Guess Umbrella Injures Worker; Indiana Supreme Court Rules Trademark Licensors Can Face Negligence Claims

In November 1996, Kaye Kennedy bought a Guess-branded watch at a Lazarus department store in Indianapolis. The store threw in a free promotional umbrella also bearing the Guess logo. Neither she nor her husband Richard had any reason to suspect the gift would cause harm.

On May 22, 1998, Richard brought the umbrella to work. A coworker picked it up and started swinging it. The shaft separated from the handle, flew through the air, and struck Richard in the nose and sinus area. The impact left him with a facial injury that became the center of a product liability lawsuit.

The Kennedys, represented by Frederick R. Hovde of the Hovde Law Firm in Indianapolis, sued Guess, Inc., distributor Callanen International, and the Hong Kong-based manufacturer under both strict product liability and negligence theories. Guess moved for summary judgment, arguing its sole connection to the umbrella was a trademark license and that it never designed, made, or distributed the product.

The trial court agreed and dismissed both claims. Hovde appealed, and in 2002 the Indiana Court of Appeals reversed, finding genuine factual disputes on both theories. Guess sought transfer to the Indiana Supreme Court.

In its April 2004 decision, 806 N.E.2d 776, the Supreme Court addressed a question Indiana courts had not previously resolved: whether a trademark licensor can face liability under the Indiana Product Liability Act. The court held that Guess did not qualify as a seller in the distribution chain for purposes of strict liability, because its only role was licensing the mark. On negligence, however, the court ruled that trademark licensors are not automatically shielded. A company that puts its name on a product and derives commercial benefit from that association may owe a duty of care proportionate to its actual involvement in the product's design, manufacture, or distribution. The case was remanded for further proceedings on the negligence claim.

The ruling gave Indiana courts a framework for evaluating brand-licensor liability in product injury cases, a question that had divided courts in other states for years. It established that the commercial shelter of a pure licensing arrangement does not, by itself, extinguish a duty to consumers harmed by products bearing the licensed mark.