Nautilus and Icon fire paper volleys in ongoing legal battles

Several ongoing legal feuds between The Nautilus Group and Icon Health & Fitness charging infringements and false advertising have escalated into what seems like the equivalent of paper-wad wars as both companies fired out public statements that infuriated and frustrated the other.

In the first round, Icon issued a short press release Jan. 13, titled “Court finds Nautilus falsely advertised its Bowflex exercise machines,” stating it had been granted a motion for summary judgment by a Utah court that “an advertising statement made by The Nautilus Group Inc. relating to its Bowflex exercise machine was false.” The statement said that the court had found that Nautilus had falsely advertised that its “resilient rods” a.k.a. “Power Rods” were “manufactured with patented technology.”

That Jan. 13 release cited “today’s ruling” when it in fact was referencing one small part of a Dec. 21 court ruling, which was still involved in some legal wrangling due to a number of motions for reconsideration that had been filed by both companies afterward.  

“The court’s ruling fully adjudicates Nautilus’ false advertising counterclaims against Icon,” the Icon release stated about the ruling from the U.S. District Court, District of Utah, in the ongoing suit originally filed by Icon against Nautilus in August 2002.

Struck broadside by the release as Nautilus CEO Gregg Hammann was presenting at the ICR XChange financial conference the morning of Jan. 13, Nautilus watched its stock prices take a sudden dive by the end of the day — dropping 2.10 in one day on a volume of nearly 2.6 million, closing at 20.25. The dip in prices — and Nautilus’ apparent ire over the attack on paper — left the company knocking out a lengthy and rather angry-sounding press release on Jan. 14 “in order to correct certain misleading and inaccurate statements,” the release stated. Nautilus stock regained strength to close at 21.80 by the end of the day Jan. 14.

The Nautilus release, nearly four times the length of Icon’s, was titled simply, “Nautilus responds to Icon Health & Fitness Inc.’s press release.” It charged headfirst into Icon’s statements, stating that, one, there had been no ruling on Jan. 13; two, the court had not “fully adjudicated” in Icon’s favor and that claims for false advertising still exist; and, three, that the case named had nothing to do with the infringement lawsuit filed by Nautilus against Icon in December 2002 that is so far set for trial in April.

That public statement by Nautilus shot out over the news wires with lengthy explanations about the two court cases, what they involve, and where they stand.  

“The Utah Court, on Dec. 21, 2004, did issue a ruling on the parties’ respective Motions for Summary Judgment and, as part of that motion, did make a statement that a single statement referring to power rods as being ‘manufactured with patented technology’ was inaccurate,” the Nautilus release said.

Although only a small piece of the Utah ruling, the court statement was nevertheless key, Icon legal counsel Brad Bearnson told SNEWS®: “It is important. It was one of our court claims.” At no time did the release mean to imply the Utah case had anything to do with the other set of suits pending in Washington state, he added.

In the Washington case, the court is now considering claims of contempt of court by Icon filed by Nautilus, because Icon had continued to sell the banned Crossbow-branded equipment in a few Icon-owned stores. A June 2004 preliminary injunction had prohibited Icon “from using the Crossbow mark on exercise equipment until entry of final judgment” in the infringement battle. Indeed, the preliminary injunction does not name Icon independent retailers as being banned from advertising or selling, but the stores found to be selling the Crossbow were Icon-owned company stores.

“We have to take some ownership” of those sales, Bearnson told SNEWS®. “It happened. We corrected it.”

The U.S. District Court, Western District of Washington, had not yet as of Jan.17 issued a ruling on the contempt charges that were filed Dec. 16.

“Bottom line is,” Bearnson said, “we’re still in the lawsuit.”

Indeed, both companies are awaiting a court ruling in the Washington litigation from the so-called Markman hearing held in September 2004. That ruling by the judge could have an influence on any possible negotiations or settlements, legal sources say, since it can be a harbinger of the potential outcome of a case.

In a Jan. 13 quarterly earnings call with analysts and media by Icon, Bearnson said there were no settlement talks and he didn’t expect any to occur.

SNEWS® View: Got all that? Basically, we have a court case by Icon charging Nautilus with trademark violations and false advertising that was filed in August 2002. We also have a case filed by Nautilus against Icon in December 2002 that charged both patent and trademark infringement. That case was broken into two by the court: one for patent claims, and one for trademark claims. In addition, we have yet another trademark infringement suit filed in July 2004 against Icon by Nautilus that says the name “Crossbar,” which is what Icon renamed the Crossbow after the June preliminary injunction, is still a trademark violation because it remains confusing to consumers. That means we have four somewhat related but very separate cases. All are still pending. Both companies meanwhile have spent many millions and millions of dollars on legal fees in the last two to three years alone on those cases.