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STATE OF MINNESOTA IN SUPREME COURT A08-321 Certified Question U.S. District Court, District of Minnesota Meyer, J. Concurring, Gildea, J. Dissenting, Magnuson, C.J. Took no part, Anderson, Paul H. and Dietzen, JJ.

General Casualty Company of Wisconsin, Plaintiff, vs. Wozniak Travel, Inc. d/b/a Hobbit Travel, Defendant, The Saul Zaentz Company d/b/a Tolkien Enterprises, Defendant. ________________________ Jeffrey A. Evans, Cook & Franke S.C., Milwaukee, Wisconsin; and James L. Haigh, Trina R. Alvero, Andrea E. Reisbord, Cousineau McGuire Chartered, Minneapolis, Minnesota, for plaintiff. Thomas C. Mielenhausen, Christopher L. Lynch, Jessica L. Meyer, Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota, for defendant Wozniak Travel, Inc. d/b/a Hobbit Travel. Gary J. Haugen, Mary R. Vasaly, Margo S. Brownell, Maslon Edelman Borman & Brand, LLP, Minneapolis, Minnesota, for amici curiae Land OLakes, Inc., 3M Company and Apogee Enterprises, Inc. ________________________ Filed: March 19, 2009 Office of Appellate Courts

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SYLLABUS Coverage for "infringement of title" in "advertising injury" provision of commercial general liability insurance policy extends to trademark infringement. The term "advertising" as used in provision of commercial umbrella liability insurance policy is ambiguous and will be broadly construed to mean any oral, written, or graphic statement made by the seller in any manner in connection with the solicitation of business. Certified questions answered in the affirmative. OPINION MEYER, Justice. The Saul Zaentz Company d/b/a Tolkien Enterprises (Tolkien) sued Wozniak Travel, Inc. d/b/a Hobbit Travel (Hobbit Travel) alleging trademark infringement for the wrongful use of the word "hobbit" in Hobbit Travels business name. Hobbit Travels insurer, General Casualty Company of Wisconsin (General Casualty), sought declaratory relief in the United States District Court for the District of Minnesota from its duty to defend and indemnify Hobbit Travel. The federal district court certified two questions to this court: 1) Does trademark infringement fall within the scope of "misappropriation of advertising ideas or style of doing business" or constitute "infringement of copyright, title or slogan" as set forth in the CGL [commercial general liability] policy? 2) Is a trademark an "advertising idea" or does trademark infringement constitute "infringing upon anothers copyright, trade dress or slogan" as set forth in the CUL [commercial umbrella liability] policy? 2

We answer both questions in the affirmative. Tolkien is a California corporation that owns the right to use and license trademarks related to the late Professor J.R.R. Tolkiens novels The Hobbit and The Lord of the Rings trilogy. Professor Tolkien created the term "hobbit" in the 1930s to describe the fictional, three-foot-tall characters featured in those novels. Since publication, the novels and their hobbit characters have enjoyed widespread popularity, which exponentially grew as the novels were developed into plays, movies, and merchandise. To promote and protect its increasingly valuable interests in the Tolkien works, Tolkien became the owner of numerous trademarks, including the term "hobbit," and established a worldwide licensing program to publicize these interests. Hobbit Travel is a Minnesota-based travel agency that has been operating under that name since 1976. Hobbit Travel established a website directed at travel consumers all over the United States. This website incorporated the term "hobbit" in displaying Hobbit Travels name, in titles of special offers, and in several connected domain names. Tolkiens discovery of this website prompted a 2006 lawsuit against Hobbit Travel in the United States District Court for the Northern District of California for trademark infringement, trademark dilution, and unfair competition. Tolkien claimed Hobbit Travel was wrongfully appropriating Tolkiens "hobbit" trademark, confusing the public about Hobbit Travels association with Tolkien, and capitalizing on Tolkiens goodwill. Tolkien, through its licensees, utilized the term "hobbit" and the corresponding characters for its own advertising and merchandising of the Tolkien works. Some marketing specifically combined the "hobbit" mark with the 3

theme of travel, as the journeys of hobbits compose a significant thread in each novels story. The term "hobbit" was licensed for travel products such as bags, souvenirs, board games, and computer games. One licensee made an agreement with Air New Zealand for the airline to market itself as "Airline to Middle-earth" and paint the hobbit characters on its jets. Another Tolkien licensee arranged for an online travel ticketing service to promote travelling to London and Canada for a stage musical adaption of The Lord of the Rings. Tolkien argued that its market for these and other services was "irreparably harmed" by Hobbit Travels use of "hobbit," and asked for injunctive relief, monetary damages, and attorney fees.1 At the time Tolkien filed suit against Hobbit Travel, General Casualty insured Hobbit Travel under a Commercial General Liability (CGL) policy and a Commercial Umbrella Liability (CUL) policy. General Casualty agreed to defend the Tolkien/Hobbit Travel litigation under a reservation of rights, and filed a complaint for declaratory relief in the United States District Court of Minnesota. In its complaint, General Casualty asserted that the allegations made by Tolkien in the underlying complaint failed to allege an enumerated "advertising injury" offense under General Casualtys insurance policies.

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The District Court of Northern California dismissed all of Tolkiens claims based on the affirmative defense of laches while the certified questions were under consideration by this court. Saul Zaentz Co. v. Wozniak Travel, Inc., No. C-06-5421, 2008 WL 2949423 (N.D. Cal. July 29, 2008). Since Tolkien has filed a notice of appeal with the Ninth Circuit Court of Appeals and General Casualtys declaratory-judgment action in the Minnesota federal district court has not been fully resolved, we continue our analysis of the certified questions. 4

Both General Casualty and Hobbit Travel moved for summary judgment on whether these "advertising injury" definitions extended coverage for Tolkiens allegations. The federal district court determined there was no controlling decision on "this important question of Minnesota law." Accordingly, the district court certified to this court whether Tolkiens trademark infringement allegations fall within the scope of General Casualtys policies. We accepted the certified questions. This court "may answer a question of law certified . . . by a court of the United States . . . if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling appellate decision, constitutional provision, or statute of this state." Minn. Stat.

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