Current and former Fitbit employees indicted on trade secret possession charges

Six current and former employees of Fitbit Inc. have been indicted on charges of possessing stolen trade secrets.

The charges, announced Thursday, are the latest event in a legal saga between the San Francisco-based exercise tracking device company and Jawbone, a now-defunct rival. All six of those charged were former Jawbone employees who left in 2014 and 2015 to join Fitbit.

Fitbit has denied any wrongdoing, saying the employees were acting on their own and that no Jawbone technology made it into its products.

The charges were announced by Northern District Acting U.S. Attorney Alex G. Tse and Homeland Security Investigations Special Unit In Charge Ryan L. Spradlin.

"Intellectual property is the heart of innovation and economic development in Silicon Valley," Tse said in a news release. "The theft of trade secrets violates federal law, stifles innovation, and injures the rightful owners of that intellectual property."

The defendants are scheduled to appear on July 9 in the San Jose courtroom of U.S. Magistrate Judge Virginia K. DeMarchi. United States v. Mogal et al., 18-CR00259 (N.D. Cal., filed June 14, 2018).

Each count comes with a potential for 10 years in prison and a $250,000 fine. Katherine Mogal, the former director of marketing at Jawbone, faces six counts. Two other defendants face four to five counts, while the others were charged with one or two counts. All signed certificates stating they had returned all Jawbone property.

The indictment accused the defendants of illegally possessing thousands of confidential files containing a wealth of Jawbone's private data about design, pricing and user preferences. It alleges Mogal took studies of consumers in Europe and China, both widely seen as growing markets for wearable fitness technology.

Two other employees are alleged to have taken information related to a project code-named Heisenberg. This multimillion-dollar effort to combine many separate technologies into a single small device came from a period when Jawbone claimed to have had a significant technological lead over Fitbit.

Jawbone initially filed a civil suit against Fitbit. It claimed some of its technology ended up in the Fitbit Alta, the once-ubiquitous narrow wrist devices. AliphCom Inc. dba Jawbone v. Fitbit Inc. et al., GCG-15-564004 (S.F. Super. Ct., filed May 27, 2015).

Jawbone also filed a complaint with the U.S. International Trade Commission, alleging Fitbit poached staff and infringed its technology. A commission judge rejected that claim in 2016.

The two companies agreed to settle their legal claims in December. In the midst of the litigation, however, Jawbone disclosed in court documents in February 2017 that there was a federal criminal investigation of Fitbit and the former Jawbone employees. When the indictments were announced last week, Spradlin said his agency had spent more than two years investigating Jawbone's allegations.

Jawbone founder Hosain Rahman announced last year he was forming a new company, Jawbone Health, to focus on medical devices connecting patients and doctors. That company released a statement saying the indictments "validate the claims we made in our 2015 lawsuit against Fitbit."