Opinion
NO. 4:01-CV-402-A
May 31, 2002
ORDER
Came on for consideration the motion of plaintiff, Atlantic Mutual Insurance Company ("Atlantic"), for summary judgment. Having reviewed the motion the court finds that the motion should be granted.
I. Background
Atlantic provides general liability and umbrella insurance coverage to defendant Mortex Products, Inc. ("Mortex") under policy numbers 48030-19-22, 48040-12-06, 48040-15-19, 48030-47-69, and 48040-57-10 (the "policies").
During a May 30, 2002, telephone conference conducted by the court, the parties agreed that Mortex is the only appropriate defendant as Summit Manufacturing, Inc. exists solely as a d/b/a of Mortex.
A. The Aspen Action
By an original complaint filed November 13, 2000, Aspen Manufacturing, Inc. ("Aspen") sought recovery from Mortex Products, Inc., individually and doing business as Summit Manufacturing, Inc., under a theory of patent infringement (the "Aspen action"). On January 4, 2002, Aspen filed a first amended complaint which included additional claims.
The Aspen action is currently pending in this court as Cause No. 4:00-CV-1772-Y.
B. The Present Action
Atlantic instigated the present suit on May 15, 2001, by filing a complaint seeking a declaratory judgment that it did not have a duty to defend Mortex as to the claims asserted in the Aspen action; and that the insurance coverage it provided to Mortex did not provide indemnification or liability coverage as to those claims. In response, Mortex asserted counterclaims for declaratory judgment, breach of contract, and violation of the Texas Insurance Code, alleging that the policies imposed on Atlantic coverage obligations as to the claims asserted in the Aspen action.
II.
Grounds of the Motion
Atlantic contends that, as a matter of law, Aspen's original complaint did not invoke coverage under the policies in question and that, therefore, it is entitled to summary judgment, both as to its claims and as to Mortex's counterclaims. Atlantic also seeks to recover its reasonable and necessary attorney's fees incurred in this action.
The present action was filed prior to Aspen's filing of an amended complaint in the Aspen action. Atlantic agrees that the allegations of Aspen's amended complaint trigger its duty to defend as to the new claims. The sole issues now presented by the motion for summary judgment are whether Atlantic had a duty to defend during the period prior to filing of the amended complaint in the Aspen action or had a payment obligation as to the claims asserted in the original complaint in the Aspen action.
III. Applicable Summary Judgment Principles
A party is entitled to summary judgment on all or any part of a claim as to which there is no genuine issue of material fact and as to which the moving party is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The standard for granting a summary judgment is the same as the standard for a directed verdict. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
IV. Undisputed Summary Judgment Evidence
As the applicable law directs the court to review only the pleadings of the underlying complaint and the terms of the insurance policy, no facts are actually disputed by the parties. In relevant part, Aspen's original complaint alleges:
8. Mortex has been and is now infringing the `096 patent by making, using and/or selling and/or actively inducing and/or contributing to infringement by others by making, using and/or selling the apparatus and methods of the claimed subject matter without the consent of Aspen and in violation of the `096 patent.
9. This infringement and/or inducement has been willful and deliberate and will continue unless preliminarily and permanently enjoined by this Court pursuant to 35 U.S.C. § 283.
10. Because Mortex has made, used and sold the subject matter of Aspen's `096 patent, Aspen's patent is infringed and Aspen is entitled to actual damages. Further, because Mortex's infringement of the `096 patent was willful, Aspen is entitled to enhanced damages in an amount equal to at least three times the actual damages pursuant to 35 U.S.C. § 284.
11. Due to Mortex's infringement of the `096 patent, Aspen's ability to control and license others under its `096 patent is being impaired and Aspen has lost market share, reputation, and goodwill. Aspen will be irreparably injured unless the infringing activities are enjoined by this Court.
13. Mortex has made, used, advertised, and sold devices which infringe the claimed invention of the `096 patent, obtaining sums of money for the manufacture, use, and sale of the invention developed and owned by Aspen. All of the benefits derived from the patent rightfully belong to Aspen because, but for Mortex's unlawful acts, Mortex would not have received those benefits.
14. Because Aspen is entitled to the money which Mortex has received as a result of its unlawful acts, Aspen is entitled to an accounting by Mortex to determine the exact amount to which Aspen rightfully is entitled including exemplary or enhanced damages up to three times the actual damages. 35 U.S.C. § 284.
Pl.'s App. Ex. F.
Mortex seeks coverage under the "advertising injury" provisions of the policies purchased from Atlantic. By these relevant policy provisions, Atlantic agrees to cover "`Advertising injury' caused by an offense committed in the course of advertising your goods, products or services."E.g., Pl.'s App. Ex. B. at 125. "Advertising injury" is subsequently defined as:
. . . 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;
b. Oral or written publication of material that a violates a person's right of privacy;
c. Misappropriation of advertising ideas or style of doing business; or
d. Infringement of copyright, title or slogan.
E.g., id. at 129-30.
V. Analysis
Under Texas law, an insurer has a duty to defend if the allegations in the complaint of the underlying suit would allow recovery on a theory within the scope of the insurance policy. See Sentry Ins. v. R.J. Weber Co., Inc., 2 F.3d 554, 556 (5th Cir. 1993 citing Terra Intern. v. Commonwealth Lloyd's, 829 S.W.2d 270, 271 (Tex.App.-Dallas 1992, writ denied). In making this determination the court looks solely to the "eight corners" of the pleadings and the policy, i.e. the explicit contents of the two documents. See Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Merchants Fast Motor Lines, 939 S.W.2d 139, 141, (Tex. 1997). The court is to liberally interpret the factual allegations within the pleadings, and any doubts as to whether the allegations state a covered cause of action are to be resolved in favor of the insured. See id. The court's inquiry concerns only the facts alleged and not the legal theories alleged. See id. Finally, there must be a causal relation between the charged injury and the covered activity. See id. at 142.
As this is a diversity case, Texas substantive law applies. See Stine v. Marathon Oil Co., 976 F.2d 254, 259 (5th Cir. 1992).
In support of its motion, Atlantic argues that the Aspen complaint does not contain allegations giving rise to a cause of action potentially covered by the "advertising injury" provisions of the policy. Mortex in turn cites to well-edited portions of paragraphs II, 13, and 14 of the original complaint in the Aspen action and asserts that those allegations "clearly" give rise to causes of action other than patent infringement, e.g. "business defamation" and "degenerating goodwill." Resp. Br. at 4.
Having reviewed the original complaint in the aspen action, the court concludes that its allegations "clearly" do not support a claim encompassed by the advertising injury provisions of the policies. Cf.Cigna Lloyd's Ins. Co. v. Bradley's Elec., Inc., 33 S.W.3d 102 (Tex.App.-Corpus Christi 2000, pet. denied). Paragraph 11, when read in its entirety, alleges that the losses of market share, reputation, and goodwill were the result of the alleged patent infringement. Paragraph 13 uses the word "advertised, " but only in the context that the allegedly infringing product was advertised for sale. The paragraph contains no allegations of alleged wrongful conduct within the scope of the advertising injury provisions of the policies. Finally, the allegations of paragraph 14 solely reference the requested damages available pursuant to 35 U.S.C. § 284, the damages section of the patent statute. The remainder of the original complaint is similarly unavailing. Atlantic is entitled, as a matter of law, to the requested declaratory judgement.
The subsequent paragraph (¶ 15) clarifies this intent by proposing an alternative measure of damages for the alleged patent infringement.
* * *
Having determined that Aspen's original complaint did not trigger a duty to defend and that Atlantic has no payment obligation under the policies as to the claims asserted in Aspen's original complaint, Mortex's counterclaims, for the most part, necessarily fail. Further, Atlantic may not recover attorney fees under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201-02, as the statute does not provide statutory authority for such relief except where controlling state substantive law permits relief. See Utica Lloyd's of Texas, 138 F.3d 208, 210 (5th Cir. 1998) (holding that Texas Declaratory Judgment Act is neither controlling or substantive).
Pursuant to the agreement of the parties expressed during a telephone conference held by the court on May 30, 2002, any claims, by any party to this action that are not resolved by the this order are being dismissed without prejudice.
VI. ORDER
For the reasons discussed herein,
The court ORDERS that Atlantic's motion for summary judgment be, and is hereby, granted as to the extent provided in this order.
The court further ORDERS and DECLARES that before January 4, 2002 (the date on which an amended complaint was filed in the Aspen action), Atlantic had no duty under policy numbers 48030-19-22, 48040-12-06, 48040-15-19, 48030-47-69, and 48040-57-10 to defend any claim alleged in the original complaint filed November 13, 2000, in Cause No. 4:00-CV-1772-Y on the docket of this court, and that Atlantic has no obligation to pay under any of the policies relating as to any claims asserted in the above-referenced November 13, 2000, complaint.
The court further ORDERS that to the extent Mortex's counterclaims are resolved by the provisions of this order they be, and are hereby, dismissed.
The court further ORDERS that to whatever extent any claim asserted by any party to this action are not resolved by this order such claims be, and are hereby, dismissed without prejudice, except that Atlantic's claim for attorney's fees be, and is hereby, dismissed with prejudice.