Saturday, April 01, 2006

False marking and false advertising of exercise machines

Icon Health & Fitness, Inc., v. The Nautilus Group, Inc., 2006 WL 753002 (D. Utah)

Previous opinion discussed here. For over a decade Nautilus claimed that the Power Rods, part of its marquee product, the BowFlex machine, were patented. The Power Rods were not patented or made with patented technology. In fact, they were made of nylon, though Nautilus called it “Poly-Hexamethanline-Adipamide.” The jury had little trouble concluding that Nautilus violated the Patent Act’s prohibition on falsely marking an unpatented article as patented.

The main issue was how many false marking offenses Nautilus committed. The court previously concluded that the issue was one of law for the court rather than fact for the jury. Counting every decision to spend money on advertising separately, plaintiff’s expert found thousands of offenses; defendant’s expert, unsurprisingly, found one long-lasting offense. There was little precedent to guide the court, and none in which the false marking had lasted through ten years and multiple nationwide ad campaigns. There were 23 different instances of the false claim in the record in 4 different media (print, TV, DVD/video kits, and the Internet), each of which had been disseminated widely. The court, essentially splitting the difference between the parties’ positions, found that Nautilus committed one new offense each week, or 650 separate offenses. That produced a $350,000 fine.

The court denied attorney’s fees on the ground that Nautilus’s conduct was not exceptional. Though the jury found that Nautilus willfully infringed Icon’s Soft Strider trademark and deliberately engaged in false advertising and false marking, the court did not find by clear and convincing evidence that Nautilus’s behavior was exceptionally egregious.

It seems that the court, while not doubting that the jury’s vertict was sustainable, thought that Nautilus’s conduct wasn’t all that awful – there was significant record evidence that the false claims to patent protection did not cause much consumer harm. Moreover, though the jury found willfullness by a preponderance of the evidence, the court suggested that the people at Nautilus may have made a stupid mistake about the patent claim, which, one surmises, just got carried over into ad after ad without anyone going back to check. Two Nautilus witnesses testified that they believed the statements were accurate because the Power Rods were part of the BowFlex, on which Nautilus holds two patents. Moreover, the Power Rods are made for Nautilus using a unique, though unpatented, process. Finally, they testified, Nautilus used the term “Poly-Hexamethanline-Adipamide” in lieu of nylon not to mislead but because that’s the term their Power Rod supplier used.

Similar uncertainties about Nautilus's good faith led the court to deny attorney's fees on Icon's successful trademark infringement and false advertising claims.

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