Trademark Licensors and Strict Products Liability: No Liability Absent Substantial Involvement

Introduction

The Supreme Court of Nevada was asked to resolve a novel question of Nevada tort law in the case of Hernandez v. The Home Depot, Inc.; Ridge Tool Company. Oscar Hernandez, the appellant, sustained injuries when a “RIDGID”-branded nail gun allegedly malfunctioned and discharged a nail into his chest. Although Home Depot designed, manufactured and sold the nail gun under license from Ridge Tool Company (the licensor of the “RIDGID” trademark), Hernandez sued both Home Depot and Ridge Tool on multiple theories, including strict products liability. After dismissing all claims except the strict liability claim against Ridge Tool, the U.S. District Court for the District of Nevada certified the following question under NRAP 5:

Does Nevada impose strict products liability on an entity whose only involvement with a defective product is to license its trademark for marketing purposes, when the licensor did not design, manufacture or distribute the product?

The Nevada Supreme Court, sitting en banc, accepted the certified question, reviewed relevant Restatement sections and nationwide authority, and answered it in the negative.

Summary of the Judgment

Answering the certified question, the Nevada Supreme Court held that, under Nevada law, a trademark licensor whose sole role is to license its trade name or logo for use by a manufacturer is not subject to strict products liability for defects in that product. In so doing, the Court:

Adopted the parameters of section 14 of the Restatement (Third) of Torts: Products Liability, which limits strict liability to those who “sell or distribute as their own a product manufactured by another” and expressly excludes mere licensors.
Declined to apply the apparent-manufacturer doctrine of section 400 of the Restatement (Second) of Torts in cases where the licensor does not participate substantially in design, manufacture, distribution or sale.
Emphasized Nevada’s policy of fixing responsibility “where it will most effectively reduce the hazards … inherent in defective products,” thereby focusing strict liability on entities with the ability to control product safety.

Analysis

Precedents Cited

The Court surveyed a progression of authorities:

Restatement (Second) of Torts §400 (1965) – The apparent manufacturer doctrine (AMD): “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.” Commentators and some courts extended this doctrine to trademark licensors prominently displaying their mark.
Restatement (Second) of Torts §402A (1965) – Establishing strict liability for all commercial sellers of defective products; adopted in Nevada in Ginnis v. Mapes Hotel Corp., 86 Nev. 408, 470 P.2d 135 (1970).
Split authority on applying §400:
  – Brandmartin v. Caterpillar Tractor Co., 527 A.2d 134 (Pa. Super. 1987) (imposed liability on licensor under §400);
  – Hebel v. Sherman Equipment, 442 N.E.2d 199 (Ill. 1982) (declined to impose strict liability on trademark licensor with no chain-of-distribution role);
  – Torres v. Goodyear Tire & Rubber Co., 786 P.2d 939 (Ariz. 1990) (no liability absent substantial licensor involvement).
Restatement (Third) of Torts: Products Liability §14 (1998) – Refining AMD and strict liability: liability extends only to those who “sell or distribute as their own a product manufactured by another,” with Comment d making clear that pure licensors (no manufacturing or distribution role) are excluded.
Post-§14 cases applying or following its approach:
- Harrison v. B.F. Goodrich Co., 881 So.2d 288 (Miss. Ct. App. 2004).
- Lou v. Otis Elevator Co., 933 N.E.2d 140 (Mass. App. Ct. 2010).
- Otis Elevator Co. (Mass.), 933 N.E.2d at 149-50 (licensor held immune absent substantial participation).
Policy Authorities – Escola v. Coca-Cola Bottling, 150 P.2d 436 (Cal. 1944) (Traynor, J., concurring); Shoshone Coca-Cola Bottling Co. v. Dolinski, 82 Nev. 439, 420 P.2d 855 (1966); Allison v. Merck & Co., 110 Nev. 762, 878 P.2d 948 (1994).

Legal Reasoning

The Court’s reasoning unfolded in three steps:

Choice of Restatement Authority: Recognizing the trend in American jurisdictions adopting section 14 of the Third Restatement over the broader Second Restatement approach, the Court determined §14 better reflects modern products liability policy.
Policy Alignment: Nevada’s strict liability jurisprudence aims to fix responsibility on those best able to control product risks. A mere licensor, who neither designs, manufactures nor distributes the product, lacks the practical ability to eliminate or remedy defects.
Limiting AMD: Under Comment d to §14, licensors who only license their trademark—but do not “sell or distribute as their own” product—are not “apparent manufacturers” and are thus exempt from strict liability. Only when a licensor substantially participates in design, manufacture or distribution could it be treated as a “seller.”

Impact

This decision will guide Nevada courts and litigants in several ways:

Clarity for Trademark Licensing: Pure licensors can rely on §14 to avoid strict products liability when they have no role in creating or bringing the product to market.
Focus on True Risk-Bearers: Injured parties will direct strict liability claims to manufacturers, distributors, and sellers who have actual control over design and safety features.
Licensing Agreements: Licensors and licensees may revisit contract terms, perhaps negotiating indemnities or quality-control provisions to assign risk and preserve consumer protection.
Preservation of Other Claims: Plaintiffs remain free to assert negligence or warranty claims against licensors who breach express or implied assurances.

Complex Concepts Simplified

Strict Products Liability: A no-fault theory under which a manufacturer or seller can be held liable for a defective product that causes injury, regardless of care exercised.
Apparent Manufacturer Doctrine (AMD): Traditional rule holding that someone who “puts out” another’s product under their own name may be treated as a manufacturer for liability purposes.
NRAP 5 Certification: A procedure by which a federal district court can ask the Nevada Supreme Court to clarify unsettled state‐law questions that are essential to the federal case.
Restatement Third §14: Modern authority narrowing AMD to those who actually “sell or distribute as their own” a product, and expressly exempting pure licensors.

Conclusion

The Nevada Supreme Court’s ruling in Hernandez v. The Home Depot, Inc. establishes that, under Nevada law, a trademark licensor whose only role is to license its name for use on another’s product cannot be held strictly liable for defects in that product. By adopting section 14 of the Restatement (Third) of Torts: Products Liability, the Court reinforced the principle that strict liability should rest with those who create, design, manufacture or distribute the product—those best positioned to prevent danger and protect consumers. This decision clarifies liability allocations in trademark licensing contexts and underscores Nevada’s commitment to effective consumer protection without imposing unwarranted burdens on passive licensors.