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Social networking: proprietary considerations can weave a tangled web

January 6th, 2012  |  Lisa Milam-Perez

While social networking has fast become a powerful marketing tool for companies, it’s proven equally valuable to employees as a vehicle for professional development. But with the typically ill-defined terms of ownership in a company’s social media presence, and the significant value that an employee’s own professional stature brings to that presence, social networking can potentially turn quite anti-social indeed. Several court rulings in recent months have tackled the legal issues that arise when these often competing interests collide.

The case of the stand-in Tweeter. A Chicago interior design firm found itself defending against federal claims because it posted updates to the private Facebook and Twitter accounts of its marketing chief after she was hit by a car and seriously injured (Maremont v Susan Fredman Design Group, NDIll, December 7, 2011). As director of marketing, public relations, and E-commerce for the design firm, social media was a key function of the plaintiff’s role, and her social media efforts to promote the firm’s sales qualified her for bonuses. The employee created a design blog hosted on the firm’s website and opened a Facebook account for the firm. The employee had her own personal Twitter and Facebook accounts as well, which were not for the benefit of the firm, although she used her personal posts and updates to promote the firm by linking them to the firm blog and website. Her efforts also generated a considerable following among the city’s design community, and her personal Twitter account boasted 1,250 followers.

Both parties appeared to be enjoying the fruits of the employee’s social media labors until one day, during a work-related errand, she was struck by an automobile and suffered serious brain trauma. While she was hospitalized for her injuries, another employee at the firm posted Facebook updates and tweets on her accounts, promoting the firm. The first of the tweets was linked to the firm’s blog, which ran an entry written by the firm’s owner informing readers of the employee’s accident and announcing that, in her absence, a guest blogger would assume the employee’s duties. Subsequent tweets also promoted the firm and, in some cases, linked readers to the firm’s blog or website. Although the employee requested that the firm refrain from posting updates to her Facebook page and Twitter account while she was out, it continued to do so, prompting her to change her passwords.

Six months later, the employee came back to work part-time, announcing her presence on the firm’s blog, “Your editor is back!” Her triumphant return was short-lived, though; still suffering the lingering effects of ongoing post-concussion syndrome, her doctor urged her to stop working completely. When she attempted to come back again a year later, her position had been filled. Contending that she suffered severe emotional distress from the firm’s posting of tweets and Facebook updates from her personal accounts to promote its business, she filed suit, alleging a false association claim (or false endorsement claim) under the Lanham Act, along with a Stored Communications Act (SCA) cause of action and state law statutory and common law privacy claims.

Under the Lanham Act, a plaintiff does not have to be in direct competition with the defendant in order to state a claim; all that is required is for the party to have a “reasonable interest to be protected” against activities that violate the Act. To have standing, a plaintiff simply must show “an intent to commercialize an interest in her identity,” the court wrote. The employee made that showing here. While promoting the firm on Facebook and Twitter had been part of her duties for the firm, it was undisputed that the employee also “created a personal following on Twitter and Facebook for her own economic benefit,” the court noted. It was clear that if she left her employment at the firm, she would promote a different employer with her Facebook and Twitter followers. As such, the employee had a protected commercial interest in her name and identity within the Chicago design community, and she satisfied the standing requirement.

The employee also asserted a potentially viable SCA claim. Without permission or authorization, the court observed, the firm used her personal Twitter password to access her personal account and authored 17 tweets, and similarly accessed her Facebook account, entered Facebook postings, and accepted at least five friend requests. This undisputed conduct raised genuine issues of material fact as to whether the firm exceeded its authority in obtaining access to the employee’s social media accounts.

Left to be seen with respect to both claims was whether the employee could prove actual damages. To establish a Lanham Act violation, she must show actual injury resulting from “actual consumer reliance on the misleading statements,” such as a loss of sales, profits, or goodwill, or that the firm was unjustly enriched. Noting that both parties had informed the court that expert discovery was necessary on this issue, the court deemed it premature for it to determine at this stage whether there was actual injury or unjust enrichment. Because the parties had yet to complete discovery as to damages, summary judgment was denied.

The court disposed of the plaintiff’s claims under the Illinois Right to Publicity Act, however. With only the contents of the tweets available for review, the court concluded that the firm and its employees had not passed themselves off as the plaintiff. The employee herself recognized publicly that the firm did not appropriate her identity by acknowledging in her blog post upon her brief return that the employer had temporarily replaced her during her absence. The employee’s common law privacy claim (asserting intrusion upon seclusion) was ill-fated as well, because she could not show that she made any attempt to keep private the matters discussed in her Facebook and Twitter posts. To the contrary, she endeavored to publicize this content widely throughout the local design community. As such, the employee failed to identify any private information upon which the firm defendants intruded.

What’s a Twitter worth? What about the Twitterer? Who owns a company Twitter account, and its followers—the employer or the Tweeter? What’s a Twitter account worth, and what—or who—creates its value? Of what effect is Twitter’s own prohibition on buying or selling accounts? Concluding these increasingly salient questions could not be resolved on a motion to dismiss, a federal magistrate judge refused to dispose of an employer’s misappropriation and conversion claims against a former employee whom it sued for continuing to use the company Twitter account after his departure (PhoneDog v Kravitz, NDCal, November 8, 2011).

As a product reviewer/video blogger, the defendant’s job had been to provide written and video commentary via a variety of media, including the company website and Twitter account. When he left the company, he simply changed the Twitter account’s handle to his own name, continued to use it, and took his 17,000 followers with him, refusing the company’s demand that he relinquish the use of the password and Twitter account. The employer argued that the Twitter account contained trade secrets in the form of the subscribers’ names and the account password. As the employer saw it, all “@PhoneDog_Name” Twitter accounts used by company employees, as well as the passwords to such accounts, constituted proprietary, confidential information.

The employer alleged that it suffered $340,000 in damages when the former employee absconded with the Twitter account. To reach this calculation, it asserted that according to industry standards, each of the 17,000 followers was valued at $2.50 and that its damages amounted to $42,500 ($2.50 x 17,000) for each month that the defendant continued to use the account. The employee countered that according to Twitter’s terms of use, all Twitter accounts are the exclusive property of Twitter and its licensors. He also suggested that followers have the right to subscribe and unsubscribe and that, as human beings, they cannot be categorized as property. Moreover, he argued that any value attributed to the account came from his efforts in posting tweets and each follower’s interest in following him, not from the account itself.

Whether the employer had any property interest in the Twitter account or the password and follower list, and what the proper valuation methodology would be, could not be resolved on the limited record before it, the court ruled. Refusing to dismiss the misappropriation and conversion claims, the court was satisfied that the employer had sufficiently described the subject matter of the “trade secret” in likening the list of Twitter followers to a customer list in which a company had an intangible property interest. That was enough, at this stage, to proceed.

Irreparable harm and the cyber-slacker. The next employee-turned-defendant in our story is a former video and social media producer for CYC, the primary online entity within a group of closely affiliated online marketing companies that develop and market herbal and beauty products (Ardis Health, LLC, et al v Nankivell, SDNY, October 19, 2011). Her duties included maintaining websites, blogs, and social media pages. As part of her responsibilities for the company’s online presence, she also maintained account passwords and other login information for websites, email accounts, and social media accounts, as well as the third-party servers where the company stored content.

When CYC saw fit to fire the employee, it requested that she return the access information to the various online accounts and servers. She refused to do so, leaving the company unable to gain access to their online accounts and websites to update them as needed for marketing purposes. CYC filed suit and was granted its motion for preliminary injunctive relief. It was uncontested that CYC owned the rights to the access information, and the employee’s unauthorized retention of the information thus formed the basis of a claim of conversion. The likelihood of the company’s success on the merits, therefore, was “unquestioned,” the court held.

Moreover, CYC satisfied the court that it would suffer irreparable harm if the access information were not returned while the case was pending. CYC relied heavily on its online presence to advertise its businesses, the court noted, which requires the ability to continuously update their profiles and pages and react to online trends. “The inability to do so unquestionably has a negative effect on plaintiffs’ reputation and ability to remain competitive, and the magnitude of that effect is difficult, if not impossible, to quantify in monetary terms,” wrote the court. “Such injury constitutes irreparable harm.”

The court rejected the former employee’s argument that CYC would not suffer irreparable harm absent return of the access information because the websites and blogs to which the information pertained had gone unused for the two years preceding her discharge. However, the defendant was a CYC employee throughout that two-year period, and it was her responsibility to post content to those websites, an incredulous court noted. “Defendant cannot use her own failure to perform her duties as a defense.” Moreover, any past failure to utilize the websites did not preclude a finding of irreparable harm here. Without the access information, CYC would be unable to pursue new opportunities that may arise. For example, CYC had recently embarked upon “daily deal” promotions, the court observed, “the success of which depends heavily on tie-ins with social media.” Thus, the court ordered the defendant to turn over the information.

“Tweets” and “updates” and “daily deals”— what a tangled web we weave. As the employment law implications of social networking continue to unspool, these proprietary squabbles promise to ensnare employers and employees alike.