Phillips Sues Google Over FitBit Patent, Could Discontinue FitBit Sales

Philips North America LLC PHG has sued Alphabet Inc. GOOGL for infringing on a patented technology that they claim is used in Fitbit devices. A Massachusetts Federal Judge has decided the claims have merit and ruled not to throw out the case.

What Happened: Phillips has a patent for using the internet to monitor exercise activity, and their suit alleges that Fitbit technology infringes on that patent. 

In January, Fitbit closed a sale to sell itself to Google at a valuation of $2.1 billion. Before the sale, Fitbit was battling similar patent claims. But now, Google is responsible for all legal issues related to FitBit products. 

The case is still in its early stages, but the judge that will be responsible for the final ruling admitted that for now, "the court must accept as true the complaint's non-conclusory allegations."

Why It's Important: Google's intention with acquiring Fitbit was to "spur innovation in wearables." However, if the court rules that FitBit products infringe on a Phillips patent, there will be a significant loss for Google. In 2020, FitBit produced $1.13 billion in revenue. 

The judge could potentially order that Google pay out compensation to Phillips and stop selling the products that the court finds to be infringing the patent. 

Google has just acquired FitBit, so being ordered to stop Fitbit sales could cost them almost all $2.1 billion that they spent to buy the fitness device company. Additionally, the fine they could be ordered to pay would almost certainly exceed hundreds of millions of dollars. 

However, even if the court does not find that FitBit infringes on a patent, the health device still does not seem to be producing good outcomes for Google. For the past five years, FitBit sales have been declining almost 20 percent year on year.