FitBit Inc: Should FIT Stock Investors Worry About Patent Disputes?

FIT StockFitBit Jawbone Patent Issues Weigh on FIT Stock

FitBit Inc (NYSE:FIT) abandoned its patent case against arch-nemesis Jawbone, losing a key battle but perhaps winning the war for the fitness tracking market. The two companies have been at loggerheads for years, a fact which kept Fitbit stock (FIT stock) shackled to the single digits.

However, the lawsuits helped Fitbit protect its market share. Researchers at IDC report that Fitbit controls more than 25% of the wearable tech market, whereas Jawbone is virtually non-existent. Jawbone’s slice of the market is so small that it didn’t even show up on IDC’s radar screen. (Source: “Jawbone Says Fitbit Drops Patent Challenge,” Fortune, December 24, 2016.)

Many analysts believe this was Fitbit’s motivation all along.

The company has been trying to ban Jawbone imports based on arcane patent disputes, but a judge swept those claims aside this summer. But this wasn’t a one-way street; Jawbone has been trying to pull a similar maneuver against Fitbit. It just wasn’t as successful.

Fitbit is now withdrawing from the fight, saying that, “Given the substantial change in Jawbone’s business condition, together with the limited relief available in a Section 337 action, Complainant withdraws its Complaint in this Investigation.”

Allow me to translate that statement from legalese to plain English: We think Jawbone is almost out of money, so there’s no point is fighting them. We’ve already won. It’s time to get back to our core business and to growing the value of FIT stock.

Obviously this kind of braggadocio doesn’t sit too well with Jawbone. The company is still pursuing several cases against Fitbit, including ones for antitrust and breach of trade secrets.

“Jawbone believes this case–involving patents already found once to be invalid–should have been dismissed long ago by Fitbit,” said Jawbone in a recent statement. “Fitbit’s pursuit of these baseless claims for so long was to burden Jawbone–an issue to be raised in Jawbone’s anti-trust claim against Fitbit.”

Since many of Jawbone’s complaints have already hit a wall in other jurisdictions, I am not overly worried about their lawsuits damaging Fitbit stock.

In fact, I’m more concerned by Fitbit’s manufacturing bottlenecks—and the overall slump in consumer electronics—than by patent disputes with Jawbone. Those are the real headwinds for FIT stock. At least now Fitbit can redirect its attention toward solving those problems.