Pedal Recall is Latest Legal Trouble for Peloton
The Peloton indoor cycling bike has become more than just a home workout, it has become something of a status symbol. But despite the company’s explosive growth since founding in 2012 and a loyal following of millions, Peloton has faced a number of legal challenges. Most recently, the company’s announced a recall of nearly 27,000 of its bike pedals. That same day, a patent infringement lawsuit was filed against Peloton by Icon Health and Fitness, the maker of a competing exercise bike.
This is not Peloton’s first lawsuit; last year a number of music publishers filed a complaint seeking more than $150 million in damages for Peloton’s unauthorized use of unlicensed songs. As at-home workouts are experiencing a surge in popularity due to the COVID-19 shutdowns, whether Peloton’s legal troubles will affect its sales or growth remains unknown.
The Rise of Peloton
Since its founding in 2012, Peloton has garnered a devoted following, despite a retail price of nearly $2,000, plus a $39 monthly subscription fee for live and on-demand classes. With over one million monthly subscribers and 3.1 million total members, Peloton’s stock is up more than 380% to date. Sales for the fitness company have especially ballooned during the pandemic, as people have sought out home workout solutions. Peloton’s last quarter earnings reported 113% growth from a year earlier.
Peloton’s Pedal Recall
On October 15, 2020, Peloton issued a voluntary recall of a version of its PR70P clip-in bike pedals. The bike pedals were issued on 27,000 bikes sold between July 2013 and May 2016. The recall was issued after Peloton received 120 reports of the pedal’s axles breaking and 16 reports of injuries sustained while using the bike. Peloton recommends that customers annually purchase new bike pedals, so the recall impacts customers who are using their bike’s original pedals. Peloton customers have complained that they have waited months to receive replacement pedals, and with limited in-home repair services due to COVID-19, customers have experienced issues with fixing the bikes on their own. Peloton has offered free replacement pedals to those affected by the recall and has warned that they should cease using their bikes until they’re able to replace the pedals.
To date, no lawsuits have been filed against Peloton concerning the pedal recall. However, the company will likely find itself susceptible to products liability claims if it can be proven that the pedals were defectively designed or manufactured. If the company’s recent statement to CNBC is any indicator, it may be likely that Peloton will partially shift blame to customers for not changing their pedals annually. As the company stated, “This recall only affects members who still have their out-of-warranty original pedals on the affected bikes sold in the specific time period.”
NordicTrack Patent Infringement Claims
At the same time, Icon Health and Fitness, the maker of the NordicTrack brand cycling bike, has claimed that two new features of Peloton’s Bike+ were “developed and used by Icon Health and Fitness well before Peloton.” Icon alleges that it owns a patent on a feature that automatically changes the bike’s resistance during a workout. Icon further claims it has a patent pending on a swiveling touchscreen display. Both features are used on Icon’s bike and treadmill products.
The lawsuit alleges that Peloton’s CEO met with Icon executives in 2013, prior to releasing their first version of the Peloton bike, seeking to use Icon’s patents. The request was denied and the two companies entered into a settlement agreement concerning a previously filed infringement lawsuit in 2017. Icon alleges in the current lawsuit that, “As the fitness industry’s leading innovator, Icon is unfortunately accustomed to having companies copy its technology” and states that “some companies, like Peloton, have built (at least in part) entire businesses on the back of Icon’s patented technology.”
Due to the nature of patent lawsuits, which will carefully compare the two competing products, experts will be needed to determine how the specific technical and mechanical designs of NordicTrack and Peloton bikes compare, and whether any comparison rises to the level of a patent infringement.
Previous Music Licensing Lawsuits
Peloton, however, may just be careless when it comes to the use of others’ products and intellectual property. In 2019, a $150 million lawsuit was filed by nine music publishers for Peloton’s use of thousands of unlicensed songs from artists such as Rihanna, Justin Timberlake, Lady Gaga, Bruno Mars, and Ed Sheeran. Since the workouts offered on Peloton center around custom playlists, the lawsuit potentially would have changed one of its major selling points. The lawsuit has since been settled, with the National Music Publishers’ Association entering into an agreement described as a “joint collaboration agreement to work together to further optimize Peloton’s music-licensing systems and processes.” The financial terms of the agreement remain undisclosed.
Experts have opined that the infringement was so brazen that it had to be the result of legal negligence. “I am baffled by it,” music attorney, Kamal Moo said. “Usually, companies know that when you use outside content for anything, you need a license. You would think an executive or legal counsel would have brought it up and said, ‘We have already licensed these compositions, but we can’t use the other ones.’”
Thus far, Peloton has not suffered any negative consequences as a result of these legal issues, and is in fact, experiencing a shipping problem due to such a high demand for its bikes. But this will be a company to watch, should any past legal woes resurface as Peloton continues its meteoric growth.