United States: Patent Disputes Over Wearables May Herald Broader Patent Litigation Regarding The Internet Of Things

The Internet of Things (IoT) refers to a network of physical objects containing sensors or actuators along with electronics for network connections and data communications. The IoT will impact many aspects of daily life, including the home, the workplace, transportation, healthcare, and health/fitness/wellness. For instance, IoT-equipped homes—smarthomes—will allow owners to remotely monitor and control lighting, heating, cooling, appliances, and security systems. Sensors and actuators may automatically turn lights on and off as someone moves from room to room and automatically adjust brightness depending on the preferences of a room occupant. A heating or cooling system may switch on to prepare for an arrival time calculated and sent by a smartphone. Moreover, smartcars could communicate and coordinate with each other to optimize traffic flow. Last year, McKinsey projected that the IoT will have a potential economic impact in 2025 between about $4 trillion and $11 trillion.

The IoT includes wearable devices or wearables, such as smartwatches, fitness and activity trackers, eyewear, and hearables (ear-worn devices) as well as augmented-reality and virtual-reality headsets. Among other things, wearables can measure various physical parameters, such as heart rate and blood pressure, and monitor various activities, such as exercise and sleep. One market-research firm estimated that sales of wearables in 2020 will exceed 400 million units and $34 billion.

Patents relating to wearables can cover device and sensor hardware, network connectivity and communications protocols, data security and encryption, power management, data analytics, and user applications. Another market-research firm reported that between 2010 and mid 2015 more than 40,000 patents on wearable electronics have been published and that related patent filings have increased by about 40% per year.

The smartphone patent wars that started in 2009 when Nokia sued Apple have largely ended. Apple's 2011 lawsuit against Samsung continues. The Supreme Court in mid March 2016 agreed to consider a question presented by Samsung concerning damages for design-patent infringement. The next day, the district court indefinitely postponed a retrial on damages scheduled to begin in late March because the question now at the Supreme Court plays a pivotal role in the retrial. Other than that 2011 case, however, lawsuits between competing manufacturers have been resolved.

But patent battles over wearables have started. For instance, in February 2014, Adidas sued Under Armour for infringing several patents relating to fitness training and tracking devices. According to Adidas, the asserted patents generally concern systems and methods that propose fitness routes to users (e.g., jogging routes), track a user's performance and location remotely and in real time, correlate and display performance information, and permit users to share information about their fitness activities. The district court has scheduled a trial for June 2016.

After Adidas started the ball rolling, AliphCom (doing business as Jawbone) and Fitbit attacked each other. In May 2015, AliphCom sued Fitbit and five former AliphCom employees in California state court alleging, among other things, trade-secret misappropriation and unfair competition. AliphCom contended that Fitbit recruiters contacted about 30% of AliphCom's employees and induced five to join Fitbit and that those employees took confidential and proprietary information with them to Fitbit.

In June 2015, about two weeks after filing in California state court, AliphCom and its subsidiary BodyMedia sued Fitbit in California federal court alleging infringement of three patents. And in July 2015, AliphCom and BodyMedia filed a complaint with the International Trade Commission alleging infringement of the same three patents asserted in California federal court as well as three additional patents. In the ITC proceeding, AliphCom and BodyMedia also alleged trade-secret misappropriation.

According to AliphCom and BodyMedia, all six patents asserted against Fitbit relate to wearable fitness and activity trackers used for monitoring and reporting on health and wellness metrics. For instance, one of the patents concerns trackers with sensors for detecting certain user data and generating health and wellness recommendations based on a target score derived from the sensed data, while another patent concerns power-consumption management for trackers.

Fitbit responded with its own series of lawsuits. In September 2015, Fitbit sued AliphCom and BodyMedia in Delaware federal court alleging infringement of three patents. Five days later, Fitbit sued AliphCom and BodyMedia in California federal court alleging infringement of three different patents. Then, in October 2015, Fitbit filed a complaint with the ITC alleging that AliphCom and BodyMedia infringe three additional patents.

So Fitbit has asserted nine patents against AliphCom and BodyMedia in three different proceedings. In the California case, the asserted patents concern the wireless pairing of a tracker to another device, such as a smartphone or tablet computer. After pairing, the devices communicate with little or no user interaction, for example, to transfer sensor data collected by the tracker. In the Delaware case, which was transferred to California in December 2015, the asserted patents generally relate to wearable fitness and activity trackers, such as trackers having heart-rate monitors and methods for notifying a user that he or she has met a predetermined goal, such as walking a certain number of steps. In the ITC proceeding that Fitbit initiated, the patents also relate to wearable fitness and activity trackers, including trackers that calculate activity points based on the amount of a user's physical activity and display the results to the user.

In the California federal case filed by Fitbit, AliphCom and BodyMedia responded by contending that Fitbit asserted frivolous patent claims against them. In addition, they asserted an antitrust counterclaim against Fitbit for unlawful monopolization of the market for personal fitness trackers.

In their respective lawsuits, the parties have requested several forms of relief. In the California state case filed by AliphCom, it seeks compensatory damages, punitive and exemplary damages, and an injunction preventing disclosure and use of trade secrets. In the federal patent cases, the respective patent owners seek compensatory damages and an injunction prohibiting further infringement of the asserted patents. In the ITC proceedings, the patent owners seek (1) an exclusion order preventing its competitor from importing infringing products and (2) a cease-and-desist order preventing its competitor from selling infringing products already imported. And in their antitrust counterclaim, AliphCom and BodyMedia requested treble damages due to Fitbit's allegedly anticompetitive conduct.

It may take courts some time to resolve the issues in the pending lawsuits over fitness and activity trackers. The smartphone patent wars may provide guidance concerning timing. As noted above, Apple's 2011 lawsuit against Samsung continues with no clear end in sight. But other manufacturer-versus-manufacturer suits ended in less time, depending on whether the parties settled or proceeded to trial.

The pending lawsuits over fitness and activity trackers presage wider patent disputes over IoT technologies as they mature and more products become available to consumers. There are relatively few competitors in the smartphone market. In contrast, several companies sell fitness and activity trackers, including Adidas, Basis, Garmin, Mio, Microsoft, Misfit, Moov, Nike, Polar, Samsung, Sony, TomTom, Under Armour, and Xiaomi. Moreover, those trackers constitute a fraction of wearables and a much smaller fraction of the IoT.

Companies continue to develop IoT patent arsenals in an intellectual-property arms race. Just as patent battles have erupted over fitness and activity trackers, patent owners in other IoT sectors will no doubt employ their patents in efforts vanquish competitors and fight for market share.

Various commentators have discussed lessens learned from the smartphone patent wars. Hopefully, IoT litigants will not need to relearn those lessens during or after costly and lengthy patent litigation.

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