The owners of fitness franchise F45 (NYSE: FXLV) will be sweating after the New South Wales Federal Court deemed invalid two of its patents that have been the subject of a four-year legal battle with rival Body Fit Training (BFT).
Justice Nicholas dismissed F45's application, ordering two of its patents be revoked and that it pay BFT's legal costs.
F45 - founded in Australia by Adam Gilchrist and Rob Deutsch, backed by Hollywood actor Mark Wahlberg and now a listed company following its July 2021 initial public offering (IPO) - has been challenging BFT over alleged intellectual property (IP) infringements as both companies try their luck in the United States market.
A spokesperson for BFT said the orders did not set a precedent for an ongoing legal case that is before the courts in the US, but may influence the result.
"We are thrilled that the Federal Court in Australia has ruled in favour of BFT against F45," BFT joint CEOs Cameron Falloon and Richard Burnet said in a statement.
"The Federal Court has determined that both of F45’s innovation patents are invalid and that, even if those patents were valid, BFT did not infringe them in any event."
The news comes four months after Melbourne-headquartered BFT sold its own IP to US-based Xponential Fitness Inc (NYSE: XPOF) for $60 million, giving its new partner the right to grow the brand in the US and Canada while BFT remains the master franchisor in Australia, New Zealand and Singapore.
"Thank you to our franchisees, members, industry partners and Xponential Fitness for their unwavering support, belief and trust in our brand," the joint CEOs added.
"We look forward to continuing to offer a different and better product, as Australia’s fastest growing fitness franchise."
The patents concerned have different numbers but are both titled 'Remote configuration and operation of fitness studios from a central server', and were described by Justice Nicholas as "virtually identical".
"The invention is carried out using generic computing technology facilitating communications between a server with access to a database of files and one or more studio computers which in turn communicate with displays located at the various exercise stations," Justice Nicholas said.
"The substance of the invention resides not in the actual physical arrangement of the exercise stations but in the computer implemented scheme which enables those physical arrangements to be made.
"It is the kind of scheme that has historically never been regarded as patentable subject matter. The scheme is not made patentable merely because it is implemented using generic computing technology."
At the time of publication F45 had not yet responded to requests for comment, but later a spokesperson responded that the company could not comment on "ongoing legal matters".
In its most recent update from 11 February, the company highlighted "explosive growth" with the purchase of 1,200 equipment world packs secured for delivery during 2022 to support significant global franchisee demand.
"Through our capital-light business model and robust balance sheet, we are in the unique position to pull forward orders by at least two quarters in advance," F45 president and CEO Adam Gilchrist said at the time.
"Our goal has always been to become the world’s fastest growing franchisor. Supported by our #1 ranking in the world for boutique fitness franchising, we believe our ability to achieve this goal has never been stronger than it is today with unprecedented demand for F45.
"It will be a proud moment when we overtake some of the most well-known and respected global franchisor systems across industries. We remain focused on driving our fiscally conservative strategy, which carefully balances growth and profitability."
After an initial spike from its $16 IPO price, F45 shares have fluctuated over the past seven months and declined 13.64 per cent to $13.99 each.
FXLV shares rose 9.01 per cent to $15.25 each overnight in the US after the announcement in Australia.
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