MEMORANDUM OPINION & ORDER Fed. R. Civ. P. 56

BRUCE S. JENKINS, Senior District Judge.

On November 4, 2010, the plaintiffs filed their Complaint commencing the above-entitled action, invoking the diversity jurisdiction of this court pursuant to 28 U.S.C. § 1332(a)(1) (2006 ed.).1

As pleaded in the Complaint, plaintiffs Hartford Casualty Insurance ("Hartford") and Twin City Fire Insurance Company ("Twin City") seek a declaratory judgment that that neither of them are obligated to defend or indemnify SoftwareMedia.com, Inc., Perseus Trading, Adam Childers, and Todd Francis for any and all losses arising out of the events that became the subject matter of the civil action entitled Microsoft Corp. v. SoftwareMedia.com, Inc., Adam Childers, & Todd Francis, Civil No. 2:10-CV-00526 CW (D. Utah, filed June 7, 2010), said action having been settled and dismissed with prejudice in or about September of 2010.2

Defendants SoftwareMedia.com and Perseus Trading Corporation, together with non-defendant Perseus Holding Corporation (collectively "SoftwareMedia") counterclaimed against Hartford and Twin City for breach of contract, seeking an award of damages exceeding $1,800,000, resulting from the insurers' refusal to defend or indemnify SoftwareMedia in connection with the 2010 Microsoft litigation.

On August 25, 2011, Hartford and Twin City filed a motion for summary judgment asserting that as a matter of law, Hartford and Twin City "owe no duty to defend or indemnify Defendants Softwaremedia.com, Inc., Perseus Trading Corporation, Adam Childers, and Todd Francis for the claims alleged" in the 2010 Microsoft litigation.3 They argue that in 2010, Microsoft did not plead that the defendants caused "personal or advertising injury" within the scope of coverage under the two policies: "the gravamen of Microsoft's complaint is that Defendants offered their customers one type of Microsoft product, but then actually sold them a less valuable product, thereby engaging in the `bait and switch' sales activities that allegedly harmed Microsoft."4 Further, even if coverage under the Hartford policy was triggered by Microsoft's complaint, "a number of exclusions are implicated that independently bar any coverage for this claim," given Microsoft's allegations concerning SoftwareMedia's conduct; the Twin City policy "is not even potentially implicated, as it contains an endorsement that excludes all coverage for `personal and advertising injury.'"5

On September 26, 2011, SoftwareMedia filed a cross-motion for summary judgment, asserting that "when compared to the language of the civil complaint filed by Microsoft against Defendants and Counterclaimants, the subject insurance policies triggered plaintiffs' duty to defend under Utah law," and when Hartford and Twin City "refused to provide a defense in that action," SoftwareMedia "were forced to settle with Microsoft"; having refused to defend, Hartford and Twin City "are now estopped from contesting the reasonableness of the settlement under Utah law and must reimburse" SoftwareMedia "for all moneys expended in that settlement, and for defense fees and costs incurred" in the 2010 Microsoft litigation.6 SoftwareMedia argues that "when read in conjunction with extrinsic evidence provided to The Hartford," the 2010 Microsoft Complaint pleaded "Lanham Act print-media slogan infringement claims — a type of `personal and advertising injury' expressly covered by" the Hartford policy.7 Conceding that Microsoft's fraud-based claims against SoftwareMedia were not covered by Hartford's policy and ultimately would not be paid under the policy, SoftwareMedia argues that the insurer nevertheless owed a duty to defend the entire Microsoft action, given the claim for alleged Lanham Act print-media slogan infringement that falls within the policy's "personal and advertising injury" coverage.8

Both sides insist that "no material facts are in dispute," and that summary judgment is appropriate on all claims as a matter of law.9 See, e.g., Valdez v. Squier, ___ F.3d ___, 2012 WL 547404, at *7 (10th Cir., February 21, 2012) ("Summary judgment is appropriate when `there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" (quoting Fed. R. Civ. P. 56(a)).

UNCONTROVERTED FACTS

The parties agree that at pertinent times, SoftwareMedia was insured under a commercial general liability policy (viz., the Commercial General Liability Coverage Form) issued by Hartford, viz., Policy No. 34 UUQ TZ4569 SC, with effective dates from January 1, 2007, through January 1, 2008 (the "CGL Coverage Form"), which was renewed annually. The parties also agree that SoftwareMedia was insured under an umbrella liability policy (the "Umbrella Liability Policy") issued by Twin City, Policy No. 34 XHQ XR3759, with effective dates from January 1, 2007, through January 1, 2008, which was renewed annually.

Hartford's Commercial General Liability Policy

The policy language defining the pertinent coverage in the Hartford CGL Coverage Form states: "We will pay those sums that the insured becomes legally obligated to pay as damages because of `personal and advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any `suit' seeking those damages."10 The CGL Coverage Form defines "personal and advertising injury" as "injury . . . arising out of one or more of the following offenses":

"Suit" is defined by the policy as "a civil proceeding in which damages because of `bodily injury,' `property damage' or `personal and advertising injury' to which this insurance applies are alleged."12 The policy also defines "advertisement"13 and "advertising idea."14

The CGL Coverage Form also includes a series of exclusions, such as a "Your Web Site" exclusion, which excludes coverage for "`personal and advertising injury' arising out of `your web site' or an electronic chat room or bulletin board hosted, owned, or over which control is exercised by any insured."15 In turn, "your web site" means "a web page or set of interconnected web pages prepared and maintained by you, or by others on your behalf, that is accessible over an internet."16 Other coverage exclusions include "Breach of Contract,"17 "Infringement of Intellectual Property Rights,"18 `Knowing Violation Of Rights Of Another,"19 "Material Published With Knowledge Of Falsity,"20 and "Material Published Prior To Policy Period."21

Twin City's Umbrella Liability Policy

The Twin City Umbrella Liability Policy states that "[w]e will pay those sums that the `insured' becomes legally obligated to pay as `damages' in excess of the `underlying insurance,'" because of an injury "to which this insurance applies caused by an `occurrence',"22 as that term is defined by the underlying insurance policy.23 The Umbrella Liability Policy also contains an exclusion of coverage that reads: "This policy does not apply to `personal and advertising injury.'"24 This ¶ B.4 exclusion itself includes an "EXCEPTION" stating that "[t]his exclusion does not apply if `underlying insurance' is applicable to `personal and advertising injury' and to claims arising out of that `personal and advertising injury'."25 These terms of the Umbrella Liability Policy are themselves modified by an Endorsement (form XL 21 33 11 00), which "modifies insurance provided under the UMBRELLA LIABILITY POLICY" as follows: "This policy does not apply to `personal and advertising injury.'"26

SoftwareMedia argues that the pertinent Umbrella Liability Policy language, namely its Endorsement modifying an exception to the ¶ B.4 exclusion27 as to "personal and advertising injury," is ambiguous, and should be construed strictly against the insurer and in favor of coverage.28

Remembering that in this context, an endorsement is "[a]n amendment to an insurance policy," Black's Law Dictionary 607 (9th ed. 2009), the terms of the Umbrella Liability Policy as thus amended are clear on this point: "This policy does not apply to `personal and advertising injury.'"

The 2010 Microsoft Litigation

On June 7, 2010, Microsoft filed a Complaint against SoftwareMedia.com, Messrs. Childers and Francis, seeking injunctive relief and damages arising from the defendants' alleged infringement of Microsoft's copyrights and other tortious conduct. See Microsoft Corp. v. SoftwareMedia.com, Inc., Civil No. 2:10-CV-00526 CW (D. Utah). The 2010 Microsoft Complaint alleged that "[f]rom at least 2007 to the present, Defendants have actively engaged in a fraudulent bait-and-switch scheme involving sales of Microsoft software licenses and Software Assurance," a software maintenance support product.29 Specifically, Microsoft alleged that

SoftwareMedia's alleged fraudulent bait-and-switch scheme necessarily involved distribution of unlicensed Microsoft software, providing the footing for Microsoft's copyright infringement claim. Microsoft's sales records indicated that "since July 2006 SoftwareMedia.com has sold 49,891 units of Software Assurance without software licenses,"31 consistent with SoftwareMedia's ongoing "bait-and-switch" software license scheme.

Microsoft also alleged that "by this conduct, including their advertising activities and unauthorized use of Microsoft's software, components, screen displays, product packaging and marks to describe the items that they distribute and sell, Defendants misappropriated Microsoft's advertising ideas and style of doing business and infringed Microsoft's copyrights, titles and slogans and trademarks."32 Microsoft's second claim for trademark infringement alleged that "[b]y engaging in bait-and-switch fraud and other unlawful practices and improper means described in this Complaint," SoftwareMedia had failed to satisfy the conditions for use of Microsoft's marks, and was continuing its use of Microsoft's marks "including the stylized `Microsoft Gold Certified Partner' logo . . . in connection to its deceptive sales practices with the willful and calculated purposes of misleading, deceiving or confusing customers and the public, and trading upon Microsoft's goodwill and business reputation."33 Microsoft's third claim made parallel allegations concerning SoftwareMedia's use of Microsoft's visual designs "in connection to its deceptive sales practices" with "the willful and calculated purposes of misleading, deceiving or confusing customers and the public," to the injury and damage of Microsoft.34

Microsoft's Complaint also pleaded claims for fraud, breach of contract, intentional interference with economic relations and unjust enrichment, all of which were grounded in SoftwareMedia's "engaging in bait-and-switch fraud and other unlawful practices described in this Complaint" for "the improper purpose of retaining for Defendants the price difference between Microsoft software licenses and Software Assurance,"35 or allegations to essentially the same effect.36 The 2010 Microsoft Complaint sought damages, including enhanced damages for willful infringement, as well as restitution, punitive damages, an accounting of profits, and injunctive relief.37

On or about August 9, 2010, the parties to the 2010 Microsoft litigation reached a settlement agreement that required the defendants to pay $1.8 million to Microsoft.38 Pursuant to the settlement agreement, the court also entered a permanent injunction on September 2, 2010, barring SoftwareMedia from buying or selling Microsoft Software Assurance as a stand-alone product. Aside from the entry of the permanent injunction, the parties stipulated that the 2010 Microsoft litigation be dismissed with prejudice, which it was on September 8, 2010.39

ANALYSIS

The parties concur that Utah law applies to decide the substantive questions in this case. Hartford and Twin City correctly submit that

In turn, SoftwareMedia correctly posits that "`[i]f the loss falls within the policy's insuring clause, coverage is triggered under the policy.'"41

When determining whether the insurer has a duty to defend a particular claim of loss, at the outset the court focuses on two documents: the insurance policy and the underlying complaint:

Benjamin v. Amica Mut. Ins. Co., 2006 UT 37, ¶ 16, 140 P.3d 1210, 1214.43 In Therkelsen, the Utah Supreme Court noted that an insurance contract may base the duty to defend on the face of the complaint and its allegations, or on the facts and circumstances underlying the complaint; "whether extrinsic evidence is admissible to determine whether an insurer has a duty to defend an insured turns on the parties' contractual terms." 2001 UT 48, at ¶¶ 22-25, 27 P.3d at 560-61.

Equine Assisted Growth and Learning Ass'n v. Carolina Cas. Ins. Co., 2011 UT 49, ¶ 10, 266 P.3d 733, 736 (footnotes omitted) (quoting Therkelsen, 2001 UT 48, ¶ 25 and Benjamin, 2006 UT 37, ¶ 16, 140 P.3d 1210 (quoting Therkelsen, 2001 UT 48, ¶ 21)). As Therkelsen explains, "[i]f the parties make the duty to defend dependent on the allegations against the insured, extrinsic evidence is irrelevant to a determination of whether a duty to defend exists." 2001 UT 48, ¶ 25, 27 P.3d at 561 (emphasis added). "Indeed, in such a case it would be error for the trial court to consider extrinsic evidence, as it is wholly irrelevant to the issue of whether the insurer has a duty to defend its insured." Id. at ¶ 23 (footnote omitted).44

Here, the key question is whether the Hartford CGL Policy's duty-to-defend clause "is triggered by the facial language of a complaint or whether the clause is triggered by the actual facts underlying the complaint." Equine Assisted Growth & Learning Ass'n v. Carolina Cas. Ins. Co., 2009 UT App 200, ¶ 25, 216 P.3d 971, 972, aff'd, 2011 UT 49, 266 P.3d 733.45

As explained above, the Hartford CGL Policy comprehends a duty to defend "a civil proceeding in which damages because of `bodily injury,' `property damage' or `personal and advertising injury' to which this insurance applies are alleged."46 Hartford contends that its policy "makes the duty to defend dependent upon the allegations against the insured," and thus "extrinsic evidence is irrelevant to the duty-to-defend determination here."47 Hartford submits that the Tenth Circuit "recently determined that, under Utah law, a policy identical to the Hartford policy required courts to consider only the underlying complaint (without reference to any extrinsic evidence) in determining whether a duty to defend existed."48

In Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153 (10th Cir. 2010), the court of appeals concluded that "the CGL policies here preclude the admission of extrinsic evidence to determine the scope of [the insurer's] duty to defend":

Id. at 1172 (record citations omitted). The clauses of the CGL policies at issue in Bartile contained essentially identical duty-to-defend language and the same definition of "suit" found in the Hartford policy.49 The Tenth Circuit construed this language to limit the duty-to-defend inquiry to the four corners of the underlying complaint: "We conclude that the CGL policies here preclude the admission of extrinsic evidence to determine the scope of EMC's duty to defend." Id.

Thus, construing the same language in the context of this case, Hartford's duty to defend under its CGL Policy is triggered only if SoftwareMedia can establish that the specific allegations pleaded in the 2010 Microsoft Complaint assert a liability covered by the terms of the Hartford CGL policy.

In Novell, Inc. v. Fed. Ins. Co., 141 F.3d 983, 986 (10th Cir. 1998), the court of appeals propounded a two-part test to determine whether an insurer has a duty to defend an "advertising injury" claim: the court must first determine whether the complaint alleges a "predicate offense," that is, one of the types of conduct specifically listed in the policy's definition of "advertising injury." If such is alleged, then the court must examine whether there is a causal connection between the alleged injuries and the insured's advertising activities.50

Here, the first prong of the "advertising injury" test is not satisfied because the 2010 Microsoft Complaint fails to allege any of the relevant conduct listed in the Hartford CGL Policy's definition of "advertising injury," quoted above. The 2010 Microsoft Complaint does not allege damages arising out of "copying in your `advertisement' [of] a person's or organization's `advertising idea'or style of `advertisement'." Rather, Microsoft alleged damages caused by SoftwareMedia's fraudulent bait-and-switch scheme. Nor does the 2010 Microsoft Complaint allege "injury . . . arising out of" an "infringement of copyright, slogan, or title of any literary or artistic work, in your `advertisement'." While Microsoft did allege injury to its copyright interests, it did not allege that the injury flowed from infringement in SoftwareMedia's "advertisements," but as the result of SoftwareMedia's fraudulent bait-and-switch sales activities involving licensing of software. See IDG, Inc. v. Cont'l Cas. Co., 275 F.3d 916, 922 (10th Cir. 2001) (holding that allegations of copyright infringement do not assert "advertising injury" because they arise out of the insured's unlicensed "copying and sale of the plaintiff's software, and not out of its promotional activity" (emphasis in original)); Farmington Casualty v. Cyberlogic Tech., 996 F.Supp. 695, 704 n.17 (E.D. Mich. 1998) ("when the claim for infringement exists irrespective of the advertising activities, the claim for defense must fail."). Moreover, as Hartford submits, "advertising injury" is not implicated here for the reason that the allegations in the 2010 Microsoft Complaint arise from SoftwareMedia's on-line Internet activity, which the CGL Policy language specifically carved out of the definition of "advertisement."

Even assuming, arguendo, that the first prong of the Novell test was somehow satisfied, the 2010 Microsoft Complaint alleged no causal connection between an "advertisement" by SoftwareMedia and Microsoft's alleged injuries for which it sought relief. Microsoft did not allege that its "advertising ideas," "style of advertisement," or copyrights were injured by SoftwareMedia's advertising activity, standing alone. Microsoft alleges that SoftwareMedia's fraudulent bait-and-switch scheme, transacted largely through its website, caused unsuspecting buyers to use Microsoft's software without valid licenses, thereby infringing upon Microsoft's copyrights. Without a causal connection between the alleged injury and the insured's advertising activities, no "advertising injury" coverage exists under Hartford's CGL Policy. See Novell, 141 F.3d at 990 (finding "neither a predicate offense nor a causal connection between [third-party claimant's] alleged injuries and Novell/WordPerfect's advertising activities" related to Novell/WordPerfect's development of a competing software product); see also IDG, Inc., 275 F.3d at 922; Sentry Ins. v. R.J. Weber Co., 2 F.3d 554, 556 (5th Cir. 1993) (holding that publishing, distributing, and selling copyrighted works lacks sufficient causal connection to sustain coverage for "advertising injury").

SoftwareMedia argues that had Hartford sifted the allegations of the 2010 Microsoft Complaint vigorously enough—"in conjunction with extrinsic evidence provided to The Hartford"— it would have shaken out "Lanham Act print-media slogan infringement claims — a type of "personal and advertising injury" expressly covered by The Hartford's policies," thus triggering Hartford's duty to defend:51

SoftwareMedia argues that such "print slogan" allegations fall within the CGL Policy coverage because "intent or fraud is not required to recover under a claim for Lanham Act print-media slogan infringement."53

SoftwareMedia points specifically to the allegations of Paragraphs 18 and 19, which allege that SoftwareMedia "advertise and distribute Microsoft software and related products on the Internet, including Defendants' website at www.SoftwareMedia.com. and by other means," and Paragraph 33 of the 2010 Microsoft Complaint, which alleges that "Defendants misappropriated Microsoft's advertising ideas and style of doing business and infringed Microsoft's copyrights, titles and slogans and trademarks."55 But Paragraph 33 does not plead a stand-alone slogan infringement claim;56 it alleges that the defendants had misappropriated and infringed "by this conduct"—referring to SoftwareMedia's "fraudulent bait-and-switch scheme" as detailed in the fifteen paragraphs of the 2010 Microsoft Complaint that immediately preceded Paragraph 33.

That Microsoft's ¶ 33 "slogan infringement claim" was intrinsically and inseparably tied to the fraudulent bait-and-switch software license scheme is borne out in the pleading of Microsoft's Lanham Act causes of action in its Second and Third Claims. Both claims allege that "[b]y engaging in bait-and-switch fraud and other unlawful practices and improper means described in this Complaint, and for the improper purpose of retaining for SoftwareMedia.com the price difference between Microsoft software licenses and Software Assurance," SoftwareMedia had failed to satisfy the conditions for use of Microsoft's marks, and was continuing its use of Microsoft's marks "including the stylized `Microsoft Gold Certified Partner' logo . . . in connection to its deceptive sales practices with the willful and calculated purposes of misleading, deceiving or confusing customers and the public, and trading upon Microsoft's goodwill and business reputation."57 Microsoft complained that SoftwareMedia's continuing use of its marks, logos, symbols and names, "including the stylized `Microsoft Gold Certified Partner' logo. . . in connection with its deceptive sales practices is likely to cause confusion, mistake or deception as to the quality, source, origin, or authenticity of products and services advertised, distributed or sold by" SoftwareMedia.58 Microsoft complained of SoftwareMedia's use of Microsoft's "titles, slogans and trademarks" in Paragraph 33 because such use was "in connection with [SoftwareMedia's] deceptive sales practices," which threatened injury to Microsoft's goodwill and reputation because of that fraudulent conduct.59 SoftwareMedia had allegedly "failed to satisfy the conditions for use" of Microsoft's titles, slogans and marks because SoftwareMedia allegedly used those titles, slogans and marks in perpetrating a "bait-and-switch" software licensing fraud on their customers, all for "the improper purpose of retaining the price difference between Microsoft software licenses" and its Software Assurance maintenance program.60

SoftwareMedia correctly asserts that under Utah law,

Benjamin, 2006 UT 37, at ¶ 25, 140 P.3d at 1216. But here, Hartford correctly found the allegation of a covered claim for "personal and advertising injury" to be lacking within the four corners of the 2010 Microsoft Complaint, and thus Hartford did not breach its duty to defend under the terms of the CGL Policy issued to SoftwareMedia.

SoftwareMedia cannot cobble together selected allegations of that Complaint with extrinsic evidence of its own print advertising into a discrete negligence-based Lanham Act claim arising from its use of Microsoft slogans in print advertising having no relationship to its alleged "fraudulent bait-and-switch scheme," which indeed is the gravamen of the 2010 Microsoft Complaint.61

CONCLUSION

SoftwareMedia's allegedly fraudulent bait-and-switch software licensing scheme is the wrong for which Microsoft sought—and obtained—a judicial remedy in 2010, in addition to a substantial monetary settlement. The express terms of Hartford's CGL Policy excluding such fraudulent and intentional wrongful conduct from coverage exonerated Hartford of any duty to defend SoftwareMedia against such allegations and from indemnifying SoftwareMedia for the pecuniary consequences that flowed therefrom.62

The court also concludes that the Twin City Umbrella Liability Policy "does not apply to `personal and advertising injury,'" as its Endorsement so clearly says.

For the foregoing reasons,

IT IS ORDERED that Plaintiffs' Motion for Summary Judgment, filed August 25, 2011 (dkt. no. 17), shall be and hereby is GRANTED, and that Defendants'/Counter-claimants' Cross-Motion for Summary Judgment on All Claims, filed September 26,2011 (dkt. no. 19), shall be and hereby is DENIED.

LET JUDGMENT BE ENTERED ACCORDINGLY.