In a move to help boost its share of the growing elliptical market, Nautilus has acquired about 30 patents from inventor Bob Rodgers.
According to Rodgers, Nautilus already had been licensing from him the technology in all of the patents it acquired. Terms of the agreement were not disclosed.
"It was a fairly concise package of related technology developed in the mid- to late-90s," Rodgers told SNEWS®. "It was a good deal for both parties."
He still owns another dozen or so patents relating not only to elliptical technology but also to other weight-bearing aerobic exercise, he added.
"I'm not retiring," said Rodgers, who licensed his first elliptical patent to now-defunct CCS. He said CCS came out with the second elliptical on the market using his patent about four months after Precor introduced the trainer.
Nautilus has said it will continue agreements with companies now licensing technology for equipment using Rodgers' patents. An official statement said the acquisition of the patents would be neutral to slightly accretive over the first two years, with third-party license fee income and the absence of paying license fees itself offsetting the acquisition cost.
"They acquired patent rights and license agreements," Rodgers said. "They also acquired the obligations and are looking forward to receiving the royalties from the agreements."
According to the 10Q statement filed by Nautilus with the SEC on May 10, 2006, for the first quarter of 2006 ending in March, the company paid $1.6 million in royalties for the first quarter this year, up from $1.5 million in the first quarter of last year. The filing noted the increase was attributed to royalties for the technology in its Bowflex Revolution gym, while the remainder was related to the Bowflex and elliptical products.
"We are gearing up for a larger share of the growing cardiovascular training market," said Tim Hawkins, president of the Nautilus fitness equipment business, in an official company statement. "This portfolio has long been considered as one of the best in the elliptical category, which is one of the fastest-growing categories of cardiovascular training…. By owning the patent portfolio outright, we have more flexibility to further expand our elliptical and related product innovations."
According to company spokesman Ron Arp, the front drive and foot platform movement concepts are covered by several patents that were acquired and are being used now in all segments, including commercial, specialty and retail. The Nautilus My Stride variable stride technology was developed internally, he added.
"We are exploring additional applications" for the technologies in the patents acquired, Arp added, "with elliptical trainers and perhaps beyond."
Rodgers, one of a group of inventors most prolific in the fitness industry, earned his first patent about three decades ago, he told SNEWS®, although the first ones were related to his former profession in the oil and gas industry. His first exercise-related patent was in the late '70s and related to squash and racquetball since that's what he himself did then. His first fitness equipment patent came in the mid-80s. He was finishing up his first elliptical patent for front-drive technology in the mid-90s about the time Precor launched its elliptical, he said.
He maintains a high interest in weight-bearing aerobic exercise, he said, and recently has acquired patents for different equipment technology that is non-elliptical as well as newer elliptical technology.
SNEWS® View: Although one would wonder why an inventor with such a large portfolio and royalty opportunities would sell the whole batch, we know it's not easy dealing with the aspects of marketing and selling patents and their technology. It takes a lot of constant work. We, of course, can't know how the agreement was designed, but we'll bet there is still a regular, annual flow of some smaller amount of royalty. As a free-lancer in any endeavor, knowing you have a certain base of income coming in each year always helps with security. And Rodgers will, of course, continue to develop and license his remaining batch of patents. For Nautilus' part, the move is expected to balance out in a couple of years, assuming of course it sticks with this technology and doesn't decide to go license other ideas instead, which, of course, would negate any benefit of this expense. The company has no doubt thought through the investment long and hard and will make it financially to its benefit, especially if it can eliminate about a million or so in royalties annually.