IP Law Daily Internet lead-generation company ZeetoGroup obtains injunction barring rival from using customer data
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Wednesday, May 15, 2019

Internet lead-generation company ZeetoGroup obtains injunction barring rival from using customer data

By Thomas Long, J.D.

ZeetoGroup’s customer lists and ad-campaign metrics were deemed protectable, and there was no dispute that competitor Internet Things misappropriated the information from a former employee. ZeetoGroup would sustain irreparable harm to its goodwill and business relationships without an injunction.

Internet lead-generation company ZeetoGroup, LLC, and its subsidiary, Tibrio, LLC, have been granted a preliminary injunction by the federal district court in San Diego, barring competitor Internet Things, LLC, its subsidiaries, and its founder and CEO from disclosing ZeetoGroup’s trade secrets to any third parties and from using those trade secrets for the purpose of directly competing with ZeetoGroup. ZeetoGroup established that Internet Things had acquired confidential customer lists and metrics for their advertising campaigns from a ZeetoGroup employee who had been hired away by Internet Things. ZeetoGroup was likely to succeed in proving that this information constituted trade secrets for purposes of federal and state misappropriation laws. In the court’s view, the alleged damage to ZeetoGroup’s goodwill and future business relationships caused by the misappropriation constituted irreparable harm justifying a grant of injunctive relief (ZeetoGroup, LLC v. Fiorentino, May 13, 2019, Sammartino, J.).

ZeetoGroup and Tibrio (together, “ZeetoGroup”) owned and operated the websites samples.com and getitfree.us, which aggregated free samples of various products, such as cleaning supplies to snack foods, and give them away to customers who visit the websites. Both companies derived their profits from advertising by “connecting consumers to advertisers” and “allowing advertisers to put ads on the websites.” Internet Things owned and operated co-defendants Simply Sweeps, LLC dba simplysweeps.com; CrediReady, LLC dba crediready.com; and Two Minute Media Topics, LLC dba twominutemedia.com. Sometime in 2018, defendant Nicholas Fiorentino, founder and CEO of Internet Things, began recruiting employees from ZeetoGroup, including ZeetoGroup’s Affiliate Marketing Director, Rocky Iorio. Iorio worked for ZeetoGroup from 2015 until November 2018, when he accepted a job with Internet Things.

On November 9, 2018, while he was still at ZeetoGroup but had given his two-weeks’ notice, Fiorentino asked Iorio to get him a list of ZeetoGroup’s “big buyers.” Iorio then sent Fiorentino screenshots of ZeetoGroup’s proprietary platform, listing around 80 of ZeetoGroup’s biggest advertising campaigns and the associated metrics for each campaign. Three weeks after starting work for Internet Things, Iorio was fired. Shortly after his firing, he sent an email to ZeetoGroup’s Chief Revenue Officer, Shayne Caldwell, informing him of the communications between Iorio and Fiorentino while Iorio was still with ZeetoGroup. The email included the screenshots he had sent to Fiorentino. Iorio also sent a copy of the images to ZeetoGroup’s CEO, Stephan Goss, in March 2019.

Co-defendant Sabiha Tudesco also was hired away from ZeetoGroup by Fiorentino. Tudesco worked as ZeetoGroup’s Chief Revenue Officer until she left for Internet Things. Although Tudesco denied having seen the list of clients sent by Iorio until after litigation commenced, according to the plaintiffs, she was aware of it and knew it was ZeetoGroup’s property. Nonetheless, she contacted clients on the list and recruited them to Internet Things.

ZeetoGroup filed suit on March 8, 2019, alleging misappropriation of trade secrets by the defendants. ZeetoGroup asserted that the defendants’ misconduct had caused it to lose an average of $1 million in sales per month, forcing it to lay off 27 employees. In addition, ZeetoGroup contended that the defendants’ use of the list had caused market confusion and irreparable harm to ZeetoGroup’s business relationships. ZeetoGroup requested a preliminary injunction barring the defendants from using the disclosed information and from contacting the advertisers on the list.

Likelihood of success. In the court’s view, ZeetoGroup demonstrated that it was likely to succeed on the merits of its misappropriation claims under the federal Defend Trade Secrets Act (DTSA) and the California Uniform Trade Secret Act (CUTSA). First, the court found that ZeetoGroup adequately asserted ownership of trade secret information. Although if the list had only contained the identities and locations of customers, it would not be protectable as a trade secret because that information was publicly available and lacked economic value, the list contained far more than that. The list also contained the revenue generated by each ad campaign and various performance metrics associated with those campaigns. This type of information could have economic value because its disclosure would allow a competitor to direct its sales efforts to customers who had shown a willingness to use ZeetoGroup’s service, the court said. ZeetoGroup also established that it took the requisite reasonable measures to keep its information secret, such as requiring employees—including Iorio and Tudesco—to sign confidentiality and nondisclosure agreements regarding client lists and related information. In addition, the information in the list was password protected.

Second, the court determined that ZeetoGroup had established the element of misappropriation. According to the court there was “no serious dispute that Defendants misappropriated Plaintiffs’ customer list.” Fiorentino admitted that he asked Iorio for a list of buyers while Iorio was still working for ZeetoGroup. Iorio complied with that request. Email messages between Iorio and Fiorentino clearly showed that the misappropriation occurred, the court said.

Irreparable harm. Next, the court determined that ZeetoGroup had met its burden of showing the irreparable harm required for entitlement to injunctive relief. The facts pointed to a “blatant misappropriation of information” that harmed not only ZeetoGroup’s revenue but also its goodwill and future business relationships. ZeetoGroup alleged that the trade secrets at issue comprised the “life blood” of its business. The defendants were directly competing with ZeetoGroup and were using the trade secrets to do so.

Balance of equities, public interest. Internet Things argued that it was a new startup company with minimal revenue, but it did not explain how enjoining it from using ZeetoGroup’s trade secrets would cause it harm. The balance of equities favored ZeetoGroup, the court concluded. In addition, requiring the defendants to comply with trade secrets laws and to protect ZeetoGroup’s confidential information would serve the public interest.

Conclusion. The court ordered that the defendants were enjoined from divulging, using, disclosing, or making available to any third person or entity ZeetoGroup’s trade secrets or using the trade secrets for the purpose of directly or indirectly competing with ZeetoGroup. The defendants were further prohibited from soliciting any business from customers identified by the trade secrets.

This case is No. 19-CV-458 JLS (NLS).

Attorneys: Christopher S. Morris (Morris Law Firm, APC) for ZeetoGroup, LLC and Tibrio, LLC. Joel M. Simon (Alperstein, Simon, Farkas, Gillin & Scott, LLP) for Nicholas Fiorentino.

Companies: ZeetoGroup, LLC; Tibrio, LLC

MainStory: TopStory TradeSecrets CaliforniaNews

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