EMD Millipore Corp. v. HDI-Gerling Am. Ins. Co.

511 F.Supp.3d 41

EMD MILLIPORE CORPORATION and Merck KGAA, Darmstadt, Germany, Plaintiffs,

v.HDI-GERLING AMERICA INSURANCE COMPANY, Defendant.

Civil Action No. 20-cv-10244-ADB

United States District Court, D. Massachusetts.

Signed January 7, 2021

Adam S. Ziffer, Pro Hac Vice, Radu Lelutiu, Pro Hac Vice, Robin L. Cohen, Pro Hac Vice, McKool Smith, P.C., New York, NY, Michael J. Miguel, McKool Smith, Los Angeles, CA, for Plaintiffs.

Bryon L. Friedman, Pro Hac Vice, Robert L. Joyce, Pro Hac Vice, Littleton Park Joyce Ughetta & Kelly LLP, Purchase, NY, Joseph K. Scully, Day Pitney LLP, Hartford, CT, for Defendant.

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS AND PLAINTIFFS’ CROSS-MOTION FOR SUMMARY JUDGMENT

BURROUGHS, D.J.

Plaintiffs EMD Millipore Corporation ("EMD") and Merck KGAA, Darmstadt, Germany ("MKDG," and together with EMD, "Plaintiffs") bring this action against Defendant HDI-Gerling America Insurance Company ("HDI"), their liability insurer, alleging that under their insurance policies, HDI is obligated to pay for MKDG's defense costs in another litigation. See generally [ECF No. 1 ("Compl.")]. Plaintiffs seek (1) a declaratory judgment that HDI has a contractual duty to defend MKDG in that litigation, and (2) damages arising from HDI's alleged "unfair claims settlement practices" in violation of Massachusetts law. [Id. at 12]. Currently before the Court is HDI's motion to dismiss the Complaint in its entirety, [ECF No. 9], and Plaintiffs’ cross-motion for partial summary judgment on the issue of HDI's duty to defend, [ECF No. 19]. For the reasons set forth below, HDI's motion to dismiss, [ECF No. 9], is GRANTED, and Plaintiffs’ motion for partial summary judgment, [ECF No. 19], is DENIED.

I. BACKGROUND

The parties do not dispute the material facts which the Court draws from the complaint and the documents attached to the parties’ filings, including the insurance policies and the complaint in the underlying litigation against MKDG.

A. The Parties

EMD is a Massachusetts corporation with its principal place of business in Burlington, Massachusetts. [Compl. ¶ 7]. It is a supplier for companies that research, develop, and produce biotechnology and pharmaceutical drug therapies. [Id. ]. MKDG is a German multinational pharmaceutical, chemical, and life sciences company that indirectly owns EMD and has its principal place of business in Darmstadt, Germany. [Id. ]. HDI is an Illinois corporation with its principal place of business in Illinois. [Id. ¶ 8]. Among other things, HDI provides commercial insurance policies. See [id. ¶ 11].

B. The Policies

EMD purchased two claims-made commercial general liability insurance policies from HDI: a primary policy and an umbrella policy. See [ECF Nos. 1-3 (primary), 1-4 (umbrella)]. Each policy covers claims made between January 1, 2016 and January 1, 2017, and, for present purposes, provides identical coverage.¹ See [ECF Nos. 1-3 (primary), 1-4 (umbrella)]; [ECF No. 24 at 2 (HDI admitting that the relevant provisions in the two policies are identical)]. Although EMD is the policyholder, MKDG is a named insured under each policy.² See [ECF No. 1-3 at 27; ECF No. 1-4 at 59].

The policies cover a number of risks. Under the policies, HDI is obligated to pay, among other things, "those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies" and "ha[s] the right and duty to defend the insured against any ‘suit’ seeking those damages."³ [ECF No. 1-3 at 13]. "[P]ersonal and advertising injury" is defined as "injury, including consequential ‘bodily injury,’ arising out of one or more" of the listed "offenses." [Id. at 23]. The offenses include, among others, "[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services" and "[t]he use of another's advertising idea in [an insured's] ‘advertisement.’ " [Id. at 23–24]. The policies do not define "disparage" or "advertising idea." See [id. at 21–25].

The policies include multiple exclusions from the personal and advertising injury coverage. See [ECF No. 1-3 at 13–15]. The parties point to two as being potentially relevant here. First, the "Breach of Contract" exclusion excludes liability for " ‘personal and advertising injury’ arising out of a breach of contract, except an implied contract to use another's advertising idea in [an insured's] ‘advertisement.’ " [Id. at 14]. Second, the "Infringement of Copyright, Patent, Trademark or Trade Secret" exclusion (the "IP Exclusion") excludes liability for " ‘personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights." [Id. ]. The IP Exclusion further states that "such other intellectual property rights do not include the use of another's advertising idea in [an insured's] ‘advertisement,’ " and that the exclusion "does not apply to infringement, in [an insured's] ‘advertisement,’ of copyright, trade dress or slogan." [Id. ].

C. The New Jersey Litigation

On January 15, 2016, Merck & Co., Inc. and Merck Sharp & Dohme Corp. (collectively, "Merck")⁴ sued MKDG in the United States District Court for the District of New Jersey (the "NJ Litigation"). See [ECF No. 1-5 ("NJ Litig. Compl.")]. Merck's complaint asserts federal claims for trademark infringement, trademark dilution, unfair competition, false advertising, and cybersquatting, and New Jersey state law claims for trademark infringement, trademark dilution, unfair competition, deceptive trade practices, and breach of contract. [Id. ¶¶ 86–159]. Because Merck's allegations in the NJ Litigation are relevant to the parties’ coverage dispute in the instant case, the Court summarizes them here.

Despite their common heritage, Merck and MKDG have been unrelated entities for longer than a century.⁵ [NJ Litig. Compl. ¶¶ 10–11]. To fairly navigate the global marketplace with their shared name, the two companies have entered into coexistence agreements, which govern what each company can and cannot do in various jurisdictions around the world regarding the use of "MERCK." [Id. ¶¶ 11–12]. Pursuant to these coexistence agreements, MKDG cannot use the trademark "MERCK," or attempt to acquire rights in any trademark containing "MERCK," in the United States or Canada. [Id. ¶ 13]. Over the years, both via litigation and informally, Merck and MKDG have disputed their respective uses, on the internet and otherwise, of "MERCK" in multiple jurisdictions. [Id. ¶ 14]. Until recently, they had not resolved the extent to which MKDG would use "MERCK" in the United States because MKDG had not directed the "MERCK" name to the United States and had not used it in connection with business activities in direct competition with Merck in the United States. [Id. ¶¶ 16–17].

In the United States, Merck has expended resources building the "MERCK" brand and has acquired goodwill in the "MERCK" trademark and trade name, and other trademarks and trade names containing the word "MERCK."⁶ [NJ Litig. Compl. ¶ 27]. Merck and its affiliates have used these trademarks and trade names in the United States for more than a century and continue to use them. [Id. ¶¶ 28–31]. These trademarks and trade names are well-known in the United States because of Merck's sales and promotional efforts with respect to Merck's medicines, vaccines, and animal health products. [Id. ¶ 32].

Pursuant to the coexistence agreements, MKDG is permitted to use the word "Merck" as part of a firm or corporate name in the United States but only in the phrase "E. Merck, Darmstadt, Germany," and only if the four words are given equal prominence. [NJ Litig. Compl. ¶ 36]. Nevertheless, MKDG has used the trade names "MERCK," "Merck KGaA," and "Merck KGaA, Darmstadt, Germany" in the United States. [Id. ¶ 37]. Moreover, Merck alleges that MKDG's use of the designation "Merck KGaA" and its reference to itself as "MERCK" are so prominent and widespread that they function as a trademark. [Id. ¶ 39]. In sum, according to Merck, MKDG "holds itself out to be ‘MERCK’ ... thereby infringing and diluting the distinctive quality of the MERCK Mark and Trade Names." [Id. ¶ 40].

In the NJ Litigation, Merck's factual allegations fit into three broad categories.

First, Merck identifies roughly a dozen examples of MKDG's allegedly improper use of the "MERCK" trademark or trade name in the United States, including but not limited to: (1) MKDG's use of "Merck" or "Merck KGaA Darmstadt, Germany" in various places on EMD's website, [NJ Litig. Compl. at ¶¶ 43–47]; (2) MKDG's promotion and sale of its products "SedalMerck®," "Merckognost®," and "MRCKß Protein" on EMD's website, [id. ¶¶ 48, 60]; (3) MKDG's use of the name "MERCK" on its Facebook and Twitter pages and YouTube channel, [id. ¶¶ 50, 59]; (4) MKDG's issuance of various press releases using "Merck," [id. ¶¶ 51–54]; and (5) MKDG's use of "Merck" and "U.S. Merck" on signage at its kiosks at multiple industry conferences, [id. ¶¶ 55–58].

Second, Merck alleges that MKDG has advanced two marketing campaigns specifically intended to confuse consumers as to MKDG's history. As part of MKDG's "Original" campaign, company employees have referred to MKDG as "the Original Merck" and have referred to Merck as MKDG's "younger brother/sister." [NJ Litig. Compl. ¶¶ 61–63]. Merck asserts that this campaign is an attempt by MKDG to (1) associate its goods and services with the "MERCK" trademark and (2) "dilute the distinctive quality of the MERCK trademark in the United States." [Id. ¶ 64]. MKDG also launched the "125 Years" campaign in which it highlighted the fact that it has been in the United States for 125 years, even though, in reality, MKDG has been re-established in the United States only since 1971. [Id. ¶¶ 65–66, 68–69]. According to Merck, this campaign is "likely to deceive consumers as to [MKDG]’s history in...