Reservation Counter, an online travel agency, has filed a
lawsuit against Expedia Inc., claiming Expedia stole its data worth "millions
of dollars of investment," gave it to a competitor, then tried to cover up
the data breach.
The lawsuit was filed in U.S. District Court in Ohio on
March 31 by TravelPass Group, Reservation Counter's parent company.
Reservation Counter gets the majority of its hotel content
from large OTAs like Expedia and Priceline and uses keyword advertising --
bidding on keywords used on search engines to trigger its ads -- as a "critical
marketing and sales tool," the lawsuit states.
Over the course of several years, Reservation Counter claims
it spent about $30 million developing data sets enabling it to successfully bid
against other OTAs in keyword auctions.
In 2009, Reservation Counter entered into an affiliation
agreement with the Expedia Affiliate Network, which was renewed in 2013. That
gave Reservation Counter access to Expedia's hotel database; it also included a
confidentiality agreement between both parties, requiring them to not disclose
each other's confidential information to other parties, according to the
lawsuit. The agreement also included a clause requiring Reservation Center to
cease bidding on names present in a URL owned by an Expedia supplier, if
requested to do so by Expedia.
The lawsuit claims Expedia employee Brian Hungria started to
leak Reservation Counter data to Roomstays.com employees Skip Gibson and Yatin
Patel in 2014; Patel would go on to found Reservations.com. Hungria allegedly
sent 18 months' worth of data to Patel and Gibson.
"With access to Reservation Counter's stolen data at
the company's outset, Res.com not only held the key to Reservation Counter's
success, but also was spared the years and millions of dollars necessary to
develop its own data analytics and successful keyword bid strategy," the
The data assisted Reservations.com in reaching one million
bookings in a year, according to the lawsuit, something that took Reservation
Counter six years to do.
"Then, to make matters worse, Expedia itself began using
Reservation Counter's data for its own purposes, in direct violation of its
contractual and statutory obligations to Reservation Counter," the lawsuit
Reservation Counter alleged that Expedia used Reservation
Counter's data for its own keyword bidding strategy.
The lawsuit additionally accuses Expedia of making
Reservation Counter agree to "various anti-competitive restrictions"
on its "participation in the keyword search advertising market for hotel
rooms," something Reservation Counter said it refused to do, leading
Expedia to allegedly cut off access to inventory of certain hotel brands.
Reservation Counter said the loss of access to that inventory cost it "tens
of millions of dollars in revenue and profits."
The lawsuit claims the data leak caused a large drop in
Reservation Counter's growth from over 100% month-to-month in December 2013 to
6% in June 2014, and to below zero after that. Meanwhile, Reservations.com
became its "most significant competitor" and Reservation Counter saw
increased advertising costs due to the competition.
Overall, the lawsuit claims the data leak cost Reservation
Counter over $61 million in lost profits, and also hindered parent company
TravelPass' ability to raise capital.
Reservation Counter claims in the suit that though Expedia
did learn of the breach "soon after" it occurred, Expedia "chose
to actively conceal the breach." The suit claims a former Expedia employee
told Reservation Counter about the breach last year.
The suit names three counts against Expedia: trade secret
misappropriation, violation of the Utah Uniform Trade Secrets Act (TravelPass
is based in Utah) and breach of contract, and seeks an award of damages for
An Expedia spokesperson
said the company does not comment on pending litigation.
Correction: Sherman Distin was mistakenly mentioned in Reservation
Counter's lawsuit against Expedia. He did not work for Reservations.com, a company that allegedly
received stolen data from Expedia.