Omni Legal Group

A TALE OF TWO AT-HOME EXERCISE BIKES
Indoor cycling has become one of the most competitor spaces in the fitness market, with many popular studios vying for consumers’ attention. Companies such as SoulCycle, which is now international, and Los Angeles-based Cycle House offer cycling classes where an instructor and participants exercise on stationary bikes with the instructor and music combining to motivate the riders. Peloton, on the other hand, offers a fitness experience unique and disparate from that previously offered by indoor cycling studios and gyms. Launched in 2012, Peloton is a high-tech fitness company known for its popular and trending home-fitness bike. In merely six years, the company has delivered more than 250,000 bikes and maintains over 600,000 active riders.

To adequately protect its novel technology, Peloton applied for and was granted two patents, United States Patent Nos. 9,174,085 and 9,233,276, for an “exercise system and method.” The disclosure delineates the limitations of class-based fitness experiences. In particular, such classes are only accessible at specific times and locations, which may not be convenient or available to some consumers. Moreover, such studios have limited space with classes often selling out even for those users in a location convenient to the studio. As such, Peloton Interactive, Inc. invented and developed an at-home fitness bike which incorporates a tablet screen to permit the user to watch the instructor, view their statistics, and compare their performance to other riders.

In November 2017, Flywheel Sports, Inc. launched its FLY Anywhere bike, also designed for at-home use. Flywheel launched in 2010 and has historically offered studio-based cycling workouts. Since its inception in New York, Flywheel now has 43 studios across the nation. Peloton filed a lawsuit in the United States District Court for the Eastern District of Texas in Marshall, Texas against Flywheel accusing it of offering a copycat version of its home-fitness bicycle. Peloton claims Flywheel’s FLY Anywhere bike uses Peloton’s technology to stream live and on-demand classes, track the rider’s performance, and compare the rider’s statistics to other riders. The Peloton bike starts at $2,245 and all of its machines come standard with a screen. Flywheel’s bike, on the other hand, runs around $1,699 and consumers must pay extra to have a screen included on the bike itself. Both machines require users to pay extra to subscribe to the classes.

Interestingly, in early 2012, Peloton and Flywheel engaged in discussions regarding a potential partnership. Per these discussions, Peloton was to be the interactive arm of Flywheel, focused on developing the at-home cycling business utilizing Flywheel’s instructor-led, studio-class content. Meanwhile, Flywheel would continue to run its existing studio cycling businesses. While Flywheel was initially interested in the partnership, the deal ultimately fell through.

Other than these discussions in 2012, in its complaint, Peloton claims that it had another run-in with Flywheel, albeit unknowingly. Three months before Flywheel’s new bike was announced, a Flywheel investor, Michael Milken, approached the CEO of Peloton, John Foley when Foley, Milken, and other chief executives attended a private investment conference. Milken allegedly pressed Foley for details about Peloton’s technology and business strategy, presenting himself as a potential investor. Milken, however, did not disclose the salient fact that he was a major investor in Flywheel. Instead, according to the complaint, Milken misappropriated this information to facilitate the development, sales, and marketing of Flywheel’s infringing bike.

In its complaint, Peloton details the hard-won journey of the attempt to build the first Peloton bike. The company notes the many technical and hardware challenges and the “dozens of investors” who refused to invest. Peloton explains that prior to its machines, no existing exercise bike had all the features sought after by Peloton, nor were there any existing products that would communicate with bike hardware, or track and analyze rider performance. The complaint further alleges Peloton was the only company to “think beyond the studio experience.” The complaint concludes “[y]et through research, ingenuity, and persistence, Peloton pushed on, working with two core manufacturing partners to design and produce the necessary high-tech, sleek bikes and tablets.”

In response to these allegations, a spokesperson for Flywheel claims this lawsuit is “a classic example of a big business trying to intimidate a competitor out of the marketplace.” Moreover, the spokesperson emphasized the fact that Flywheel launched its “unique and differentiated indoor cycling offering that utilizes proprietary on bike FLY Tech tracking technology and signature features,” such as scoreboards and individual personalized performance trackers eight years ago. By comparison, Peloton only introduced its home indoor cycling experience four years ago, employing many of the features first pioneered by Flywheel.

Ironically, before Flywheel announced any intention to release an at-home bike, Foley boasted that he had no concern regarding competition in the stationary cycling space from companies like Flywheel. Rather, the CEO posited his concern would be targeted at technology companies, like Amazon, coming into the space “versus a content company trying to figure out what Peloton does.” In an interview, the CEO stated that brands like SoulCycle and Flywheel were content companies that are known national brands for their local studios.

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