Southwest says American is attempting to steal its trade secrets

Carrier seeks relief from subpoenas that ask for details of its distribution strategy

Southwest Airlines told the court in which American Airlines is suing Travelport that American is trying to obtain its trade secrets.

Southwest said the U.S. District Court, Northern District of Texas, should quash a number of subpoenas in which American told Southwest to provide its distribution game plan as well as details of commercial agreements.

Among the documents that Southwest says American is seeking are:

•     Documents demonstrating the technological capability between Southwest and the GDSs to implement a Direct connect distribution model.

•     Internal documents concerning distribution of Southwest products and services to business travelers served by travel agents or travel management companies, including through Direct connect technology or channels.

•     Communications with GDSs regarding any Direct connect initiative, including Direct connect capabilities with respect to marketing unbundled products.

•     Documents relating to whether and to what extent Southwest uses or should use, or limit its use of, a GDS, including cost comparisons of distributing directly versus through a GDS.

•     All documents concerning distribution of Southwest Airlines’ content through GDSs or to their subscribers.

•     Documents sufficient to show the amounts paid by any GDS to Southwest or paid by Southwest to any GDS since 2006.

•     Southwest's agreements with each GDS company.

American is also seeking depositions from Southwest executives on topics including:

•     Southwest’s share or percentage of revenue, including relative to other airlines, from business travelers.

•     The terms of all of Southwest’s agreements with Travelport and Sabre.

•     The commercial aspects of Southwest's Direct connect arrangements.

•     The technological aspects of Southwest's connection to and inclusion in Travelport’s Universal Desktop and participation in Travelport’s Universal API.

Southwest Airlines logoSouthwest said American’s motion to compel Southwest to provide the documents and depositions, which was filed under seal, made little mention of Southwest’s offer of a compromise.

Southwest said it had offered to produce its GDS contracts and “significant data” concerning ticket sales and payments to and from GDSs. “With this information, American can use the data to see how the contracts have impacted Southwest’s sales; for example, its economists could construct regressions,” it said in its motion for a protective order.

Southwest said American has indicated that it wants the information “primarily to respond to arguments that American’s Direct connect system was technically flawed and commercially unworkable.” But, it said, the information would not address those assertions, should Travelport make them, because Southwest has adopted “a very different direct connect strategy” than American’s.

“American's system apparently is designed to operate on a travel agent’s desktop, while Southwest’s direct connect systems operate on Internet web pages,” it said in court papers. “While Southwest’s strategy has been a commercial success, evidence showing the details of how Southwest achieved that success would say nothing about whether American's different system would also be a success,” it said.

“In the same way, the success of VHS video recorders would reveal nothing about whether Betamax should have been successful, even though both recorded video programs.”

Southwest also said its strategy of pursuing direct distribution, a direction that it set in 1994, carried some risks, and it required investments of money and resources. It said American, which until recently had pursued a much different strategy that included heavy reliance on GDSs, now wants to emulate Southwest’s success, and it wants Southwest to provide the blueprint.

American Airlines logoIn a statement, American said the notion that it wants to duplicate Southwest’s distribution strategy is “absurd.” It said any document produced in the case would be subject to a protective order that would allow Southwest to mark it as highly confidential, prohibiting its disclosure to American employees or consultants working on American’s distribution plans.

It said its own plans are “well developed” and have been widely publicized and are not dependent on what is found in Southwest’s documents.

“Seeking documents from third parties is a normal part of the litigation process, and we are confident that the court can, and will, strike the right balance in ensuring that American has access to relevant evidence without causing commercial harm to Southwest,” American said.

Southwest has been a thorn in American’s side for more reasons than one. It has become the largest domestic U.S. airline, operating in American’s backyard. In addition, American has said it had asked Travelport for the same kind of deal it gave Southwest, but it said Travelport refused, saying American had helped create the GDS “beast” and should “live with it.”

Read about Sabre’s new defense in US Airways’ antitrust lawsuit in the Jan. 7 issue of TTU.

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