On August 9, 2012, a district court for the Western District of Michigan dismissed counterclaims of tortious interference with a business expectancy and conversion brought after the removal of a company’s Facebook page and the alleged loss of its more than 19,000 “fans.” (Lown Companies LLC v. Piggy Paint LLC, No. 11-cv–911 (W.D. Mich., Aug. 9, 2012)) . This case illustrates how courts struggle with determining the value of Facebook friends, Twitter followers, and other social media “assets.”

Plaintiff Lown Companies, LLC holds a registered mark “PIGGY POLISH” for nail polish products. Lown brought a trademark infringement action against Defendant Piggy Paint, LLC when Lown discovered that Piggy Paint was allegedly selling nail polish products under the mark “PIGGY PAINT NATURAL AS MUD.” Lown also sent a take down request to Facebook, requesting removal of Piggy Paint’s Facebook page on grounds of alleged copyright infringement (although it should have been brought based on alleged trademark infringement).

Facebook honored Lown’s request. Piggy Paint consequently lost access to its Facebook page and access to its 19,000 “fans.”

As a result, Piggy Paint raised several counterclaims against Lown, including tortious interference with a business expectancy and conversion. In particular, Piggy Paint alleged that it had a business expectancy in the more than 19,000 “fans” that “liked” its page. (Some commentators were surprised it had 19,000 fans in the first place – see Eric Goldman’s scholarly and humorous blog on this case). Moreover, Piggy Paint alleged that Lown intentionally exercised control over Piggy Paint’s mark by removing its page from Facebook.

The Court dismissed both counterclaims.

First, the Court found that “Piggy Paint has not and cannot show that the removal of the facebook page — which did not offer any means of placing orders or doing business — resulted in the loss of any business.” The Court held that Piggy Paint’s alleged business expectancy with its “fans” was “too indefinite to form the basis of an actual expectation of business.” Moreover, the Court recognized that Lown’s removal request was based on its desire to protect own mark, not out of malice.

Second, the Court recognized that Facebook, not Lown, took down Piggy Paint’s page. Thus, the conversion counterclaim was inapplicable to Lown to because Piggy Paint failed to allege that Lown had any authority or ability to control the page or force Facebook to remove it.

This case is important as the courts begin to address the ownership and value of social media “assets.” It demonstrates the need explain the damages or harm incurred when bringing claims for the loss of social media friends, fans, or followers. The Court seemed to suggest that Piggy Paint may have proceeded on its tortious interference counterclaim if it explained how the loss of its “fans” caused a loss of business.

This case is analogous to the currently pending–and closely watched–PhoneDog v. Kravitz case, which involves a dispute over a company’s alleged loss of its Twitter account and followers that were allegedly taken by a former employee. Similar to this case, the court in PhoneDog dismissed PhoneDog’s tortious interference with a prospective economic advantage claim on grounds that PhoneDog failed to allege any facts regarding how the loss of its Twitter account and followers caused it any economic harm. The court subsequently allowed PhoneDog’s claim to go forward once PhoneDog amended its complaint and explained how it lost advertising revenue from the loss of its Twitter account and followers: “there is decreased traffic to [the] website through the Account, which in turn decreases the number of website page views and discourages advertisers from paying for ad inventory on PhoneDog’s website.”

The Piggy Paint Court did not indicate in its opinion or order whether Piggy Paint’s counterclaims were dismissed with or without prejudice. If the dismissal was without prejudice, Piggy Paint may be able to bring a tortious interference with a business expectancy counterclaim if it can provide specific facts and explain how the loss of its Facebook “fans” caused the loss of any business. This case also reflects a growing trend where courts refuse to accept conclusory allegations that the mere loss of social media “assets” is sufficient to show damages or losses.

This case also reveals the potential dangers in the use of social media to conduct business and as a company’s primary marketing device. As seen in the PhoneDog case, issues will continue to rise regarding the ownership of social media accounts, connections through those accounts, and other valuable social media assets. In the recent Eagle v. Morgan case, a federal court in Philadelphia ruled an employer could claim ownership of a former executive’s LinkedIn Account, where the employer had significant involvement in the creation, maintenance and operation of the account. Earlier this year, a Colorado federal court in Christou v. Beatport, LLC allowed a plaintiff’s trade secret misappropriation claim based on the theft of MySpace “friends” to proceed.

These significant issues will continue to linger as the courts grapple with issues such as whether social media accounts and followers can be owned, misappropriated, converted, transferred, or assigned, who may be liable when someone loses access to their social media accounts and followers, and what damages, if any, are recoverable.

Companies who utilize social media for business should consider the different protections and risks associated with each social network. For example, Piggy Paint demonstrates how a company can lose access to thousands of “fans” with simple takedown request from a competitor, at least in Michigan. The recent Facebook (Piggy Paint, Michigan), Twitter (PhoneDog, California), LinkedIn (Eagle, Pennsylvania), and MySpace (Christou, Colorado) cases, at least at this stage as the law develops, may reveal different levels of protection for each network in each state and may influence whether a company focuses their marketing efforts on a specific network.

While you can’t put a price on friendship, it is becoming apparent that you may be able to in social media and sue for the loss or denial of that “asset”–so long as you provide specific facts and explain the actual value of the social media connection at least in some jurisdictions. We will continue to follow this rapidly evolving area.