Fitbit Moves Toward Trial in Jawbone Trade Secrets Theft Case

  • Judge says lawsuit isn’t just rehash of trade-panel dispute
  • Pioneers in wearable activity trackers are embroiled in battle

Fitbit Inc. is headed toward a trial over claims it stole rival Jawbone Inc.’s trade secrets, after failing to persuade a judge to throw the case out.

A California state judge on Friday rejected Fitbit’s argument that the lawsuit is merely an attempt to rehash claims that were already analyzed and rejected by the U.S. International Trade Commission in Washington in October.

The jurisdiction of the court is of a “much broader scope” than the trade agency, San Francisco Superior Court Judge Richard Ulmer said Friday before issuing a final decision.

The two pioneers in wearable activity trackers have been embroiled in legal battles since May 2015, when Jawbone accused Fitbit in a lawsuit of plundering employees and critical proprietary information.

Matt Larson, a litigation analyst for Bloomberg Intelligence, said Friday’s ruling will give Jawbone “another swing at trade secrets claims nearly identical to its failed ITC suit.”

‘Headline Risk’

“Trial is still a long way off,” he said. “Absent an out-of-court settlement, the lawsuit will continue to be a distraction and pose headline risk for Fitbit.”

Larson also said he wouldn’t be surprised if Fitbit tries to appeal Ulmer’s decision.

A spokesman for Fitbit declined to comment on the ruling.

Jawbone said it’s pleased the court didn’t let Fitbit escape liability for its conduct.

“We look forward now to focusing on presenting our case to a California jury, which will not be bound by the strict procedural limitations that we faced in the ITC,” a company spokesman said. “We will push the case to trial as quickly as possible and are confident that justice will be done."

Mark Reiter, a lawyer for Fitbit, argued at a hearing Friday that Jawbone shouldn’t get a chance to retry its claims in state after first going to the International Trade Commission.

Criminal Probe

Jawbone’s lawyers contended that the agency looked only at a limited number of allegations against Fitbit and had no authority to consider claims against the former employees who are also defendants in the suit. In February, Jawbone said in a court filing that its rival was under investigation by a criminal grand jury for theft of trade secrets. Fitbit said at the time that it was cooperating with prosecutors.

The judge said that while companies often go to the ITC because it’s a faster way to resolve disputes, that doesn’t mean they can’t come back later and ask for a hearing in court.

In the tentative ruling issued at the start of Friday’s hearing, Ulmer said the ITC proceeding didn’t reach conclusions about various trade-secret claims, and noted that the agency didn’t consider whether Jawbone was entitled to monetary damages.

“On the other hand, our California courts have unlimited jurisdiction to adjudicate all of the issues and remedies plaintiff asserts here,” Ulmer said.

Jawbone was an early maker of wearable devices, but lost market share as competition from Fitbit and tech giants like Apple Inc. increased. The company started in 1999 as a maker of Bluetooth headsets and wireless speakers and later pivoted to make fitness trackers.

Jawbone has long suffered from financial instability, despite raising multiple new rounds of funds over a span of more than a decade.

The case is Aliphcom Inc. v. Fitbit Inc., CGC15-546004, California Superior Court, San Francisco County (San Francisco).

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