CGS Industries v. Charter Oak Fire Insur.

U.S. COURT OF APPEALS, SECOND CIRCUIT
Insurance Law

, New York Law Journal

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Judge Gerard Lynch

CGS Industries was sued under the Lanham Act for infringing upon Five Four Clothing Inc.'s distinctive rear pocket stitching (FF stitching) on jeans that CGS supplied to Walmart, which Walmart then sold. Insurer Charter Oak appealed district court's judgment holding it liable to CGS for its expenses—totalling $396,342—in defending and settling the underlying trademark infringement suit. Second Circuit held that Charter breached its contractual duty to defend CGS and was therefore liable for CGS's defense costs of $146,342. However, the circuit found Charter did not have a duty to indemnify CGS and was not liable for its $250,000 in settlement costs. The case was remanded to district court for further proceedings consistent with the circuit's opinion. Discussing Hugo Boss Fashions v. Federal Insurance, the circuit concluded that the FF stitching design was not a "phrase" and that to hold the FF stitching design to be a "slogan" would stretch that definition beyond recognition. The circuit also noted that despite its boilerplate allegation of willful misconduct, Five Four's Lanham Act §43(a) claim did not require it to prove that CGS intended to infringe on its trademark, as such a claim does "not require proof of intent to deceive."

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