Lululemon and Peloton are fighting about more than lookalike sports bras and yoga pants in their newly-initiated legal clash. Peloton apparel, which allegedly infringes Lululemon design patents and trade dress, is at the heart of the declaratory judgment (“DJ”) action that the exercise bike-maker lodged in a New York federal court and the infringement complaint that Lululemon filed with a California federal court shortly thereafter. However, as the motion to dismiss that Lululemon filed on Friday indicates, the parties are currently at odds over a more fundamental issue: where their case should play out.
According to the motion to dismiss it filed with the U.S. District Court for the Southern District of New York on January 7 in response to Peloton’s complaint, Lululemon argues that its former partner used the “professional courtesy” that Lululemon granted it to “game” the venue in the design patent and trade dress infringement case. Specifically, Lululemon asserts that it was “misled” by Peloton’s legal counsel, which requested additional time to provide a substantive response to the cease-and-desist letter that it received from Lululemon, and then used that time to “prepare a [DJ] complaint and then race to this courthouse, its home forum, to preempt Lululemon from filing a complaint in its choice of forum.”
While venue conflicts are generally governed by the first-to-file rule, which mandates that when there are two competing lawsuits, the first suit should have priority, Lululemon argues that there is a “critical exception” when the first-filed lawsuit is “an improper anticipatory declaratory judgment action.” That is precisely what is going on here, per Lululemon, given that New York-based Peloton’s DJ action was filed in response to a direct – and concrete – threat of litigation.
Turning its attention to a number of arguments that Peloton made to refute the characterization of its DJ as anticipatory, including that it filed the action because “it could not afford the harm to its reputation from leaving Lululemon’s claims unanswered,” Lululemon asserts that such arguments are “baseless.” Among other things, Lululemon argues that there was no risk of reputation harm for Peloton as a result of the claims that it made in its cease-and-desist, as such claims were not public at that time, and thus, “posed no harm” to Peloton’s reputation. In fact, Lululemon alleges that it was Peloton that “publicly aired the parties’ dispute.”
Also weighing in favor of dismissal? The issue of convenience, which is typically a venue-related consideration, but according to Lululemon, is not quite as relevant here as it might be in other cases, as both parties are “enormous, publicly-traded companies, each having annual revenues exceeding $4 billion” and a “nationwide presence.” This makes it so that “litigation in any specific venue in the U.S. is not particularly convenient or inconvenient.”
Beyond that, Lululemon claims that California – not New York – is the “center of Peloton’s infringing activities.” Peloton maintains “13 showrooms in California, its greatest number in any state” versus 6 in New York. As for its own operations, Lululemon states that a redacted (but seemingly substantial) percentage of its annual sales come from California, which plays home to what is “effectively its U.S. headquarters for product and branding, where [it] makes most of its major project development and branding decisions.” Meanwhile, 17 percent of Lululemon’s retail stores are located in California, versus 6 percent in New York.
Considered along with the policy at play (namely that “federal courts, including both the Second Circuit and Federal Circuit, uniformly condemn this sort of conduct,” as it serves to “discourage potential plaintiffs from communicating with potential defendants in an effort to reach out-of-court resolutions of their disputes”), Lululemon argues that “the plainly anticipatory nature of Peloton’s [DJ] action weighs heavily in favor if dismissal of this action.”
Should the court opt to dismiss Peloton’s DJ, the case as a whole would still be far from over, as such a decision would not impact the complaint that Lululemon lodged in California in the wake of Peloton’s filing, and Peloton would inevitable lodge its own claims in connection with that suit.
The rival cases got their start in late November when Peloton – fresh out of a 5-year-long apparel deal with Lululemon – filed a DJ action in New York federal court, seeking an order that it is not infringing a number of Lululemon’s design patents and trade dress by way of its new apparel offerings. Lululemon responded with a counter suit, arguing that the Peloton is on the hook for design patent and trade dress infringement in connection with its sale of “copycat” athleticwear on the heels of pulling the plug on the parties’ 5-year-long co-branding partnership.
According to its complaint, Lululemon claims that “unlike innovators such as [itself],” when Peloton opted to launch its own collection of apparel, it “did not spend the time, effort, and expense to create an original product line, [and] instead, Peloton imitated several of lululemon’s innovative designs and sold knock-offs of lululemon’s products, claiming them as its own.”
The case is Peloton Interactive, Inc. v. Lululemon Athletica Canada Inc., 1:21-cv-10071 (SDNY).
Share
