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Fitbit named in broad patent investigation -3

15:00 11-Jan-20


On 1/11/20 11:22 AM, a subscriber wrote:

What do you think the chances are that the ITC dismisses the claim entirely?

It's difficult to put a number on the chances, because the complaint (link added below) is confidential.  For those who don't know, though, Philips is a historically innovative company, not some patent troll.  This plus the specific list of companies named makes me think that this is probably not an overly broad patent.  So, there may be some merit, but it's also possible that Apple was avoided simply because of its clout.  Fitbit is American, while Garmin has its headquarters in Kansas, but is incorporated in Switzerland.  Of the other companies named, Ingram Micro is American while MainteK and Inventec are Chinese.  It's worth noting that Philips is based in the Netherlands, though it has a North American subsidiary; this is one case where the partiality shown by the current administration could conceivably work in our favor.

On 1/10/20 7:10 PM, Esekla wrote:

The U.S. International Trade Commission says it will investigate wearables from several device manufacturers, including Fitbit, in response to a patent violation claim by Philips.  Philips is asking for tariffs or an import ban, while Fitbit says the claim is "without merit."

I don't think this will affect the ultimate result of Google's Fitbit buyout, but it could create delay.  The average length of ITC investigations is well over a year, and even the shortest of them takes in excess of 9 months.  Since the correct way to value an arbitrage is (risk versus) annualized profit, time to conclusion is an important variable.  A settlement could wrap things up sooner, but I was anticipating regulatory challenges in any case.  Don't expect Fitbit to come to terms with Philips until those hurdles have been mostly cleared.

This isn't enough to scare me out of the arbitrage on FIT, but it is worth mentioning and tracking.