Brothers Hezi and Gabby Liebovich (hat), owners of Australias largest online store in their modern office with groovy furniture. Photo: Wayne Taylor
After cashing in for $80 million on selling their online coupon business to a consortium led by James Packer, two Australian brothers have now brought one of the biggest online brands to heel in a further windfall worth hundreds of thousands of dollars.
Melbourne-based brothers Gabby and Hezi Leibovich – who recently sold a chunk of their lucrative daily deal sites CatchOfTheDay and Scoopon at a believed valuation of $200 million – registered groupon.com.au and its associated trademark and business name before its rival, US coupon giant Groupon, revealed its plans to launch in Australia.
The Leibovich brothers’ sites are very similar offerings to Groupon. Both market coupons for different items each day and prices are heavily discounted as each item is bought by a large group of people.
Andrew Mason, chief executive officer and co-founder of Groupon. Photo: Bloomberg
The opportunistic move to snap up Groupon’s Australian trademark and domain name forced Groupon to launch in Australia under a different brand, Stardeals.
Last year Groupon took the Leibovich brothers to court, filing cases in the US, New Zealand and Australia. It hoped to force the Leibovich brothers to hand over the name.
Now they’ve agreed to settle and it’s understood the Australian brothers have been paid hundreds of thousands of dollars to hand over the groupon.com.au domain name and local trademark.
Billionaire James Packer. Photo: Nic Walker
A study released in July by the research firm Telsyte showed the Australian group buying market was booming. “The market grew from $71.8 million in Q1 2011 to $123.9 million in Q2 2011, a quarter-on-quarter increase of 72 percent. The market is on track to reach or exceed $400 million by the end of 2011,” Telyste said.
In US court documents obtained by Fairfax Media, publisher of this website, Hezi Leibovich says in a declaration to the court that the Groupon business name, trademark and domain name was purchased “solely for defensive purposes … to ensure that neither plaintiff [Groupon in the US] nor any other entity could use the name to offer online discount voucher services that might lead to confusion in Australia with Scoopon”.
Hezi also makes note of the fact that his groupon.com.au domain name had “not conducted any business in Australia or elsewhere” and that the website was “not in operation” and returned a “server not found” message when viewed using a web browser, effectively meaning that the Leibovich brothers weren’t even using the website to sell goods and had only purchased it to block competitors from using it.
Documents filed by Groupon in the US allege the Leibovich brothers had copied their idea and were infringing on their copyright, among a number of other allegations including the Leibovich’s knowing about Groupon in the US before registering groupon.com.au, the trademark “Groupon” and the business Groupon Pty Ltd.
Groupon also alleged that the brothers’ Scoopon website home page was “nearly identical to Groupon’s home page” and that supporting web pages were “similarly indistinguishable from Groupon”.
Groupon was seeking damages which it hadn’t put a price on in the US court.
Separate to lodging a case in the US, Groupon lodged an intellectual property action in the Federal Court in Victoria last August in an attempt to gain access to the groupon.com.au domain name, trademark and business name.
But by Wednesday last week the case had been dismissed by Justice John Mansfield following the settlement, which sees Groupon pay the Leibovich brothers for the groupon.com.au domain name and trademark by Groupon.
In January, Groupon’s CEO Andrew Mason explained on the company’s website why it hadn’t launched in Australia and would instead launch under the domain name stardeals.com.au.
“Scoopon went a little further than just starting their Groupon clone – they actually purchased the groupon.com.au domain name, took the company name Groupon Pty Limited, and tried to register the Groupon trademark (filing for the trademark just seven days before us) in Australia,” Mason wrote in a blog post.
In discovering this, Mason said Groupon had “reluctantly” offered Gabby and Hezi Leibovich “about $US286,000 for the groupon.com.au domain and trademark”, an offer which was ultimately rejected.
Intellectual property lawyer Trevor Choy, who is not involved in the case, said Scoopon was likely to have received the original $US286,000 or more. “I can’t see any reason for the Australians to go any lower,” he said.
“The main thing that would be likely to happen is that [the Leibovich's] would’ve asked for more money for whatever reason,” Choy said.
He speculated that the brothers may have reneged on the original $US286,000 offer Groupon’s Mason claimed was agreed on because it could have had “strings attached”, for example, a condition which prevented the brothers from trading outside of Australia.
“[It may have come] with strings and then the Australians said ‘No, we’re not accepting these particular strings, we’re not accepting the terms of the agreement. The deals off’. And then basically the parties have had to go back and renegotiate.
“Now it may be that they just finished off with $US286,000, or it may be that the Australians said ‘No, we’ve changed our mind now: you’ve made comments about us, we would like more money if we’re going to accept these strings’. Or: ‘No, we don’t accept these stings at all, the deals completely gone and they just have to work some other [thing out].”
As to why the case had been resolved, Choy said that it may have been because of media reporting and the fact that James Packer – one of the Leibovich’s recent investors – would not have been “all that thrilled” with a company he invested in being used in legal proceedings and his name in the spotlight.
“I know that obviously the Aussie guys have done very well in Australia – and yes they’ve got a major investor in Packer on board – but I can’t imagine Packer to be all that thrilled about a big chunk of his investment being used in legal proceedings even if there’s a good case,” Choy said.
Choy also said he was “absolutely” sure the Leibovich brothers registered the Groupon trademark and domain name to block out their US rival in the Australian marketplace.
In a statement yesterday, Groupon said that it had “received registration approval” for the domain name groupon.com.au and trademark GROUPON from IP Australia. “Terms of the registration are not disclosed.”
The Leibovich brothers said they were “pleased” to announce that they had “settled its legal dispute with Groupon in Australia, the US and in New Zealand”.
“Scoopon has determined that as it now enjoys a leading position in the marketplace, when combined with the recent backing of the Tiger and Packer consortium of investors, that it is exceptionally well positioned to meet Groupon in the market. Scoopon can now focus on continuing to drive its business and delivering unmatched benefits to both consumers and service providers alike.”
This reporter is on Twitter: @bengrubb