U.S. Test v. N.D.E. Enviromental Corp.

• Decision Date: 19 November 1999
• Citation: 196 F.3d 1376
• Parties: (Fed. Cir. 1999) U.S. TEST, INC.,Plaintiff/Counterclaim Defendant-Appellant, and BOBBY COBB,Counterclaim Defendant-Appellant v N D E ENVIRONMENTAL CORP., Defendant/Counterclaimant, and UNITED COASTAL INSURANCE CO., Defendant-Appellee. 99-1087 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1376

196 F.3d 1376 (Fed. Cir. 1999)

U.S. TEST, INC.,Plaintiff/Counterclaim Defendant-Appellant and BOBBY COBB,Counterclaim Defendant-Appellant v N D E ENVIRONMENTAL CORP., Defendant/Counterclaimant and UNITED COASTAL INSURANCE CO., Defendant-Appellee.

99-1087

United States Court of Appeals for the Federal Circuit

DECIDED: November 19, 1999

Rehearing Denied December 17, 1999

Appealed from: United States District Court for the Western District of Louisiana Judge Richard T. Haik, Sr.

William David Kiesel, Roy, Kiesel & Tucker, P.L.C., of Baton Rouge, Louisiana, argued for Plaintiff/Counterclaim Defendant-Appellant and Counterclaim Defendant-Appellant.

Charles A. O'Brien, III, of Baton Rouge, Louisiana, argued for Defendand-Appellee.

Before MAYER, Chief Judge, MICHEL and LOURIE, Circuit Judges.

LOURIE, Circuit Judge.

U.S. Test, Inc. and Bobby Cobb appeal from the decision of the United States District Court for the Western District of Louisiana granting United Coastal Insurance Co.'s ("UCIC's") motion for summary judgment that UCIC had no duty to defend U.S. Test and Cobb in their patent infringement suit against N D E Environmental Corporation ("NDE"), and denying U.S. Test and Cobb's corresponding cross-motion. See U.S. Test, Inc. v. NDE Envtl. Corp., No. 95-0199 (W.D. La. Oct. 16, 1998) (judgment). Because the district court correctly concluded that UCIC had no duty to defend U.S. Test and Cobb, we affirm.

BACKGROUND

U.S. Test manufactures and sells the Model 200P, an ultrasonic device used to detect leaks in underground fuel storage tanks. See Statement of Material Facts Not in Dispute at 1, ¶ 2. U.S. Test solicits sales of the Model 200P by advertising in national trade journals, mailing brochures to potential customers, and presenting the Model 200P at national trade shows. See id. at 2, ¶ 3. U.S. Test also provides training seminars and instructions on the proper use of the Model 200P. See id. at 2, ¶ 4.

After competitor NDE acquired an exclusive license to two patents directed to the ultrasonic gauging of tanks, U.S. Patents 4,748,486 and 4,805,453 (the "Haynes patents"), NDE sent letters to several of U.S. Test's customers charging them with infringement of these patents in their use of the Model 200P. See Compl. for Decl. J. at 3, ¶ 8. In response to these letters, U.S. Test filed a declaratory judgment action against NDE, requesting the district court to declare that its actions did not infringe the Haynes patents, and that the patents were invalid and unenforceable. See id. at ¶¶ 10-12. NDE counterclaimed, alleging that U.S. Test infringed the Haynes patents by making, using, and selling products that infringe the patents, as well as inducing others to perform methods and to use products that infringe the patents. See NDE Answer, Countercl., and Jury Demand at ¶¶ 18-21. NDE amended its answer and counterclaim and further asserted that U.S. Test was liable for contributory infringement of the '453 patent. See Am. Countercl. at 6, ¶ 11. NDE also joined Bobby Cobb, the CEO, president, and sole shareholder of U.S. Test, as a counter-defendant. See id. at 1, ¶ 1; 6, ¶ 12.

U.S. Test then filed an amended complaint, making UCIC, the insurance company from which it had purchased a general commercial liability insurance policy, a third-party defendant pursuant to Fed. R. Civ. P. 14. See Pl.'s Am. Supplemental Compl. at 1-2, ¶¶ 1, 3. U.S. Test alleged that under the "advertising injury" provision of the policy, UCIC was obligated to defend U.S. Test in the patent infringement action brought by NDE and to pay any damages awarded against it. See id. That provision reads as follows:

COVERAGE B. PERSONAL AND ADVERTISING INJURY LIABILITY

1. Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" or "advertising injury" to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS--COVERAGES A and B. We will have the right and duty to defend any "suit" seeking those damages.

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b. This insurance applies to "personal injury" only if caused by an offense:

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(2) Arising out of the conduct of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you . . . .

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c. This insurance applies to "advertising injury" only if caused by an offense:

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(2) Committed in the course of advertising your goods, products or services. . . .

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J.A. at A150-A151. As relevant here, Section V. of the policy defines "advertising injury" and "personal injury" as follows:

1. "Advertising injury" means injury arising out of one or more of the following offenses:

a. 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;

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d. Infringement of copyright, title, or slogan.

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16. "Personal injury" means injury, other than "bodily injury", arising out of one or more of the following offenses:

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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. . . .

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J.A. at A155, A157. In its answer, UCIC asserted, inter alia, that it had no duty to defend U.S. Test under the policy. See Ans. at 3, ¶ 8.

U.S. Test and Cobb (hereinafter "U.S. Test") and UCIC cross-moved for summary judgment on the issue whether UCIC had a duty to defend U.S. Test. The district court, from the bench, granted UCIC's motion for summary judgment and denied U.S. Test's cross-motion. The court held that UCIC had no duty to defend U.S. Test, because, under the plain language of the policy, patent infringement does not constitute "advertising injury." See Tr. at 34-35. The court reasoned that if the policy were meant to cover patent infringement, it would have included such language in the policy, as it did for "infringement of copyright, title or slogan." See id. at 34. The court also noted that the disparagement by "oral or written publication" portion of the "advertising injury" provision did not cover patent infringement, as that language should be "read in the context of libel and slander." Id. Finally, the court held that UCIC did not waive its right to deny U.S. Test coverage under the "advertising injury" provision of the policy. See id. U.S. Test appealed to this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1) (1994).

DISCUSSION

A. Standard of Review

Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). We review a district court's grant of summary judgment de novo, see K-2 Corp. v. Salomon S.A., --F.3d--, 52 USPQ2d 1001, 1003-04 (Fed. Cir. 1999), reapplying the summary judgment standard, see Mehl/Biophile Int'l Corp. v. Milgraum, --F.3d--, 52 USPQ2d 1303, 1305 (Fed. Cir. 1999).

An insurance policy is a contract, and we must therefore apply the relevant state contract law in construing the terms of the policy. See, e.g., Augustine Med., Inc. v. Progressive Dynamics, Inc., --F.3d--, 52 USPQ2d 1515, 1517 (Fed. Cir. 1999) (applying Minnesota law to interpret a settlement agreement). In this case, the parties agree that the law of Louisiana controls. Under Louisiana law an insurance policy is interpreted using standard contract principles, see Louisiana Ins. Guar. Ass'n v. Interstate Fire & Cas. Co., 630 So. 2d 759, 763 (La. 1994), and "[w]hen a contract can be construed from the four corners of the instrument without looking to extrinsic evidence, the question of contractual interpretation is answered as a matter of law and summary judgment is appropriate," Peterson v. Schimek, 729 So. 2d 1024, 1029 (La. 1999); see also Schroeder v. Board of Supervisors, 591 So. 2d 342, 345 (La. 1991). Whether a contract provision is clear or ambiguous is a question of law, see Interstate, 630 So. 2d at 764, and if a court determines that the provisions are unambiguous, then the interpretation and meaning of those provisions are also issues of law, reviewed de novo, see Banque De Depots v. Bozel Mineracao E Ferroligas, 728 So. 2d 533, 534 n.1 (La. Ct. App. 1999).

B. Duty to Defend

U.S. Test argues that the district court erred in holding that UCIC had no duty to defend it against NDE's patent infringement allegations. U.S. Test contends that NDE's allegations are covered under the "infringement of copyright, title or slogan" portion of the "advertising injury" provision of the policy. While apparently conceding that the language of the provision does not expressly provide coverage for allegations of patent infringement, U.S. Test asserts that the provision is nonetheless ambiguous, because the phrase "infringement of . . . title" could include allegations of patent infringement. Citing Rymal v. Woodcock, U.S. Test asserts that under Louisiana law, if the coverage of a policy is ambiguous, and an alleged lawsuit could be included in the coverage, then the policy must be interpreted to obligate the insurer to defend the insured. See Rymal v. Woodcock, 896 F. Supp. 637 (W.D. La. 1995). U.S. Test supports its argument by noting that Louisiana law construes insurance policies liberally so as to favor the insured. U.S. Test alternatively contends that UCIC had a duty to defend it based on the "disparagement of goods" offense listed in either the "advertising injury" or the "personal injury" provisions of the UCIC policy. U.S. Test interprets "goods" to encompass patents, and asserts that NDE's allegations of inducement of infringement are effectively allegations of disparagement of goods.

UCIC responds that the district court properly concluded that it had no duty to defend U.S. Test. UCIC contends that NDE's allegations are clearly not included in the ...