By Maxine Neuhauser and Susan Gross Sholinsky, Epstein Becker Green
(Maxine Neuhauser is a Member of Epstein Becker Green's Labor and Employment and Health Care and Life Sciences practices in the firm's Newark office. Susan Gross Sholinsky is a Member of Epstein Becker Green’s Labor and Employment practice, in the firm’s New York office.)
Social media – encompassing web-based and mobile interactive technologies, including blogs, photo sharing, forums, and social networking, using various platforms, such as Facebook, Twitter, Flickr, LinkedIn, and YouTube – is easily available, constantly evolving, and increasingly pervasive.
The embrace of technology has diminished the distinction between personal time and work time, work place and personal space, and open communications and private information. Collisions at the intersection of company ownership and employee rights on the ever-expanding lanes of the information highway are increasing.
Recent lawsuits highlight the challenges in protecting a company’s intellectual property, trade secrets, proprietary information, and business assets – and even defining what they are – as employers welcome these new technologies.
The issues and questions raised underscore the necessity for employers to take social media into account when developing and enforcing their policies and procedures pertaining to confidentiality, restrictive covenants, and intellectual property.
The cases also draw attention to the importance of prudence, equity, and fair play, which, though elusive to define or to quantify, often take a front seat in the courtroom.
PHONEDOG V. KRAVITZ: IT’S MY TWITTER AND I CAN TWEET WHO I WANT TO (OR MAYBE NOT)
A recent lawsuit involving a web-based company and a former employee has put a spotlight on the ownership and value of a Twitter account begun by an employee under the auspices of his employment, but continued by him, under a different name, after he terminated his employment. Specifically, PhoneDog v. Kravitz, pits PhoneDog, “an ‘interactive mobile news and reviews web resource’ that reviews mobile products and services and provides users with resources needed to research, compare prices, and shop,” against a former employee, Noah Kravitz, who was hired as a product reviewer and video blogger.
According to the company’s complaint, PhoneDog provided Kravitz with a Twitter account (“@PhoneDog_Noah”), which he used “to disseminate information and promote PhoneDog’s services.” During his employment, Kravitz's Twitter account attracted approximately 17,000 followers.
The complaint says that when Kravitz resigned, the company claims that it asked him to return the Twitter account, but, rather than doing so, he simply changed the name to “@noahkravitz” and continued to tweet. Since his departure (and the publicity of the lawsuit), Kravitz’s Twitter account gained 4,000 more followers.
Eight months after Kravitz left the company, PhoneDog sued him for misappropriation of trade secrets, intentional and negligent interference with prospective economic advantage and conversion. The company contends that it suffered $340,000 in damages as a result of Kravitz’s unauthorized use of the Twitter account, analogizing Kravitz’s 17,000 Twitter followers to a proprietary customer list. Thus, the company calculated its alleged damages by claiming a value of $2.50 per month per follower (i.e., $2.50 x 17,000 (followers) x 8 (months)).
PhoneDog further contends that it established the Twitter account (or instructed Kravitz to establish the account) to drive viewers to its website and that the loss of the account’s followers has effectively reduced the website’s value to advertisers that purchase space on the site.
Kravitz, for his part, contends, that PhoneDog has no property rights in the Twitter account or its followers. He alleges that he established the account and set up the password and that, in any event, under the terms of Twitter’s Terms of Service, “all Twitter accounts are the exclusive property of Twitter and its licensors.”
Kravitz further argues that, unlike proprietary customer lists, the identities of his Twitter followers are public. He contends that the Twitter account has no intrinsic value and that any asserted value could only be attributed to his tweets and the interest people have in following him.
Of note, Kravitz seems to concede that the situation would be different if a written contract had been in place. He argues that absent a written agreement prohibiting an employee from changing the handle of a Twitter account, industry precedent leaves the employee free to continue the account under a different name.
Kravitz twice moved to dismiss the lawsuit. Both times, the court declined to do so, although it initially dismissed some counts without prejudice. Most recently, the court permitted PhoneDog to amend its complaint, to reassert claims alleging intentional and negligent interference with prospective economic advantage.
In making its ruling, the court was persuaded that PhoneDog had sufficiently alleged economic harm in the form of possible decreased advertising revenue caused by the diversion of 17,000 followers when Kravitz renamed the Twitter account and the disruption of the company’s relationship with at least one advertiser.
Left undecided at this juncture is whether PhoneDog will ultimately be able to establish a property interest in the Twitter account, the password, or the followers and, if so, their value.
It is noteworthy that Kravitz alleges PhoneDog filed the lawsuit in retaliation for his request for a percentage of the website’s advertizing revenues – an apparent admission that his tweets did, in fact, draw people to the company’s website. On the other hand, it appears that PhoneDog was content to have Kravitz use the account under his own name for months until a dispute arose between the parties.
EAGLE V. MORGAN: LINKED-IN OR FROZEN-OUT?
Linda Eagle owned Edcomm, a financial services and training company, along with two colleagues, Clifford Brody and David Ship. Eagle and Brody founded the company in 1987.
In 2008, Eagle established a LinkedIn account that she used for business, such as promoting Edcomm’s services; for personal purposes, such as reconnecting with family and friends; and for reasons that mixed the two, such as building social and professional relationships.
An Edcomm employee, Elizabeth Sweeney, assisted Eagle in maintaining the account and had her password.
In 2010, Sawbeh Information Services Company (SISCOM) purchased Edcomm. The following year, SISCOM discharged Eagle, along with Brody and Shipp, and appointed new executive management. Although Brody changed his LinkedIn password just before the termination meeting, Eagle neglected to change hers. When she left, Eagle took her laptop and cellular phone.
Using Eagle’s password obtained from Sweeney, Edcomm’s new executive management gained access to Eagle’s LinkedIn account, changed the password, and then changed Eagle’s profile to display the name and photograph of new CEO Sandi Morgan. Thus, individuals searching for Eagle were routed to a LinkedIn page featuring Morgan’s name and photo, but which continued to display all of Eagle’s information, including her awards, recommendations, and most notably – her connections.
After the new management refused Eagle’s demand to return the LinkedIn account to her, she sued Edcomm and three of its executives in the U.S. District Court for the Eastern District of Pennsylvania. She alleged 11 causes of action, including violation of the Computer Fraud & Abuse Act (CFAA), violation of the Lanham Act, identity theft, unauthorized use of name, invasion of privacy, conversion, tortuous interference with contract, and civil conspiracy.
Thereafter, Eagle regained control of the LinkedIn account but then allegedly refused to turn over Edcomm’s proprietary business information, such as the LinkedIn connections of other Edcomm employees. She similarly refused to return the laptop. In addition, although Edcomm had disabled Eagle’s cellular telephone number, she apparently succeeded in having the number transferred to her own account.
Edcomm countersued, alleging much the same against Eagle as she had alleged against it. Eagle then moved to dismiss the counterclaims.
In a detailed opinion,the District Court considered each of the causes of actions raised by Edcomm. While the court dismissed most of the counterclaims, including Edcomm’s own allegations of violation of the CFAA, it found that two of the company’s claims met the legal threshold for stating a claim.
First, the court declined to dismiss the counterclaim for conversion arising out of Eagle’s refusal to return her company laptop.
Of more importance, the court refused to dismiss the counterclaim alleging misappropriation of Eagle’s LinkedIn account and connections. It found that an issue of fact existed arising from Edcomm’s allegations that its “personnel, not Eagle, developed and maintained all connections and much of the content on the LinkedIn Account, actions that were taken solely at Edcomm’s expense and exclusively for its own benefit.”
DISCUSSION
Companies, their lawyers, and the courts must keep up with the changes in the workplace that social media and technology bring nearly daily. Can traditional legal principles apply where business is driven by sharing information in a virtual world that is open to all? Perhaps.
Judging by information gleaned from court opinions and news reports, PhoneDog did not have a written agreement with Kravitz establishing the company’s ownership of the Twitter account. When Kravitz left, rather than immediately asserting its rights to the account, the company asked Kravitz to continue tweeting on the company’s behalf – again without any written agreement. It was only after Kravitz and PhoneDog had a falling out, apparently over Kravitz’s request for remuneration, that PhoneDog sued.
While it may be difficult to find exact analogies in existing case law to new digital dilemmas, there is some guidance. Companies have successfully asserted ownership rights over telephone numbers, which courts have recognized to be valuable assets and which is a notion that the court in the Eagle case likewise acknowledged.
Similarly, it is hardly a new concept that departing employees may not simply walk off with their former employer’s work-product. Amassing LinkedIn connections and Twitter followers during the course of employment – and in the Eagle case, with the assistance of company personnel – has many, though admittedly not all, of the traditional attributes of employee-created proprietary business information.
Moreover, it is axiomatic that a company’s goodwill – arguably demonstrated by an employee’s 17,000 Twitter followers – is a valuable asset and entitled to protection.
That said, employees for a long time have successfully overcome efforts to enforce confidentiality, noncompetition and non-solicitation agreements in cases where their former employers have “slept on their rights.”
Therefore, traditional written agreements can be critical for demonstrating, in a virtual environment, that:
• The employer has confidential and proprietary information.
• Employees are aware of the company’s ownership of information they may have used or developed while employed.
• The company has taken appropriate steps to protect the information.
The shape and scope of trade secret and confidentiality agreements may, of course, vary according to a company’s business and where it is located.
By way of example, however, an agreement might include a provision such as this:
(c) During the term of Employee's service with Company and after termination of such employment, unless authorized in writing by Company, Employee will not:
(i) use the Information for Employee's benefit or advantage; (ii) load or enter Information on or into any computer, system, platform, or storage medium not controlled by the Company, and such prohibited repositories include, without limitation, personal computers not owned by the Company as well as any Internet platforms/sites commonly referred to as networking sites (e.g., LinkedIn or Facebook);
(iii) use the Information for the benefit or advantage of any third party;
(iv) improperly disclose, or cause to be disclosed, the Information or authorize or permit such disclosure of the Information to any third party; or
(v) deliberately, or with gross negligence, use the Information in any manner that may injure or cause loss to Company directly or indirectly.
The future is now, and employers should certainly consider updating their policies and employment agreements, including restrictive covenant agreements, to consider social media.
The following advice is not new, but it nevertheless remains fresh: The best way to protect a company’s intellectual property is through written agreements, oversight, and enforcement.