Fitbit (NYSE:FIT) won the latest round of its ongoing legal fight with AliphCom's Jawbone when the U.S. International Trade Commission, or ITC, ruled that Fitbit did not misappropriate the latter's trade secrets. Don't expect the fight to end anytime soon, though, as another judge just overturned a previous ruling that will allow Fitbit's patent infringement suit against Jawbone to proceed. It appears the legal battle between the two fitness-tracking device makers is just heating up.
Fitbit: 1, Jawbone: 0
In the long-running legal battle that started in May 2015, Jawbone accused Fitbit of stealing trade secrets and patent infringement. Earlier this year, the U.S. ITC invalidated the sleep monitoring and data output patents Jawbone claimed Fitbit had infringed upon. In the ruling, Judge Dee Lord stated the patents "seek a monopoly on the abstract ideas of collecting and monitoring sleep and other health-related data, and are therefore ineligible." While the patent infringement was just part of Jawbone's claims against Fitbit, the U.S. ITC recently issued another ruling in favor of Fitbit and said the company had not misappropriated trade secrets from Jawbone. The company had been attempting to block the import of Fitbit's devices to the United States under the Tariff Act. Naturally, Jawbone was not pleased with the U.S. ITC's recent ruling and has already announced plans to appeal.
Although the ruling is a win for Fitbit, other lawsuits between the two companies are still pending in federal and state courts. The claims involved in the lawsuits are basically the same claims in the complaints to the U.S. ITC. Jawbone alleges that Fitbit stole trade secrets when it hired former Jawbone employees and infringed on several of its patents. Jawbone accuses its former employees of stealing at least 335,191 files, which included schematics, manufacturing data, and product launch schedules, when Fitbit first hired them.
I'm sure Fitbit investors breathed a sigh of relief after the recent U.S. ITC decision, because a ruling in favor of Jawbone would have had a devastating impact on Fitbit's business. In a prepared statement, Fitbit co-founder and CEO James Park said:
We are pleased with the ITC's initial determination rejecting Jawbone's trade secret claims. 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.
Fitbit: 2, Jawbone: 0
Fitbit had also filed a lawsuit against Jawbone last November alleging that Jawbone had infringed upon three of its patents and sought to block the import of Jawbone's devices to the United States -- sounds familiar, right? Earlier this year, a U.S. ITC judge ruled that Fitbit's three patents at the center of the case were invalid and stopped the case from moving forward. Fitbit appealed the decision, and the U.S. ITC found the trade court's ruling invalidating two of the patents focused on heart rate monitoring and portable monitoring devices was wrong. It did uphold the ruling that the third patent was invalid, however.
So that was another win for Fitbit in its ongoing legal battle. The tables have turned for Jawbone as this ruling clears the way for Fitbit to attempt to block Jawbone from importing its products. But it could be a while before rulings are issued in the various pending cases. Depending on their outcomes, a ruling in favor of either company could prove to be very advantageous -- and potentially devastating to the loser.
Ben Estep owns shares of Fitbit. The Motley Fool owns shares of and recommends Fitbit. Try any of our Foolish newsletter services free for 30 days. 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.