Litigation: Trademark licensor liability in product-liability cases

Trademark licensors should carefully consider their involvement in the design, manufacturing, marketing and distribution of the products they license

With the U.S. Supreme Court holding last year in Pliva, Inc. v. Mensing that the manufacturer of a generic pharmaceutical product cannot be liable under a failure-to-warn theory, pharmaceutical plaintiffs are searching for new theories to hold nonmanufacturers liable for alleged injuries. The 2009 case Conte v. Wyeth Inc., et al. was widely publicized for allowing plaintiffs injured by a generic pharmaceutical to hold the “innovator,” or brand-name manufacturer, liable even though it did not manufacture the product, but Conte has not found favor with other courts. In the wake of Mensing and Conte’s failure to gain traction, one has to wonder which nonmanufacturer is the next target.

Plaintiffs recently scored a victory in the battle to hold trademark and trade name licensors liable in product-liability actions in August when the Connecticut Superior Court in Aquaulo ex. rel. Saldibar, et al. v. A.O. Smith Corp., et al. affirmed a $2.4 million verdict against a trademark licensor that neither sold nor manufactured the asbestos-containing dry-set ceramic tile mortar at issue. Although claims against trademark or trade name licensors have had mixed success, licensors should examine their relationship with the license-holding manufacturers or sellers and determine if the benefits of the license are worth the potential risk of liability. 

Saldibar and preceding cases rely on the degree of control maintained over the product by a licensor and the extent of the licensor’s involvement in the distribution, marketing or manufacture of the product. In Saldibar, the defendant, a trade association that developed and patented asbestos-containing formulas for the mortar it licensed to manufacturers, moved for summary judgment on the premise that it was not a “product seller” for purposes of Connecticut’s Products Liability Act. Summary judgment was denied in favor of allowing the jury to determine whether the defendant held itself out as a manufacturer because it provided licensees with detailed specifications “governing all aspects of the product,” including the percentage of asbestos to be used, the grade of asbestos to use and the supplier from whom the asbestos should be purchased; required periodic in-house testing of each licensees’ product; marketed the product with its trademark and trademark number prominently featured; collected licensing fees; and issued product warnings. 

The Saldibar court cited two earlier cases evaluating the extent of the trademark licensor’s participation in the production, marketing or distribution of the product at issue. In the 1990 case Burkert v. Petrol Plus of Naugatuck, Inc., General Motors, the trademark licensor of formulations of automatic transmission fluids, was not deemed a “product seller.” GM exercised no control over the formulations its licensees used, was unaware of the composition of licensees’ formulations, received no financial benefits from licensing, had little supervision of the production and distribution of the product, examined no samples or test data, and offered no warnings. Likewise, in Iragorri v. United Technologies Corp., vacated in part on other grounds, Otis Elevator, a trademark licensor, was not considered a “seller of the product” based on a lack of evidence of its control, distribution or marketing of the elevator.

The outcome of a product-liability lawsuit against a licensor may vary widely from state to state, but at a minimum, trademark licensors should give careful consideration to their involvement in the design, manufacturing, marketing and distribution of the products they license. The risk of liability and the possible increase in lawsuits against licensors suggest that, under some circumstances, the risks may outweigh a licensor's benefits. 

Contributing Author

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J. Carter Thompson Jr.

J. Carter Thompson, Jr. is Chair of the Product Liability & Mass Tort Practice Group at Baker, Donelson, Bearman, Caldwell & Berkowitz, PC (Jackson, MS)....

Additional Contributors: Ceejaye Peters

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