Fighting Fit-ness - lululemon v Peloton

As we hit the summer months, fitness regimes are likely to be gearing up – and people may be minded to swap in their leggings for a pair of lululemon shorts or sign up to a Peloton class (or two). However, amidst the rising temperatures, these two fitness companies are also getting heat from each other on the intellectual property front.

Lululemon has been the athletic apparel company of choice for many since it was founded in 1998.

Peloton launched in 2012 and has quickly become one of the world’s leading interactive fitness platforms.

In 2016, Peloton entered into an agreement with lululemon to sell co-branded products. Under the arrangement, Peloton would purchase lululemon’s products wholesale and apply the Peloton branding to the products. Peloton would then sell the co-branded products. In 2021, Peloton decided to end the partnership and develop its own branded fitness apparel. At the time the partnership ended, Peloton claimed it was amicable but now the situation seems anything but.

Out of Alignment

After ending the agreement with lululemon, Peloton launched its own private label apparel brand, Peloton Apparel, in September 2021.

In mid-November 2021, lululemon sent Peloton a cease-and-desist letter alleging that five of the Peloton Apparel products infringed its United States design patents, and that one of the Peloton Apparel products infringed its US trade dress rights. On that basis, lululemon demanded that Peloton stopped selling the relevant products.

In response, on 24 November 2021, Peloton brought proceedings in the US courts, seeking a declaratory judgment that (i) its products do not infringe lululemon’s design patents and trade dress; and (ii) lululemon’s patents are invalid on the basis that the basic features of the patents were already known in the prior art. This is not the first time Peloton has sought to challenge the intellectual property rights of a fellow fitness company – as we discuss here.

On 29 November, some 5 days later, lululemon brought its own action against Peloton, along the lines set out in its cease-and-desist letter. lululemon alleged that the following five Peloton Apparel products infringed its patents (details of which are included next to the images of the Peloton products):

1. Strappy Bra

2. High Neck Bra 3. Cadent Peak Bra

4. Cadent Laser Dot Bra 5. Cadent Laser Dot Leggings

In addition, it alleged that Peloton’s One Lux Tight, infringes its trade dress as it is a copycat of the lululemon Align leggings.

The US position on designs

US design patents protect new, original and ornamental designs for an article of manufacture. They protect the appearance of a product, not its underlying functionality (which would be covered by utility patents).

To successfully register a design patent in the US, an application is made to the United States Patent and Trade Mark Office (USPTO). The application is reviewed by an examiner who checks that it complies with the relevant statutory requirements, as well as searching for prior art to ensure that the design is novel and non- obvious. A US design patent affords the owner up to 15 years of protection. It protects against the unauthorised use of the design (or a highly similar design that an “ordinary observer” would deem to be the same design) on any manufactured article and prohibits dealings in infringing articles.

The UK position on designs

We will have to wait and see how these disputes play out in the US courts but they pose interesting questions as to what would happen if they were raised in the UK courts.

While the process for obtaining a US design patent is similar to obtaining a patent in the UK, UK patents will not be granted for the aesthetic design of a product – but the same could be protected as a registered design.

UK registered designs protect new, 3D or 2D designs which have individual character. A design means the appearance of a product, resulting from the features of the lines, contours, colours, shape, texture or materials of the product or its ornamentation.

Obtaining a registered design grants the holder a 25-year monopoly right. The process of getting a UK registered design is significantly shorter and cheaper than obtaining a patent, as it involves no substantive examination of the design (unlike patents, which are subject to very close scrutiny by patent examiners).

If lululemon had registered the products in question as designs in the UK and brought an action on that basis, it would have to show that Peloton infringed its exclusive right to use the design by (i) using an identical design; or (ii) a design which does not produce a different overall impression on the informed user. Infringement is therefore not limited to the exact design as registered. This would likely assist lululemon considering the stricter US interpretation of the scope of patent protection which imposes a high threshold of similarity.

A party who successfully argues design right infringement in the UK courts is entitled to:

• Damages, or alternatively an account of the profits;
• an injunction (interdict in Scotland) preventing further infringement; and
• an order for the delivery up or destruction of the infringing goods.

Invalidity of a registered design is often sought as a counterclaim to infringement proceedings (a litigation tactic which Peloton also deployed in the US proceedings). In the UK, a design registered after 9 December 2001 may be invalidated on the basis that:

• it does not meet the requirements of a “design” under the Registered Designs Act 1949;
• it is contrary to public policy or morality; or
• it was not new and/or lacked individual character when compared with an earlier design at the time it was applied for.

Similar to the right available in the US courts, and subject to meeting certain criteria, it is also possible to seek a declaratory judgment from the Scottish and English courts (albeit the remedy is discretionary) as to whether a right does or does not exist, -as Peloton is seeking to do in the US court.

Trade dress

Trade dress is the overall appearance of a product or service. This includes packaging, design or other visual features.

The US provides for a specific cause of action for ‘trade dress infringement’. There are two key requirements for eligibility:

1) The applicant must prove that the ‘trade dress’ they are seeking to protect is not functional, i.e. that the design isn’t dictated by the practical or technical function of the product.

2) Second, the applicant must prove that the design is distinctive, i.e. that US consumers would recognise the product or packaging design as the applicant’s design based on its shape/appearance alone.

US ‘trade dress’ can be both a registered an unregistered right, with registration conferring the added benefit of giving a presumption of validity and acting as a deterrent to third parties. Either way, the right is infringed by another company using trade dress similar enough to cause a likelihood of confusion in the eyes of ordinary consumers.

By contrast, an action cannot be raised in the UK for “trade dress” infringement. Instead, an action would generally seek to enforce the IP rights which make up the components of trade dress. In addition to registered rights such as trade marks and designs, rights may also subsist under the doctrine of passing off which protects unregistered brand “goodwill”. Unlike US trade dress, the right to claim for passing off is purely a common law right that is not capable of registration, but in other respects they have many similarities.

A successful passing off claim requires proof of:

• goodwill or reputation attached to the goods or services;
• a misrepresentation that could or is likely to lead the public to believe that the goods or services offered by the infringer are the goods or services of the claimant, and
• damage, such as financial loss or damage to goodwill.

Getting in shape

As the lululemon / Peloton matter shows, even those at the top of their game can find themselves having to pull their weight in court. Some top tips for brands to avoid finding themselves in the same scenario are:

1. Have an agile strategy for IP protection – fashion, in particular, is fast-paced and constantly evolving. It is important that brands have a strategy for IP protection which moves with the times, including registering those IP rights which are key to the business operation (or indeed relying on unregistered rights where they provide adequate protection at lower cost), and for enforcing these rights.
2. Pre-empt the aftermath of a commercial agreement coming to an end – it is likely that part of the sting in this matter was that Peloton launched its own range of sportswear so soon after ending its agreement with lululemon. In scenarios such as this, parties should consider including restrictive covenants in agreements, within the confines of competition law.
3. Choose jurisdiction wisely – Peloton commenced proceedings in New York, while lululemon opted to take action in California, for the perceived benefits to each of their cases. When deciding where to raise an action it is important that parties consider where the best forum for their dispute is (while complying with the rules on jurisdiction). In the UK, parties should give thought as to whether their needs would be best served by the courts of England (which is the ‘default’ choice for many UK businesses) or by the often-overlooked Scottish courts, which offer a rights-holder friendly and cost-effective forum which is very well set up for the enforcement of IP rights (as further set out in our previous post here).