OBAN US, LLC v. Nautilus, Inc.

When a company licenses the use of its brand to another they do not have a duty to monitor the licensee’s infringement of a third party mark.

Opinion (Arterton): The Plaintiff, Oban US, LLC (Oban) manufactures fitness heart rate monitors and sued Sports Beat, Inc. (Sports Beat), the manufacturer of a virtual copycat which is sold via license under the brand name Bowflex. Oban is also suing Nautilus, Inc. (Nautilus), the owner of the Bowflex brand. Nautilus moved to dismiss the claim against them under failure to state a claim of contributory trademark infringement, vicarious copyright liability, or unfair competition that arises out of Nautilus’ licensing agreement with Sports Beat. Oban alleges that Nautilus knew about the products being sold under its brand, how they were being sold, and that its brand was being used to deceive the public. The test for contributory infringement is whether (1) Nautilus “intentionally induced” Sports Beat; or (2) “continued to supply an infringing product” to Sports Beat, knowing that the product was being mislabeled. The court held that when Nautilus’ licensed Sports Beat to use its brand they did not have a duty to monitor the Sport Beat’s infringement of a third party mark. The duty that is imposed on a licensor of a trademark to monitor the products produced be a licensee extends only to maintain consistent and predictable quality. As a result Nautilus's motion to dismiss was GRANTED.