Jawbone filed a lawsuit against Fitbit on Wednesday alleging that Fitbit has hired Jawbone employees away from the company for the purpose of finding out confidential information about Jawbone.
Fitbit filed an initial public offering on May 7. In that filing, the company noted that it has 68 percent of the fitness tracking wearable device market and that it had a profit of $131.8 million in 2014.
The lawsuit, filed in the Superior Court of the State of California for the County of San Francisco (the county in which both companies are headquartered), alleges four causes of action:
- Misappropriation of trade secrets
- Breach of contract
- Breach of implied covenant of good faith and fair dealing
- Unfair and unlawful business practices
The filing, which asks for a jury trial, states: "This case arises out of the clandestine efforts of Fitbit to steal talent, trade secrets and intellectual property from its chief competitor, Jawbone. Indeed, tacitly acknowledging that it lacked the proprietary technology, capabilities and expertise to progress to the next generation in a rapidly changing technology space and thereby deliver on the lofty promises and expectations conveyed to investors as part of its impending initial public offering (IPO)—promises that leading financial analysts have since criticized as being unsubstantiated and 'fuzzy' –Fitbit sought to overcome those shortcomings and its admitted difficulties in 'attracting and retaining highly skilled employees' by systematically plundering Jawbone employees and their competitor's critical trade secrets and intellectual property."
The lawsuit alleges that the plundering of employees began early this year when recruiters from Fitbit contacted about 30 percent of Jawbone's workforce. At least five of those employees joined Fitbit. Those five individuals are named as defendants in the lawsuit along with Fitbit.
The lawsuit stated: "As one Fitbit recruiter admitted in a moment of unguarded candor: 'Fitbit's objective is to decimate Jawbone.'"
Prior to the five employees leaving, the lawsuit alleges that they downloaded from their work computers onto USB thumb drives information related to the company's business plans as well as products and technology. The lawsuit also states that some of the employees used a product called CCleaner to conceal what they had done while others manually wiped their system logs to hide which files they had accessed in their last days with Jawbone.
Jawbone employees must sign a confidentiality agreement in which they agree not to disclose Jawbone company secrets to others. The agreement, which Jawbone says each of the five employees signed, also noted that when their employment ends, they would not "copy, delete, or alter any information contained upon my Company computer or Company equipment before I return it to Company." It also notes that if they had moved any company information to a personal device, they would return that information to the company and delete it from the personal device before leaving the company.
Jawbone is seeking:
- Compensatory damages plus interest and prejudgment interest in an amount to be determined at trial
- Other economic and consequential damages in an amount to be determined at trial
- Punitive and exemplary damages in an amount appropriate to punish or set an example of the defendants
- Preliminary and permanent injunctive relief to prevent the individual defendants from disclosing any additional trade secrets
- Restitution of all profits made by defendants in the past and future, as a result of having engaged in the wrongful conducts which has or will damage Jawbone
- Attorneys' fees, witness fees and the costs of the litigation incurred by Jawbone in amount to be determined at trial; costs of the suit incurred
Earlier this month, Fitbit was hit was a class action lawsuit that made seven claims against the company, including false advertising, unfair competition and fraud related to sleep data.