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Jawbone's Legal Troubles Aren't Going Away

By Chris Neiger – Sep 21, 2016 at 8:07AM

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A decision from the International Trade Commission could bring more problems for Jawbone -- and be a boon for Fitbit.

Image source: Jawbone.

Earlier this month it became clear that Jawbone's legal troubles have done anything but subside. The company has been embattled in a lawsuit with Fitbit (FIT) over patented technologies, but the latest judge's decision will make it even harder for Jawbone to use its patents against the world's leading wearable tech company.

A decision from the International Trade Commission (ITC) said that a previous trade judge's ruling that Fibit's patents weren't eligible for legal protection was incorrect. That means that Fitbit could use existing patent laws to prevent Jawbone from importing some of its devices from Asia, where many of its products are manufactured. 

Both companies have opposing views of the ITC decision, of course. A statement from Fitbit (republished on Bloomberg) said, "We are confident in the strong legal bases underlying our patent infringement claims." 

Jawbone said, "We also believe the judge will find Fitbit's patents are not infringed by any Jawbone products and that Jawbone's own patents predate the patents Fitbit is trying to assert."

It's not definite that Fitbit will be able to block Jawbone's sales of certain devices in the U.S., of course, but the latest decision will likely make it more difficult for Jawbone to win its overall legal fight with Fitbit. Jawbone is the middle of trying to get a separate decision overturned that said that some of its patents weren't valid, along with a judge's decision that that said Jawbone hasn't had any trade secrets stolen. In short, there's a lot for Jawbone to appeal these days.

Where the companies stand

It's hard not to view Jawbone's lawsuits as a last-ditch effort to stay in business. The company was once a key player in the wearable technology space, but now doesn't even make it on the top five vendor list, according to IDC.

Meanwhile, Fitbit is currently ruling the wearable tech space with 5.7 million device shipments the second quarter of this year. Its closest competitor, Xiaomi, shipped 3.1 million, and Apple followed in the third spot with just 1.6 million.  

Fitbit's success clearly doesn't mean Jawbone's lawsuits or claims are invalid, but it does indicate that these lawsuits may be Jawbone's best bet at staying in the wearable tech space (unless it finally releases a clinical-grade wearable tech device). 

Don't expect to hear anything final about the ongoing litigation between the two companies anytime soon, as a final decision for this most recent legal battle isn't expected until sometime next year. 

And while the most recent decision is in favor of Fitbit, the company is likely more focused on which products it'll release next in order to outpace Apple than it is in beating Jawbone in the courtroom. Fitbit doubled its operating expenses in the most recent quarter on a year-over-year basis, with most of that coming from research and development and marketing. 

Those expenses appear to have paid off, with Fibit continually outpacing every other wearable technology company. It may be wise for Jawbone to take a leaf out of Fitbit's book, and focus its attention on new products, rather than new litigation.

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple and Fitbit. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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