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Practice Tip: A Synopsis of Trademark Licensor Liability
A case in strict products liability is available in all states against the manufacturer of a defective product. A “manufacturer” is often defined as one who designs, produces, sells or otherwise distributes the product. Suppose, however, a company's logo is on a product that has been manufactured by someone else. Is the non-manufacturer responsible to a plaintiff and if so, under what theory? The answer depends upon the state in which you sue. Some jurisdictions hold a non-manufacturer liable as an “apparent manufacturer” if it has merely licensed its trademark. Other states require that the licensor have a “significant role” in the chain of distribution, and some states are hybrid, eg, they permit liability against trademark licensors but require more than just licensing the trademark. The following examples illustrate the way some states analyze this liability.
Connecticut requires a “significant role” of the licensor. Burkert v. Petrol Plus, 216 Conn. 65, 579 N.E.2d 26 (1990) involved the sale of defective Dextron 2 automatic transmission fluid that plaintiffs purchased from Petrol Plus. Petrol Plus filed a third-party action seeking indemnification from General Motors, the trademark licensor of Dextron 2, pursuant to Restatement Torts 2nd '400, which provides: “One who puts out as his own product a chattel manufactured by another is subject to the same liability as though he were its manufacturer.”
GM permitted manufacturers to use the name Dextron 2 on specific formulations of transmission fluids that met GM's performance standards. GM received no royalties or other financial benefits from this licensing program. It argued that under Connecticut's Product Liability Act, it was not a manufacturer and, therefore, could not be held responsible for merely licensing the product. The court agreed and ruled that under Restatement Torts 2nd '400 a non-manufacturer can be held liable only if it put out a chattel. GM, the court said, was not sufficiently involved in the stream of commerce to warrant the imposition of tort liability.
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