Lululemon Athletica (NASDAQ: LULU) is being sued by NIKE (NYSE: NKE) accused of patent infringement over its Mirror fitness device and mobile app. This comes just weeks after a similar case emerged between Lululemon and Peloton Interactive (NASDAQ: PTON) over claims Peloton infringed on Lululemon's bra and leggings design patents.
While the NIKE case accuses LULU of patent infringement, the Peloton case has LULU as the accuser. After Lululemon threatened to sue Peloton, the notorious spin bike manufacturer got in there first by filing a suit stating there is no merit to Lululemon's claims.
Lululemon quickly responded with a patent lawsuit of its own against Peloton.
Confused much? Suffice to say, Lululemon will be subject to legal fees, and this does not bode well for the stock.
NIKE takes a stand
Lululemon acquired Mirror for $500m in 2020. With the flight to working out from home, this seemed a strategic move. Now NIKE states LULU infringes on several of its historical patents by selling its Mirror fitness device. In recent years, NIKE itself has launched a series of popular mobile apps, including Nike Run Club and Nike Training Club.
A spokesperson for Lululemon told CNBC:
“The patents in question are overly broad and invalid. We are confident in our position and look forward to defending it in court.”
While these cases may swing in Lululemon's favor, at this point, nothing is certain. Shareholders do not like uncertainty, negative press, and unnecessary spending on court proceedings.
FactSet analysts give all three of these stocks an Overweight rating.
The consensus sees NKE stock with a long-term growth rate of 16.4%. Meanwhile, LULU stock has a long-term growth rate of 29% and PTON stock 51%.
Despite the ongoing court battles, it's worth keeping these popular fitness stocks on your radar.