Through a glass darkly: Nike sues Lululemon over mirror

In my bio below you'll see a picture of me sporting my new digital camouflage Lululemon Surge Warm Half-Zip that had arrived the night before writing this. Inside the box was a card trying to sell me something called Lululemon Mirror. The image on the card was very similar to what Lululemon has on their site (see image at the top).

My first reaction was "This looks like something Nike would make. I wonder if it'll claim to own the IP rights."

I was doomscrolling on Twitter a few hours later and yup, I saw that Lululemon is being hauled into New York Southern District Court by Nike for patent infringement for their new "smart home gym that gets to know you." Lululemon now gets to know their lawyers better than it had ever hoped to because, when it comes to intellectual property rights, Nike doesn’t play.

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The Nike battle with Lululemon all comes on the heels of the recent massive patent rights win for Sonos over Google. In both cases, the defendant is accused of embedding proprietary technology in its branded product -- Nike’s technology in the Lululemon mirror and Sonos’s technology in Google’s Chromebooks, Pixel phones, Chromecast, and the like.

Tim George, a Pennsylvania lawyer, explains why these companies often pursue legal action so quickly:

Companies such as Nike and Sonos have spent countless millions to become what is known as first-choice brands. When you think of sneakers and innovation in sports, you think of Nike. So if Nike doesn’t actively protect their intellectual property rights, that status quo changes and they may never reclaim their place. That’s why these disputes move so quickly to the courts, if not necessarily as quickly through them.

Mirror is undoubtedly ultra cool. It is everything anyone could want in a Coronavirus-era home gym product. It looks to be highly-engaging, fun, and in Lululemon’s own words, "the ultimate studio, with over 10,000 classes, taught by world-class trainers -- right on your wall."

In an era where people are uncertain whether they should invest in gym memberships or in-person fitness classes for the foreseeable future because of new virus strains and forced closures, the products and services that best replicate the experience of actually being outside of your home will win -- and Mirror does exactly that. 

So you might be thinking "What’s the issue here -- did Nike actually make its own Mirror? I would have remembered seeing this." The simple answer is that it didn’t, but that doesn’t mean that Nike won’t win this lawsuit -- and here’s why:

Nike sees itself as a technology company and a research and development company with the same intensity that many of us see it as a great sneaker company. It invests massive amounts of money into not only imagining what’s next and what comes after that, but actually working on the Next Next Next Big Thing.

Technology is a great thing but sometimes it can bite us when we don’t appreciate its qualities and parameters. As the always excellent blog, The Fashion Law, explained, it’s Lululemon’s own very expensive tech acquisition here that has them in extremely hot water: "In its complaint, Nike asserts that the technology at the heart of the $1,500 at-home exercise system -- which Lululemon brought in-house when it acquired fitness startup Mirror in June 2020 for $500 million -- 'practice[s] the claimed inventions of [its] asserted patents,' namely, U.S. patents 8,620,413; 9,278,256; 9,259,615; 10,188,930; 10,232,220; and 10,923,225, all of which are utility patents (as distinct from design patents), and thus, protect the invention of a new and useful process, machine, manufacture, or composition of matter. "

In other words, Nike is saying that it has been the leader in digital technology as it relates to sports for eons, in part because it actually patents stuff it invents and might not be ready to use today but might use tomorrow. That’s what it asserts happened here and, if it's right, Lululemon is going to have a tension headache that a quick home workout won’t help.

Nike has slid under our collective radar as a technology company since at least 2019, when it immersed itself deeply enough into data science, augmented reality, and machine learning to essentially chart a new path for the future of the business. By reimagining the business as a tech company that makes hardware (shoes, clothing, and accessories) and software (well, actual software), the engine becomes the pixels and the car becomes the future of the business.

What separates Nike from all of its competitors individually and collectively is that it is powerful enough to innovate for itself, meaning that it can build, test, iterate, file as many patents as it likes -- and then rinse and repeat as many times as it likes -- without ever affecting either its market share or the primacy of the brand in the eyes of consumers. How many companies in the world in any vertical can say this?

Lululemon envisioned a similar future for itself. It’s honestly a great brand. Coming off a rough patch in which some customers felt that the very high quality of its products had declined, the brand is at an all-time high in every possible metric and poised to hit the $2 billion revenue mark as early as this year. It's going to need that money, because its $500 million investment in Mirror could triple once Nike leaves the courtroom. That wouldn’t kill Lululemon because of both cash on hand and a line of investors who would happily fund a new equity round, but it would be a solid gut punch.

This is, of course, a wasted opportunity for both brands. At their core, Nike and Lululemon are a perfect fit. Not for an acquisition, but to play together on new fields they would co-create. And maybe that could be the eventual result of this lawsuit in an ideal and perhaps 25 percent less competitive world -- that these two iconic brands could find the synergy to allow them to build something common from the foundation of each other’s strengths and user base. 

But for now, both sides will prepare for the battle that costs not only money and effort, but represents a wasted investment of time and resources that should be focused on building great things that make their users happy. 

Aron Solomon, JD, is the Chief Legal Analyst for Esquire Digital and the Editor of Today’s Esquire. He has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. Aron has been featured in CBS News, USA Today, ESPNTechCrunch, The Hill, BuzzFeed, Fortune, Venture Beat, The Independent, Yahoo!, ABA Journal, Law.com, The Boston Globe, and many other leading publications. 

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