What your company can learn from the Fitbit trade secret lawsuit

In August, a U.S. International Trade Commission judge cleared Fitbit, a company that produces wearable fitness trackers, of stealing trade secrets from Jawbone, a competitor that produces similar products. The decision comes after a year-long legal battle-something that few companies want to find themselves in. Here are some lessons from the lawsuit and insights on how you can protect your own trade secrets.

Jawbone filed suit against Fitbit in July 2015, alleging the company poached Jawbone employees and encouraged them to share confidential data. Jawbone claims that Fitbit began contacting a significant portion of its workforce in early 2015 and convinced at least five employees to leave the company. Employees brought with them portable USB devices that held confidential business information regarding financial data, product plans, and supply chains.

Jawbone uncovered the alleged stealing of trade secrets by looking at the former employees’ email history. According to Law360, “Jawbone says it conducted analyses of its former employees’ work computers, which revealed the downloading of confidential information and, in some cases, former employees who forwarded company data to personal email addresses for later use.”

In addition to stealing trade secrets, Jawbone also alleged that Fitbit infringed on six of its patents, although each of these patents were withdrawn or invalidated in court by the time the trial began in May.

Fitbit, denied the claims, saying that “As the pioneer and leader in the connected health and fitness market, Fitbit has no need to take information from Jawbone or any other company.” At the time of the lawsuit, Fitbit was also preparing for an IPO.

Ultimately, the judge determined that Fitbit did not misappropriate any trade secrets and there was no violation of the Tariff Act. The determination can be found here, and indicates a more detailed explanation “shall issue within 30 days.”

Jawbone hoped that the ITC would rule in its favor and prevent Fitbit from importing products made in foreign manufacturing facilities to the U.S. However, Fitbit remains the largest company in the wearable fitness tracker space.

Although the lawsuit did not result in the outcome that Jawbone hoped for, the case serves as a warning for businesses that rely on trade secrets for a competitive edge. Trade secrets can be incredibly valuable, so for businesses to know how to protect them. Here are five basics:

  • Catalogue and protect your trade secrets. If you fail to take precautions to protect your trade secrets, you may lose out on legal protections if you ever to go court to fight for them. They are called trade secrets for a reason-if a judge determines that you failed to actually keep them secret, your legal options are limited. Make sure documents like non-compete agreements and confidentiality agreements are current.
  • Limit who knows about them. Trade secrets should be shared on a “need to know” basis. The more people who know about them, the more chances there are for them to be exposed, or bet determined they are not actually secrets.  And make sure trade secrets are kept in a safe place that snooping employees cannot access, whether it is in a computer folder with restricted access or a locked file cabinet.
  • Educate staff on why it is important to protect them. Lower-level and newer employees typically have a lesser commitment to the company than founders or owners. It is critical for the senior employees and officers to explain and emphasize why trade secrets need to be protected and the consequences that can result if they are not. Make it clear that trade secrets are not to be shared even after employees move to a different company.
  • Have a protocol for when employees leave. Do not find yourself in a situation similar to the one that Jawbone alleged. Pay attention when an employee gives notice. Are files moving around? Are abnormally large emails being sent? Are employees leaving the office with lots of folders or paperwork? Take note of what’s happening. Even better, consider immediately restricting information access upon receiving notice.  Maybe even ask the employee to leave immediately or treat the last two weeks as paid leave.
  • Understand your legal protections. Before you find yourself with a case of stolen trade secrets, make sure that you take the legal actions necessary to prevent an issue before it happens. Have an attorney review your documents like non-competition and confidentiality agreements, telecommute policies, and policies on use of personal devices for work.

If you would like to know more about best practices for protecting your trade secrets, or if you’re concerned that your trade secrets may have been compromised, contact Chernoff Law Firm today.