Fitbit Inc fka FIT

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Fitbit Inc (FIT) Wins Critical Jawbone Patent Ruling

ITC rules against Jawbone, says Fitbit did not steal trade secrets

By Brad Moon, InvestorPlace Contributor | Aug 24, 2016, 9:01 am EDT

http://investorplace.com/2016/08/fitbit-stock-fit-jawbone-lawsuit/#.V73Wv2dTGUk

Fitbit, Inc (NYSE:FIT) has been engaged in a bitter series of lawsuits with fitness tracker rival Jawbone, who has repeatedly accused Fitbit of stealing trade secrets. Fitbit has won a big victory, though. The International Trade Commission (ITC) just ruled in its favor, finding that the company did not misappropriate Jawbone trade secrets.

The two fitness tracker manufacturers have been battling in court for over a year. Consumer demand for the devices has ramped up even as Jawbone fell further behind market leader Fitbit. With sales sliding, Jawbone laid off staff and closed offices. As the situation got more dire for Jawbone, legal actions began. Things reached a crescendo last year, when Jawbone sued Fitbit three times in just two months.

The latest action filed with the ITC claimed Fitbit had hired away Jawbone employees, who in turn stole information from their former company. The patent lawsuit also alleges the former Jawbone employees then designed products for Fitbit that infringed on the Jawbone patents.

Fitbit issued a press release that outlined the ITC’s decision:


“The Administrative Law Judge who presided over the merits hearing concluded that Fitbit did not misappropriate any Jawbone trade secrets. This determination followed earlier decisions that eliminated from this investigation all six of the Jawbone patents asserted against Fitbit.”

Fitbit Scores an Important Win

This was a critical ruling for Fitbit. Jawbone’s suit requested a cease-and-desist order. It was an attempt to block the company from importing its fitness trackers, or parts needed to manufacture fitness trackers. Had Jawbone won even a temporary order, it could have severely disrupted the company’s ability effort to launch its next-generation activity trackers.

In the latest fitness tracker sales figures from IDC, Fitbit held 24.5% of the market worldwide, with annual growth of over 25%. Jawbone failed to place in the top five. Reports earlier this year said Jawbone was about to drop out of the fitness tracker market altogether, perhaps to focus instead on developing a medical-grade wearable.

Jawbone quickly refuted those reports. But based on the most recent legal ruling against its claims — and its rapidly disappearing activity tracker market share — the company had better have a solid Plan B.

Fitbit was quick to rub its rival’s nose in the victory.

“We are pleased with the ITC’s initial determination rejecting Jawbone’s trade secret claims,” said James Park, CEO and Co-Founder of Fitbit. “We greatly appreciate the ALJ’s time and diligent work on this case. From the outset of this litigation, we have maintained that Jawbone’s allegations were utterly without merit and nothing more than a desperate attempt by Jawbone to disrupt Fitbit’s momentum to compensate for their own lack of success in the market.”

There’s no subtlety there. Clearly Fitbit is ready to put the distraction of the legal wrangling behind it to focus on more imminent threats, like Apple Inc.’s (NASDAQ:AAPL) soon-to-be-announced Apple Watch 2.