Judge Oetken Rules Peloton Can Ride Away from Invalid Patent
On April 2, 2020, Judge Oetken granted summary judgment of anticipation and resolved a variety of contract and tort claims in a long-running feud between VR Optics (“VRO”), Peloton Interactive, Inc. (“Peloton”), and Peloton’s design consultant Villency Design Group LLC (“VDG”).
Peloton hired VDG to design, develop, and manufacture aspects of Peloton’s now-ubiquitous interactive stationary bike. In their agreements, VDG guaranteed that the intellectual property provided by VDG would not “infringe upon the rights of any third party” and that VDG would indemnify Peloton for any allegations of infringement. While their agreements were still in force, VDG’s sole owners Joseph Coffey and Eric Villency created VRO, acquired U.S. Patent No. 6,902,513 (“the ’513 patent”), and asserted it against Peloton. Peloton, in turn, asserted third-party claims against VDG, Villency, and Coffey.
On summary judgement Peloton argued that the ’513 patent is anticipated by U.S. Patent No. 6,997,852 to Watterson (the “Watterson Patent”). The parties agreed that the Watterson Patent “discloses all of the independent claims’ limitations, save one,” and Judge Oetken noted that the “validity of the patent at the heart of this sprawling, years-long litigation rests, then, on the thin reed of this single element.”
VRO argued that its expert report on validity raised an issue of fact that precludes summary judgement. However, Judge Oetken held that VRO’s expert’s opinion “rests on an unduly cramped reading of this Court’s prior [claim] construction” and was “inconsistent with the plain and ordinary meaning of the claim’s terms.” As such, Judge Oetken excluded the opinion and held that the independent claims were anticipated by the Watterson Patent.
VRO also argued that the ’513 patent’s dependent claims survive summary judgment because Peloton did not argue that they were anticipated by the Watterson Patent in its opening brief. Judge Oetken disagreed holding that Peloton’s brief did argue that all of the asserted claims were invalid and Peloton’s Local Rule 56.1 Statement of Material Facts “methodically cataloged, with citations to admissible evidence, where Watterson disclosed each limitation of the dependent claims.” Judge Oetken also held that VRO failed to identify contrary evidence, and only “repeated a rote complaint that each statement was conclusory and implausibly claimed the statements were ambiguous.” Absent contrary evidence, Peloton’s assertions were deemed admitted, and summary judgment of anticipation was granted as to the dependent claims.
Judge Oetken then turned to Peloton’s contract and tort claims against VDG, Coffey, and Villency. Because Judge Oetken held that the ’513 patent was invalid, and the designs provided by VDG did not infringe a valid patent, Peloton’s breach of the warranties and breach of the covenant and good faith and fair dealing failed, as did Peloton’s tortious interference claim. In addition, Judge Oetken held that Peloton had not proffered sufficient evidence to support a fraudulent concealment claim. However, Judge Oetken held that VDG breached the 2014 agreement by failing to defend Peloton against VRO’s claims, and granted summary judgment in Peloton’s favor.
The case is VR Optics, LLC v. Peloton Interactive Inc., No. 16-cv-6392 (JPO) (S.D.N.Y.).