Analysis: Lululemon patent claim highlights cutthroat yoga world

Sat Aug 18, 2012 7:08am EDT
 
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By Allison Martell

(Reuters) - Lululemon, the hip Canadian chain that made yoga apparel fashionable, has taken its fight for market share to the courts with a patent lawsuit, as new brands of active wear seek to undercut its premium prices.

The lawsuit filed by Lululemon Athletica Inc LLL.TO, which cultivates a mellow yoga vibe in its stores, comes as investors indicate growing unease over the company's future. Whether the lawsuit, filed in a U.S. court, will shore up the company's position remains to be seen.

Patent lawsuits are uncommon in apparel and can be difficult to win. The suit could deter imitators, and thus help the Vancouver-based company cement its growth. It also highlights how tough the competition is.

"This is a low barrier-to-entry industry. Lululemon, their success, has drawn new competitors throughout the mall," said independent retail analyst Brian Sozzi. "The valuation is so high. It's tough to warm up to a stock when you see so many new competitors."

In the suit filed in federal court in Delaware on August 13, Lululemon accused PVH Corp's PVH.N Calvin Klein brand and manufacturer G-III Apparel Group Ltd (GIII.O: Quote) of infringing three patents on the design of its yoga pants. Design patents protect the appearance of goods, in contrast to more common utility patents, which focus on how things work.

"What Lululemon is doing here is staking its turf," said Jeremy de Beer, an intellectual property expert and law professor at the University of Ottawa.

Founded in 1998, Lululemon took Canada and then the United States by storm with costly, colorful, fashionable workout gear targeted at professional young women. Its shares are up seven-fold since its 2007 initial public offering, and now trade at 46 times earnings.

De Beer compared Lululemon's suit to tech sector patent wars, such as the high-profile trial between Apple Inc (AAPL.O: Quote) and Samsung Electronics Co Ltd (005930.KS: Quote), now drawing to a close.   Continued...

 
A Buddha statue sits at the entrance of Lululemon Athletic in San Francisco, California, in this March 31, 2006 file photo. REUTERS/Kimberly White/Files