Garmin Sued by Former Shareholders of Payments Startup Fit Pay

NEW YORK, Feb. 25, 2020 /PRNewswire/ -- The former shareholders of payments startup, Fit Pay, Inc. have filed a Complaint in federal court in the Southern District of New York against Garmin International alleging the company unjustly benefitted from the acquisition of the technology that powers its Garmin Pay contactless payment feature. The Complaint claims that Garmin forced the breach of an earn-out agreement between the Fit Pay founding shareholders and its parent company, Nxt-ID. 

The Complaint, which names Garmin International, Inc., asset lender CrowdOut Capital, LLC, and Nxt-ID, Inc. as defendants, includes multiple causes of action including breach of contract, unjust enrichment, and tortious interference with a contract, among others.

According to the filing, "Garmin continues to profit off the Fit Pay technology, which it acquired at a fire sale price, at Fit Pay Shareholders' expense. It is against equity and good conscience to permit Garmin to continue to retain all of the revenue attributable to Fit Pay's technology and Fit Pay Shareholders are entitled to restitution."

Garmin, the 5th-ranked producer of smartwatches in the world, launched the Garmin Pay contactless payment in November 2017 powered by Fit Pay's technology and platform. The feature, which is now included in over 60 Garmin devices, enabled Garmin to offer a capability comparable to Apple's popular Apple Pay service. 

By leveraging Fit Pay's technology, Garmin joined Apple, Google, and Samsung as one of only five companies in the world with a payment network certified, commercially live tokenized contactless payment capabilities. These payment capabilities enabled Garmin to go toe-to-toe with its larger competitors during a period in which its market share grew from less than 1 percent to more than 6 percent, and its market capitalization grew by nearly $5 billion.

The Complaint follows an announcement in January by the US International Trade Commission (USITC) that is investigating allegations by Koninklijke Philips that Garmin and Fitbit, Inc. violated its patents to produce their wearable products. The Complaint and the USITC investigation highlight the pressure on companies in the highly competitive smartwatch category to acquire and launch new technology. This rush to innovate often comes at the expense of the companies responsible for developing the core technologies behind key features.  

The Complaint was filed in the United States District Court for the Southern District of New York. It seeks actual, compensatory, consequential, and punitive damages. The plaintiffs are represented by Wilmer, Cutler, Pickering, Hale and Dorr, LLP.

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SOURCE Fit Pay Shareholders