U.S. court dismisses Nautilus' patent infringement case against Icon

After racking up a majority of the legal wins in the past, Nautilus came up short this week when a U.S. court dismissed all remaining claims in its pending patent infringement case against Icon less a month before charges were to go to trial, effectively ending the case.
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After racking up a majority of the legal wins in the past, Nautilus came up short this week when a U.S. court dismissed all remaining claims in its pending patent infringement case against Icon less a month before charges were to go to trial, effectively ending the case.

The May 26 ruling came on the heels of several other major blows earlier this month when Icon won three motions one after the other for partial summary judgment in the case stemming from a December 2002 suit filed by Nautilus alleging patent infringement of its Bowflex by Icon's Crossbow. That equipment is now called the Crossbar because of preliminary legal rulings, although that name is now also being challenged in court by Nautilus in another case filed in July 2004. The December 2002 suit had also alleged trademark infringement and that case, which was separated from the patent allegations, is still pending.

“We are pleased with the judge's decision and believe this is further confirmation of what Icon has stated all along – that Icon went out of its way to avoid infringement and did not, in fact, infringe Nautilus' intellectual property,” said Icon general counsel Brad Bearnson, referring to the victory as "good news."

Nautilus responded only briefly with a short, generic announcement on the heels of the ruling by the U.S. District Court, Western Washington, in Seattle, and declined further comment when asked for additional explanation.

"We believe this matter will have no bearing on the success of our operating plans or our operating results," the Nautilus statement said, without a name attached. "We are fully committed to protecting the intellectual property of our innovative brands. We believe vigorously protecting intellectual property is fundamental to any company committed to bringing a fast pace of innovation to their customers and industry."
 
Appeal expected
The Vancouver, Wash.-based Nautilus said it will appeal the ruling to the Federal Circuit Court of Appeals, just as it will continue to prosecute the two trademark infringement cases it filed – the one split from the current patent case and the second regarding the Crossbar name. The Crossbar trademark case, which alleges that name is confusing to consumers in its similarity to the name Bowflex just as the name Crossbow was, is now scheduled for January 2006 trial.Â

Logan, Utah-based Icon in fact was granted a trademark to both names: The mark was registered for the Cross Bow (two words according to U.S. Patent & Trademark Office records) on May 3, 2005, after the company filed for it July 18, 2003. At the same time, it filed for a trademark for the name "Crossbar by Weider" (July 16, 2003), which became registered on May 4, 2005.

A tangled legal web
The first suit in the infringement series was actually filed by Icon in August 2002 in the U.S. District Court, Utah, relating to Icon's then-named PowerFlex made for Gold's Gym (see SNEWS® story, Jan. 14, 2005, "Nautilus and Icon fire paper volleys in ongoing legal battles). Bearnson told SNEWS® in late 2002 that the Utah action seeks a determination from the court that Icon products do not infringe Nautilus patents or intellectual property. This case is now slated for August trial.

As for the current Icon victory, Bearson said in an official company release, “While Nautilus may appeal this matter, we believe its claims of patent infringement are without merit and that the federal courts will continue to reject those claims."

A ruling from a federal appeal on the dismissed patent case may not be made for eight months to a year. Nautilus has won two separate prior federal appeals: one in February 2004 that reinstated the patent case after it was dismissed the first time by the district judge, and one in June 2004 that affirmed the granting of a preliminary injunction that meant Icon had to stop using the Crossbow name. The June federal ruling was the result of a reconsideration of a previous federal ruling in Icon's favor on the same issue.

Icon won summary judgments
The pre-dismissal rulings this month that were squarely in Icon's favor, however, included two partial summary judgments granted on May 10 and one on May 25, the day before U.S. District Judge Ricardo Martinez dismissed the case and two days after a mandatory mediation hearing was held between the two parties. The judge also on May 27 denied two requests for summary judgment by Nautilus and cancelled the pending trial date.

This came about three months after the same U.S. District Court had issued rulings on claims in a so-called "Markman hearing" held in September 2004, in which Nautilus had won more claims than Icon. (See SNEWS® story, March 10, 2005, "Nautilus/Icon infringement battles wage on: Nautilus takes upper hand in preliminary arguments in Washington case.") Although not binding, the Markman rulings – somewhat like a trail before the jury trial – can lay the groundwork for the pending jury trial and indicate which way the judge leans, which in turn legal experts say may help push parties toward a settlement. After a Markman hearing, the successful party or parties may file motions for summary judgment, which are often granted. In this case, the motions by Icon, although it won fewer claims, were granted, while Nautilus' reciprocal motions were not.

"You might have more arrows in your quiver," Bearnson told SNEWS®, "but you only need one to kill the beast."

The trademark case that had been separated from the current dismissed lawsuit and mostly ignored of late is now expected to regain attention.

SNEWS® View: Nautilus is clearly fuming and the company's promise to appeal this verdict to the federal court level means more money gets flushed down the legal expense toilet – money that both Icon and Nautilus could be spending on employees, marketing, training, the fitness industry or even additional product development.

The irony here is that the patent that is being battled over in this case is a patent that expired in April 2004. Sure, a decision in Nautilus' favor would mean Icon would be on the hook for potentially millions in licensing fees and penalties from sales that occurred while the patent was valid. Nevertheless, there is little doubt to many in the industry that this case is becoming as much about collective egos and chest-thumping as it is about money. It is apparent by Nautilus' latest press release that as long as there is a breath of hope in the appeal process, the company is going to keep lawyers on the company payroll. And we know Icon would do the same if and when the tables were turned. Until this point, neither Icon nor Nautilus has given any indication that settlement or acquiescence in any of the current, pending or possibly soon-to-be-appealed cases has ever or will ever be an option. Collective corporate egos aside, there is the common public perception that settling a case is virtually an admission of guilt or wrong-doing – and no company exec wants to be tagged with that.

Nautilus (NYSE: NLS) has even more at stake since it is publicly traded and watched carefully by the Street. How the stocks perform have a huge effect on the executive team's reputation, not to mention their bank accounts. And Icon isn't immune from financial ebbs and flows either. Although not publicly traded, rumors are once again afloat that the company could be struggling, rumors that are perhaps unfairly spurred on to some degree by its founders taking a very long sabbatical on a church mission in China but certainly fed by real numbers in its financials the last couple of quarters that have likely caused a few in-house grimaces and groans.

While there is certainly no current indication that either company would be willing to let go of the other's throat, even as a gesture of goodwill, we'd sure like to see each company finally reach a point where this legal wrangling ceases to be important any more.

Likely? No. But we can at least hope, can't we?

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