Groupon Sues Former Employees for Revealing its Trade Secrets to Google (Colleen McNicholas)

Groupon, the world’s biggest online coupon site, filed a civil lawsuit against former sales managers Brian Hanna and Michael Nolan, who left the company a month ago. Groupon alleges Hanna and Nolan took confidential trade secrets to their new employer Google. Groupon claims Hanna and Nolan’s work at Google will inevitably lead to disclosure of Groupon’s trade secrets. Groupon also claims Hanna and Nolan breached their employment agreement, which prohibited them from revealing confidential information and soliciting former clients for two years after leaving Groupon.

Groupon describes itself as the innovator of deal-of-the-day websites that provide consumers with discounted offers for goods and services that are targeted by location and personal preference. After Groupon rejected Google’s 6 billion dollar buyout last year, Google created Google Offers a similar daily deal website.

The complaint stated that “in their new positions with Google Offers and/or Google, Hanna and Nolan will provide the same or similar services as they provided at Groupon,” requiring them “to employ confidential and proprietary information that they learned while employed at Groupon.” The complaint states the confidential information the defendants were given and had knowledge of were Groupon’s deal history with merchants, pricing and structure of those deals, the identification of existing and prospective Groupon merchants, and Groupon’s in-house sales Wiki providing information regarding Groupon’s sales practices and strategies. Groupon also states in the complaint this information is not publicly available and was developed over time through substantial research.

Groupon alleges Hanna and Nolan did not return some of the company’s information it obtained during its employment. It also alleges Hanna emailed himself client information on his last day working for Groupon. Groupon alleges Google will use this information to compete with Groupon and as a result it will suffer irreparable injury. Groupon seeks damages for violation of the Illinois Trade Secret Act and contract damages.

Groupon will most likely be successful in establishing the information at issue are protectable trade secrets. Under the Uniform Trade Secret Act, which resembles the Illinois Trade Secret Act, to be a protectable trade secret the information must not be secret, some value must be derived from it not being generally known, and reasonable means of secrecy need to be taken. If the Court finds Groupons allegations in the complaint to be true, the three requirements for a protectable trade secret will most likely be met.  Courts will consider information to be secret if it is not generally known or not readily ascertainable. If Groupon is correct that the information at issue here is not publicly available, then it most likely meets the secret requirement.  The court will also most likely find that Groupon derives commercial value from the information the defendants had access to, since it gave Groupon a competitive advantage in the marketplace. Groupon also most likely took reasonable means to protect their secrets, since they had the defendants sign a confidentiality agreement in their employment contracts.

The information Groupon alleges Hanna and Nolan revealed to Google is most likely a protectable trade secret; therefore, it can be misappropriated. According to the Illinois Trade Secret Act, acquiring the trade secret by improper means or disclosing or using a trade secret that was acquired under a duty to keep secret or confidential constitute misappropriation. The court would have to find that the defendants disclosed to Google the information they acquired while at Groupon and agreed to keep confidential. The court also could find it improper for Hanna to email Groupon’s client information on his last day of employment.

If Illinois accepts the inevitable disclosure doctrine, it could be applied in this case.  Inevitable disclosure is applied when an employee’s knowledge and skills are inseparable from an employer’s trade secret such that the employee cannot avoid using the secrets for a subsequent employer. PepsiCo, Inc. v. William E. Redmond and the Quaker Oats Company, 54 F.3d 1262 (1995). General knowledge obtained can’t be protected. Groupon alleges the defendants in their new positions at Google will inevitably disclose Groupon’s trade secrets. A court could find these allegations to be true since it will be hard for Hanna and Nolan from using the knowledge they acquired from Groupon’s trade secrets, such as sales and operational plans, in a similar position at Google. The inevitable disclosure doctrine was applied to a similar case, PepsiCo, Inc. v. William E. Redmond and the Quaker Oats Company, where Redmond a high-level employee at PepsiCo had access and knowledge of its confidential trade secrets, such as marketing and pricing plans, obtained a similar position at PepsiCo’s competitor Quaker. The court found Redmond would inevitably disclose these secrets in his new job at Quaker, which would cause harm to PepsiCo since Quaker is a direct competitor with its sport’s drink line.

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This blog and its accompanying Twitter account have been established as social media learning tools for the Internal Communications and Employee Engagement class at Columbia College Chicago. Through this blog, we will share our observations about current events, change management and employee communications theory, and the application of social media in shaping employee engagement.
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