Pelotonís IP Obstacle Course
by George H. Pike
The pandemic has had different impacts on different businesses. Fitness centers and gyms were among the early victims of the March 2020 lockdown, being forced to fully close in many states. Then, they were permitted to reopen in a limited capacity, but experienced another round of closures or severe restrictions in the late fall. By contrast, however, home gym equipment manufacturers, including Peloton, NordicTrack, and Echelon, saw business boom. Peloton’s stock rose by 350% through late fall 2020 due to increased sales and interest in its home exercise equipment.
BULLY OR BULL’S-EYE?
This increased market share for Peloton, however, has made the company either a bully or a bull’s-eye when it comes to protecting and strengthening or being accused of stealing intellectual property (IP) rights of all kinds. In 2020 alone, Peloton has sued or been sued over multiple patents, as well as trade secrets. This is on the heels of a 2019 lawsuit accusing the company of substantial copyright infringement.
The Peloton lawsuits provide for an interesting case study of the role that IP rights and assets play in businesses that are not typically known for IP issues. While technology companies will often rely on a heavy portfolio of patent assets, and entertainment and media companies rely on assets that are protected by copyright, an exercise equipment company must also be aware of the IP assets that it retains, the IP assets that it protects, and how it uses the IP assets of others.
‘CONNECT, BOND, INSPIRE’
Peloton is a relatively recent entry into the fitness equipment marketplace. It was founded in 2012, with its first product—a stationary bicycle—introduced in 2014. The company added treadmills to its product line in 2018. A key component of Peloton’s success is its built-in touchscreen and the availability of classes, trainers, instructors, and a community of “members” who can “connect, bond, inspire, and grow stronger together.” Peloton has targeted a generally affluent consumer base with its product line and digital content, with personal exercise equipment prices ranging from nearly $2,000 to more than $4,000.
NordicTrack, by contrast, dates back to 1975 and offers a broader range of personal exercise equipment, including its original “skier,” along with exercise bikes, ellipticals, treadmills, and incline trainers. Its products encompass a wider range of features and options, with prices running from less than $1,000 to nearly $4,000, depending on features. Like Peloton, its higher-end equipment includes touchscreens and the availability of digital content.
‘EXERCISE SYSTEM AND METHOD’
It’s at this higher end of the marketplace where the most recent disputes have played out. In May 2020, after the initial burst of interest in home exercise equipment in response to the pandemic, Peloton sued ICON Health and Fitness, owner of NordicTrack, for infringing on Peloton’s “Exercise System and Method,” which is embodied in several patents issued to Peloton between 2015 and 2020 (Peloton v. ICON, 20-cv-0662, U.S. District Court for Delaware, 5/15/20). The patents combine onboard sensors in the equipment that collect data about the user’s activities with a user-controlled display screen that can project both live and asynchronous content. The display then integrates the collected data to create a lifelike “exercise class” or community experience.
Peloton’s suit claims that NordicTrack, which has previously offered prerecorded classes via a touchboard known as iFit, with no mechanism for collecting or comparing performance, incorporated the “System and Method” into a new-generation touchboard called the iFit Leaderboard.
PATENTS AND TRADE SECRETS
The squabble has continued. In October 2020, ICON filed a patent infringement suit (ICON v. Peloton, 20-cv-1386, U.S. District Court for Delaware, 10/15/20) claiming that its original iFit touchboard was protected by “hundreds of patents” that Peloton infringed. ICON noted that Peloton’s CEO met with ICON during Peloton’s startup phase, attempting to get a license to use the ICON technology. ICON refused to license its technology and claimed that “this did not stop Peloton.”
Most recently, and while both of the previous lawsuits were pending, Peloton filed a second suit against ICON claiming theft of trade secrets. Specifically, Peloton is claiming that ICON engaged in a “fraudulent campaign to improperly acquire Peloton’s trade secret advertising plans by soliciting the disclosures from an advertising and production company with which Peloton contracted” (Peloton v. ICON, 20-cv-1535, U.S. District Court for Delaware, 11/16/20). In response, ICON’s attorney asserted that the claims are “baseless” and a distraction from Peloton’s “misappropriation of ICON’s intellectual property.”
This isn’t Peloton’s only IP squabble. Echelon, another equipment manufacturer, has filed a claim with the U.S. Patent and Trademark Office to invalidate two of Peloton’s patents. And, earlier in 2020, Peloton settled a lawsuit brought by a music publishers group, which claimed that Peloton was using unlicensed music in its exercise videos and classes.
Peloton asserts itself as both an exercise and media company, but in the minds of most of the public, it’s a high-end, high-tech bike and treadmill company. However, the cases involving Peloton illustrate the depths to which IP rights and obligations invade virtually any business or company.
Peloton’s IP challenges, both in asserting its IP rights and in defending IP claims, encompass three of the four major IP areas—copyright, patents, and trade secrets. And I don’t believe I would need to dig very deeply to find trademark issues that Peloton has encountered. I once put together a research assignment involving a restaurant company and had no difficulty identifying copyright, trademark, patent, and other IP issues that the restaurant might face.
The way IP law is currently structured, it takes very little formal or “legal” action to engage with IP. Copyrights exist and are owned when any work is created and fixed; no other formal action is required. Trademarks become protectable when there is an association between the mark and the consumer. Businesses don’t need to create patents, trademarks, or copyrights to use, or potentially misuse, the patents, trademarks, and copyrights of others. As the Peloton cases show, those rights are easily intertwined with all of the businesses’ operations and require as much attention.