Jawbone lawsuit accuses Fitbit of trade secret theft

The allegations reveal the rivalry -- and vitriol -- between the leading fitness trackers as Fitbit prepares for its IPO.

Max Taves Staff Reporter
Max writes about venture capitalism and startups while seeking out the new new thing to come out of Silicon Valley. He joined CNET News from The Wall Street Journal, where he contributed stories on commercial real estate, architecture, big data and more. He's also written for LA Weekly, Slate and American Lawyer Media's The Recorder, where he covered legal battles in Silicon Valley. Max holds degrees from Georgetown University and Columbia University's Graduate School of Journalism.
Max Taves
3 min read

Jawbone accuses Fitbit of stealing valuable trade secrets.

Competition in the fitness tracker business was already intense. Now, it just got nasty.

In a strongly worded lawsuit filed Wednesday in San Francisco, activity tracker Jawbone accused its larger rival Fitbit of strategically luring away its employees in a deliberate attempt to steal vital Jawbone business plans. The lawsuit comes almost three weeks after Fitbit filed for an initial public offering.

Jawbone, which makes the Up line of activity trackers, alleges Fitbit recruiters contacted about 30 percent of Jawbone's workforce early this year and hired at least five of its employees specifically to glean intimate knowledge of Jawbone's corporate strategy. The suit also alleges those employees copied internal Jawbone documents detailing vital trade secrets -- including the company's supply chain, product lineup, revenue and product costs -- which they then gave to Fitbit.

For its part, Fitbit denies any wrongdoing and says it plans to fight back.

"Fitbit has no need to take information from Jawbone or any other company," the company said in a statement sent to CNET. "We are unaware of any confidential or proprietary information of Jawbone in our possession and we intend to vigorously defend against these allegations."

Jawbone's suit asserts that the allegedly stolen files are the "informational equivalent of a gold mine for Fitbit," because they provide Fitbit with "an intricate roadmap into the core of Jawbone's business."

Fitbit's intentions were laid bare, says Jawbone, in a statement by one of its recruiters quoted in the complaint: "Fitbit's objective is to decimate Jawbone."

Since its 2007 launch, Fitbit has become the dominant maker of wearable devices. Sales rose 142 percent last year, to $745.4 million, according to industry tracker NPD Group. It also sold nearly 11 million devices last year to capture 68 percent of the activity tracker market, up from 58 percent in 2013. Jawbone held 19 percent of the market in 2013; its share of the market in 2014 is not known.

The market is only getting more crowded -- and more difficult. Both companies already compete against the likes of Pebble, Samsung, LG and Microsoft. And then there's Apple and the Apple Watch, released last month. Industry observers expect Apple's newest product to radically shake up -- and shake out -- the fitness tracking business.

Jawbone's lawsuit also names five former employees and accuses them of breaking their confidentiality agreements.

"Forensic analyses performed by Jawbone on its former employees' computer devices revealed that a number of the departed employees used USB thumb drives in their last days of employment at Jawbone to steal proprietary company information," the suit reads.

In one notable example, Jawbone's suit accuses a former Jawbone user experience researcher of deliberately calling a meeting at Jawbone to discuss the company's future plans before defecting to Fitbit. That researcher downloaded Jawbone's secret plans onto her personal computer, so she could pass that information on to her new employer, according to Jawbone.

Calling Fitbit's damage "substantial, and in many respects irreparable," Jawbone now wants justice -- or money. The company's seeks a portion of the profit Fitbit might have gained from using the allegedly stolen secrets, in addition to damages.

While accusations of trade secret theft and talent-poaching are common in Silicon Valley, Jawbone's lawsuit reads like a stinging indictment of Fitbit's competency as a soon-to-be-public company. According to Jawbone, Fitbit's actions show it lacks the capability to "deliver on the lofty promises and expectations conveyed to investors as part of its impending initial public offering."

In other words, Jawbone charges Fitbit couldn't innovate on its own, so it had to steal in order to satisfy Wall Street.

Jawbone's legal action comes amid its own difficulties. The company suffered an embarrassing and costly delay this year for its Up3 fitness tracker. Originally slated for release by the end of 2014, the Up3 didn't ship until this month. Fitbit released its newest line of products, including the Surge Smartwatch and its Charge HR, earlier this year.

Update, 9:43 a.m. PT: Adds comment from Fitbit.