Mid-Continent argued that there is no coverage because the prior judgment did not concern an advertising injury on its face and because Kipp relied primarily on the use of the houses as advertisements, but a house cannot be an advertisement. The court said that the prior judgment conclusively established Hallmark's liability for copyright infringement, including copyright infringement committed in connection with Hallmark's advertising. The court said that this is a covered offense and moreover, the record shows that Hallmark engaged in advertising activities during the policy periods.

 Because the jury determined that the houses themselves infringed the copyright of Kipp, the court continued, the determinative question for coverage is whether the houses themselves were advertisements such that the jury verdict potentially gives rise to coverage as an injury arising out of infringement upon another's copyright, trade dress or slogan in Hallmark's advertisement. The court found that Kipp presented evidence that the houses themselves were used to attract customers and Mid-Continent never offered any evidence to the contrary.

 Mid-Continent did not dispute the fact that Hallmark used the infringing homes themselves to market to customers, but then argued that an infringing house can never be an advertisement as a matter of law. Mid-Continent argued that under the terms of the policy and common sense, a house cannot be a notice and it cannot be broadcast or published in accordance with the terms of the policy definition of advertisement. The Court of Appeals did not agree.

 The court decided that it is undisputed that Hallmark's primary means of marketing its construction business was through the use of the homes themselves, both through model homes and yard signs on the property of the infringing homes it had built, all of which were marketed to the general public. The court concluded that the infringing houses in this case as used by Hallmark all qualify as advertisements under the terms of the policies. Because the court concluded that Hallmark infringed Kipp's copyright in its advertisement, the policies define the resulting injury as an advertising injury, that is, an injury arising out of the infringement in the advertisement. Thus, the judgment against Hallmark is because of that advertising injury and under the plain language of the policy, the court ruled, Mid-Continent owes a duty to indemnify.

 The ruling of the district court was affirmed.

 Editor's Note: The U.S. Court of Appeals, Fifth Circuit, finds that, in accordance with Texas law, advertising is a marketing device designed to induce the public to buy something. In this case, the homes built by the insured were, in effect, advertising since the insured used them to solicit business. This made the houses advertisements, and since the policy exempted from the copyright infringement exclusion an advertising injury arising out of infringement in the insured's advertisement, the insurer owed the duty to indemnify.