Passive Trademark Licensor Held Not Liable for Product Defect

by Dorsey & Whitney LLP

Can merely licensing a trademark result in strict liability for injuries resulting from a product bearing the trademark? A decision earlier this month says no.

In Shukrullo Dzhunaydov v. Emerson Elec. Co., et al., No. 12-CV-2188, 2016 BL 82209 (E.D.N.Y Mar. 17, 2016), plaintiff Dzhunaydov injured his hand while operating a table saw. He filed suit against the manufacturer, distributor and retailer of the saw. He also named Emerson Electric Co. in the lawsuit because Emerson had licensed its “Rigid” trademark to Home Depot, which used the mark to market the table saw. Emerson moved for summary judgment at the conclusion of fact discovery. It claimed that since it was not involved in the design, manufacture or sale of the saw, it could not be liable for Mr. Dzhunaydov’s injuries. Instead, it was merely a passive trademark licensor. Senior Judge Frederic Block agreed with Emerson. He found that Emerson did not exercise any authority to control or inspect the table saw, nor did it perform any quality control visits or approve product specifications even though the license agreement granted Emerson such rights.

Judge Block’s rationale is consistent with how several courts and state legislatures are dealing with tort reform. The majority of states adopted some form of tort reform to address the harsh effects of strict products liability on non-manufacturing parties such as distributors and retailers. These passive distributors and resellers are not involved in the design or manufacture of the defective product, and the economic benefit they receive from the pass-through sale pales in comparison to the liability risk of a large jury verdict. Similarly, many times these passive distributors are named in the lawsuit for purely strategic reasons such as defeating removal to federal court by a non-resident manufacturer. Consequently, courts and legislative bodies are moving towards liability based upon allocation of fault for the injuries suffered rather than strict liability arising solely from the presence in the chain of distribution. For example, in Sanns v. Butterfield Ford, 2004 UT App 203, 94 P.3d 301 (2004), the Utah Court of Appeals affirmed summary judgment in favor of the automobile dealer because the dealer had merely sold the vehicle in question. The plaintiff in that case was injured in a rollover accident. He sued the automotive manufacturer claiming that the van was defective because it had too high of a center of gravity. He also sued the dealer. The Court in Sanns held that Utah’s Liability Reform Act precludes a strict liability claim against the passive distributor where there is no evidence that the distributor knew of or contributed in any way to the defective condition of the product. See also Saieva v. Budget Rent-A-Car of Rockford, 227 Ill. App. 3d 519, 169 Ill. Dec. 334, 591 N.E. 2d 507 (1992) (purpose of Illinois statute is to defer liability upstream to the ultimate wrongdoer, the manufacturer).

Emerson takes these tort reform concepts and applies them to the intellectual property field.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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