For a handful of current and former Fitbit Inc. employees accused by the feds on Thursday of possessing trade secrets stolen from Jawbone, it must be a feeling of, “Here we go again.”
The six people indicted Thursday by a federal grand jury for possessing stolen trade secrets were witnesses in a 2016 U.S. International Trade Commission proceeding that found no theft of trade secrets. A separate civil proceeding in California state court fizzled last fall after plaintiff Jawbone went out of business.
Now the San Francisco U.S. Attorney’s Office is picking up the baton following an investigation by the Department of Homeland Security. Thursday’s indictment alleges that Katherine Mogal, Ana Rosario, Patrick Narron, Patricio Romano, Rong Zhang and Jing Qui Weiden possessed Jawbone’s technical and financial data, marketing plans, pricing information and other trade secrets after resigning from the company in 2014 and 2015.
“This office, together with our law enforcement partners, is committed to protecting the intellectual property rights and economic security of this district,” Acting U.S. Attorney Alex Tse of the Northern District of California said in a press release announcing the indictment.
Five of the six employees are no longer with Fitbit, according to a company spokesman. He also pointed out that an International Trade Commission judge held a nine-day trial on Jawbone’s claims in 2016, and “found that no Jawbone trade secrets were misappropriated or used in any Fitbit product, feature or technology.”
That had not been enough to convince San Francisco Superior Court Judge Richard Ulmer to dismiss Jawbone’s state court trade secret action. “Because the scope and jurisdiction of an ITC proceeding is limited, not all of the issues raised in our case were adjudicated,” Ulmer wrote in an order last year. Those issues included “acquiring trade secrets.”
That case ended when Jawbone struck a global settlement with Fitbit in December, several months after Jawbone had begun liquidating its assets.
Homeland Security Investigations (HSI) has been conducting its own investigation for more than two years. Thursday’s indictment doesn’t allege that Fitbit used the trade secrets, but contends that the employees possessed them after leaving Jawbone with the intent to benefit someone other than Jawbone.
Five of the six employees left Jawbone in March and April of 2015 to join Fitbit. At Jawbone they had held positions ranging from marketing director to supply chain manager to audio and design engineering and research.
Each is accused of possessing one or more of 14 different trade secrets. Among them are design and technical specifications, internal presentations and email discussions that relate to Jawbone’s unreleased Heisenberg fitness headphone product. The product incorporated gyroscopes, accelerometers, magnetometers and an optical heart rate monitor.
“Such data was highly proprietary, represented a multimillion-dollar investment into research and design, and was a critical part of Jawbone’s historical strategic advantage in headphones and speakers over its competitors, particularly Fitbit,” the indictment stated.
The alleged secrets also include a Chinese market study; vendor and pricing information; and spreadsheets detailing Jawbone product costs, margins and action plans.
The defendants face maximum sentences ranging from 10 to 60 years, and fines ranging from $250,000 to $2.5 million, according to the U.S. Attorney’s Office. Assistant U.S. Attorney Amie Rooney is prosecuting the case with assistance from Nina Burney Williams and Elise Ette.
Orrick, Herrington & Sutcliffe had represented the employees in the state court proceedings.