Fitbit better watch its step because Jawbone has a serious bone to pick with its competitor.
On May 27, 2015, Jawbone, a maker of wearable fitness and activity tracker devices, filed suit in California state court alleging at least five former employees accumulated confidential information related to market research, products and designs, and supply chain prior to joining rival competitor, Fitbit, for Fitbit’s benefit. On the eve of Fitbit’s June 18th IPO, Jawbone filed a second suit alleging patent infringement with the U.S. District Court for the Northern District of California, and, on July 9, 2015, Jawbone requested what effectively amounted to an injunction on the import of Fitbit devices with the U.S. International Trade Commission by incorporating its earlier claims for trade secret misappropriation and patent infringement.
In its original complaint, Jawbone accused Fitbit of a “systematic campaign to steal talent, expertise, strategic direction, and highly confidential information” in order to “decimate” Jawbone. Fitbit allegedly contacted 30 percent of its rival’s workforce in early 2015 in order to poach employees with access to proprietary information. As a result of Fitbit’s recruitment efforts, at least five former Jawbone employees allegedly downloaded confidential data that “are the informational equivalent of a gold mine” on USB thumb drives or private e-mail addresses after accepting Fitbit’s offer of employment but before informing Jawbone of their decision.
Jawbone brought breach of contract, breach of the implied covenant of good faith and fair dealing, misappropriation of trade secrets, and unfair business practice claims against Fitbit and its former employees based on various signed agreements, including a confidentiality agreement, in which the former employees promised to return Jawbone property and to refrain from disclosing confidential information after termination.
Jawbone’s lawsuits highlight the importance of maintaining robust confidentiality agreements for any competitive market. More important than tracking whether their employees were getting in their 10,000 steps each day, Jawbone would have been wise to monitor their employees’ other, less fitness-related activities. Even with confidentiality agreements in place, employers can take steps to protect confidential information by instituting technology security protocols to regularly check for unusual downloads or access to confidential information. As Jawbone forlornly states in its complaint, once critical information is revealed, “there is no manner by which it can be stripped from Fitbit’s institutional knowledge base.”