“Patents that have been thoroughly examined during prosecution are more likely to withstand validity challenges during IPR. To this end, it might be beneficial for practitioners to work closely with examiners to make sure that close prior art references…are substantively considered during prosecution.”
Peloton Interactive, Inc. is a popular fitness company that offers high-end stationary bikes, treadmills, and online exercise classes. The demand for online exercise classes increased significantly during the pandemic, and so did Peloton’s market cap. With over 4 million members and quarterly revenue over $1 billion, Peloton has become a leader in the online fitness industry. Peloton secured certain patent rights in the United States with respect to online exercise classes during the early years of its development and has continuously expanded its patent portfolio. Its online exercise patents claim methods and systems that enable users to virtually compare with and compete against other users. This article explores the prosecution history of these patents, their current challenges under inter partes review (IPR) proceedings, and possible future developments.
The Evolution of Peloton’s Online Exercise Patents
Peloton has two patent families related to online exercise classes, both named “Exercise System and Method.” One patent family relates to online cycling classes (9,174,085; 9,233,276; 9,861,855; 10,022,590; 10,322,315; 10,486,026; and 10,639,521), and the other relates to online treadmill classes (10,864,406 and 10,974,094). This article focuses on the patents on remote cycling classes which appear to be Peloton’s most asserted and litigated patents.
The ‘085 patent is the first patent issued in this patent family, and later patents in this patent family gradually broadened the claim scope and/or added more features. During prosecution of the ‘085 patent, the claims were amended to include limitations that significantly narrowed the claim scope. To infringe this patent, a competitor must perform a series of steps, including at least the following: 1) providing information about available live and archived cycling classes, 2) providing an interface that includes a display screen associated with a stationary bike, 3) receiving a selection from a user, 4) sending a selected cycling class to a computer associated with the stationary bike for display on the display screen associated with the stationary bike, 5) detecting multiple performance parameters from at least two users’ stationary bikes at the same point in the selected cycling class, and 6) displaying a performance parameter from the two users on the display screen associated with a user’s stationary bike, such that the two users’ performance parameter at the same point in the selected cycling class can be compared with each other.
Due to the narrowed claim scope (e.g., on the display screen associated with a user’s stationary bike), the ‘085 can be circumvented, for example, by displaying users’ performance parameters on a large screen in the instructor’s studio, or by displaying the cycling class on a TV screen in a user’s living room. To close these loopholes, the ‘276 patent broadens the claim scope to recite that the cycling classes and the performance parameters are displayed on a display screen at a user’s remote location.
Another issue with the ‘085 patent is that the patent is only infringed when a competitor both makes the bikes and offers remote cycling classes. A bike manufacturer alone would not infringe this patent because it does not provide information about the cycling classes. An online cycling class provider alone would not infringe because it does not provide an interface or detect the performance parameters. An entity can be held responsible for others’ performance of method steps, but only under limited circumstances (e.g., the entity directs or controls others’ performance, or where the actors form a joint enterprise). See Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020, 1022 (Fed. Cir. 2015).
The ‘855 patent tries to solve this problem by claiming a method for displaying live and archived cycling classes, including displaying information about available live and archived cycling classes and displaying performance parameters on a display screen at a user’s location. The ‘590 patent solves the problem by claiming a system having a user interface to display live and archived cycling class content, sensors to detect a user’s activity and to generate performance parameters, and a local processing system to perform similar functions as described in the method claims in the ‘855 patent.
The ‘315 further broadens the claim scope to cover not only cycling classes, but also other exercise classes. In the ‘026 patent, a ranked list is dynamically updated based on performance parameters of previous users which are synchronized with a user’s performance parameter. Patent No. 10,639,521 includes additional claim limitations that each of the available archived exercise classes comprise content for an entire exercise class, and that performance parameters displayed on the dynamically updated ranked list are synchronized to one another.
Challenges to Peloton’s Online Exercise Patents
Currently, three of Peloton’s online exercise patents (No. 10,022,590; 10,322,315; 10,486,026) are being challenged by Echelon Fitness Multimedia, LLC in IPR proceedings (IPR2020-01186, IPR2020-01187, and IPR2020-01541). These challenges are as a result of Peloton’s lawsuit asserting these three patents and patent No. 10,639,521 against Echelon.
In one of the IPR proceedings (IPR2020-01541), Peloton argued that the Patent Trial and Appeal Board (PTAB) should exercise discretion to deny institution because the Examiner already considered substantially the same prior art during prosecution. The PTAB disagreed and found that the prior art references cited in the IPR proceeding provided additional detail. The PTAB also found that Echelon has adequately shown that the Examiner overlooked teachings of a prior art reference and erred in a manner material to patentability. Although most of the prior art references relied upon in the IPR were identified on an Information Disclosure Statement (IDS) during prosecution and thus known to the Examiner, the Examiner allowed the application without substantively discussing the relevance of these prior art references.
In early 2021, the PTAB instituted trials for all three IPR petitions, finding that Echelon has demonstrated a reasonable likelihood of prevailing.
Possible Future Developments
Although the PTAB has instituted IPR proceedings against three of Peloton’s patents, it does not necessarily mean that they will be invalidated. Previously, Flywheel Sports, Inc. challenged Peloton’s patents (9,174,085; 9,233,276; 9,861,855; and 10,322,315) in IPR proceedings (IPR2019-00294, IPR2019-00295, IPR2019-00564, and IPR2019-01411). Three petitions were instituted. Before the PTAB could reach a decision on the fourth petition (IPR2019-01411), the parties settled with FlyWheel admitting to infringement and agreeing to terminate its online cycling classes. In the end, Peloton effectively acquired FlyWheel’s online class business, since FlyWheel’s customers could trade in their Flywheel Home Bike for a refurbished Peloton Bike and convert to Peloton’s class subscription.
This time, it is uncertain whether Echelon would settle like FlyWheel did. If Echelon wants to settle, it could certainly use the instituted IPR trials as leverage in settlement negotiations. It appears that it is in Peloton’s best interest to settle, given the PTAB’s unfavorable opinion in the IPR institution decisions. Moreover, the outcome of these IPR proceedings would likely impact Peloton’s other litigation efforts. In May 2020, Peloton asserted the ‘026 and ‘521 patents against ICON Health & Fitness, Inc. Peloton is also being sued for patent infringement by ICON, Mad Dogg Athletics, Inc., and Dish Technologies LLC.
If Echelon does not wish to settle, it is possible that these three patents could become invalidated. Fortunately, Peloton has continuation applications (16/866,499; 16/902,195; 17/220,839; 17/220,867; and 17/220,876) pending in this patent family. Peloton also has other patents (e.g., No. 10,898,760 claiming a method of coordinating workouts across remote exercise machines) and new applications (e.g., 16/188,172; 16/874,453; 16/217,548; 16/510,619; 16/251,023; 16/359,969; and 16/359,972) that may result in other patents. In addition, Peloton has recently acquired Precor Inc. and presumably acquired hundreds of patents owned by Precor that could be used for both offensive and defensive purposes.
Promoting Thorough Examination During Prosecution
To succeed in today’s highly competitive and unpredictable business world, it is critical to have a high-quality and diversified patent portfolio. Patents that have been thoroughly examined during prosecution are more likely to withstand validity challenges during IPR. To this end, it might be beneficial for practitioners to work closely with examiners to make sure that close prior art references, especially those that could potentially invalidate the patent, are substantively considered during prosecution. For example, practitioners can help direct the examiner’s attention to those references during an examiner interview or by discussing them in an office action response, which could be more effective than simply citing the references in a lengthy IDS.