472 (5th Cir. 2009). “The duty
to defend does not depend upon the truth or falsity of the allegations; a
plaintiff’s factual allegations that potentially support a covered claim are all
that is needed to invoke the insurer’s duty to defend.” JHP Dev., 557 F.3d at
212. “When reviewing the pleadings, courts must focus on the factual
allegations, not the asserted legal theories or conclusions.” Test Masters Educ.
Servs., Inc. v. State Farm Lloyds, 791 F.3d 561, 564 (5th Cir. 2015) (citing
Ewing Constr. Co. v. Amerisure Ins. Co., 420 S.W.3d 30, 33 (Tex. 2014)). “If
the underlying pleading alleges facts that may fall within the scope of coverage,
the insurer has a duty to defend; if, on the other hand, the pleading only alleges
facts excluded by the policy, there is no duty to defend.” Ooida, 579 F.3d at 472.
“Thus, even if the allegations are groundless, false, or fraudulent the insurer
is obligated to defend.” Test Masters, 791 F.3d at 564 (quoting Zurich Am. Ins.
Co. v. Nokia, Inc., 268 S.W.3d 487, 491 (Tex. 2008)). “Courts may not, however,
(1) read facts into the pleadings, (2) look outside the pleadings, or (3) imagine
factual scenarios which might trigger coverage.” Id. (quoting Gore Design
Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365, 369 (5th Cir. 2008)).
III
Laney argues that the Underlying Complaint alleges facts that describe
an advertising injury in three ways: (1) by alleging the use of the ART
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Companies’ advertising ideas, (2) by alleging trade dress infringement, and (3)
by alleging slogan infringement. We reject each argument.
A
Laney first argues that the district court erred when it concluded that
the Underlying Complaint did not allege the use of another’s “advertising
idea.” Laney contends that the Underlying Complaint alleges that the ART
Companies’ advertising ideas were used by Laney in promoting its treatment
by using phrases “soft tissue techniques,” “soft tissue therapy,” and “more than
500 techniques” on its website and including ART testimonial videos focusing
on the benefits and effectiveness of ART treatments.
Although the Policy defines “advertisement” it does not define
“advertising idea.” Absent a policy definition, terms are “given their plain,
ordinary, and generally accepted meaning” unless the insurance contract
indicates otherwise. Ramsay v. Md. Am. Gen. Ins. Co., 533 S.W.2d 344, 346
(Tex. 1976); see also U.S. Metals, Inc. v. Liberty Mut. Grp., Inc., 589 F. App’x
659, 662 (5th Cir. 2014) (unpublished) (applying Ramsay). “The Fifth Circuit
and Texas’[s] courts have not spoken directly to the definition of an advertising
idea in [commercial general liability] policies. . . .” Cont’l Cas. Co. v. Consol.
Graphics, Inc., 656 F. Supp. 2d 650, 658–59 (S.D. Tex. 2009), aff’d, 646 F.3d
210 (5th Cir. 2011). Other courts, however, have persuasively defined
“advertising idea.” For example, the Eleventh Circuit defines “advertising
idea” as “any idea or concept related to the promotion of a product to the
public.” Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 1188 (11th
Cir. 2002). Other circuits have adopted similar definitions, see, e.g., Green
Mach. Corp. v. Zurich-Am. Ins. Grp., 313 F.3d 837, 839 (3d Cir. 2002) (an
advertising idea is “an idea about the solicitation of business and customers.”),
as have district courts in this circuit, see, e.g., Gemini Ins. Co. v. Andy Boyd
Co., LLC., No. CIV.A. H-05-1861, 2006 WL 1195639, at *2 (S.D. Tex. May 3,
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2006) (“An advertising idea is a concept about the manner a product is
promoted to the public.”), aff’d, 243 F. App’x 814 (5th Cir. 2007) (unpublished). 1
Under these definitions, the Underlying Complaint does not allege the use of
the ART Companies’ advertising ideas in Laney’s advertising.
Preliminarily, allegations that Laney used the ART Companies’
trademarks do not allege the use of the ART Companies’ advertising ideas
because under Texas law, a trademark is not a marketing or advertising
device. Sport Supply, 335 F.3d at 464. Accordingly, Laney’s use of
trademarked phrases, such as “ART” or “Active Release Techniques,” is not the
use of another’s advertising idea. Id. at 464–65.
Likewise, allegations that Laney used non-trademarked phrases, such
as “STT,” “soft tissue techniques,” and “more than 500 techniques,” do not
allege the use of the ART Companies’ advertising ideas.
The Underlying Complaint alleges that Laney—but not the ART
Companies—used phrases like “STT,” “soft tissue techniques,” and “more than
500 techniques.” True, occasionally the Underlying Complaint refers to ART
as a “soft tissue system,” or an “extremely effective soft tissue management
system” but those statements neither attribute the use of the “soft tissue”
language to the ART Companies nor indicate that the ART Companies used
the “soft tissue” language in its advertising. The same is true for the use of the
phrase “more than 500 techniques.” Although the Underlying Complaint
describes ART as featuring over 500 techniques, it alleges only that Laney used
the phrase. The Underlying Complaint cannot allege that Laney used the ART
1 These definitions accord with both Texas law and the Policy’s definitions of
advertising. Under Texas law, “the term ‘advertising’ refers to a common device for soliciting
business.” Sport Supply Grp., Inc. v. Columbia Cas. Co., 335 F.3d 453, 464 (5th Cir. 2003).
Likewise, the Policy’s definition of advertisement, requires “a notice that is broadcast or
published” to the public “for the purposes of attracting customers or supporters.”
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Companies’ advertising ideas if it does not allege that the ART Companies had
advertising ideas.
Even if the Underlying Complaint alleged that the ART Companies used
the challenged phrases, we would still hold that the Underlying Complaint did
not allege the use of another’s advertising idea. Generally, an “advertisement
is an activity or item distinct from the product being advertised.” 2 Sport
Supply, 335 F.3d at 463 (quoting Ekco Grp., Inc. v. Travelers Indem. Co. of Ill.,
273 F.3d 409, 413 (1st Cir. 2001)); accord Green Mach., 313 F.3d at 839.
Accordingly, when an insured is accused of using another’s product, they are
generally not using another’s “advertising idea.” See, e.g., Frog, Switch & Mfg.
Co. v. Travelers Ins. Co., 193 F.3d 742, 748 (3d Cir. 1999); Simply Fresh Fruit,
Inc. v. Cont’l Ins. Co., 94 F.3d 1219, 1222 (9th Cir. 1996), as amended (Aug. 16,
1996); Evanston Ins. Co. v. Clartre, Inc., 158 F. Supp. 3d 1110, 1120 (W.D.
Wash. 2016); Kreuger Int’l, Inc. v. Fed. Ins. Co., 637 F. Supp. 2d 604, 614 (E.D.
Wis. 2008); Pa. Pulp & Paper Co. v. Nationwide Mut. Ins. Co., 100 S.W.3d 566,
572 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). 3 And that is precisely
what the Underlying Complaint alleges. It alleges that Laney unlawfully used
a patented product (ART) and then advertised the product on its website.
Because, without more, taking and then advertising another’s product is
different from taking another’s “advertising idea,” the Underlying Complaint
does not allege that Laney used ART’s “advertising idea.”
2 Nothing in the Policy definition of advertisement indicates a departure from this
general rule.
3 There are, of course, limits to this general rule. Namely, when the product itself is
an “advertising idea,” or used as an “advertising idea,” then use of the product may also be
use of an advertising idea. See Mid-Continent Cas. Co. v. Kipp Flores Architects, L.L.C., 602
F. App’x 985, 994 n.20 (5th Cir. 2015) (unpublished) (distinguishing Ekco on its facts because
the evidence demonstrated that a builder’s use of the product itself (homes) was the
“primary—indeed, nearly only—means of marketing its services”).
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B
Laney next argues that the Underlying Complaint states a trade dress
claim. Trade dress “refers to the total image and overall appearance of a
product and may include features such as the size, shape, color, color
combinations, textures, graphics, and even sales techniques that characterize
a particular product.” Test Masters, 791 F.3d at 565 (quoting Amazing Spaces,
Inc. v. Metro Mini Storage, 608 F.3d 225, 251 (5th Cir. 2010)). Laney claims
that the Underlying Complaint potentially states a trade dress claim because,
according to Laney, it alleges that Laney mimicked the ART Companies’ “style
of doing business” on Laney’s website. We disagree.
First, many of the allegations simply state that Laney used the ART
Companies’ product. These allegations do not allege a trade dress claim
because “[t]rade dress protection . . . is not intended to create patent-like rights
in innovative aspects of product design.” Eppendorf-Netheler-Hinz GMBH v.
Ritter GMBH, 289 F.3d 351, 355 (5th Cir. 2002). For this reason, “trade dress
protection extends only to incidental, arbitrary or ornamental product features
which identify the source of the product.” Id. Put another way, trade dress
protects the distinctive look of the product, not the functional product itself.
Id. (“[F]unctional product features do not qualify for trade dress protection.”).
Accordingly, Texas courts have held that allegations that a whole product was
copied, without more, do not state a trade dress claim and are not covered by
a general commercial liability policy like the one here. See, e.g., KLN Steel
Prods. Co. v. CNA Ins. Cos., 278 S.W.3d 429, 442 (Tex. App.—San Antonio
2008, pet. denied).
Second, allegations that Laney misappropriated the ART Companies’
trademarks, without more, do not allege a trade dress claim. For example, in
America’s Recommended Mailers v. Maryland Casualty Co., we considered
whether an allegation that a company distributed a mailer that falsely noted
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an affiliation with the AARP stated a trade dress claim. 339 F. App’x 467, 468–
69 (5th Cir. 2009) (unpublished). We held that it did not because, “[w]hile the
AARP . . . alleged that Mailers inappropriately used the AARP’s trademark in
a deceptive manner, the AARP [did] not challeng[e] the shape, design, color
scheme, or any other aesthetic aspect of the cards or the similarity of Mailers’s
cards to any other advertisements for financial products.” Id. at 469.
Third, the Underlying Complaint neither expressly alleges a trade dress
claim nor alleges the required elements of trade dress. For example, the ART
Companies do not allege that phrases such as “STT” or “over 500 techniques”—
or indeed, any non-trademarked phrases—are distinctive or have acquired
secondary meaning. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763,
768 (1992) (outlining the requirements of protectable dress dress); see also
Lady Primrose’s, Inc. v. After Hours Bath Prods., Inc., 211 F.3d 125, 2000 WL
309967, at *2 (5th Cir. 2000) (unpublished) (trade dress must either be
inherently distinctive or have acquired secondary meaning). Likewise, the
Underlying Complaint does not “identify” any “discrete elements of the trade
dress that it wishes to protect.” Test Masters, 791 F.3d at 565. Absent these
allegations the Underlying Complaint does not allege the use of the ART
Companies’ trade dress. See id. at 566–67.
Fourth, the allegations concerning Laney’s website, when read in
context, do not concern the “look and feel” of “the website itself.” Id. at 566.
All the Underlying Complaint alleges about Laney’s website is that it used
certain words and phrases to describe the product Laney offered and that those
words and phrases could have confused customers because they described the
ART Companies’ product. Missing from those allegations is any description of
the design, layout, motif, or style of either Laney or the ART Companies’
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marketing or websites. “[A]bsent some allegation of aesthetic similarity” the
Underlying Complaint does not state a trade dress claim. Id. at 566. 4
C
Last, Laney argues that the Underlying Complaint states a claim for
slogan infringement. Laney argues that “ART,” “Active Release Techniques,”
“soft tissue techniques,” “more than 500 techniques,” and “Active Release
Technique protocols” are all slogans. We disagree.
A slogan infringement claim requires an allegation that another entity
used a slogan. See St. Surfing, LLC v. Great Am. E & S Ins. Co., 776 F.3d 603,
609 (9th Cir. 2014) (“Street Surfing’s purported use of ‘Street Surfing’ as a
slogan in its own advertising is irrelevant. The policies’ coverage extends only
to Street Surfing’s infringement of another’s slogan.”). As explained in Part
III.A, except for “ART” and “Active Release Techniques,” the Underlying
Complaint does not allege that the ART Companies ever used any of the alleged
slogans.
“ART,” “Active Release Techniques,” and “Active Release Technique
protocols” are not slogans. They are brand and product names (or brand and
product names used as an adjective). Absent specific factual allegations to the
contrary, a housemark, brand name, or product name is not a slogan. See, e.g.,
Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 619 (2d Cir. 2001)
4 Both cases Laney cites are distinguishable because they each involved significant
allegations of aesthetic similarity. See, e.g., Gemmy Indus. Corp. v. Alliance Gen. Ins. Co.,
190 F. Supp. 2d 915, 919 (N.D. Tex. 1998), aff’d 200 F.3d 816, 1999 WL 1095935 (5th Cir.
1999) (unpublished) (“Fun–Damental specifically alleged numerous ways in which the design
and appearance of plaintiff’s product mimicked its own and caused customer confusion. It is
clear that plaintiff was sued for using this trade dress to ‘call public attention’ to its
product.”); Selective Ins. Co. of Se. v. Creation Supply, Inc., 2015 IL App (1st) 140152-U, 2015
WL 522247, at *7 (Ill App. Ct. Feb. 9, 2015) (“The placards are more than the mere display
of the product itself and affirmatively serve to attract customers. The shape and design of
the marker is prominently displayed in the placard, which is the source of the underlying
trade dress claim.”).
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(noting that “a ‘trademarked slogan’ is a word or phrase used to promote house
or product names, but is not the house or product name itself standing alone”);
ShoLodge, Inc. v. Travelers Indem. Co. of Ill., 168 F.3d 256, 259 (6th Cir. 1999)
(“Nor does [trademark infringement] fall within the ordinary meaning of the
phrase ‘infringement of slogan,’ because a trademark or service mark is not a
‘slogan.’”); Interstate Bakeries Corp. v. OneBeacon Ins. Co., 773 F. Supp. 2d 799,
815–16 (W.D. Mo. 2011), aff’d, 686 F.3d 539 (8th Cir. 2012) (“Renaming the
trademark infringement and unfair competition claims pled in the Flowers
litigation ‘slogan infringement’ in an effort to afford policy coverage would
render the policy exclusion for claims of trademark infringement meaningless.
Under IBC’s theory, any claim involving the alleged misuse of a trademarked
name would be covered by the policy as a potential cause of action for slogan
infringement.”).
In any event, the phrases do not fit within the definition of slogan.
Although the Policy does not define “slogan,” both parties argue that a slogan
is a “distinctive cry, phrase, or motto of any party, group, manufacturer, or
person; catchword or catch phrase.” Cincinnati Ins. Co. v. Zen Design Grp.,
Ltd., 329 F.3d 546, 556 (6th Cir. 2003) (quoting Random House Unabridged
Dictionary 1800 (2d ed. 1993)). The Underlying Complaint does not allege that
the ART Companies used the alleged slogans as catchy, stand-alone phrases.
Indeed, where the Underlying Complaint ascribes statements using the
challenged phrases to the ART Companies, the statements describe what ART
is. These narrative descriptions of what ART is differ markedly from the short,
catchy phrases that other courts have found to be slogans. See Selective Ins.
Co. of Am. v. Smart Candle, LLC, 781 F.3d 983, 986 (8th Cir. 2015) (“The words
‘Smart Candle,’ [are not] ‘attention-getting.’ The words simply are the
trademarked name of the company, used for product recognition.”); Interstate
Bakeries Corp. v. OneBeacon Ins. Co., 686 F.3d 539, 546 (8th Cir. 2012) (“IBC
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fails to identify anything . . . indicating that Flowers claims to use or actually
uses ‘Nature’s Own’ as ‘a brief attention-getting phrase used in advertising or
promotion,’ rather than as a simple product identifier.”); see also Hudson Ins.
Co. v. Colony Ins. Co., 624 F.3d 1264, 1268 (9th Cir. 2010) (concluding that
“Steel Curtain” is a slogan); Zen Design, 329 F.3d at 556–57 (concluding that
“The Wearable Light” is a slogan). Accordingly, we hold that the Underlying
Complaint does not state a slogan infringement claim.
IV
We have considered Laney’s remaining arguments, and they are without
merit. We affirm.
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