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Trading Secrets A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

Former PhoneDog Employee Off the Hook in Closely Watched Trade Secrets Spat

Posted in Trade Secrets

By Jessica Mendelson and Joshua Salinas

We previously blogged about the case of PhoneDog v. Kravitz, a Northern District of California case that called into question the ownership of Twitter followers on an employee’s professional account following the employee’s departure from the company. After over a year and a half of litigation, the parties have finally reached a settlement agreement.

Noah Kravitz, a former employee of PhoneDog, an “interactive mobile news and reviews website” was sued by his former employer, which claimed Kravitz unlawfully continued to use PhoneDog’s Twitter account following his departure from the company. At the time of Kravitz’s departure in October 2010, the twitter account had 23,000 followers. As of today, the account has more than 27,000 Twitter followers. Kravitz claims he took the Twitter account with the website’s blessing. Phone Dog, however, sued Kravitz, demanding compensation for the Twitter followers Kravitz acquired through his employment with the company. This lawsuit was the “first to put a price tag on the worth of a Twitter user,” (i.e. $2.50 per follower) and tackled the question of “who owns a professional Twitter account started during a period of employment.”

The terms of the settlement are confidential, yet the parties have confirmed Kravitz will maintain sole custody of the Twitter account at issue. Additionally, the settlement will resolve all legal claims between the parties. “I’m very glad to have worked this out between us,” Kravitz said in a statement. “If anything good has come of this, I hope it’s that other employers and employees can recognize the importance of social media … good contracts and specific work agreements are important, and the responsibility for constructing them lies with both parties.”

As Kravitz suggests, the case highlights the importance of clearly establishing ownership of social media before problems arise. Employers who make use of social media accounts should create contractual agreements that clearly state who owns these accounts.  (See e.g. Ardis Health, LLC, Curb Your Cravings, LLC and USA Herbals, LLC v. Ashleigh Nankivell, 2011 WL 4965172 (S.D.N.Y. Oct. 19, 2011) (awarding injunctive relief and ordering former employee to return social media passwords to employer who had written ownership agreement).  In the long run, creating such contracts can be significantly cheaper than the litigation that could ensue without such an agreement. This is especially true given the questionable value of Twitter followers, who can be “fickle [and] unpredictable.” Although there is clearly a value in having such followers, legal experts, such as Eric Goldman, question whether it is really worth the cost of litigation in the case of such disputes, or whether the parties should simply create new accounts.

Legal experts advise that one way to avoid such disputes is to require employees to agree “that the company, not the employee, owns the account and that employees must return all social media logins and passwords at end of employment.” This can be done through a written ownership agreement that explicitly lays out expectations about whether the account is meant for business or personal use. This is especially true given that “social media accounts often mix the personal and the professional, so from a practical standpoint making a clean break may not be possible.” Please also see John Marsh’s Trade Secret Litigator blog for a nice summary of the cases in this space.

Such agreements should be customized based on the employer’s planned use of social media accounts for their specific business. Additionally, having such an agreement in place allows employees to create separate personal accounts if they so desire, which may prevent them from facing a situation similar to that faced by Kravitz. Finally, employers should also incorporate into such agreements that the employee agrees to return the passwords to the accounts upon the termination of their employment.  Employers should be cautious, however, in wording such agreements in light of recent laws designed to protect employees’ personal social media accounts.