Jawbone sues Fitbit, claiming it poached key employees who then took secrets with them

Hosain Rahman JawboneREUTERS/Rick WilkingHosain Rahman, CEO and co-founder of Jawbone

Fitness tracking device maker Jawbone is suing rival company Fitbit, alleging that Fitbit has poached Jawbone employees who downloaded confidential information before leaving for Fitbit, the New York Times reports.

Jawbone sued Fitbit on Wednesday in California State Court. “This case arises out of the clandestine efforts of Fitbit to steal talent, trade secrets and intellectual property from its chief competitor,” Jawbone’s lawyers say in the complaint.

Jawbone’s lawsuit alleges that earlier this year, Fitbit’s recruiters tried poaching Jawbone employees. Those who left for Fitbit downloaded copies of confidential Jawbone information on thumb drives and took them to Fitbit.

The lawsuit cites several examples of former Jawbone employees who put in their two weeks’ notice without indicating that they were leaving for a rival company, and then allegedly took confidential documents from Jawbone with them upon leaving.

Fitbit filed to go public earlier this month, and it’s quickly growing and profitable. In its S-1, the company says that in 2014 it had net profits of $US132 million from operations, on revenue of $US745 million. Including stock-based compensation and other adjustments, Fitbit’s net income was $US38.5 million. The company’s revenue grew almost 10X in the past two years.

In comparison, Jawbone has encountered a few bumps in the road. Recently, Jawbone delayed the launch of its latest product, the Up3. Bloomberg View suggests that the $US300 million round Jawbone raised in February from BlackRock wasn’t actually equity investment, but a loan that had some strict terms — if Jawbone gets bought up, BlackRock will be paid before other investors. The financial management firm will also be able to dictate how Jawbone spends its money as a company.

Earlier this year, numbers from financial data tracking startup Mattermark indicated that Jawbone was a “unicorn” — a private company with a valuation exceeding $US1 billion — which was considered to be at risk of failing.

Jawbone is seeking financial damages in its lawsuit. Jawbone also wants to keep its ex-employees from using the information that Jawbone says they took from the company, the Times reports.

We reached out to both Jawbone and Fitbit for comment on this story, and will update this story accordingly.

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