Maridav /
22 December 2015AmericasFabio Marino and Luc Dahlin

Jawbone v Fitbit: will fitness trackers be the next IP war?

Jawbone and Fitbit, the two leading providers of wearable fitness trackers, appear to have gone to war over who owns the intellectual property to this rising technology. Each company has asserted IP rights against the other in a multitude of forums.

Does this mean that fitness trackers will be the next battleground in the IP wars? Not likely. It may signal, however, the willingness of smaller technology companies within rapidly emerging niche markets to use their IP aggressively in an effort to maximise their market share.

This article gives a brief overview of the various fronts opened between Jawbone and Fitbit, which both have their headquarters in San Francisco, what is at stake and what this will mean for the fitness trackers industry in the future.

A growing market

Wearable fitness trackers have become ubiquitous in the consumer electronics market over the past few years. Although not nearly as popular as smartphones, there is “more than $200 billion of consumer spending on health and fitness”, said Fitbit chief executive James Park earlier this year. Not only is this market already huge, but in February 2015, research firm CCS Insight said that “by 2018, 172 million wearables will be sold worldwide, up from just 29 million in 2014”.

On June 18, 2015 Fitbit issued an initial public offering (IPO) of its stock. Fitbit was valued at $4.1 billion based on its IPO. The stock opened at 52% above its IPO price at $30.40. Within two days of trading, the stock price had risen by 20 percent. By July 9, the stock price was nearly double the IPO price.

Jawbone, not content to let its main rival score massive successes on Wall Street and in the media, filed a suit within weeks of Fitbit’s initiating its IPO, claiming that “Fitbit strategically lured away its employees to steal its trade secrets.” In its lawsuit, Jawbone contended that “Fitbit poached as much as 30% of its workforce in early 2015 to gain knowledge of key trade secrets, including its upcoming product lineup, information about its supply chain, and financial data.”

Jawbone accused Fitbit of attempting to recruit over one third of its workforce, many of whom downloaded trade secrets on to their personal devices before leaving Jawbone for Fitbit. Unsurprisingly, Fitbit denied the allegations.

“Fitbit, however, was quick to point out that the ruling was not ‘against Fitbit’ but rather ‘focused on the exchange of information between Jawbone and its former employees’.”

Jawbone, however, did not stop there. Using the variety of tools available to IP owners, Jawbone filed a patent infringement suit as well as an International Trade Commission (ITC) proceeding. In June, Jawbone sued Fitbit in San Francisco, alleging patent infringement. Immediately after, Jawbone sued Fitbit at the ITC, re-alleging its trade secret complaints and asking that the ITC block the import of Fitbit products and components into the country.

Fitbit responded to Jawbone’s actions in kind, filing a flurry of its own lawsuits. In September, Fitbit filed a lawsuit in Delaware, accusing Jawbone of infringing three patents that were issued in 2014 and 2015. Then, in an effort to match Jawbone’s litigations, Fitbit filed a complaint at the ITC asking the court to block the import of Jawbone products and components into the country that infringed Fitbit’s patents. Jawbone responded to the Fitbit actions by filing anti-competition claims against Fitbit in San Francisco.

In October, the court in the Jawbone-filed trade secrets case returned a preliminary injunction in favour of Jawbone, requiring all of Fitbit’s employees who were former Jawbone workers to return any confidential information they had taken with them when they left for Fitbit and to stop using any trade secrets for Fitbit’s benefit.

Fitbit, however, was quick to point out that the ruling was not “against Fitbit” but rather “focused on the exchange of information between Jawbone and its former employees” and “has no impact on Fitbit.” Decisions in the ITC cases are due in mid-2016 and the patent suits continue.

Lessons to be learned

There are a number of lessons to take away from the wearable fitness tracker IP battles. First, the back-and-forth between Jawbone and Fitbit proves that ‘IP wars’ between tech companies are not going away any time soon, even with the rise of post-grant proceedings. Although the smartphone wars may have slowed down, along with patent infringement cases in general, many companies continue to assert their IP rights against competitors unafraid of litigation costs or resulting countersuits.

Second, companies are continuing to look at the ITC as a favourable forum for parties asserting IP rights because of the ITC’s power to issue injunctions limiting what may be imported into the country. This is especially important for consumer electronic goods, where many of the components (or entire products) are manufactured abroad and then imported. On the other hand, because the only remedy available in the ITC is injunctive relief, designing around a patent can be a complete defence in that forum.

Third, unless the patents asserted by companies are fundamental to their products (ie, there is no way to manufacture the products, or an acceptable alternative product, without infringing on the patent), patent suits are unlikely to drastically realign the marketplace. None of the patents asserted by Jawbone or Fitbit is fundamental to wearable fitness trackers; it is highly unlikely, therefore, that either’s patent litigation will result in a large change within the wearable fitness tracker niche market.

At the most, the prevailing party will earn a chunk of change and may momentarily set back its competitor. Even if the ITC enforces an exclusion order, the affected party would probably be able to design around the asserted patents or design devices not based on misappropriated trade secrets. Therefore, while there might be a period where the affected party works on a redesign, it would likely be able to eventually introduce new devices into the market. Neither side is in danger of being forced from this still-emerging market.

Finally, these lawsuits may be indicative of the future of smaller tech companies fighting for position within a niche market. While few small tech companies have IP rights that are so fundamental to a technology that the company can force competitors out of the market, it may be able to leverage its IP rights into a greater market share.

Where there are fewer competitors within an emerging niche market, such as in the wearable fitness tracker market, a small change in market share or position can translate to a large percentile gain in profit for the prevailing side. Even if Jawbone or Fitbit is able only to temporarily block the import of its competitor’s products or force its competitors to hold its products from the market while it designs around a patent, a small delay within an emerging market may limit a company’s abilities to hold on to its market share. As new customers constantly enter the emerging niche market, it is essential for companies to have an attractive product on the market at all times.

Overall, the wearable fitness tracker market is unlikely to see drastic changes arising out of Jawbone and Fitbit asserting IP rights against the other. While neither company may be able ultimately to force the other out of the market, one may be able to leverage its IP rights into a greater market share.

Fabio Marino is a partner at  McDermott, Will & Emery. He can be contacted at:

Luc Dahlin is an associate at McDermott, Will & Emery. He can be contacted at:

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