Competitor Accuses Fitbit of Stealing Information by Hiring Workers Away

Close to what should be one of the biggest events of Fitbit's life - its initial public offering of stock - the maker of wearable health trackers is facing an unexpected challenge: a lawsuit from one of its biggest competitors.

Jawbone sued Fitbit in California state court San Francisco on Wednesday, accusing its rival of "systematically plundering" confidential information by hiring Jawbone employees who improperly downloaded sensitive materials shortly before leaving.

"This case arises out of the clandestine efforts of Fitbit to steal talent, trade secrets and intellectual property from its chief competitor," lawyers for Jawbone wrote in the complaint.

The legal action is an unusual twist for Fitbit, which this month filed for an initial public offering, a move meant to take advantage of huge demand for wearable devices. Fitbit's trackers, as well as a range of offerings like Jawbone's Up bands and the Apple Watch, have drawn users eager to document and quantify ever more aspects of their health.

Within that field, the 8-year-old Fitbit has become one of the most prominent players. The company claims in its prospectus that it had the highest-selling connected activity tracker in the United States in the first quarter, citing data from the NPD Group that put its market share at 85 percent.

But Jawbone's lawsuit may throw a kink into what is meant in part to be a celebration of success.

According to the complaint, recruiters for Fitbit contacted nearly one-third of Jawbone's employees early this year. Some of those employees then decided to leave, but before doing so, they downloaded information like Jawbone's current and future business plans and products. Those individuals used thumb drives to download files and used programs to cover their tracks or deleted system logs, according to the court filing.

One now-former employee, Ana Rosario, was hired by Fitbit as a user experience researcher around April 16 but did not disclose that she planned to leave Jawbone until April 22, the complaint said. On April 20, according to the complaint, Rosario held a meeting with Jawbone's senior director of product management to discuss the company's future plans and then downloaded what the company said was a "playbook" outlining its future products.

During her exit interviews, Rosario initially denied taking confidential information, but she later acknowledged downloading its "Market Trends & Opportunities" presentation, the complaint said.

Another employee who specialized in audio products, Patrick Narron, told Jawbone on April 8 that he planned to leave in two weeks to take another job - but did not disclose that he was heading to Fitbit, and he was allowed to stay. The complaint claims that Narron sent confidential information about future products to his personal email address several times, in violation of corporate policy.

In the court filing, Jawbone quoted an unnamed executive search consultant who reportedly said, "Fitbit's objective is to decimate Jawbone."

Around April 17, according to the complaint, Fitbit's chief people officer, Marty Reaume, called Jawbone and acknowledged that her company had been poaching employees from its competitor. But Reaume said nothing about the purported taking of sensitive Jawbone information.

A representative for Fitbit did not return a call seeking comment.

The lawsuit by Jawbone also comes as the company faces speculation about its financial health. Begun as a manufacturer of cellphone headsets, Jawbone has tried its hand at a number of products, including wireless speakers and then wearable fitness trackers, winning fans of its Up series of devices and services.

But it has been bedeviled by production issues throughout its 16-year history, including its Up3 fitness band. News reports have raised questions both about why the company still is not profitable (and about its latest fundraising round, a $300 million financing effort led by the asset management giant BlackRock.

A representative for Jawbone said in a statement: "Demand for Jawbone's products are extremely strong, as is the company's financial health. The company has plenty of cash and an exciting product pipeline. Jawbone and its investors are bullish on its future."

According to the court filing, Jawbone is seeking both financial damages and relief from the court to prevent the former employees from using the information Jawbone says they took from the company.

© 2015 New York Times News Service