Acuity v. Bagadia
| Decision Date | 18 June 2008 |
| Docket Number | No. 2006AP1974.,No. 2006AP1153.,2006AP1153.,2006AP1974. |
| Citation | 750 N.W.2d 817,2008 WI 62 |
| Parties | ACUITY, a Mutual Insurance Company, Plaintiff-Appellant-Petitioner, v. Kishan BAGADIA; UNIK Associates, LLC; Symantec Corporation; and Quarterdeck Corporation, Defendants-Respondents. |
| Court | Wisconsin Supreme Court |
For the plaintiff-appellant-petitioner there were briefs by Arthur P. Simpson, Michelle D. Johnson, and Simpson & Deardorff, S.C., Milwaukee, and oral argument by Arthur P. Simpson.
For the defendants-respondents, Symantec Corporation and Quarterdeck Corporation, there was a brief by John S. Skilton, Michelle M. Umberger, Eric G. Barber, and Heller Ehrman LLP, Madison, and Christopher F. Stoll and Heller Ehrman LLP, San Francisco, Calif., and oral argument by John S. Skilton.
For the defendants-respondents, Kishan Bagadia and UNIK Associates, LLC, a letter was filed by Steven P. Bogart and Reinhart Boerner Van Deuren s.c., Milwaukee.
An amicus curiae brief was filed by Beth Ermatinger Hanan and Gass Weber Mullins LLC, Milwaukee, on behalf of Wisconsin Insurance Alliance.
A lawsuit in the United States District Court for the District of Oregon (hereinafter "District Court of Oregon") that resulted in a judgment for $958,253.40 entered against two of the respondents, Kishan Bagadia and UNIK Associates (collectively, "UNIK"), and in favor of the two other respondents, Symantec Corporation and Quarterdeck Corporation (collectively, "Symantec"), precipitated the present action filed by UNIK's insurer, Acuity Mutual Insurance Company ("Acuity"), in the Waukesha County Circuit Court.1 Acuity sought a declaration that its insurance policy with UNIK does not cover the damages entered by the District Court of Oregon for an "advertising injury" Symantec alleges that it incurred as a result of UNIK's infringement of Symantec's copyrights and trademarks. Alternatively, in the event the circuit court ultimately held that Acuity's policy does cover the damages, Acuity sought a declaration that the amount it owes UNIK is set off by the amount Symantec has allegedly recovered from another insurer.
¶ 2 The circuit court entered a final judgment against Acuity, directing Acuity to indemnify UNIK for the full $958,253.40, plus interest.
¶ 3 We review the decision by the court of appeals2 affirming the circuit court's entry of final judgment against Acuity and in favor of UNIK and Symantec. Two issues confront us: (1) Whether, under Acuity's Commercial General Liability ("CGL") insurance policy, UNIK engaged in "advertising activity" resulting in UNIK's infringement of Symantec's copyrights and trademarks, thereby obligating Acuity to indemnify UNIK. (2) If so, whether the amount in which Acuity is obligated to indemnify UNIK may be offset by the amount Symantec purportedly has already received from another insurer. We affirm. We hold that Acuity is liable for the damages entered against UNIK, because Acuity's policy assures coverage for the copyright and trademark infringement UNIK committed as a result of advertising Symantec's products. However, we decline to consider whether Acuity is entitled to have the judgment amount offset by the amount Symantec has allegedly collected from another insurer because the record with respect to that issue is insufficiently developed for us to render a decision.
¶ 4 In 2002, Symantec sought to put a halt to UNIK's unauthorized distribution and sale of Symantec software by filing a lawsuit in the District Court of Oregon alleging copyright and trademark infringement. Symantec creates, publishes and manufactures software that protects the security of personal computers. It owns four copyrights at issue: Norton AntiVirus®, Norton Utilities®, Norton Ghost®, and Norton CleanSweep®. It also owns six trademarks at issue: Symantec®, Norton SystemWorks®, Norton AntiVirus®, Norton Utilities®, Norton Ghost®, and Norton CleanSweep®.4 UNIK Associates, which is insured by Acuity, is a Wisconsin-based software vendor whose business focuses primarily on purchasing computer software at discount prices and then selling that software to resellers. Symantec claimed in the federal suit that UNIK, among other actions, advertised, distributed, and sold Symantec's copyrighted and trademarked products without authorization. Symantec also alleged that UNIK's actions caused injury to Symantec, including consumer deception and confusion.
¶ 5 The District Court of Oregon issued summary judgment in Symantec's favor. It found that UNIK "advertised [Symantec's] SystemWorks®5 software through trade magazines, telephone marketing, direct mailings, and supplying samples to interested buyers." Symantec Corp. v. CD Micro, Inc., No. 02-406-KI, slip op. at 4 (D.Or. Feb. 24, 2005). UNIK placed advertisements bearing Symantec's trademarked name in computer trade magazines. In addition, UNIK shipped samples of Symantec's SystemWorks® products to existing customers who requested them over the phone. UNIK would ship a sample disk containing the SystemWorks® software in a plain, white paper sleeve without a retail box or a manual. In accordance with the customer's specifications, UNIK would mark the inner hub of the sample disk to indicate the SystemWorks® products contained within. The customer would inspect the sample. If the sample met the customer's approval, the customer would place a full order for the product with UNIK. UNIK, in turn, would place the order with its supplier and, upon receipt, would ship the full order to its customer in the plain, white sleeves it used to ship the samples. Symantec sold each of its SystemWorks® suites of software for more than $40, but UNIK sold them at prices ranging from $3.50 to $20. UNIK sold 117,273 copies of Symantec's software between December 2000 and October 2003, generating approximately $845,672 in gross revenue.
¶ 6 The federal court concluded that UNIK's actions violated Symantec's copyrights and trademarks. It ordered both an injunction and monetary damages. The court enjoined UNIK from "[d]isseminating, promoting, selling, offering for sale, distributing, or using any unauthorized copies" of Symantec's copyrighted products. Symantec, No. 02-406-KI, [Stipulated] Permanent Injunction, ¶ 1(a) . It further enjoined UNIK from "[p]rocuring, using (including use on web sites, on the Internet, and on any products distributed by UNIK), reproducing, counterfeiting, or copying any of [Symantec's] registered trademarks, or distributing any products bearing [Symantec's] trademarks." Id. at ¶ b.
¶ 7 The court also imposed monetary damages. It awarded statutory damages of $60,000 for each of the six Symantec trademarks UNIK infringed and $15,000 for each of the four Symantec copyrights UNIK infringed. Pursuant to federal statutes6 providing for election of damages, Symantec elected to recover the $360,000 in statutory trademark infringement damages, but elected to forego the $60,000 in statutory copyright infringement damages in favor of collecting $272,226 in actual copyright infringement damages. The court also awarded Symantec costs and attorney's fees of $326,07.40, bringing the total judgment against UNIK to $958,253.40.
¶ 8 Meanwhile, as the federal lawsuit unfolded, Acuity filed a lawsuit in Waukesha County Circuit Court, seeking, via a motion for summary judgment, a declaration that it had no duty to defend UNIK in the Oregon action. The court denied Acuity's motion and ordered Acuity to defend. However, the District Court of Oregon entered final judgment against UNIK. Acuity, Symantec and UNIK then filed cross motions for summary judgment with respect to the question of whether Acuity had a duty to indemnify UNIK for the federal court judgment. The circuit court denied Acuity's motion and granted Symantec's and UNIK's respective motions. In its final judgment, the court ordered Acuity to indemnify UNIK for the full $958,253.40 plus prejudgment interest, despite Acuity's request that the award be offset by the alleged $165,964.38 Symantec had already received from Continental Casualty Company.7
¶ 9 The court of appeals affirmed. Acuity v. Bagadia, 2007 WI App 133, ¶ 1, 302 Wis.2d 228, 734 N.W.2d 464. It held that Acuity's insurance policy with UNIK covered Symantec's judgment with respect to both its copyright infringement and trademark infringement claims. UNIK engaged in "advertising activity," as described in the policy, which resulted from its infringing Symantec's copyrights and trademarks. Accordingly, the court of appeals held that Acuity is obligated to indemnify UNIK for the full amount entered by the circuit court. The court of appeals also denied Acuity's request to offset the award by the $165,964.38 Acuity alleges Symantec received from Continental, pointing out that the record is insufficient to allow it "to determine who owes what." Id., ¶ 24.
¶ 10 The court of appeals employed a three-step test to reach its conclusion that UNIK's activities resulted in "advertising injury" to Symantec, thereby obligating Acuity to indemnify UNIK. Id., ¶ 6. First, the court concluded that copyright infringement and trademark infringement constituted enumerated offenses under Acuity's policy — copyright by virtue of being expressly enumerated in the policy, and trademark by virtue of being encompassed within "title," which is expressly enumerated in the policy. Id., ¶¶ 7, 17. Second, the court concluded that UNIK advertised Symantec's copyrighted and trademarked products and names. Id., ¶¶ 7, 9, 18. Finally, the court concluded that there existed a causal nexus between UNIK's advertising and its infringement of Symantec's copyrights and trademarks. Id., ¶¶ 13, 19, 22.
¶ 11 We granted review and now affirm.
¶ 12 We are called upon to review an entry of summary judgment that interpreted an insurance policy. We review the interpretation of an insurance...
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