Social media and related issues in the workplace can be a headache for employers. There is no denying that social media has transformed the way that companies conduct business. In light of the rapid evolution of social media, companies today face significant legal challenges on a variety of issues, ranging from employee privacy and protected activity to data practices, identity theft, cybersecurity, and protection of intellectual property.

On September 28th at 12:00 p.m. Central, in Seyfarth’s fifth installment in its Trade Secrets Webinar Series, Seyfarth attorneys Justin Beyer, Ryan Behndleman, and Dawn Mertineit will discuss the relationship between trade secrets and social media.

The panel will specifically address the following topics:

  • The interplay between social media privacy laws and workplace investigations and how developing internal company policy and/or contracts can protect company assets
  • Defining, understanding, and protecting trade secrets in social media
  • How courts are interpreting ownership of social media accounts and whether social media sites constitute property
  • How to prevent trade secret misappropriation or distribution through social media channels
  • The interplay between protection of company information and ownership of company accounts in the social media age

Please join us for this informative webinar.

Season’s Tweetings

In the first UK high court decision on tweeting, the Employment Appeal Tribunal has held that dismissal of an employee for offensive posts on his private twitter account could potentially justify termination under the UK’s unfair dismissal rules.

The employee was dismissed after a colleague raised an anonymous complaint about the content of his tweets. The Court held that termination of an employee for offensive comments on his social media account could fall within the ‘range of reasonable responses’ open to employers.  The employee’s right to freedom of expression needs to be balanced against the employer’s concern to protect its reputation.

To decide whether termination was justified, UK Employment Tribunals will look at the entire picture, including:

  • Was the twitter account relevant to the employee’s role? In this case, the employee used the twitter account in his role as an internal investigator, to monitor the posts of other employees.
  • Was the twitter account genuinely private? If it linked the employee to the employer, or was followed by a number of work colleagues or customers, it may not be seen as private.
  • Did the employer’s social media policy or disciplinary rules make clear that offensive twitter posts could result in discipline, up to and including termination?
  • Is there evidence of actual damage to the employer’s reputation, such as complaints from customers or wider publicity?

This case extends the principles already applied to Facebook comments, as in the case of Apple v Crisp where termination was justified for an employee who criticized Apple’s products on Facebook in breach of a clear internal policy.

[Game Retail Ltd v Laws]

 

As the social media landscape continues to evolve rapidly, Trading Secrets is committed to keeping pace with this evolution in order to provide the most value for our readers. Regular blog contributors Erik Weibust and Dawn Mertineit, both attorneys in Seyfarth’s Trade Secrets Practice, serve as the Trading Secrets “social media directors” and will be actively monitoring the social media outlets for the blog, including Twitter, Facebook, Google+, Tumblr, YouTube, and LinkedIn.

We will continue to educate about news and legislation relating to trade secrets, non-competes, computer fraud, privacy and social media. Through our social media accounts, Erik and Dawn engage directly with influencers in our industry/area of expertise, share content with them, and stay active in conversations through various social media platforms — all with a focus on sharing items that are of value to our audience. We encourage our readers to engage in the conversation as well!

Social media clearly has numerous uses and benefits, as hundreds of millions of users worldwide can attest. From connecting with a long lost friend, to marketing a new product or service, to organizing a high school reunion or even an uprising in the Middle East, social media has become a ubiquitous part of our lives. But its rapid proliferation comes with risks.

In addition to the hazards to individuals on which the media regularly reports — invasion of privacy, harassment, bullying and the like — the increased risks to employers are just as compelling, albeit perhaps not as sensational. Most employers today have implemented social media policies that govern such things as if and when employees may access social media during the workday and appropriate uses thereof, but many companies fall short in protecting their trade secrets and customer relationships or goodwill.

Employees, especially younger ones, may unwittingly put their employers at risk simply by connecting with customers and/or vendors on LinkedIn, or by boasting about their latest achievements on Facebook or Twitter. Or they may be using social media intentionally to solicit customers or employees after termination.

As the line between business and personal information becomes increasingly blurred, employers must be cognizant of the risks inherent with the increased use of social media and take affirmative steps to protect their trade secrets and customer relationships before it is too late. Once a trade secret has been disclosed, its protections cannot be recovered; and once a customer leaves, he or she may never return.

 Setting Expectations

The most basic step that any employer should take to protect itself is to set expectations for its employees. In addition to creating the kind of culture where employees want to be protective of their employer, this can be accomplished by implementing policies that limit what employees are permitted to post on social media, and the security or privacy measures that must be put in place if they do so.

For instance, subject to the strictures of the National Labor Relations Act, employees should not be permitted to comment publicly on confidential projects or issues, even if they believe it is only to their “small” group of friends. While this is universally true, any policy should explicitly reference social media. Moreover, if employees are permitted to connect with customers and vendors on LinkedIn, their list of contacts should be set to private so that other LinkedIn users cannot view them. This type of policy is the building block for all others, and it isn’t enough simply to have such a policy in place; it must clearly and repeatedly be explained to employees, and perhaps even be the subject of an annual training.

While most employers have confidentiality and nondisclosure policies and agreements in place, they oftentimes do not specify that customer contact information, preferences, and the like that are maintained on LinkedIn and other social media sites fall within the strictures thereof. These policies and agreements should require that such information be deleted immediately from the employees’ accounts if they leave the company for any reason (just as hard copy customer lists must be returned or destroyed).

Although potentially difficult to enforce on their own, absent evidence of misappropriation or improper solicitation, policies such as this can influence a court’s opinion of a noncompliant former employee and add support to a request for injunctive relief should litigation be initiated. Of course, one purpose of these policies is to set clear expectations so as to avoid the need for litigation in the first place.

Who “Owns” Social Media?

Once employee expectations are established, the next thing an employer should do is assert an ownership interest over social media accounts and content, even if that content is already identified as confidential and must be deleted when the employment relationship ends. Few courts have addressed the issue of who “owns” social media. It is a difficult issue because accounts are often free and employees have already joined at the time of hire. Employers should, at the very least, have policies in place that inform employees that the company owns any content that was developed on the job or using the employer’s resources or confidential information.

For instance, the policy should be clear that customer information and goodwill are the company’s property even if posted on an employee’s LinkedIn account. (This policy must go hand in hand with the confidentiality policies discussed above or it will be ineffective.) There will always be disputes over whose goodwill it actually is, and social media ownership policies will certainly not be enforced by every court under every set of circumstances, but it is better to implement such a policy than face the risks of not doing so.

Last year, in Eagle v. Morgan, a federal court in Pennsylvania ruled that a company could not assume its former CEO’s LinkedIn account after she was terminated because although the company had expressed “an intense interest in the issue involving ownership of LinkedIn accounts,” it was clear that on the date the CEO was terminated “no policy had been adopted to inform the employees that their LinkedIn accounts were the property of the employer.” Had the company implemented such a policy, the outcome may have been different.

On the flip side, in Ardis Health LLC v. Nankivell, a federal court in New York ruled that a former employee must turn over the login, password and other access information to several websites, blogs, and social media pages that she had created and maintained for her former employer, because the employee had signed an agreement at the outset of her employment that all work created or developed by her “shall be the sole and exclusive property of [the employer], in whatever stage of development or completion,” and that she must return all confidential information upon request. The existence of such an agreement in this instance protected the company.

Where there is no policy or agreement, a court may leave the question of ownership to a jury, which is not a good result for employers, as jurors will not want to believe that their employers can appropriate or monitor their social media accounts. In PhoneDog v. Kravitz, a federal court in California denied a former employee’s motion to dismiss claims by his employer, alleging that the former employee unlawfully continued using the company’s Twitter account after he quit. There was no policy or agreement in place in this case, and the ultimate outcome will necessarily turn on who actually owns the Twitter account.

Similarly, in Christou v. Beatport LLC, the plaintiff claimed that a former employee misappropriated its trade secrets, including login information for profiles on MySpace and lists of MySpace “friends.” The defendants argued that a list of MySpace friends “is broadcast to the public via the Internet and thus cannot be considered a trade secret.” A federal court in Colorado denied the defendant’s motion to dismiss, holding that whether the information was a trade secret is a factual issue, but opined that:

Social networking sites enable companies … to acquire hundreds and even thousands of “friends.” These “friends” are more than simple lists of names of potential customers. “Friending” a business or individual grants that business or individual access to some of one’s personal information, information about his or her interests and preferences, and perhaps most importantly for a business, contact information and a built-in means of contact. Even assuming that employees generally knew the names of all of the “friends” on [the former employer’s] MySpace pages, it is highly unlikely, if not impossible, that employees knew the contact information and preferences of all those on the “friends” list from general experience.

This is an evolving area of law, and information that was protectable 10 years ago may not necessarily be protectable today.

In Sasqua Group Inc. v. Courtney, a federal court in New York ruled that LinkedIn connections and Facebook relationships with clients cultivated by a former employee were not trade secrets belonging to the firm because although that information “may well have been a protectable trade secret in the early years of [the company’s] existence when greater time, energy and resources may have been necessary to acquire the level of detailed information to build and retain the business relationships at issue … for good or bad, the exponential proliferation of information made available through full-blown use of the Internet and the powerful tools it provides to access such information [now] is a very different story.”

While this case is a classic example of bad facts making bad law, having policies in place at the very least sets expectations for employees, and at best it could carry the day in court.

Beware of Overreach

When implementing policies and agreements related to social media, employers must beware not to infringe upon employees’ rights under state or federal law, including the National Labor Relations Act, which safeguards employees’ right to engage in “protected concerted activities,” Additionally, many states have now enacted or proposed some form of social media privacy laws, some of which prohibit employers from requiring employees or applicants to disclose login information to social media accounts and retaliating against those who refuse to do so.

Employers must also ensure that their own conduct does not run afoul of any laws, including the federal Stored Communications Act, which prohibits the unauthorized access of electronic communications and has been applied to social media. Earlier this year, in Ehling v. Monmouth-Ocean Hospital Service Corp., a federal court in New Jersey held that an employee’s Facebook posts were protected by the Act because she had configured her privacy settings to restrict posts to her “friends” (but found that the employer had not violated the act by viewing the employee’s wall, because a co-worker, who was one of her Facebook friends, showed the post to their employer).

Similarly, in Maremont v. Susan Fredman Design Group Ltd., a federal court in Illinois refused to grant summary judgment to an employer on claims brought by an employee alleging that it had illegally accessed her Twitter and Facebook accounts while she was on medical leave, finding that there were factual disputes as to whether the employer exceeded its authority in accessing those accounts.

Legal issues aside, most employers do not want to create a culture where their employees are constantly in fear of being monitored, which will harm morale and decrease loyalty. This can have the exact opposite effect of what the policies are intended to promote, as disgruntled or disloyal employees are the most likely to take actions harmful to the company.

What Constitutes Solicitation on Social Media?

Regardless of what policies and agreements are implemented, employers must typically still establish that a former employee misappropriated trade secrets and/or improperly solicited customers or employees to obtain relief. The lines are not as clear as they were in the past, however. Does “friending” a customer on Facebook constitute solicitation? Updating one’s LinkedIn account to identify a new employer? Tweeting how great a new employer’s product or service is? These questions largely remain open and have not been addressed in most jurisdictions.

In fact, recent research has uncovered no published decisions in the employment context regarding what constitutes improper solicitation using LinkedIn, the most prolific business-centric social media site that has more than 225 million users worldwide.

However just last month, a Massachusetts court issued an unreported decision in KNF&T Staffing Inc. v. Muller, holding that updating a LinkedIn account to identify one’s new employer and to list generic skills does not constitute solicitation. In this rather narrow decision, the court did not address whether a LinkedIn post could ever violate a restrictive covenant, and several other cases involving this issue settled before it could be resolved.

Outside of the employment context, the Court of Appeals of Indiana, in Enhanced Network Solutions Group Inc. v. Hypersonic Technologies Corp., held that a nonsolicitation agreement between a company and its vendor was not violated when the vendor posted a job publicly on LinkedIn and an employee of the company applied and was hired for the position, because all major steps that led to the employment were initiated by the employee.

In the context of Facebook, a Massachusetts court ruled in Invidia LLC v. DiFonzo that a hairstylist did not violate her nonsolicitation provision by “friending” her former employer’s customers on Facebook because “one can be Facebook friends with others without soliciting those friends to change hair salons, and [plaintiff] has presented no evidence of any communications, through Facebook or otherwise, in which [defendant] has suggested to these Facebook friends that they should take their business to her chair.”

Likewise, in Pre-Paid Legal Services Inc. v. Cahill, a former employee posted information about his new employer on his Facebook page “touting both the benefits of [its] products and his professional satisfaction with [it]” and sent general requests to his former co-employees to join Twitter. A federal court in Oklahoma denied his former employer’s request for a preliminary injunction, holding that communications were neither solicitations nor impermissible conduct under the terms of his restrictive covenants.

In sum, common sense continues to reign supreme in determining what constitutes solicitation in the age of social media, and if it looks, tastes and smells like solicitation, it probably is. Nevertheless, it is imperative that employers protect their trade secrets and goodwill by setting clear expectations and implementing policies and agreements that clearly express those expectations and provide a means by which to enforce them if necessary.

In dismissing a claim for violation of Fourth Amendment rights, the United States District Court for the District of Nevada in Rosario v. Clark County School District, No. 2:13-CV-362, 2013 U.S. Dist. LEXIS 93963 (Nev. Jul. 3, 2013) recently became the latest court to hold there is no reasonable expectation of privacy in Twitter tweets.

This case arises out of plaintiff Juliano Rosario’s tweets about his high school’s basketball team. Juliano tried out for the team in his senior year, but was initially cut. After his father protested the cut, Juliano was eventually given a spot on the team. Immediately following the final game of the season, Juliano made numerous sexually and racially offensive tweets about several school officials, including coaches and the athletic director. The school disciplined Juliano for “cyberbullying” after learning of the offensive tweets. Juliano and his father then filed a 10-count complaint against the school district and six of its employees alleging, among other things, that the defendants (the school district and several officials) violated Juliano’s Fourth Amendment rights by searching his Twitter account.

In ruling on the defendants’ motion to dismiss the Fourth Amendment claim, the Court recited Supreme Court precedent providing that a person has a constitutionally protected reasonable expectation of privacy when that person has both a subjective expectation of privacy and that expectation is one that society recognizes as reasonable. The plaintiffs argued that Juliano had such a reasonable expectation of privacy in his tweets. The Court disagreed and explained that Twitter has two privacy settings: (1) “private,” where tweets can arguably only be read by a tweeter’s “followers”; and (2) “public,” where tweets can be read by anyone. The Court reasoned that tweeters using the “public” setting intend that anyone who wants to read the tweet may do so, and there can therefore be no reasonable expectation of privacy. The Court opined that tweeters using the “private” setting have a “more colorable argument about the reasonable expectation of privacy in his or her tweets,” but nevertheless held that such users are still “disseminating [] postings and information to the public, [and] they are not protected by the Fourth Amendment.” United States v. Meregildo, 883 F. Supp. 2d 523, 525 (S.D.N.Y. 2012) (relating to Facebook posts).

For purposes of ruling on the defendants’ motion to dismiss, the Court assumed as true the plaintiffs’ allegations that Juliano’s Twitter account was “private,” and not “public.” The Court nevertheless concluded that Juliano had no reasonable expectation of privacy in his tweets, and that there was no Fourth Amendment violation when the school accessed his tweets through a follower’s account after that follower gave the tweets to school officials. The Court concluded that it is well-established that a person who shares information with a third party takes the risk that that third party will share it with the government, and that the same logic applies in the social media context.

This decision may also help support the notion that social media followers may not constitute protectable trade secrets. (See also our previous blogs regarding trade secret protection for followers on Twitter, MySpace, and LinkedIn).

Did you think Facebook was just for “likes” and “status” updates? Think again! A federal district court in New York recently tackled the issue of service of process via social media head on, permitting service via Facebook as a backup means of service for serving foreign defendants.

In the case of Federal Trade Commission v. PCCare247, Inc., the Federal Trade Commission (“FTC”) sued multiple defendants, including five based in India. The foreign defendants included two businesses and three individuals. According to the FTC, the defendants had violated certain provisions of the Federal Trade Commission Act by developing a business to deceive American consumers into fixing non-existent computer problems. The FTC had already secured a temporary restraining order against the defendants, which enjoined specific business practices and froze some of the defendants’ assets.

Each defendant had been provided with the summons, complaint, and related court documents by email to their last known addresses, by Federal Express (“FedEx”), and by personal service through a process server. FedEx had confirmed delivery for some of the defendants, and the process server had confirmed delivery to all defendants.

The FTC also served the documents to the Indian Central Authority for service, pursuant to Rule 4(f)(1) of the Federal Rules of Civil Procedure and the terms of the Hague Convention. After multiple inquiries over a four month period, the Indian Central Authority had not responded to the FTC in order to confirm receipt. The Defendants were on notice of the lawsuit, and hired attorneys to represent them at the preliminary injunction. However, defendants’ attorneys withdrew a few months later for nonpayment.

Since the Indian Central Authority failed to confirm service, the FTC filed a motion seeking permission to serve additional documents via email and Facebook. In its analysis, the Court concluded that service by email and Facebook was not prohibited by international agreement, nor had India objected to this type of service. The court conducted a due process analysis, and found that Facebook service was reasonably calculated to notify the defendants of future filings.

Here, the defendants used both email and social media frequently to run their business, and therefore, service by email alone was sufficient to satisfy due process. Furthermore, the fact that two of the defendants had registered their email accounts with Facebook, included their job titles on Facebook, and were Facebook friends with one another, suggested they were highly likely to receive such messages. According to the court, “where defendants run an online business, communicated with customers via email, and advertise their business on their Facebook pages, service by email and Facebook together presents a means highly likely to reach defendants.”

Although the district court permitted service of process in PCCare247, the fact that it was merely an alternative means of service seems to have played a key role in the decision. Prior case law from the same district court suggests that we should not necessarily expect Facebook service to spread like wildfire, and that such service may be limited to cases where the Facebook profile can be properly authenticated. For example, in Fortunato v. Chase Bank USA, the court declined to permit service of a third party complaint by Facebook message to an address found on the individual’s Facebook profile, as the plaintiff failed to show the Facebook profile was authentic or that it was regularly used by the individual.

The use of social media for service is likely to become an increasingly disputed issue in the coming months and years. This past month, Texas became the first state to propose a bill allowing for service of legal process via social media. Texas State Representative Jeff Leach, a Republican, recently introduced a bill in the state’s House of Representatives regarding the use of social media for service of process. If passed, House Bill 1989, would permit “an electronic communication sent to the defendant through a social media website” to act as a method for service of process, provided that “the defendant maintains a social media page on that website, the profile on the social media page is the profile of the defendant, the defendant regularly accesses the social media page account, and the defendant could reasonably be expected to receive actual notice if the electronic communication were sent to the defendant’s account.” If the bill were to become law, Texas would be the first state to legalize social media as an alternative means of service.

Service via social media has become increasingly prevalent in other countries, suggesting the United States may not be far behind. In England, the High Court recently approved the use of Facebook for service of legal documents in a commercial dispute. Similarly, “Facebook is routinely used to serve claims in Australia and New Zealand.”

The use of social media for service of process is likely to be a continuing issue in the United States, and we will keep you apprised of future developments in this rapidly changing area.

In Seyfarth’s third installment of its 2013 Trade Secrets Webinar series, on Tuesday, March 19, 2013, at 12:00 p.m. Central Standard Time, Seyfarth attorneys Gary Glaser, Scott Schaefers, and Jessica Mendelson will address the relationship between trade secrets and social media. The Seyfarth panel will specifically address the following topics:

  • What’s are “Trade Secrets” and Best Practices to Protect Against Them “Walking out the Door. . .”?
  • The NLRB’s Increased Scrutiny of Employers Social Media Policies Makes the Clear Identification of your Trade Secrets More Important Than Ever
  • My Company is Union-Free – I Can Protect My Trade Secrets Without Worrying about the National Labor Relations Act. . .Can’t I?
  • Be Careful What You Wish For: Urging Your Employees to Use Social Networking as a Marketing Tool May Well Blur the Line as to Who Owns “Your” Trade Secrets
  • Linked Out? Don’t be a Twit! Can You Stop Your Trade Secrets from “Friending” your Competitors?
  • Recent Employee Privacy Legislation – are Bans on Mandatory Turnover of Social Networking Passwords Good or Bad?
  • The Trade Secrets Clarification Act – How it May Impact Employee Privacy.

There is no cost to attend this program, however, registration is required.

*CLE credit is available. Seyfarth has applied for CLE credit in IL, NY, and CA. If you would like us to pursue CLE credit in any additional states, please contact events@seyfarth.com. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

On January 22, 2013, United States Magistrate Judge Steven Shreder of the Eastern District of Oklahoma issued a report and recommendation, following Plaintiff Pre-Paid Legal Services, Inc.’s motion for preliminary injunction against its former employee Todd Cahill, concerning whether certain social media communications constituted impermissible employee solicitations in violation of a restrictive covenant agreement. Pre-Paid Legal Services, Inc. v. Cahill, Case No. CIV-12-346-JHP, 2013 U.S. Dist. LEXIS 19323 (E.D. Okla., Jan. 22, 2013). 

In its motion, Pre-Paid Legal Services, now known as LegalShield, sought a preliminary injunction seeking to enjoin Cahill’s misappropriation of trade secrets and solicitation of its workforce.  LegalShield sought to prevent certain social media communications made by Cahill through Twitter and Facebook, which LegalShield argued constituted impermissible solicitations.  Notably, Magistrate Judge Shreder held that these communications were neither solicitations nor impermissible conduct under the terms of the agreement. 

To summarize the facts of the case, LegalShield sells legal service plans to its customers, providing access to legal services.  LegalShield seeks to sell these plans utilizing a network marketing sales model, where sales associates recruit and build a sales organization, which is referred to as a recruiter’s “downline.”  LegalShield makes “downline” information—made up of the contact and performance information of sales associates—available to sales associates through a password protected site.

Cahill was originally hired as a sales associate, built a significant downline network.  In building his network, Cahill created private Facebook pages, which Cahill used to communicate with his most successful associates.  Cahill was eventually promoted to a Regional Manager over the Southern California region and Regional Vice President of Illinois.  Concurrent with his promotion to Regional Manager, he executed the Regional Manager Agreement.  Included within that agreement were both confidentiality provisions and a non-solicitation provision, prohibiting solicitation of LegalShield employees.

On August 10, 2012, allegedly under false pretenses, Cahill allegedly called a meeting of a number of high ranking sales associates.  Prior to the meeting, Cahill allegedly met with certain sales associates and solicited and sought to convince those persons to leave LegalShield’s employ for Nerium, a skin care company, which also operated a multi-level marketing company.  At the meeting, Cahill allegedly told the employees that he was leaving LegalShield and, if the employees were interested in where he was going and what he was doing, they should email Cahill.

Following the meeting, Cahill emailed his resignation letter to LegalShield.  After his resignation, LegalShield shut off his access to his downline information.  Three days later, Cahill allegedlyposted information about Nerium on the private Facebook pages he created during his employment with LegalShield.  Cahill did not post any information to those pages after August 13, 2012.  Cahill, however, allegedly continued to post information about Nerium on his personal Facebook page and sent general requests to LegalShield employees to join Twitter.

In moving for a preliminary injunction, LegalShield argued that Cahill should be preliminarily enjoined from utilizing, disclosing or misappropriating LegalShield’s trade secrets, which LegalShield argued was its downline information.  Cahill argued that he did not have access to the information, with which the court agreed and the court denied LegalShield’s motion with respect to its misappropriation claim.

LegalShield also argued that Cahill should be enjoined from directly soliciting LegalShield’s employees.  Citing Cahill’s undisputed solicitations of LegalShield’s employees, the court found that LegalShield satisfied its burden and Cahill was enjoined from initiating contact with LegalShield’s employees.

In the most interesting piece of the case from a legal development standpoint, the court gave careful consideration to LegalShield’s argument that Cahill’s general posts to his personal Facebook page about Nerium constituted impermissible solicitations.  Noting that such an argument constituted a “novel issue”, the court analyzed other court decisions in which similar arguments were made regarding alleged social media solicitations. 

Specifically, the court analyzed Enhanced Network Solutions Group, Inc. v. Hypersonic Technologies Corp., 951 N.E.2d 265 (Ind. Ct. App. 2011) and Invidia, LLC v. DiFonzo, 2012 WL 5576406 (Mass. Super. Oct. 22, 2012).  In Enhanced Network, the Indiana Court of Appeals considered whether a job posting on a LinkedIn page constituted an improper solicitation.  The court found that the posting did not constitute a solicitation because the Enhanced Network employee “made the initial contact with Hypersonic after reading the job posting on a publicly available portal of LinkedIn.”  951 N.E.2d at 268. 

In Invidia, the plaintiff argued that its former hairstylist violated a non-solicitation provision by friending certain of plaintiff’s customers on Facebook after leaving plaintiff’s employ.  Finding that such friending was not a solicitation, the Massachusetts court held that: “one can be Facebook friends with others without soliciting those friends to change hair salons, and [Plaintiff] has presented no evidence of any communications, through Facebook or otherwise, in which [Defendant] has suggested to these Facebook friends that they should take their business to her chair at David Paul Salons.”  2012 WL 5576406, at *6.

Discussing the facts of the instant case, the court found that Cahill’s acts were even less explicit that those of the defendants in Enhanced Network or Invidia.  The court also found that LegalShield presented no evidence that it would suffer irreparable harm if Cahill was not enjoined from posting on his personal Facebook page or that Cahill’s Facebook posts had caused a LegalShield employee left as a result of such posts.  2013 U.S. Dist. Lexis 19323 at *30-31.

The import of this decision and others like it is that courts do not appear convinced that simply providing information in a public forum, to which a former employee’s coworkers or customers may visit constitutes improper solicitation.  That said, no court appears to have been confronted with the question of whether an improper solicitation occurs when the former employee communicate with a former employer’s workforce or customers directly through a social media site or speaks ill of the former employer through such a site.  Despite no court being confronted directly with these questions, the Cahill, Enhanced Network, and Invidia decisions all foreshadow that courts will enjoin solicitations through social media if those communications rise to the level of traditional solicitations, such as emails, etc. 

The important takeaway from this case is that courts are treating social media solicitations argument as legitimate.  This development offers an area of discovery that all employers should seek to explore (and an area that defense counsel must be sure to caution their clients to preserve). 

But, though it is now being recognized by courts as a possible means by which a former employee could breach a non-solicitation provision, employers are still required to show more than a former employee provides mere access to information, even where that information is likely to be viewed by that employer’s workforce or customers.  Courts, instead, appear to be looking for either personalized communications to the allegedly solicited persons or generalized communications either extolling the virtues of the new employer or badmouthing the former employer.  Under that factual scenario, the Cahill court, at least, appears to suggest that such generalized posts could constitute impermissible solicitations.

For more information on these interesting issues, please join me on February 20, 2013 for an informative complimentary webinar on Trade Secrets in the Telecommunications Industry. The webinar starts at noon c.s.t. and you can register here.

Throughout 2012, Seyfarth Shaw LLP’s dedicated Trade Secrets, Computer Fraud & Non-Competes Practice Group hosted a series of CLE webinars that addressed significant issues facing clients today in this important and ever changing area of law. The series consisted of eight webinars:

1) Employee Privacy, Social Networking at Work, and the Computer Fraud and Abuse Act Standoff;
2) Employee Theft of Trade Secrets or Confidential Information in Name of Protected Whistleblowing;
3) Pleading, Providing and Protecting Trade Secrets in Litigation;
4) Protecting Your Trade Secrets in the Financial Services Industry;
5) When Trade Secrets Cross International Borders;
6) Trade Secrets and Non-Compete Legislative Update;
7) Trade Secret Protection Best Practices: Hiring Competitors’ Employees and Protecting the Company When Competitors Hire Yours; and
8) 2012 California Year in Review: What You Need to Know About the Recent Developments in Trade Secret, Non-Compete, and Computer Fraud Law.

As a conclusion to this well-received 2012 webinar series, we compiled a list of key takeaway points for each of the webinars, which are listed below. For those clients who missed any of the programs in this year’s webinar series, the webinars are available on CD upon request or you may click on the title below of each webinar for the online recording. CLE credit is available as discussed below. We are also pleased to announce that Seyfarth will continue its trade secrets webinar programming in 2013 and has several exciting topics lined up. We will release the 2013 trade secrets webinar series in the coming weeks.

Employee Privacy, Social Networking at Work, and the Computer Fraud and Abuse Act Standoff

The first webinar of the year, led by Seyfarth partners Gary Glaser and Scott Schaefers, addressed the issue of employees’ privacy rights on their work computers; unauthorized use or disclosure of company intellectual property while using social media; and the Computer Fraud and Abuse Act (CFAA).

  • To have the best chance of seeking remedies under the federal CFAA, only give employees access to company networks on a need-to-know basis. Require all employees with access to confidential company information to sign confidentiality and restricted access and use agreements. Have clear written policies in place that leave no doubt that any access and use of company information, for purposes other than company business, is strictly prohibited, and have employees acknowledge receiving copies of such policies. Send out periodic reminders of those policies, each of which should require acknowledgement of receipt by the employees.
  • Do NOT attempt to access an employee’s personal e-mails, files or Internet accounts without advice of counsel. Under both federal and many state laws, employees often have privacy rights in their personal information, even if they store it or access it on company computers.
  • For social networking sites (e.g., LinkedIn), have clear written policies that spell out what company information may/may not be posted on such sites, and identify what information belongs to the company (e.g., contact lists, company photos or graphics, etc.), as well as a process for purging the company-owned information from their contact lists posted on social networking sites such as LinkedIn at the time the employee departs. An exit interview should also be conducted at the time any employee separates, and as part of that exit interview process, each exiting employee should be given a written reminder of their ongoing trade secret, confidentiality and social networking obligations. If an employee leaves the company without such clear written direction, the company risks waiving any proprietary interest in the information in his/her LinkedIn profile. Also consider using ownership agreements that specify that the company owns the particular social media accounts that the employee may work on and remember to obtain the password from the employee to the company owned social media account before the employee leaves.

Employee Theft of Trade Secrets or Confidential Information in The Name of Protected Whistleblowing

In our second webinar of the series, Seyfarth partner Robert Milligan answered the question, “Can employees steal trade secrets and confidential information to support their whistleblower claims?” This program covered recent decisions addressing the interplay between maintaining employer confidentiality and protection of trade secrets and protected activity under whistleblower statutes and “self-help” discovery, as well as the provisions in whistleblower bounty programs that preclude enforcement of confidentiality agreements in certain instances.

  • A central goal of Sarbanes-Oxley is the accurate valuation and protection of a company’s assets. But what does this mean for trade secrets, which have traditionally been thought of as an undefined intellectual property right? Sarbanes-Oxley has mandated duties of disclosure and internal controls that have transformed trade secrets into an asset that must be valued and reported.
  • At a minimum, companies should create a trade-secret protection committee or have a corporate officer whose job it is to identify, value, and protect trade secrets. However, doing so requires an understanding of 1) what a trade secret is, 2) where one finds a trade secret, and 3) how to appropriately protect a trade secret. The key is to identify, inventory and value as well as institute internal controls to protect trade secrets. Seyfarth has extensive experience assisting companies with this process and offers an effective and well-received trade secret audit program.
  • Section 922 of the Dodd-Frank Act prevents any person from interfering with a whistleblower’s report, including by threatening to enforce confidentiality agreements. Whistleblower thieves may seek revenge by making confidential information public in addition to bringing it before the SEC. Companies must act swiftly to have genuine confidential or trade secret information removed from public mediums, such as the Internet, to attempt to preserve its secrecy. New whistleblower rules may decrease incentives to follow internal reporting procedures and instead provide a perverse incentive for sham employees to work for bounties rather than fulfill their employment obligations. Careful planning should be done to make good hiring decisions as well as employing effective performance management of existing hires to attempt to manage the risk of the retention of rogue and disloyal servants.
  • Consider these strategies to protect trade secrets and confidential information when faced with a whistleblower thief:
  1. Make sure you have a clear anti-retaliation policy and document investigation. Follow your corporate compliance programs and ethics policies and procedures.
  2. Be careful in all communications with the whistleblower. Do not make him or her feel threatened. Try to find an employee that the whistleblower thief trusts to get back company documents.
  3. Consider engaging a third-party neutral to maintain confidential documents and information if the whistleblower has not yet gone to the SEC.
  4. Consider amnesty negotiations. Remind the whistleblower of the serious legal consequences of stealing trade secret and confidential information.
  5. Offer to study the problem internally and report to the SEC.
  6. Move swiftly to attempt to obtain the removal of any confidential or trade secret documents from the Internet by working with Internet service providers to obtain the immediate takedown and involve the court as needed.

Pleading, Proving and Protecting Trade Secrets in Litigation

The third installment in the 2012 Trade Secrets Webinar Series was presented by trade secrets practice leader Michael Wexler. Many courts require that claims for trade secret misappropriation be pled specifically as to the nature of the trade secret or suffer the consequences of challenges to the pleadings. The challenge is to plead with reasonable particularity without actually disclosing the secrets in a public document. From a defense stand point, the identity of the trade secret is paramount to prepare defenses, determine the value of the secrets, and determine if they were actually misappropriated. This webinar covered the ethical, technical and practical aspects of initial pleadings that are fundamental to the filing and defending of trade secret claims.

  • In any trade secrets litigation in which you represent the plaintiff, you must have a frank discussion with your client prior to the inception of the litigation concerning its duties to identify the alleged misappropriated trade secrets with specificity and the resulting discovery disclosure that will be required in the litigation. Simply put, the client needs to know that counsel for the defendant(s) (at a minimum) will be provided access to the allegedly purloined trade secret as well as others. Depending upon the state and occasionally the individual judge, the defendants may also be able to obtain access to the stolen trade secrets subject to a protective order so that they can defend themselves against the claim. A plaintiff must be mindful that their secrets may be further disclosed to a competitor during trade secret litigation subject to non-disclosure obligations and that plaintiff must vigorously defend and protect the confidentiality of said information throughout the litigation.
  • A majority of states either by statute or case law require that a plaintiff disclose their trade secrets with specificity as part of the discovery process. Failure by the plaintiff to provide sufficient specificity regarding the stolen trade secret in discovery may result in a defendant obtaining summary judgment on the claim. Some states require the plaintiff to provide a specific trade secret disclosure document before discovery commences. See California Code of Civil Procedure section 2019.210.
  • Protective orders in trade secret litigation must be carefully tailored to protect confidential information disclosed in discovery and limit the disclosure of such information to those who need to know for purposes of the litigation. A protective order should have appropriate measures concerning how documents containing confidential information will be provided to the court, witnesses, and experts. Careful consideration should also be made on whose burden it is to justify the protection level assigned to particular documents.
  • Plaintiffs should use contention interrogatories to flesh out any allegations made by the defendant(s) that particular alleged trade secrets are in the public domain. Written discovery should probe the basis of such allegations, including when and where such disclosure occurred.

Protecting Your Trade Secrets in the Financial Services Industry

The fourth webinar in the series, presented by partners Scott Humphrey and James McNairy, focused on trade secret considerations in the banking and finance industry, including prosecuting claims against former employees who are FINRA members.

  • When seeking injunctive relief in a trade secrets dispute involving parties that are subject to FINRA regulation, be sure to first consult FINRA (NASD) Rule 13804 governing injunctive relief—while the moving party may first seek injunctive relief from a court of competent jurisdiction, the party must also make specified filings with FINRA.
  • When litigating a trade secret dispute before FINRA, keep in mind that the FINRA process is often less formal than in court, and the arbitration panel may include persons who are not lawyers. Thus, it behooves both parties to keep their legal arguments concise and, where complex trading algorithms or other complex trade secrets are at issue, the trade secret should be described as simply as possible.
  • When the FINRA trade secret dispute arises out of facts involving broker recruitment, the parties should be aware of the 2004 “Protocol for Broker Recruiting,” which currently has well over 400 signatories and allows brokers to take to their new employer certain account information. Other limitations within the protocol should also be carefully considered before filing suit.

When Trade Secrets Cross International Borders

Our fifth webinar in the 2012 series was presented by Robert Milligan, Marjorie Culver and Matthew Werber and provided a high-level discussion of recent non-compete and trade secret issues that impact foreign companies conducting business in the United States and companies operating internationally. This program provided an overview of the key considerations that foreign companies should appreciate in order to effectively navigate trade secret and non-compete law in the U.S. and highlighting the issues facing U.S. trade secret owners attempting to address the theft of stolen trade secrets abroad. This webinar provided valuable insight for companies who compete in the global economy and must navigate the legal landscape in these jurisdictions to ensure they are adequately protecting their trade secrets.

  • In many U.S. states, initial employment and continued employment can be sufficient consideration for non-compete, non-solicitation and non-disclosure agreements, whereas in several European countries, the employer must pay for any post-termination non-compete. In contrast to the law in some foreign countries, employers can still enforce the non-compete even if the employer terminates the employment relationship in some U.S. states. Injunctive relief is typically the top litigation goal in most U.S. trade secret/non-compete matters. There are significant differences in U.S. states concerning the interpretation of the Uniform Trade Secrets Act (which has been adopted in 46 U.S. States). For example, there are significant differences regarding the application of the inevitable disclosure doctrine, trade secret preemption and recoverable damages.
  • Cross-border considerations: employers must be vigilant and think critically about the most likely venue that a non-compete/trade secret battle will occur should an employee later leave the company as forum and choice of law can be outcome determinative. Employers should carefully select employees for cross-border coverage, taking into consideration where the work will likely be performed, where the employee will likely reside, what jurisdiction/choice of law is most favorable, and the likely chance of successful enforcement. The employer should draft to the highest standard based upon the likely locale of any dispute concerning the non-compete.
  • Trade secret holders seeking to remedy misappropriation occurring abroad should consider the United States International Trade Commission (ITC) as a potential forum for seeking relief. In TianRui Group Co., Ltd. v. ITC, 661 F.3d 1322 (Fed. Cir. 2011), the Federal Circuit ruled that the ITC can exercise its jurisdiction over acts of misappropriation occurring entirely in China so long as the dispute concerns products being imported into the United States.

Trade Secrets and Non-Compete Legislative Update

The sixth webinar of the year, led by Robert Stevens, Erik Weibust, and Daniel Hart, focused on new and pending legislative changes to non-compete and trade secrets statutes, including a review of Georgia’s Revised Restrictive Covenant Act one year after its enactment, recent and pending legislative changes to non-compete statutes in New Hampshire and Massachusetts, adoption of the New Jersey Uniform Trade Secrets Act, and pending legislative changes to trade secrets statutes in Idaho and at the federal level.

  • To the extent that they have not already done so, employers operating in Georgia should have their non-compete agreements evaluated by counsel to ensure that they are taking full advantage of the change in Georgia public policy toward enforcement of restrictive covenant agreements, which permits courts to blue pencil overbroad agreements and which only applies to agreements signed after May 11, 2011.
  • Employers operating in New Hampshire should ensure compliance with the new statutory requirement of disclosing non-compete and non-piracy agreements to employees prior to making an offer of employment or an offer of change in job classification, while employers operating in Massachusetts should stay abreast of proposed legislation that, if enacted, could make enforcement of restrictive covenants more difficult in Massachusetts. Please see our chart that summarizes the various iterations of the proposed legislation.
  • In light of New Jersey’s adoption of the Uniform Trade Secrets Act and proposed legislation in Idaho and at the federal level, trade secrets law is slowly moving toward greater uniformity. In light of the continually developing statutory landscape, employers operating anywhere in the United States should continue to ensure that they have taken reasonable measures to protect their trade secrets, by, among other steps, limiting access to trade secrets to employees with a need for such access, providing password protections on documents, encrypting data, limiting the ability of employees to remotely print highly sensitive documents, and enacting vigorous restrictive covenant agreements in jurisdictions where such agreements are permitted.

Trade Secret Protection Best Practices: Hiring Competitors’ Employees and Protecting the Company When Competitors Hire Yours

The seventh webinar in our series, presented by Michael Wexler, Robert Milligan and Joshua Salinas, discussed best practices when dealing with newly hired or departing employees and the incumbent trade secret, non-competition and information protection issues.

  • During the job interview of a competitor’s employee, remember to 1) discuss general skills and talents, not the former employer’s customers or trade secrets; 2) control the interview and put the employee at ease; 3) make clear that the employee should not, under any circumstances, use or bring any of his employer’s information or solicit any former co-workers; 4) focus on making the transition as smooth as possible for the former employer; and 5) check if the employee has any existing agreements with former employers before making an offer.
  • Key agreements/provisions/policies that companies should have with their employees: 1) non-disclosure and trade secret protection agreements; 2) non-solicitation of employee agreements/provisions; as permitted by law 3) agreements/provisions relating to former employer’s trade secrets (don’t use or disclose and do not bring to premises); 4) computer use and access provisions/agreements; 5) social media ownership agreements and policies; and 6) invention assignment agreements.
  • The exit interview process with departing employees is key. Employers should:
  1. Prepare for the interview, identify the trade secret and confidential information the employee accessed/used, consider having in-house counsel or HR and employee’s manager present
  2. Question the departing employee in detail.
  3. Ask the employee why he/she is leaving.
  4. Ask the employee what his/her new position will be.
  5. Check the employee’s computer activities and work activities in advance of the meeting.
  6. Ensure that all Company property, hardware, and devices have been returned, including e-mail and cloud data, and social media accounts; consider using an inventory list.
  7. Ensure that arrangements are made to have all company data removed from any personal devices, accounts, storage areas.
  8. Disable access to company computer networks.
  9. Make sure you obtain user names and passwords for all company social media accounts.
  10. Inform the employee of his continuing obligations under agreements with the Company.
  11. Consider letter to new employer and employee with reminder of continuing obligations.
  12. Consider having departing employee’s emails preserved and electronic devices forensically imaged.
  13. Consider using an exit interview certification.

2012 California Year in Review: What You Need to Know About the Recent Developments in Trade Secret, Non-Compete, and Computer Fraud Law

In Seyfarth’s final installment of its 2012 Trade Secret Webinar series, Seyfarth attorneys James McNairy, Joshua Salinas and Jessica Mendelson reviewed noteworthy California cases and other legal developments in the increasingly hot areas of trade secret protection, the preemptive effect of the California Uniform Trade Secrets Act, California’s hostility to non-competition and non-solicitation agreements, the continued erosion of the Computer Fraud and Abuse Act as a tool for California employers to curb data theft, and social media’s influence on how organizations identify and protect confidential information.

  • Clearly define company social media policies before problems arise. Avoid restricting employees’ abilities to discuss the terms and conditions of their employment, wages, and other activities protected under Section 7 of the National Labor Relations Act. Employers who make use of social media accounts should consider using contracts to state clearly that the employer owns the accounts, which are to be used only for authorized purposes, but that do not overreach into areas that violate employee rights to privacy.
  • Companies should ensure their computer and network policies cover “access,” not merely “use,” to comply with the Ninth Circuit’s narrow interpretation of the CFAA. Access should be defined clearly to delineate functionally what computer resources and information employees permissibly may and may not access, with data repositories containing sensitive information requiring enhanced access restrictions.
  • To fall under California Business and Professions Code section 16601’s “sale of business” exception, non-competition covenants executed pursuant to the sale of a business should be incorporated into the terms of the purchase agreements and reflect a clear purpose to protect business goodwill.
  • Because preemption under California’s Uniform Trade Secrets act is increasingly invoked by defendants as a basis to dismiss claims related to the taking of trade secret information, it is imperative that potential plaintiffs carefully plead non-trade secret claims as distinct from the trade secret allegations within the complaint. Failure to do so can cause related claims to be preempted and, if the trade secret claim itself is faulty, significantly reduce the number of at issue claims.
  • Create a culture of confidentiality within your company so that at every turn employees are aware of the importance of protecting confidential, proprietary, and trade secret information and the steps required of all employees to protect the company’s information assets. Doing so may enable your organization to invoke the trade secrets exception to California Business and Professions Code section 16600, which may help protect company information assets and moderate high employee mobility in California.

2013 Trade Secrets Webinar Series

Beginning in January 2013, we will begin another series of trade secret webinars. The first webinar of 2013 will be a national year in review on the most important cases and developments throughout the country concerning trade secrets, non-competes, and computer fraud. To receive an invitation to this webinar or any of our future webinars, please sign up for our Trade Secrets, Computer Fraud & Non-Competes mailing list by clicking here.

For attorneys licensed in Illinois, New York or California, who are interested in receiving CLE credit for viewing recorded versions of the 2012 webinars, please e-mail CLE@seyfarth.com to request a username and password. Seyfarth Trade Secrets, Computer Fraud & Non-Compete attorneys are also happy to discuss with you presenting similar presentations to your groups for CLE credit.

Happy holidays!!!

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.