                                                                                                                           Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


12-20-2002

Green Machine Corp v. Zurich Amer Ins Grp
Precedential or Non-Precedential: Precedential

Docket No. 01-3635




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"Green Machine Corp v. Zurich Amer Ins Grp" (2002). 2002 Decisions. Paper 802.
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PRECEDENTIAL

       Filed December 20, 2002

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 01-3635

GREEN MACHINE CORPORATION,
       Appellant

v.

THE ZURICH-AMERICAN INSURANCE GROUP, as
succeessor to THE MARYLAND COMMERCIAL
INSURANCE GROUP; VALIANT INSURANCE COMPANY

On Appeal From the United States District Court
For the Eastern District of Pennsylvania
(D.C. No. 99-cv-03048)
District Judge: Honorable Mary A. McLaughlin

Argued November 4, 2002

Before: BECKER, Chief Judge, McKEE and Hill*,
Circuit Judges.

(Filed: December 20, 2002)

_________________________________________________________________

* Honorable James Hill, United States Circuit Judge for the Eleventh
Circuit, sitting by designation.



       JOSEPH E. VAUGHAN, ESQ.
        (Argued)
       JUSTIN S. WALKER, ESQ.
       Vaughan, Duffy & Connors, LLP
       102 Pickering Way
       Suite 200
       Exton, PA 19341

       Attorney for Appellant

       R. BRUCE MORRISON (Argued)
       DANIEL G. SANDERS
       Marshall, Dennehey, Warner,
        Coleman & Goggin
       1845 Walnut Street
       16th Floor
       Philadelphia, PA 19103

       WALTER F. KAWALEC, III
       Marshall, Dennehey, Warner,
        Colemen & Goggin
       200 Lake Drive East
       Woodland Falls Corporate Park
       Suite 300
       Cherry Hill, NJ 08002

       Attorneys for the Appellees, The
       Zurich American Insurance Company
       and Valiant Insurance Company

       LAURA A. FOGGAN, ESQ.
       JOHN C. YANG, ESQ.
       Wiley Rein & Fielding LLP
       1776 K Street, NW
       Washington, DC 20006

       Attorneys for Amicus Curiae,
       Complex Insurance Claims Litigation
       Association

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OPINION OF THE COURT

HILL, Circuit Judge.

Green Machine Corporation appeals the entry of
summary judgment against it on the issue of Zurich-
American Insurance Group’s duty to defend and indemnify
it in an underlying patent infringement action. For the
following reasons, we affirm.

I.

In 1995, Chiuminatta Concrete Concepts, Inc. and its
principals ("Chiuminatta") filed suit in a California federal
district court against Green Machine Corporation ("Green
Machine") and others. Among other things, Chiuminatta
alleged that Green Machine’s manufacture, sale and
promotion of certain concrete-cutting saws infringed and
induced others to infringe Chiuminatta’s products and
methods patents. In November of 1996, the California
district court entered judgment for Chiuminatta, and Green
Machine appealed.

In July of 1997, Green Machine sought insurance
coverage for Chiuminatta’s patent infringement claims
under a policy of general liability insurance issued to Green
Machine by Zurich-American Insurance Group ("Zurich").
Green Machine maintained that Chiuminatta’s claims fell
within the "advertising injury" coverage provided by
Zurich’s policy. Zurich denied Green Machine’s request for
coverage in June of 1998.

Shortly thereafter, the Court of Appeals for the Federal
Circuit reversed the district court’s judgment as to the
product patent, holding that Green Machine’s manufacture,
sale, and use of its concrete-cutting saw did not infringe
the product patents of Chiuminatta. See Chiuminatta
Concrete Concepts, Inc. v. Cardinal Industries, Inc. , 145 F.3d
1303 (Fed. Cir. 1998). The Federal Circuit, however,
affirmed the district court’s judgment that Green Machine’s
sales demonstrations encouraged cutting concrete using a
method patented by Chiuminatta, thereby both violating

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and inducing others to violate Chiuminatta’s methods
patent. Id. 1

In May of 1999, Green Machine filed a three count
complaint in state court seeking a declaration that Zurich
was required to defend and indemnify it in the underlying
Chiuminatta patent action. Zurich removed the action to
the United Stated District Court for the Eastern District of
Pennsylvania, where the parties filed cross-motions for
summary judgment.

In August of 2001, the Pennsylvania district court
granted Zurich’s motion for summary judgment and denied
Green Machine’s cross-motion. The court held that
Chiuminatta’s complaint did not allege an "advertising
injury" and, consequently, Zurich had no duty to defend
Green Machine in the lawsuit. We review this conclusion of
law de novo. Township of Center, Butler County,
Pennsylvania v. First Mercury Syndicate, Inc., 117 F.3d 115,
117 (3d Cir. 1997). The district court had diversity
jurisdiction of this case pursuant to 28 U.S.C.S 1332, and
we have appellate jurisdiction under 28 U.S.C. S 1291.

II.

Zurich’s duty to defend and indemnify Green Machine is
contained in Section I (B) of the policy which provides the
following:

       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.

Zurich denied coverage to Green Machine based upon its
position that the allegations in the underlying lawsuit do
not state a claim for advertising injury. Under the policy, an
advertising injury, among other things, is one arising out of
the "misappropriation of advertising ideas or style of doing
business."2 Green Machine contends that Chiuminatta’s
_________________________________________________________________

1. The case was remanded and remains pending.

2. The parties agree that this is the relevant definition of advertising
injury for purposes of this action.

                                4


claims can appropriately be viewed as both of these types
of advertising injury.

A. Misappropriation of An Advertising Idea
We have recently held that "to be covered by the policy,
allegations of . . . misappropriation have to involve an
advertising idea, not just a nonadvertising idea that is
made the subject of advertising." Frog, Switch & Mfg. Co. v.
Travelers Ins. Co., 193 F.3d 742, 748 (3d Cir. 1999).
Misappropriating advertising ideas is the wrongful taking of
an idea about the solicitation of business and customers. Id.3

In this case, there are no such allegations.4
Chiuminatta’s complaint alleges that Green Machine
infringed its concrete-cutting patents by creating similar
products or copying certain patented methods. There is no
allegation that Green Machine took any of Chiuminatta’s
marketing, promotional, or advertising materials or ideas.
The only connection between Chiuminatta’s claim and
advertising is that Chiuminatta also alleges that, after
Green Machine "stole" its patented method of cutting
concrete, it advertised that method to others, thereby
inducing them to infringe the patent as well.

Advertising injury is not, however, the same thing as
advertising per se. Advertising injury is the
misappropriation of another’s advertising idea or concept.
Green Machine argues that "Chiuminatta’s advertising
concept [was] to solicit its relevant market to cut concrete
using its patented method" (emphasis added). Thus,
Chiuminatta’s advertising idea which Green Machine
contends it was accused of misappropriating was to
advertise. Under this theory, any competitor of
Chiuminatta’s who advertises -- no matter what the
content of that advertising -- has misappropriated
_________________________________________________________________

3. In view of our recent explanation of "advertising injury" in Frog,
Switch, we decline Green Machine’s invitation to hold that this term is
ambiguous as a matter of law.

4. In determining the existence of coverage,   the factual allegations of the
underlying complaint against the insured are   to be taken as true and
liberally construed in favor of the insured.   Biborosch v. Transamerica Ins.
Co., 412 Pa. Super. 505, 603 A.2d 1050, 1052   (Pa. Super. 1992).

                                5


Chiuminatta’s advertising idea to advertise. This is not
what we mean by advertising injury since, were that the
meaning, there could be no advertising without injury.
Allegations that Green Machine stole a patented method for
cutting concrete and also advertised the results of that
theft, does not convert the underlying theft into"advertising
injury." Id. at 744.

B. Misappropriation of Style of Doing Business

Green Machine also asserts that Chiuminatta’s complaint
can be fairly read to allege advertising injury by way of
misappropriation of "style of doing business." Style of doing
business has routinely been characterized as referring to a
company’s "comprehensive manner of operating its
business." Hyman v. Nationwide Mut. Fire Ins. Co., 304
F.3d 1179, 1188 (11th Cir. 2002) (citing Novell, Inc. v.
Federal Ins. Co., 141 F.3d 983, 986 (10th Cir. 1998)
(collecting cases). Green Machine contends that
Chiuminatta’s patented method for cutting concrete is its
"manner of operating its business" and, therefore, its style
of doing business.5

We have already rejected this overly broad view. In Frog,
Switch, we explained that "style of doing business" is "a
plan for interacting with consumers and getting their
business." Id. at 749-50. Style of doing business, therefore,
refers to a company’s marketing approach, not its
production or product. Chiuminatta’s method of cutting
concrete is like a "product."6 It is not a marketing strategy
_________________________________________________________________

5. Green Machine states that "[f]rom the allegations of the Chiuminatta
Complaint, it is clear that [Chiuminatta’s]‘business’ is the uncured or
‘soft’ concrete cutting business and that its‘comprehensive manner’ of
operating within that business is to manufacture saws and to use those
saws in a certain manner (i.e., to cut concrete in a certain claimed
hardness range as defined in the 675 Patent)."

6. We do not agree with Green Machine that Chiuminatta’s method of
cutting concrete is "trade dress" which may constitute an advertising
injury if misappropriated. See Frog, Switch, 193 F.3d at 748; see also
Hyman v. Nationwide Mutual Fire Insurance Co., 304 F.3d 1179 (11th
Cir. 2002). Chiuminatta’s patented method for cutting concrete is
Chiuminatta’s "product." This method is not merely packaging, labeling,
or marketing designed to make the real product readily identifiable to
consumers. Hyman, 304 F.3d at 1189.

                                6


or a "plan for interacting with consumers and getting their
business."7 Chiuminatta alleges not that Green Machine
copied its marketing strategy or style of attracting
customers, but that Green Machine copied its patented
method for cutting concrete in order to sell its own saws,
thereby inducing others to infringe on the patented method
as well. These allegations do not state a claim for
misappropriation of Chiuminatta’s marketing style used to
sell its concrete-cutting method, but rather for theft of the
underlying method itself.

III.

Misappropriation of an advertising idea is the wrongful
taking of an idea concerning the solicitation of business
and customers. Misappropriation of a style of doing
business is the wrongful taking of a company’s plan for
interacting with consumers and getting their business.
There are no such allegations in the underlying action
which forms the basis for Green Machine’s request for
coverage under its policy of insurance with Zurich
American. Accordingly, the judgment of the District Court
denying coverage will be affirmed.
A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit
_________________________________________________________________

7. We are not persuaded by Green Machine’s argument that the meaning
of "style of doing business" depends upon whether we are dealing with
a method patent or a product patent, or direct infringement as opposed
to induced infringement. Green Machine’s theory is that when the patent
at issue is for a method of doing something, that method is its style of
doing business. We can think of no principled reason why this should be
so, and Green Machine has cited no authority in support of its theory.

                                7
