Test Masters Educational Services, Inc. v. State Farm Lloyds
791 F.3d 561
| 5th Cir. | 2015Background
- TES (Test Masters Educational Services) and Singh (Robin Singh Educational Services) are competing test-prep companies both using the name/mark “Testmasters.”
- Singh sued TES and asserted counterclaims under § 43(a) of the Lanham Act; TES tendered defense to its insurer, State Farm.
- State Farm initially defended under a reservation of rights because the original counterclaim included allegations (later removed) that TES’s website copied a clickable map on Singh’s site, which might suggest trade dress claims.
- State Farm’s policy covered "advertising injury" including trade dress infringement in advertisements, but expressly excluded trademark claims.
- After Singh amended its counterclaim to remove the map allegations, State Farm withdrew the defense; TES sued for a declaratory judgment that State Farm had a duty to defend.
- The district court granted summary judgment for State Farm; the Fifth Circuit affirmed, holding the Amended Counterclaim alleged trademark and false-advertising theories, not trade dress, and thus did not potentially trigger coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether State Farm had a duty to defend TES under the policy’s advertising-injury/trade-dress coverage | TES argued Singh’s Amended Counterclaim could be read to allege trade dress ("confusingly similar" website), so coverage was potentially implicated | State Farm argued the Amended Counterclaim alleges trademark and false-advertising claims, not trade dress, and the policy excludes trademark claims | Held: No duty to defend; Amended Counterclaim did not potentially allege trade dress infringement, so policy did not cover the claims |
| Whether allegations of a "confusingly similar" website alone trigger trade dress coverage | TES contended consumer confusion could support a trade dress theory and thus create ambiguity favoring defense | State Farm argued confusion stemmed from use of the Testmasters mark and false representations of services, not from distinctive aesthetic/site "look and feel" required for trade dress | Held: "Confusingly similar" allegation, in context, related to mark use and false service claims, not trade dress; insuffcient to trigger coverage |
| Proper application of the eight‑corners rule and scope of permissible inference from pleadings | TES urged ambiguities in the pleadings be resolved in its favor under Texas law | State Farm argued courts cannot read facts into pleadings or consider removed allegations; coverage depends on the four corners of the Amended Counterclaim | Held: Applied eight‑corners rule; courts may not read facts into pleadings or consider removed allegations—doubts resolved for insured only where pleadings potentially allege covered claim |
Key Cases Cited
- Ewing Constr. Co. v. Amerisure Ins. Co., 420 S.W.3d 30 (Tex. 2014) (sets out Texas eight‑corners rule and duty‑to‑defend principles)
- Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487 (Tex. 2008) (insurer must defend if pleadings potentially include a covered claim)
- TrafFix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23 (2001) (trade dress must be distinctive and nonfunctional)
- Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225 (5th Cir. 2010) (describes trade dress as total image/overall appearance)
- KLN Steel Prods. Co. v. CNA Ins. Cos., 278 S.W.3d 429 (Tex. App. 2008) (distinguishes trademark copying from protectable trade dress when distinctiveness/nonfunctionality not alleged)
- Nola Spice Designs, L.L.C. v. Haydel Enters., Inc., 783 F.3d 527 (5th Cir. 2015) (recognizes likelihood of confusion as element common to trademark and trade dress claims)