Court stands firm: Nautilus told to pay Icon $7.8 million in Bowflex false advertising damages

A Utah district court has declined to change the $7.8 million award that a jury in November 2005 decided Nautilus must pay Icon Health & Fitness for what the court deemed false advertising of the Nautilus Bowflex.
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A Utah district court has declined to change the $7.8 million award that a jury in November 2005 decided Nautilus must pay Icon Health & Fitness for what the court deemed false advertising of the Nautilus Bowflex.

In a filing with the Securities and Exchange Commission, Nautilus said the "verdict is inconsistent with the law and evidence presented at trial and that the evidence does not support the damage award." It also said it would appeal the terms of the jury award to a higher court.

In an official statement, Nautilus said only that "there are serious and important questions of law that should be considered by an appellate court." Icon has declined comment since the matter may be appealed.

In lengthy court briefs filed several weeks after the verdict, both companies had argued their side before U.S. Judge Tena Campbell of the U.S. District Court, District of Utah, asking the judge to modify the award before finalizing it. Icon had stated in the December 2005 brief that the verdict should be binding and the court should "use its discretion to increase the amount." Nautilus (NYSE: NLS) had stated the verdict should be advisory, that district courts "routinely award excessive damages," and that the verdicts should be "significantly reduced."

The case stems from an August 2002 lawsuit filed by Logan, Utah-based, Icon Health & Fitness that charged Vancouver, Wash.-based, Nautilus with trademark infringement of its "Soft Strider" patent on a treadmill belt and false advertising pertaining to the Bowflex and its rods. The November ruling had been called a "vindication" by Brad Bearnson, Icon's legal counsel.

Last week, the court had added $325,000 to the above amount for false advertising after calculating the number of "violations" over 650 weeks from January 1992 and June 2004, figuring $500 per week or violation. (Click here to see a March 30, 2005, SNEWS® story, "Icon wins first court-ordered payment from Nautilus in Bowflex patent case.")

At that time, an Icon spokeswoman had said the company was "pleased with what we have on this so far," and that the company was waiting on the judge's final decision. This final decision was handed down by the judge late in the day April 3.

Nautilus stated in its SEC filing on April 5 that the company would post a bond or letter of credit in the amount of the judgment when it files its appeal.

Also still being reviewed by the higher court is an appeal of an earlier 2005 verdict in favor of Icon in a patent case. In that case, filed in December 2002, Nautilus had charged infringement by Icon with its then-named Crossbow equipment now called Crossbar.

Despite the litigation setback, investors shrugged off the court decision and focused on news of Nautilus' Texas plant closing (click here to read the April 4, 2006, SNEWS® story, "Did you hear?… Nautilus to close Texas manufacturing facility"). Both Avondale Partners and C.L. King & Associates reiterated their "Market Outperform" and "Strong Buy" ratings, respectively, and a $20 target price. Analyst support helped shares of Nautilus climb 5.6 percent -- or $0.89 -- to $16.89 during afternoon trading on April 5 on the New York Stock Exchange, closing at $16.95. The stock has traded in a 52-week range of $13.51 to $29.65.

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