IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 18-50097

NAUTILUS, INCORPORATED, 

 Plaintiff - Appellee

v.

ICON HEALTH & FITNESS, INCORPORATED, 

 Defendant - Appellant

Appeals from the United States District Court

for the Western District of Texas

USDC No. 5:16-CV-00080

Before CLEMENT, OWEN, and HO, Circuit Judges.

PER CURIAM:*

Nautilus sued ICON Health & Fitness for breach of contract after ICON 

stopped paying royalties on a licensed patent. The district court granted 

summary judgment to Nautilus. Because we find no error, we AFFIRM. 

Nautilus and ICON are exercise equipment companies. After a series of 

assignments, ICON became a non-exclusive licensee of some of Nautilus’s

patents. Under the Patent Licensing Agreement, ICON was required to pay 

 

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not 

be published and is not precedent except under the limited circumstances set forth in 5TH 

CIR. R. 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

February 22, 2019

Lyle W. Cayce

Clerk

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royalties on all licensed “Products” it made or sold during the term of the 

respective patents. “Products” is a defined term: “any apparatus, systems or 

products covered by at least one Claim of any of [Nautilus’s] Patent Rights.”

The parties dispute whether ICON owes royalties for a Chinese 

elliptical-machine patent. After years of paying royalties, ICON stopped

making payments because it determined that it was not manufacturing a 

royalty-generating “Product.” Because ICON manufactured and sold a 

partially assembled machine, it believes that it did not manufacture anything 

“covered by” Nautilus’s patent for a fully assembled machine.

Nautilus sued ICON for breach of the Agreement and ICON 

counterclaimed in equity to recover some royalty payments it made on the 

Chinese patent. The parties cross-moved for summary judgment on the 

contract claim. The district court granted summary judgment to Nautilus. It 

concluded that ICON’s manufacture was covered by Nautilus’s patent, and 

thus ICON’s failure to pay royalties breached the Agreement. We agree with 

the district court. 

To begin with, we agree that Nautilus’s right to royalties is coextensive 

with its right against infringement. So we must determine whether ICON’s 

machines “infringed” Nautilus’s patent. Nautilus argues that ICON has 

“admitted” or otherwise waived its right to contest that ICON’s activities 

violate Nautilus’s patent. We reject these arguments for essentially the same 

reasons as the district court.

We also agree with the district court that ICON’s activities infringed the 

patent. Nautilus’s patent protects two innovations: the component parts of 

the elliptical machine and the structural relationship between the component 

parts. The parties agree that ICON’s machines include all the component parts 

protected by the patent. Moreover, they agree that if ICON had assembled the 

elliptical machine and sold that assembled product, it would have violated

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Nautilus’s patent. But ICON argues that its manufacture and export of a 

partially assembled machine does not “practice” the structural elements of the 

patent, and therefore does not infringe the patent. 

In the district court, both parties offered expert reports on Chinese 

patent law. The experts agreed on the basics: To infringe a patent, the 

infringing party must “practice” all elements of the patent (the “all-elements 

rule”) within China. But they disagreed whether the all-elements rule requires

structural relationships to be practiced through full assembly, or whether 

those relationships can be practiced through partial assembly with

instructions. ICON contends that structural elements may only be practiced 

through assembly. Thus ICON argues that the district court improperly closed 

a “gap” in Chinese patent law that existed under American patent law—one

that was only closed by legislation. See Microsoft Corp. v. AT&T Corp., 550 

U.S. 437, 442–45 (2007) (describing the loophole first recognized by Deepsouth 

Packing Co., Inc. v. Laitram Corp., 406 U.S. 518, 526–29 (1972), and 

acknowledging its later closure by 35 U.S.C. § 271(f)(1)). 

We agree with the district court and Nautilus. We are not persuaded by 

ICON’s arguments that any “gap” exists in Chinese law, and we therefore 

cannot reverse the district court for “improperly filling” it. 

We AFFIRM the judgment.

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