Wednesday, June 29, 2022

Peloton and NordicTrack owner iFit make peace over patent disputes

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As Peloton sorts out its financial troubles, it appears the company is easing its patent litigation. Today, Peloton and iFit – which owns rival NordicTrack – announced that they have settled all pending lawsuits and that “all pending actions between the companies will be dismissed.”

The Announcement itself was brief and offered few details. As part of the settlement, iFit has agreed to remove certain on-demand leaderboard technology from its devices, while Peloton will license “certain iFit patents related to remote control technology.” This is somewhat of a reversal of attitude from where Peloton was about six months ago.

In November — just as Peloton’s stock troubles began to mount — the company reportedly filed lawsuits against rivals Echelon and iFit. At the time, Peloton claimed that the companies were getting “free rides” on their innovations, especially regarding their leaderboards. However, in January, Echelon managed to win when it convinced the US Patent and Trademark Office that two of Peloton’s streaming patents should have been unpatentable in the first place.

Peloton has filed several patent lawsuits, alleging rivals get a “free ride” from its leaderboard and streaming technology.
Photo by Amelia Holowaty Krales / The Verge

In the past, Peloton was not afraid to get into patent battles. It was a big part of his strategy in dealing with rivals and imitators. According to a recent Echelon counter-claim, Peloton has spent a lot of money on marketing, undercutting and loss-making to “gain and maintain market share and suppress competition.” Echelon also claimed in the filing that Peloton’s cash reserves allowed it to “fund serious baseless lawsuits against competitors to increase their costs, intimidate and bully them out of the market.”

Notably, the Echelon filing also attributed Peloton’s disputed strategy to former CEO John Foley, who stepped down in February. Foley was heavily criticized at the time for leading the company astray.

Patent battles are risky, especially if courts don’t find Peloton’s innovations that innovative after all. That could potentially leave Peloton without legal protections for its core technologies. Patent Wars are also: notoriously expensive, and in his most recent quarterly earnings report, Peloton’s new CEO, Barry McCarthy, described the company’s cash flow as “thin capitalized.” So while iFit is giving up “some but not all” of its leaderboard technology, the conclusion here may be that McCarthy would rather give up expensive legal battles than spend millions burying competitors in paperwork.

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