Just As It Prepares For Its IPO, Fitbit Is Hit With A Lawsuit From Jawbone

3-6-2013 7-57-27 PM

Earlier this month, Fitbit filed for an IPO that it hopes will raise an additional $100 million in capital. The offering is backed by what analysts are calling “phenomenal” financial figures and growth forecasts, setting Fitbit up for what seemed like a slam dunk IPO. Now, however, the road to its IPO has gotten a bit more complicated, as activity tracker rival Jawbone has filed a lawsuit against Fitbit alleging that the company stole confidential information through a series of strategically poached employees.

The lawsuit, filed yesterday in the state of California, charges Fitbit with “systematically plundering” information from Jawbone by hiring employees who downloaded strategically sensitive and confidential information just before quitting. “This case arises out of the clandestine efforts of Fitbit to steal talent, trade secrets and intellectual property from its chief competitor,” says the court documents. The document goes on to allege that Fitbit’s recruiters contacted nearly one-third of Jawbone’s employees this year, and while some of those employees left without downloading protected information, others copied Jawbone’s future product and business plans prior to departing. Some employees went so far as to use third-party software to delete system log files in an effort to cover up their actions. Fitbit’s own executives have acknowledged poaching staff from Jawbone, but have adamantly denied allegations that it also stole confidential information.

One example outlined in the court case is that of Ana Rosario, a Jawbone employee who was hired by Fitbit on April 16, but who continued working for Jawbone until April 20th, during which time she held a meeting with Jawbone’s senior director of product development to discuss future development plans, and then downloaded the company’s future products playbook. In her exit interview with Jawbone, Mrs. Rosario acknowledged downloading the materials.

While Fitbit’s financial performance has been stellar over the last few years, Jawbone has faced increased scrutiny over its inability to achieve profitability. The company raised a $300 million funding round in 2014, but prior to that, it had already taken $279 million in venture funding as well as a $100 million debt-backed round in September 2013. In total, Jawbone has raised north of $600 million in outside investments.

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