WASHINGTON – A user manual posted on a firm’s Web site can be considered advertising, a federal appeals court has ruled, overturning a lower court on the question and stepping in where the state’s courts have yet to tread.
The ruling by a panel of the 4th U.S. Circuit Court of Appeals means that Transportation Insurance Co. must defend its client, Rockville-based Teletronics International Inc., for advertising-related injury under the terms of their policy.
But the appeals court took great care to say that its Thursday ruling did not mean that any information posted on a Web site constitutes advertisement, as the lower court ruled. The appeals judges said that even widely distributed information is not advertising unless it is specifically for the purpose of generating or soliciting business.
Frederick Samuels, an attorney for Teletronics, said he thought the court had made a “good decision” that had “some significance.” The case’s importance, he said, was that it centered on the question of when the transmission of materials counts as advertisement.
The appeals panel rendered an unpublished opinion in the case, which surprised Samuels. He speculated that the court might not have officially weighed in on the matter because the Maryland courts themselves had yet to comprehensively define “advertisement.”
The case began as a dispute between
Teletronics and Young Design Inc., a Virginia manufacturer of radio amplifiers used in wireless data devices. Teletronics had approached Young about the possibility reselling the amplifiers under Teletronics’ name.
But in 1999, Young Design accused Teletronics of selling “knockoff” versions of its amplifiers and distributing user manuals that were nearly identical to those from the Virginia company. It said Teletronics also posted the manuals on the Internet. Young Design sued Teletronics for copyright infringement in the U.S. District Court for Eastern Virginia.
While that suit was working its way through the courts, Teletronics asked its insurance carrier, Transportation Insurance, to defend it under the terms of its comprehensive general liability policy. That policy contained an “advertising injury” provision that required the insurer to defend Teletronics against claims brought in the course of advertising.
Transportation refused, saying that posting the manual on the Internet did not constitute advertisement. Teletronics filed suit in Maryland, and the case ended up in federal district court in Greenbelt, where the judge granted summary judgment for Transportation.
On appeal, the three-judge panel examined the issue of whether documents posted on the Internet necessarily constitute advertisement. It noted that Maryland courts had yet to examine the issue of what legally constitutes advertisement and that other courts, state and federal, were divided on the question.
The appeals panel said those rulings generally said “advertisement” legally encompasses any widespread distribution of promotional material to the public. But some courts include one-on-one solicitation in their definition of advertisement.
In either case, the court said, Teletronics’ actions count as advertisement. The company posted the manual on its Web site, meeting the widespread distribution test, and directed customers to if after they made e-mail inquiries, meeting the one-on-one test.
The appeals court sent the case back to district court with directions to enter judgment in Teletronics’ favor.
Attorneys for Transportation Insurance did not return phone calls Friday.
-30- CNS 01-21-05