What happens when companies move from being partners to becoming rivals? It’s an important question at a time when brand collaborations are all the rage.
We’re seeing this play out now with two of the hottest sports brands on the market: exercise equipment giant Peloton and activewear juggernaut Lululemon. For five years, these companies teamed up to create co-branded workout apparel. But now, they’re engaged in a bitter legal battle, with Lululemon accusing Peloton of copying its designs, and Peloton fighting back, saying its designs are original.
There are plenty of subtle arguments in the lawsuits filed by both parties. But more broadly, it’s about how Lululemon and Peloton have evolved into competitors as they each seek out new revenue streams. Peloton has started creating apparel and Lululemon has started selling exercise equipment through its acquisition of Mirror. These lawsuits appears to be the brands’ attempt to define their turf and prevent the other from impinging on it.
“It seems like what Lululemon is really upset about is that they had a former partner who is now a competitor,” says Sarah Burstein, a professor of law at the University of Oklahoma, who specializes in design patents. “That’s what so many of these cases come down to: They don’t want to compete.”
The legal tussle
Peloton and Lululemon first began collaborating in 2016 on workout apparel that featured both brands’ logos. The deal made sense. It allowed Peloton to sell high-quality clothing designed by an expert activewear maker. Meanwhile, it enabled Lululemon to tap into Peloton’s devoted customer base.
The partnership ended this past September, and Peloton began making its own apparel in-house. Lululemon is now making the case that Peloton’s new gear bears too many similarities to Lululemon’s. On November 11, Lululemon sent Peloton a cease-and-desist letter, alleging that five of Peloton’s apparel products—four bras and one pair of leggings—infringe on Lululemon’s design patents and trade dress rights. For example, Lululemon showed an image of Peloton’s “Strappy Bra” next to an image of its patent for a bra with almost identical straps, and of Peloton’s “Cadent Laser Dot Leggings” next to an image of its patent for a legging with almost identical dots cut out by laser.
Lululemon also alleged that Peloton infringes on its trade dress rights for it Align legging—a popular product that generates hundreds of millions of dollars for Lululemon in the U.S. alone. Lululemon said Peloton’s pant is “confusingly similar” to the Align and is sold “to identical customers” through overlapping distribution and marketing channels. Lululemon said that if Peloton didn’t stop selling these alleged copycat products, it would file a copyright infringement lawsuit.
Things have only escalated since then. Peloton didn’t comply with Lululemon’s demands; instead, it preemptively sued Lululemon in federal court on November 24, asking the court to settle the matter by declaring that Peloton hadn’t infringed on Lululemon’s patents or trade dress rights. In its filings, Peloton argues that design elements in its sports bras and leggings are common throughout the market. At one point, Peloton highlighted a bra that Lululemon patented in 2017, contrasting it with a Sweaty Beatty bra that came out in 2015 and had very similar design and functional elements. In other words, Peloton argues that Lululemon’s patents aren’t valid because they’re not particularly unique, and therefore “cannot be infringed upon.”
As expected, Lululemon countersued on November 29. Lululemon claimed that it supplied Peloton with some of its most “innovative and popular” activewear pieces, and that after the co-branding deal ended, Peloton, “did not spend the time, effort, and expense” to create its own original product line. Instead, it sold “knockoffs of Lululemon’s products, claiming them as its own.” Burstein says Lululemon has an uphill battle. Trademark infringement can be hard to prove because it hinges on an average consumer being unable to tell the difference between a Peloton product and a Lululemon product. “Lululemon is arguing that Peloton is ‘passing off’ its products as Lululemon’s,” she says. “When Peloton’s pants have a big ‘P’ on them and they don’t have that distinctive logo on the back of the leggings.”
We’ll have to wait and see whether this lawsuit will go to court or if the parties will settle. Peloton declined to comment for this story. Meanwhile, Shannon Higginson, Lululemon’s SVP, general counsel, and chief compliance officer, says, “We are confident in our position and look forward to properly resolving the case through the courts.”
Burstein notes that legal battles aren’t always just about legal rights. There’s also brand image to consider. By going after each other in such a high-profile case, both parties have to think through how lawsuits like this may affect consumer perception of their brands. Burstein says it’s important for the companies not to look like they’re strong-arming the other. “There’s law, and there is business and PR,” she says. “Part of pursuing these lawsuits has to do with how you’re perceived in the market. You never want to come off as bullying.”
But besides branding concerns, Burstein says losing a legal fight like this in court could have major financial consequences. “Design patent infringement is hard to prove, but the damages are really scary,” she says. “If you win your case, you are entitled to all the profits from the sale of that article.”
One famous example was when Apple sued Samsung for willfully infringing on Apple’s design and utility patents related to the iPhone. In 2012, a jury awarded Apple $1.049 billion in damages and Samsung zero damages in its countersuit.
Still, most lawsuits settle out of court. But if the case does progress in the court system, there could be millions of dollars at stake. “Patent infringement is a very scary weapon to have in your litigation,” says Burstein.