[BreachExchange] Jawbone Fails to Prove Trade Secret Misappropriation by Fitbit at ITC

[Audrey McNeil]

http://www.natlawreview.com/article/jawbone-fails-to-prove-trade-secret-
misappropriation-fitbit-itc

Trade secret theft is a growing threat to American businesses. One obstacle
to addressing misappropriation through a lawsuit can be a lack of direct
evidence of theft. For example, if an employee leaves his company to work
for a competitor and, some months later, the competitor comes out with a
product similar to that of the original employer with features previously
unique to the original product, it might be inferred that the employee
improperly took trade secret information to the competition. A decision in
the U.S. International Trade Commission (ITC) this past summer suggests
that these facts, without more compelling evidence, may be insufficient to
support a finding of trade secret misappropriation. The decision is an
important reminder to all trade secret owners to develop a comprehensive
trade secret management plan that tracks a company’s trade secrets and who
has access to them so that theft can be documented and used in judicial
actions, if necessary.

In August 2015, the ITC instituted an investigation based on allegations by
Jawbone that Fitbit misappropriated 154 Jawbone trade secrets through the
recruitment of a former Jawbone employee. The trade secrets at issue
generally relate to the manufacturing and testing of Jawbone wrist worn
activity monitors that track a user’s activity and the number of calories
the user has expended.

One allegedly stolen trade secret related to wireless antennas and
transceivers used on the accused products. Jawbone alleged that the trade
secret information was misappropriated by a former Jawbone employee, a
program manager, who retained the information and took it with her to
Fitbit. While working on wearable devices at Jawbone, the employee
forwarded to her personal email documents relating to an antenna design on
Jawbone wearables. Jawbone argued that only after the employee began to
work at Fitbit did Fitbit “for the first time in its company history” and
“without any evidence of study or validation of its feasibility” select the
same antenna design as that used by Jawbone. To prove misappropriation,
Jawbone relied entirely on circumstantial evidence.

In an August 23, 2016 initial determination, ALJ Lord rejected Jawbone’s
assertions. Recognizing that trade secret misappropriation can be proven by
circumstantial evidence, the ALJ found Jawbone’s assertions of what
embodied the trade secret so “vague and contradictory” as to make it
impossible to determine what constituted trade secret information. The ALJ
also found Jawbone’s allegations contradicted by the factual record and
thus unconvincing.

Jawbone’s failure to prove trade secret misappropriation provides guidance
for future complainants at the ITC contemplating allegations of trade
secret misappropriation where it is likely only circumstantial evidence
will be discoverable:

"Clearly define your trade secret. Jawbone’s attempt to prove trade secret
theft failed, in part, due to its inability to specify what information it
considered a trade secret. The initial determination explains that “[t]he
content of alleged trade secret no. 98 has been a moving target throughout
this investigation,” varying from antenna placement, to antenna design, to
antenna configuration, to choice of antenna. Additionally, the trade secret
description became “increasingly abstract and amorphous.” The Restatement
of Torts (3d) § 757 makes clear that “[a] person claiming rights in a trade
secret bears the burden of defining the information for which protection is
sought with sufficient definiteness to permit a court to . . . determine
the fact of an appropriation.” Practitioners of trade secret
misappropriation cases should be keenly aware of this requirement and be
sure to clearly define the boundaries of the stolen trade secret. A
well-developed trade secret asset management plan will greatly assist in
this process."

Circumstantial evidence must be convincing. Jawbone’s allegations of
misappropriation of trade secret no. 98 relied on circumstantial evidence
that (1) a Fitbit product on which the former Jawbone employee worked had a
similar antenna design to a Jawbone product on which the employee also
worked, and (2) that the employee retained some Jawbone information after
leaving the company.

The ALJ credited rebuttal testimony that the employee was not responsible
for antenna design at either Jawbone or Fitbit, however, and further found
it likely that the allegedly stolen antenna design was independently
developed by Fitbit and that any retention of Jawbone information by the
employee was unintentional. Based on these determinations, the ALJ found
that the employee did not steal any trade secret information. This
determination is a good reminder that while circumstantial evidence can be
sufficient to prove trade secret misappropriation, it must be compelling to
do so.

The ITC has seen a recent uptick in trade secret related cases under
Section 337. With the increasing threat of trade secret theft, American
corporations are evidently utilizing the powerful remedies available in a
Section 337 investigation, which can include an order excluding importation
into the United States of all of a specified product. With the recent
passage of the Defend Trade Secrets Act (see coverage here), and the
promise of a more uniform federal trade secret jurisprudence to be applied
at the ITC, practitioners should be aware of the teachings of this and
other trade secret cases at the ITC to track this quickly evolving area of
law.
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