In one fell swoop, the nearly five-year legal wrangling in two courts in two states between Nautilus Inc. and Icon Health & Fitness were ended when Nautilus announced an out-of-court settlement of all outstanding intellectual property litigation.
Details of the settlement were confidential; however, it's no secret that each company has spent many millions on the suits, trials and appeals. Nautilus (NYSE: NLS) alone estimated that the settlement will save the company about $1.5 million just this year, spokesman Ron Arp told SNEWS®.
In the 10-K filed by Nautilus with the SEC for the 2005 year, the company noted that a 57.3 percent increase in general and administrative expenses over 2004 (from $31 million to $48.8 million, or from 5.9 percent of net sales to 7.7 percent of net sales) was "primarily due to increased legal fees of approximately $5.7 million mostly related to litigation with Icon…."
"We're pleased that it's settled," said Icon's Colleen Logan, the only statement available from the company based in Logan, Utah, which had launched the first volley in August 2002 with a lawsuit against Nautilus charging trademark infringement, among other details.
Nautilus confirmed to SNEWS® that it would now be licensing intellectual property from Icon but would not be paying licensing fees. Icon had no comment on its arrangements as of April 27. Other financial details of the settlement remained confidential.
"We decided that this was a good alternative to several more years of litigation," said Arp, senior vice president, corporate communications. "We mediated receiving access to significant intellectual property that will be helpful to our business; we have access to more intellectual property that will be important as we further develop our strategic position in the marketplace."
The companies, which have sparred over patents and trademarks, some of which included the now-expired Bowflex patent, began settlement negotiations in September 2006, just before the trademark portion of the case brought by Nautilus against Icon in the U.S. District Court, Western District of Washington, was to begin, with a requested outcome of a jury trial.
The patent infringement portion of the same case, brought by Nautilus in December 2002 as one suit but separated into two by the court, was ultimately won by Icon when Nautilus lost a federal appeal in August 2006 of the November 2005 judgment. The settlement of the case, which had charged infringement of the Bowflex, among other things, ultimately cost Nautilus close to $8.2 million.
The other case was a second one brought by Icon against Nautilus in September 2006 in the U.S. District Court, District of Utah, that charged patent infringement.
Another previously settled trademark infringement case, brought in July 2004 by Nautilus against Icon concerning the new Icon name, Crossbar, adopted by Icon for its Crossbow, was settled out-of-court in late 2004 and was not a part of this agreement.
SNEWS® View: Ultimately, it's a glorious day to see many millions of dollars stop flowing into lawyers' pockets and legal coffers when it can be better spent on equipment development, fitness promotion and retailer programs, among other things. It's only a sad state that it took almost five years to get to this point.