Just hours after it announced it had confidentially filed for an initial public offering, Peloton Interactive suffered a potential setback in its dispute with Flywheel Sports over possible patent infringement.
A review board within the U.S. Patent and Trademark Office has agreed to take a second look at the validity of three Peloton patents after finding that Flywheel has established a “reasonable likelihood” of winning its argument that the patents cover old ideas. The Patent Trial and Appeal Board issued its orders Wednesday.
A victory at the review board could be key to the legal tussle between the two companies. Peloton sued Flywheel last September claiming Flywheel copied its at-home bike technology and infringed its patents. The case, filed in a federal court in Texas known for being friendly to patent owners, is ongoing.
Companies accused of patent-infringement often file petitions with the review board, which works more quickly than district court. It’s also been described as a “death squad” because of a high rate of invalidity rulings, though recent rule changes at the agency could lower Flywheel’s chance of success.
The review board will issue its final decisions in about a year. Flywheel can ask the judge in Texas to put Peloton’s lawsuit on hold until the review is completed. He’s already rejected Flywheel’s request to have the case transferred to a court in New York.
A spokeswoman for Peloton declined to comment, citing the quiet period before its IPO. A Flywheel spokesman said the company was “pleased” with the board’s decision to review the patents.
New York-based Peloton, founded in 2012, sells an at-home spin bike for a lofty price tag of more than $2,000, plus a monthly subscription of $40. Flywheel, also based in New York, has focused on in-person classes, building out a network of brick-and-mortar studios and charging about $30 per class. Then, in late 2017, Flywheel launched its own at-home bike. Soon after, Peloton filed its initial lawsuit, alleging that Flywheel was copying its patented technology with the home exercise product.
The original lawsuit says that “rather than innovating and investing, as Peloton had, Flywheel infringed the Peloton Patents by creating a copycat of the Peloton Bike experience called the ‘FLY Anywhere’ that, among other things, detects, synchronizes, and compares the ride metrics of remote users on a graphical user interface.”
Flywheel’s bike has a similar cost structure. The basic model starts at $1,699 before tax, delivery, and a $39-a-month-subscription. In April, Flywheel was taken over by one of its lenders, Kennedy Lewis Investment Management, a New York-based investment firm. The firm is said to be gauging interest from potential buyers.
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