Infogroup sues Gupta's new firm over trade secrets
Infogroup has accused founder and former CEO and Chairman Vinod Gupta of stealing confidential company information and using it to develop a client base for his competitive startup Database101. Infogroup also claims Gupta is marketing this venture in a way that makes it appear associated with Infogroup.
In a complaint (see attached PDF) filed Sept. 7 in Nebraska's Douglas County District Court, Infogroup claims it conducted several tests that indicated Database101 was in possession of Infogroup's customer data and actively using it to pursue Infogroup's client base.
For example, Infogroup said Database101 sent a direct marketing solicitation to a fictitious account that was planted in Infogroup's customer database to detect unauthorized access. The lawsuit also says Gupta's new company contacted an Infogroup employee using an email address that was created only for communications between the employee and Infogroup. Database101 “could not have identified the account without unlawful access to Infogroup's trade secrets,” according to the complaint.
Gupta characterized this as "hogwash," saying that Infogroup employees received communications from Database101 after registering with the company's website. He vowed to fight what he calls "a publicity stunt" on the part of Infogroup, and said he believes his company has "strong grounds for a countersuit."
"When we started the website, over 2,000 times their employees bombarded our website," he said. "They would come in and register and see what we had. Anyone who registers with our website gets our direct mail."
Infogroup's complaint says the company “implemented its scheme to unfairly compete with Infogroup” by systematically hiring more than 20 former Infogroup employees, especially those who had access to trade secrets, including executives, IT professionals and salespeople. Gupta counters that Infogroup also tried to poach Database101's employees, successfully luring away Gupta's "top software designer."
The suit names one Database101 employee as a defendant, Tracy Hyman, who Infogroup claims reviewed and may have exported a number of highly confidential client records — “the vast majority of which related to customers with whom he had no relationship” — during his last four weeks of employment. Hyman is currently VP of enterprise sales at Database101, according to the complaint.
The suit also alleges that Database101 has attempted to associate itself with Infogroup by publishing a similar catalog of goods and services that ties the two businesses together by emphasizing that Gupta founded both.
Although Gupta founded Infogroup in 1972, he was permanently barred by the Securities and Exchange Commission (SEC) in 2010 from acting as a director or officer of any public company after he settled a civil suit for allegedly misusing Infogroup company funds. He resigned from Infogroup's board and sold his interest in the company shortly thereafter.
Infogroup is requesting in its suit that:
- Database101 be prohibited from using Infogroup's trade secrets and return those trade secrets to Infogroup.
- The court enjoin Database101 and Gupta from making further statements associating the company with Infogroup, remove a clip from its website to this end, issue a clarifying press release, and post a clarifying statement on its website.
- Database101 pay Infogroup the total amount of any “unjust enrichment” related to the use of trade secrets or association with the company, as well as other damages.
- Hyman be found in breach of contract, be ordered to return the confidential data he allegedly retained, and pay Infogroup damages related to both.
- All personal property belonging to Infogroup and in the possession of employees of Database101 be returned.
Infogroup released a brief statement, in which it did not directly name Gupta or his company. It instead noted that Infogroup has “built up significant goodwill and marketing leadership in our 40-year history and [has] invested hundreds of millions of dollars in our data assets and applications.” It also indicates an “intention to vigorously defend that goodwill and market leadership from what we consider to be unfair trade practices.”