Jawbone Initiates Three Legal Actions Against Fitbit Alleging Fitbit Stole Jawbone’s Employees, Information, and Patented Ideas

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Jawbone is a manufacturer of fitness and activity tracking bands.  Fitbit is also a manufacturer of fitness and activity tracking devices.  Jawbone was founded in 1999, and Fitbit was founded in 2007.  Both companies have similar products with regard to fitness and activity trackers.  Both companies have applications for cell phones and other devices where the bands and information may be saved and tracked.  Both companies’ devices track sleep, steps, workout activity, and some even have heart rate monitors for more accurate calorie burn and other statistics.

Jawbone accused Fitbit of conducting a “systematic campaign” to steal Jawbone’s talented employees, Jawbone’s expertise, the company’s confidential information, and even Jawbone’s strategies for direction

On May 27, 2015, Jawbone filed a lawsuit in state court in California alleging that former employees accumulated confidential information relating to Jawbone’s market research, products, designs, and supply chain for the benefit of Fitbit before joining the competing company.  Jawbone followed this lawsuit with a second lawsuit on June 10, 2015 alleging patent infringement in the United States District Court for the Northern District of California.  Additionally, Jawbone requested an injunction on the import of all fitness and activity tracking devices produced by Fitbit on July 7, 2015, with the United States International Trade Commission by incorporating their earlier claims against Fitbit.

In the May 27 complaint, Jawbone accused Fitbit of conducting a “systematic campaign” to steal Jawbone’s talented employees, Jawbone’s expertise, the company’s confidential information, and even Jawbone’s strategies for direction.  They claim this campaign was to “decimate” Jawbone.

Jawbone further alleges that Fitbit contacted approximately thirty percent of Jawbone’s workforce in early 2015, pilfering employees for confidential, company information, causing at least five former Jawbone employees to leave Jawbone for Fitbit.  Not only did these employees jump ship, but before they left Jawbone, they accessed confidential information, which was, as Jawbone described it, the equivalent of “a gold mine” from USB drives and private e-mail addresses.

These actions were the basis for the first lawsuit alleging breach of contract, breach of implied covenant of good faith and fair dealing, misappropriation of trade secrets, and unfair business practice.  The lawsuit also includes as parties the former Jawbone employees based on signed agreements during their term of employment where the employees promised to return Jawbone property and not disclose confidential information after termination of employment.

Fitbit has stated that it has developed more than 200 of its own patents, patent applications, and plans…

Jawbone’s June 17 complaint alleges that Fitbit infringed on Jawbone’s patents, specifically the patent for a system that monitors body weight and other physiological conditions by using information taken from data-collecting band worn by the customer.  Jawbone claims that is has invested over $100 million in research and development of the technology used in their fitness and activity tracking bands.  They also claim they have resisted hundreds of patents, including the patent at issue, specifically for “a wellness application using data from a data-capable band.”

Fitbit has stated that it has developed more than 200 of its own patents, patent applications, and plans so as to defend itself against Jawbone’s challenges.  Fitbit went public in mid-June of 2015, with its stock beginning at around $23 in early June of 2015, and currently resting at around $45 in late July of 2015.

Jawbone has also filed for an injunction with the United States International Trade Commission of all of Fitbit’s fitness and activity trackers and their parts in the United States.  Jawbone has requested a decision within fifteen months and a cease-and-desist on top of that injunction.

This is not Fitbit’s first time at bat with legal battles.  On January 25, 2015, the United States District Court for the Northern District of California ruled in a lawsuit initiated by Fitbug, Limited against Fitbit for violations of trademark infringement laws and unfair competition laws.  The major issue in this case surrounds Fitbit’s logo as it is compared to Fitbug’s logo.  Fitbit’s logo has similar font to Fitbug’s logo, but used different colors, etc.  Summary judgment was entered in favor of Fitbit, and against Fitbug, so Fitbit was not found as being in violation of trademark laws or unfair competition laws.

Unfair business practice claims require proof of unethical or deceptive practices on behalf of the competing party

In order to meet the elements of each of the claims brought in the lawsuit, Jawbone will have to prove that Fitbit intentionally sought out their employees with the intention of gaining not only their employment, but also to obtain employees who had information they would only be able to obtain from within the competitor’s business.  Unfair business practice claims require proof of unethical or deceptive practices on behalf of the competing party.

Jawbone would likely have to find evidence of such unethical or deceptive trade practices conducted by Fitbit to gain that information, to solicit their employees, and to conduct other actions that would be considered unlawful or unethical based on the statutes in the State of California.  For many of the other claims Jawbone will have to prove that Fitbit received information that was highly confidential from the former Jawbone employees, and likely even identify what information was stolen.

Courts will often conclude a patent claim is not valid if they find the claimed product or invention was disclosed in other venues such as prior patents, magazines, televisions, etc.

For a patent infringement claim, it must be proven that a company or person has a patent on a product or an idea, and that another person or company made, sold, or offered to sell that patented idea or product.  If an item is materially changed by subsequent processes or becomes a nonessential component of another product, it is likely that the item is not infringing on a patented idea or product.  A company or person infringes when they “practice each element of a patent claim.”  Courts will often conclude a patent claim is not valid if they find the claimed product or invention was disclosed in other venues such as prior patents, magazines, televisions, etc.

 

Jawbone will have to go through the elements and parts of the patents they have on the ideas and products produced that they are claiming Fitbit is copying or imitating.  In doing so, they will have to make the argument that their idea was the original and that they have rights to a fitness and activity tracker.

Something that may harm Jawbone’s chances is the fact that the suit is brought against Fitbit only…

While Fitbit and Jawbone have similarities in their product, they have separate and distinct factors.  Similarly to the Fitbug lawsuit, while there are similarities, there are distinct differences.  Something that may harm Jawbone’s chances is the fact that the suit is brought against Fitbit only, as opposed to the multiple other companies who also produce, manufacture, and sell fitness and activity trackers whose names may not be as popular or publicized as Fitbit or Jawbone’s names.  That in conjunction with the distinct differences such as display on the band, set up of the mobile application, means of tracking workouts and activities, etc. are all factors that will go into determining whether Fitbit did in fact utilize patented ideas of Jawbone’s to create their fitness and activity bands.

So, what does this mean for companies with similar products and manufacturing goals?  If you create products that are similar to another company, should you live in fear of a patent lawsuit or an unfair trade practices lawsuit with every single product they manufacture?  Will this give companies permission to sue their competition because while they were in the market first, their competition is now becoming more popular?

Simply because a company creates a similar product does not necessarily mean they have infringed on patented information

Companies are constantly going to be creating new products, and the likelihood that products will be similar is inevitable and something that is almost to be expected in a competitive market.  Simply because a company creates a similar product does not necessarily mean they have infringed on patented information.  At the same time, keeping an eye on products being manufactured, and working with your legal counsel or patent consultant to create a checklist for what would constitute a violation of your patent for particular products would be useful in determining whether it might be appropriate to pursue a patent challenge.

Also, it is important to realize that products are going to be similar.  If a product is popular, and there is a high demand for a particular product, more companies will jump on the moneymaking bandwagon.  As demand for these products increase and a desire amongst people who purchase these products to not have one of the same as others with the type of product, more and more companies will develop their own version of popular products.  Simply because a company was one of the first to develop a type of product does always give them ultimate rights to challenge companies who come after them.
To avoid this situation, there are certain steps Jawbone could have or should have taken to prevent information from potentially being taken in the first place. But, what steps could have been taken?  It appears at the heart of the legal issues between Jawbone and Fitbit is the initial “poaching” of Jawbone employees by Fitbit to allegedly gain confidential information that could only have been gained from within the company.

Protecting confidential information by having technology security protocols, regularly checking unusual downloads, regularly checking and monitoring when employees access confidential information or download such information onto other devices may be good strategies to assist in preventing information transfers…

Jawbone could have implemented certain security protocol for confidential information or particular processes that would have prevented employees from accessing highly confidential information without going through a certain process, getting certain approval, or providing certain information and reasoning for accessing that information.  Protecting confidential information by having technology security protocols, regularly checking unusual downloads, regularly checking and monitoring when employees access confidential information or download such information onto other devices may be good strategies to assist in preventing information transfers or at least monitoring when certain information is accessed.

Another strategy might even be not granting employees access to such highly confidential information without a certain level of employment or position. However, this action could lead to displeasure or feelings of inadequacy in the workplace.  Rather than creating an open workplace and a workplace where all will feel value, it could lead to a divide.

The result of this lawsuit will be interesting to see, and one certainly highly watched as the increase in investments and purchases of fitness and activity tracking devices continues.  This will also be an important case for employers in their own considerations of recruiting and dealing with employees of competing companies.