Peleton Goes After Competitors Riding Its Coattails

my first time Peloton writers. Keep it up, Polton. You don't have to be into fitness trends to have heard about Peloton, the New York based company founded in sales an at home spin bike with a hefty price tag of two thousand two dollars plus a monthly subscription charge of thirty nine dollars for its interactive, live and recorded workouts.

Peloton relies heavily on its patents, trademark, brand, and use of copyrighted material to justify those high prices and to distinguish itself from competitors, and so it's involved in a growing list of intellectual property battles. It's defending its turf in court with a multi pronged approach. The company sued Echelon in October for allegedly ripping off its patents and trade dress after suing Flywheel for patent infringement last year.

Joining me is Susan Scaffeiti, professor at Fornham Law School and director of the Fashion Law Institute. So, Susan, do the claims against Echelon mirror the claims against Flywheel very similar? Of course, we're looking at a suite of intellectual property and related claims going back to most importantly Peloton's patents having to do with incorporating a screen with a bike, but also using the software necessary to make sure that experiences are archived and the data can move back and forth.

And in the case of Peloton, we're also dealing with a trademark claim having to do with the somewhat sound alike names and also the use of the stylized P for Peloton and the stylized E for Echelon, both in a red and white copper way. I was surprised to learn that Peloton did not invent the computerized exercise equipment that lets users compete remotely, or the touch screen or the on demand programming. So what is patentable about what

Peloton has done? Junette question goes to the very heart of the case is what Peloton has done sufficient to not only be patentable, which the Patent Office ultimately said yes, but to survive a challenge to the patent on the basis of obviousness, and what Peloton is claiming and the patent office agreed is that Peloton had to engage in some technological advances in order to archive information and to allow the back and forth flow of that information between

the company and the user, so you could track your progress over time, as well as tracking against other competitors in the studio in terms of live classes or the parallel to in the studio in terms of live classes, or against everyone who could possibly dial into an on demand class. So there was some additional technology that had to be developed in order to make Peloton work. Flywheel struck back against Peloton's lawsuit and challenge Peloton's patents, So

can you tell us what happened there? Apparently the US Patent and Trademark Office is going to take a second look at the patents they are and again this is really on the basis of whether or not this is simply obvious, and whether or not the quote unquote prior art in the patent, that is, the disclosure of what had been done previously was complete, insufficient, and how significant is it that the Patent and Trademark office is taking

a second look at these patents? Well, a patent, once issued, is still a prima fascia valid, but the fact that the Patent trademark office is taking a second look is certainly something that is going to give some comfort to both Flywheel and Echelon. What kind of decision can they make. Can they say these patents just aren't valid and then out the window goes Peloton's patents, or is there then another review. In theory the patents could be invalidated. But

of course this is all appealable. But in the meantime, of course, Peloton is making a strong argument that it has not only its registered trademark that is somewhat similar to for example, Echelon, but also has developed trade dress

around it's a product. And so the appearance of the bike itself, the black and the red color way, the appearance of the screen, all of these things work together to create an image of Peloton that is recognizable to the consumer, and that it believes that in particular Echelon has copied. So Peloton is not relying exclusively on its patents but also on trademark law. So Peloton is then

taking a multi pronged approach to this. It is Peloton is trying to create a suite of intellectual property rights. It will protect what it has developed and marketed successfully so far. Some say that the strength of Peloton is not so much the patents, but it's the marketing. Well. Marketing and intellectual property protection are not necessarily mutually exclusive, right.

Once you have intellectual property without great marketing, it can never go anywhere, So usually these things that work in tandem. The claim that this is nothing but marketing around an empty core is perhaps a little extreme. In this case. There is certainly something at least to the trademarks, and very possibly to the patents as well. We just need a little bit more information on what was truly non

obvious and truly innovative about those patents. The thing about obviousness is that it's easy to say in retrospect that, sure, anyone could have thought of putting a screen together with a bike in this particular way and making it work. And certainly, as you noted, other companies did integrate screens and exercise equipment in the past. The question is, is the way that Peloton has done it is Peloton's method to use the technical term different enough to warrant protection,

and that's what we're waiting to see. In the meantime, Peloton is wise to also focus on its trademarks and continue to move forward with its marketing and to try to maintain its position in the marketplace. Although, as you know, since Peloton's i p O in September, its numbers have been falling. So would you say this is an uphill battle for Peloton or not so much so? What it

is is a substantial expense and risk for Peloton. In fact, it's a risk that was even disclosed in its securities filings prior to the i p O. Peloton noted that it had substantial intellectual property but was likely to have to spend quite a bit to protect that intellectual property against challenges and also to enforce that intellectual property against others.

So Peloton knew going into its i p O that it was going to have challenges the surrounding of the its intellectual property and the way that it has tried to use that intellectual property to buoy its value. Thanks Susan. That's Susan Scaffitia, professor at Fordham Law School and director of the Fashion Law Institute. Peloton is also facing a lawsuit from the music industry, which says the company is using copyrighted music without permission. Thanks for listening to the

Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud, and on bloomberg dot com slash podcast. I'm June Grosso. This is Bloomberg