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Lululemon Wins a Big Battle Against Peloton

The connected bike company keeps getting bad news as it struggles with demand.

Peloton  (PTON) - Get Free Report, once the darling of those trapped at home by the pandemic and determined to stay active, has not had a great time of it since vaccines hit the market and masks started coming off.

It was inevitable that the company would see a dip in sales as people who previously were very much trapped at home started to feel comfortable going out and socializing again. And it suffered a new blow after it reported its Q1 earnings in November 2021, leading to a 34% drop in its stock price.

Meantime, Peloton came up against a variety of PR nightmares that surely didn't help its cause. In 2019, a commercial featuring a husband gifting his wife a Peloton rubbed people the wrong way. A six-year-old child was fatally injured on a Peloton treadmill in 2021, leading to a product recall. 

And who could forget that "Sex & The City" fans had to watch their beloved Mr. Big have a heart attack during his Peloton workout?

At the beginning of 2022, Peloton was limping -- and understandably so. On top of the big drop in sales due to folks staying home less, the company was accused of covering up rust on its bikes and shipping them out to customers anyway. Everything taken together, Peloton needed to make some major moves to renew customer belief in its products. 

Peloton coped by slashing both jobs and prices, then boosting the price of its all-access membership in June. But the company's stock still has yet to recover -- and now, Peloton has another black mark on its reputation.

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Peloton Rival Files a Lawsuit

Peloton competitor Lululemon  (LULU) - Get Free Report was none too pleased when Peloton launched its athleisure line, Peloton Apparel, in September 2021. A few months later, Lululemon sent a cease and desist letter to Peloton regarding five items that it claimed infringed upon its design patents, specifically its Branded Strappy Bra, Cadent Laser Dot Bra and Legging, High Neck Bra, Cadent Peak Bra, and the Peloton Branded One Lux Tight.

This claim is complicated by Peloton's history with Lululemon. Back in 2016 the two worked together on co-branded apparel, but then Peloton decided to break off and make its own athleisure wear in 2021 -- and that's where the trouble began.

Peloton reacted to the cease and desist by filing a declaratory judgment action with the Southern District of New York on November 21, 2021, requesting that the court provide a declaration that Peloton did not infringe upon Lululemon's patents.

On November 29, Lululemon filed a lawsuit against Peloton in U.S. District Court for the Central District of California, formally claiming that the new Peloton Apparel collection featured multiple stolen designs from its clothing line, specifically its Branded Strappy Bra, Cadent Laser Dot Bra and Legging, High Neck Bra, Cadent Peak Bra, and the Peloton Branded One Lux Tight.

And while the battle looked as if it could become an ugly one, the two companies have decided to come to a settlement. 

“The parties have negotiated a mutually agreeable settlement, and are pleased the matters could be resolved amicably, resulting in dismissal of the pending litigation between them,” a Peloton spokesperson told Retail Dive

“Without admissions of any kind, in an effort to resolve the dispute, Peloton has agreed to phase out certain designs identified in the complaint by Lululemon.”

The terms of the settlement were not disclosed.