A criminal grand jury is investigating Fitbit over trade secret allegations

By Jonah Comstock

Fitbit's alleged theft of trade secrets from Jawbone, already the subject of a closed ITC case and an ongoing civil court, is being investigated in a third and more serious venue: a criminal grand jury probe, conducted by the Department of Justice and the Department of Homeland Security, that has been looking into the matter for five months, according to a new court filing by Jawbone. Bloomberg first reported the news.

Grand jury investigations are secret; the only reason this investigation has been made public is that Jawbone made the assertion in a filing in the ongoing civil case. Jawbone was responding to Fitbit's motion for a dismissal, arguing that the ITC judge had already investigated and dismissed the claims. 

"After a full examination of the issues and Fitbit's resounding victories at the ITC, coupled with Jawbone’s complete failure in the marketplace and reported insolvency, Jawbone is now attempting to exert leverage against Fitbit in civil litigation pending in the California state court," Fitbit said in a statement earlier this week. "Fitbit is cooperating with the U.S. Attorney's Office to demonstrate, once again, that these allegations are without merit."

The suit alleges that Fitbit sent recruiters after nearly a third of Jawbone employees, and that five of those employees took information about Jawbone’s current and future business plans and products with them on thumb drives. In the filing Jawbone describes one of its former employees as requesting a meeting with company executives to better understand the company's future strategy and get a look at prototype devices for future products. Weeks before leaving to join Fitbit, she then downloaded the presentation, which Jawbone said was its "Playbook for the Future" onto her personal computer.

ITC Judge Dee Lord dismissed the case in August, noting that "no party has been shown to have misappropriated any trade secret", but at the time the full text of her decision was not available because it was being redacted for trade secrets. The now-available document addresses each alleged trade secret in detail -- and shows that this could be a hard fight for Jawbone to win, unless the grand jury turns up new evidence.

In one, Lord says "Complainants’ allegations are so vague and contradictory that it is not possible to determine what constitutes alleged trade secret no. 98, much less to determine whether it was misappropriated. Moreover, Complainants’ allegations are contradicted by the factual record, which refutes any inference of misappropriation. Accordingly, Complainants have not satisfied their burden to make out a prima facie case of trade secret misappropriation."

For another, Lord writes "Complainants’ theory of how an alleged misappropriation may have occurred is highly speculative." She goes on to assert that there's also no evidence of Jawbone's having been financially harmed by the alleged trade secret appropriation.