BOSTON (CN) – A man who says he invented an online business selling gift certificates – splitting the take with the businesses that redeem them – claims AOL ripped off his business plan, and even named its website after his, to interfere with his business. WowWhatSavings dba Wow sued AOL dba Wow.com and Patch.com in Middlesex County Court. Groupon, a similar but not identical online deal site, recently rejected a $6 billion buyout offer from Google.
Todd Rideman says he invented Wow and ran it as a one-man shop from Waltham, in Boston’s high-tech corridor. He began business in August 2009, according to his complaint.
WowWhatSavings, or WS, does most of its business through its website, wowwhatsavings.com. It offers deals or discounts “by entering into arrangements with the various vendors,” Rideman says.
“WS earns income by taking a percentage of each deal purchased by one of its users. For example, WS might sell a gift certificate to a restaurant worth $20 for $10. Every time a gift certificate is purchased WS might retain $5 and give $5 to the restaurant. WS’s main market is Boston, but it offers various ‘deals’ and discounts throughout the United States and is engaged in interstate commerce.”
In June or July 2010, Rideman says, he had coffee with a minority shareholder in WS, nonparty Paul Airaisian. Airaisian said that he had a meeting that afternoon with Pat Purcell, of Patch.com, which is wholly owned by defendant America Online. “Airaisian was going to interview Purcell and feature Patch.com for the Belmont Business Review,” according to the complaint. (Airaisian’s name is also spelled as Airisian in the 13-page complaint.)
Before his meeting began, Airaisian introduced Rideman to Purcell.
“Airisian stated that Rideman was the owner of ‘Wow,’ which he described as a daily seal site like Groupon,” the complaint states. “Airisian further stated that he would like to discuss the possibility of WS, Patch, and AOL working together to do a daily deal site.
“Rideman explained to Purcell what WS was about and about its business. Rideman and Purcell then promised to follow up with each other to discuss the possibility of working together. Purcell further stated that he said he would talk with his AOL bosses when he was back in New York.”
Rideman says he and Purcell exchanged some emails, but in late July or early August, “Purcell told Rideman that AOL was not interested in a deal site at that time.”
Rideman says Purcell was “fully aware that wowwhatsavings.com called itself ‘Wow,’ as Rideman always referred to his business as ‘Wow.'” He adds that he was even wearing “company apparel with the name ‘Wow’ on it when he met Purcell” for the first time.
Then, the complaint states: “AOL launched a coupon site exactly similar to WS on November 10, 2010 and used the URL wow.com, which had previously been used for a site dedicated to the fantasy game World of Warcraft. AOL had copied WS’s business and made an almost identical website to wowwhatsavings.com.”
In subsequent pages of his complaint, Rideman cites specific cases in which he says AOL interfered with his business by calling up his business partners and asking if they wanted to do business with Wow. One such business partner, a restaurant owner, “told them [AOL] that he already made offers on ‘Wow,’ thinking the caller was referring to wowwhatsavings.com, which he knew to be called ‘Wow,'” according to the complaint. The restaurateur “was completely unaware that they were referring to another site called ‘wow.com’ that has the exact business as ‘wowwhatsavings.com.'”
Rideman adds that AOL knew that his home base and main market was Boston, and that “AOL targeted Boston because of WS’s penetration in the market as ‘Wow.’ …
“AOL’s initial target markets are Boston, Washington and Philadelphia,” according to the complaint.
Rideman claims he “has lost business and revenue as a result of the defendant’s interference,” and that AOL “induced the users and vendors to enter into agreements with their site wow.com via trickery and other improper means, by confusing the users and vendors and making them believe they were doing business with WS.”
He demands an injunction and damages for 11 counts, including fraud, trademark infringement and dilution, unfair competition and business law violations.
He is represented by David Summer of Boston.
Rideman’s complaint may be complicated by its reference to Groupon.
Groupon, an online site that began business in November 2008 – 9 months before Rideman began Wow – recently rejected a $6 billion buyout offer from Google. Groupon said it preferred to remain independent, and sought investors who would put $900 million into the company – and claims to have them lined up.
Groupon’s model is slightly different from Rideman’s.
Groupon offers a single daily deal in each of a number of geographic markets, with the catch that a certain number of people must sign up for them for any of them to get the deal.
The prospect of multiple customers may be more appealing to businesses, and the site has become something of a social network site as well, as people text and twitter one another to try to line up enough customers to secure the deals.
Rideman’s site is a more traditional, straight deal for discounted gift certificates.
Nonetheless, the tremendous success of Groupon, and its rejection of $6 billion after just 25 months of existence, indicates the stakes for which Rideman, the little guy, and AOL, the giant, may be playing.