Wearable devices maker Fitbit Inc. was accused of patent infringement as its initial public offering approaches in a second lawsuit by rival Jawbone Inc.
Jawbone says Fitbit’s activity tracking devices use technology protected by three patents owned by BodyMedia Inc., which Jawbone acquired in 2013 for $100 million, according to a complaint filed Wednesday in San Francisco federal court. Jawbone sued Fitbit two weeks ago in California state court, alleging it recruited its employees and plundered its trade secrets.
The latest suit comes as Fitbit is expected to price its IPO on June 17. It’s seeking to raise as much as $478 million, according to data compiled by Bloomberg.
Scholars debate whether companies time the filing of patent suits to coincide with an IPO to force a settlement, or because the IPO makes for a cash-rich target, said Michael Risch, a law professor at Villanova University School of Law in Pennsylvania.
“This was obviously a strategic filing,” Risch said in an e-mail. “Filing a separate trade secret case in state court is a hallmark of that. But does Jawbone really think that Fitbit will simply roll over simply because there is an IPO? I doubt it. More likely, Jawbone just wants its competitor to feel some pain and this is a good time to do it using the legal system.”
Fitbit is profitable, with $745 million in revenue last year and more than $100 million in net income. Still, as it markets the sale to investors, the company must show them it can continuing growing despite heightened competition and the tendency for many users to stop using activity trackers after a few months.
Wednesday’s suit was filed by AliphCom, the corporate entity that does business as Jawbone, and Pittsburgh-based BodyMedia. They said in the complaint that they will ask the U.S. International Trade Commission to investigate Fitbit’s imports of infringing technology. That complaint will based on at least some of the same patents, according to the lawsuit.
Fitbit said it will vigorously defend against Jawbone’s claims.
“As the pioneer and leader in the connected health and fitness market, Fitbit has independently developed and delivered innovative product offerings to empower its customers to lead healthier, more active lives,” the company said in an e-mailed statement. “Since its inception, Fitbit has more than 200 issued patents and patent applications in this area.”
Jawbone alleged in its first complaint on May 27 that San Francisco-based Fitbit’s recruiters contacted a third of its employees this year and hired at least five, some of whom used USB thumb drives to steal proprietary information as they left.
The data-theft allegations, if true, are serious, Risch said.
“In general, it’s not trade secret misappropriation to solicit employees and companies often overclaim solicitation as a method of interrogation,” he wrote. “But if there is evidence of cherry picking the best employees, and information about the best employees came from someone with a secrecy duty, that too could create a problem.”
The patent case is AliphCom Inc. v. Fitbit Inc., 15-cv-02579, U.S. District Court, Northern District of California (San Francisco). The earlier case is AliphCom Inc. v. Fitbit Inc., CGC15-546004, California Superior Court, San Francisco County (San Francisco).