With Fitbit inching closer to the landmark moment of its IPO, it is now facing a new challenge of a lawsuit filed by Jawbone, which is one of its biggest competitors in the fitness tracker industry.
Jawbone claims that the company has systematically plundered its trade secrets by poaching employees. The employees allegedly downloaded confidential information from Jawbone's database before leaving to transfer to Fitbit.
"This case arises out of the clandestine efforts of Fitbit to steal talent, trade secrets and intellectual property from its chief competitor," wrote Jawbone lawyers.
The lawsuit is a sudden problem for Fitbit, as the company has filed for an initial public offering this month. Fitbit is looking to take advantage of the increasing demand for wearable technology, fueled by Fitibit's products alongside Jawbone's Up devices and the Apple Watch. These trackers have made users want to record all quantifiable aspects of their health.
According to Fitbit in the prospectus that it filed for its IPO, the company has the best-selling fitness tracker in the country over the first quarter, with NPD Group data stating that Fitbit has an 85 percent market share.
However, Jawbone's lawsuit against Fitbit could dampen what would have been a celebration of the company's success.
The lawsuit claimed that Fitbit recruiters made contact with almost a third of the employees of Jawbone earlier in 2015. Some of the contacted employees agreed to transfer to Fitbit, but before they did, they downloaded documents which included the current and upcoming products and business plans of Jawbone. The employees used flash drives and then utilized software to delete system logs and cover their tracks.
Ana Rosario, a now-former employee, was said to be hired by Fitbit on April 16 as a user experience researcher. However, Rosario only revealed that she was transferring from Jawbone on April 22. On April 20, Rosario met with the senior director of product management of Jawbone to talk about the future plans of the company, and then retrieved a document containing Jawbone's future products.
In her exit interview, Rosario denied at first that she acquired confidential data, but then later admitted that she downloaded a Jawbone presentation on market trends and opportunities.
Patrick Narron, another employee that transferred from Jawbone to Fitbit, allegedly emailed confidential data on Jawbone's future to his personal account, which violated company policies.
Marty Reaume, Fitbit's chief people officer, admitted on April 17 in a phone call with Jawbone that the company was poaching employees from Jawbone. However, Reaume did not say anything regarding the alleged stealing of trade secrets.
Jawbone is looking to be awarded financial damages and an order from the court to prevent its former employees to use the stolen information.
