As Peloton gets its financial ducks in a row, it appears the company is easing up on its patent disputes. Today, Peloton and iFit — which owns rival NordicTrack — announced that they’ve settled all pending litigation and that “all pending actions between the companies will be dismissed.”
The announcement itself was brief, offering little detail. As part of the settlement, iFit has agreed to remove some on-demand leaderboard tech from its devices, while Peloton will license “certain iFit patents relating to remote control technology.” This is somewhat a reversal in attitude from where Peloton was roughly six months ago.
Back in November — just as Peloton’s stock woes were beginning to take hold — the company reportedly filed lawsuits against rivals Echelon and iFit. At the time, Peloton alleged that the companies were getting “free rides” off its innovations, particularly with regard to its leaderboards. However, in January, Echelon managed to get a win when it convinced the US Patent and Trademark Office that two of Peloton’s streaming patents shouldn’t have been patentable in the first place.
In the past, Peloton hasn’t been afraid to get into patent battles. It was a big part of its strategy in dealing with rivals and imitators. According to a recent Echelon counterclaim, Peloton’s spent a lot of money on marketing, undercutting prices, and operating at a loss to “gain and maintain market share and stifle competition.” Echelon also alleged in the filing that Peloton’s cash reserves allowed it to “fund serial baseless litigation against competitors in order to raise their costs, and intimidate and bully them out of the market.”
Notably, the Echelon filing also attributed Peloton’s litigious 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 deem Peloton’s innovations as not that innovative after all. That could potentially leave Peloton without legal protections for its core technologies. Patent wars are also notoriously expensive, and, in its most recent Q3 earnings, new Peloton CEO Barry McCarthy described the company’s cash flow as “thinly capitalized.” So while iFit is giving up “some” but not all of its leaderboard tech, perhaps the takeaway here is that McCarthy would rather give up expensive legal battles than spend millions burying competitors in paperwork.
