An employee checks his health and fitness data from a connected Fitbit Inc. (Photographer: Chris Ratcliffe/Bloomberg)

Fitbit Wins First Round in Jawbone Trade Secrets Case

(Bloomberg) -- Fitbit Inc. was cleared of allegations that its activity trackers were made using confidential information that had been stolen from rival Jawbone Inc.

Fitbit and its contract manufacturer, Flextronics International Ltd., didn’t steal trade secrets to make the fitness devices, U.S. International Trade Commission Judge Sandra Dee Lord said in a notice posted on the agency’s website Tuesday. The judge’s findings are subject to review by the full commission, which has the power to stop products made overseas from entering the U.S.

“No party has been shown to have misappropriated any trade secret,” the judge said in the notice. Her full findings will become public after both sides get a chance to redact confidential information.

The trade secrets allegations are all that’s left of virulent back-and-forth patent-infringement complaints the companies had filed against each other at the Washington agency. Three Fitbit patents and four Jawbone patents were invalidated by judges, although the companies are challenging those findings.

Biggest Maker

Fitbit remains the largest maker of activity trackers even as both companies face increasing competition from more established electronics companies such as Apple Inc. and Samsung Electronics Co.

Jawbone had claimed that Fitbit lured away key employees, who brought with them confidential information, accusing Fitbit of “systematically plundering Jawbone” employees and information such as designs and marketing plans in an effort to “decimate” its rivals. The company also has filed trade secret claims against Fitbit in state court in California.

Fitbit said it was pleased with the judge’s findings.

“From the outset of this litigation, we have maintained that Jawbone’s allegations were utterly without merit and nothing more than a desperate attempt by Jawbone to disrupt Fitbit’s momentum to compensate for their own lack of success in the market,” James Park, Fitbit’s co-founder and chief executive officer, said in a statement.

Flextronics has been a contract manufacturer for both companies, and is accused of using Jawbone design information on other products, a charge it denies.

Jawbone said the ITC case involved “a very small subset of Jawbone’s trade secrets,” and it will ask the commission to review Lord’s findings. It said it is “continuing to pursue its much broader trade secret case” against Fitbit in state court.

“Jawbone is confident it will prevail when the full scope of its claims is heard by the jury,” the company said in a statement.

The trade commission can’t order one side to pay the other cash compensation; its sole power lies in ordering customs officials to stop products at the border.

A final decision in the case is scheduled for December, and any import ban would be subject to presidential review, which could put it in the lap of whoever gets sworn in on Jan. 20.

The case is In the Matter of Certain Activity Tracking Devices, 337-963, U.S. International Trade Commission (Washington).