SOCIAL MEDIA, TRADE SECRETS, AND YES, THE SKY IS FALLING Marisa Warren and Arnie Pedowitz Pedowitz & Meister, LLP 1501 Broadway, Suite 800 New York, NY 10036 212-403-7321 pedowitzmeister.com I. Introduction On the forefront of issues facing the modern workplace today is the ability of employees to publish, through the use of the internet, information that may be damaging to employers. Blogs were one of the first vehicles that enabled employees to publish information about their employer. Blogs, or “web logs” as originally named, emerged from the early days of the internet1 and quickly rose to popularity in the mid-1990s.2 Blogs allowed the average internet user to establish a personal online diary which carried no barriers to publishing, no restrictions on content, and no limit to the potential readers online. Although blogs have remained popular,3 the rise of social media4 creates new challenges for the workplace. Recent case law has begun to address the impact of social

                                                         1

Attiya Malik, Are You Content with the Content? Intellectual Property Implications of Weblog Publishing, 21 J. Marshall J. Computer & Info. L. 439, 443 (2003).

2

Alan Nye, Blog Wars: A Long Time Ago in an Internet Far, Far Away . . ., 20 Me. B.J. 102, 102 (2005).

3

Blogpulse.com, last visited Apr. 5, 2011, noting that there are over 159 million blogs in existence today.  

4

While social media use has grown dramatically across all age groups, older users have been especially enthusiastic over the past year about embracing new networking tools. Social networking use among internet users ages 50 and older nearly doubled—from 22% in April 2009 to 42% in May 2010.6 “Between April 2009 and May 2010, social networking use among internet users ages 50-64 grew by 88%--from 25% to 47%. During the same period, use among those ages 65 and older grew 100%--from 13% to 26%. By comparison, social networking use among users ages 18-29 grew by 13%—from 76% to 86%.” See PEW INTERNET AND AMERICAN LIFE PROJECT, OLDER ADULTS AND SOCIAL MEDIA, http://www.pewinternet.org/Reports/2010/Older-Adults-and-Social-Media.aspx (Aug. 27, 2010) (last visited Apr. 1, 2011).  

 

  media on the employment relationship,5 however many issues have yet to be determined. As a result, employers continue to wrestle with employees’ use of Facebook and other social media to communicate to the outside world about their employers. Employees, on the other hand, are left struggling to identify what conduct is legally permissible. II. Can Social Media Destroy Trade Secret Protection? Social Media has the potential to significantly impact an employer’s ability to maintain trade secret protection over various pieces of information. To qualify as a trade secret the information: must be maintained in confidence, must have commercial value from not being generally known, and must not be readily ascertainable by proper means.6 As a general rule, the more detailed and difficult to obtain the information, the more likely that the customer list will be considered a trade secret. Social media may thrust certain pieces of information that were “maintained in confidence” into the public domain. Due to the unpredictability of social media privacy settings, lots of information is now readily ascertainable by proper means, even when employers believe this information is being kept confidential. Facebook’s privacy policy, for example, as of December 22, 2010, states that “some of the content you share and the actions you take will show up on your friends’ home pages and other pages they visit” and that Facebook may “disclose information pursuant to subpoenas, court orders, or                                                          5 See, e.g. EEOC v. Simply Storage Management, LLC, 270 F.R.D. 430, (S.D. Ind. 2010) (requiring that all information from plaintiffs’ social networking profiles and postings that relate to their general emotions, feelings, and mental states must be produced in discovery when they allege severe emotional trauma and harassment against their employer); Pietrylo v. Hillstone Rest. Group, Civ. No. 06-civ.-5754 2009 WL 3128420 (FSH) (D. N.J. Sept. 25, 2009) (N.J. court upheld a jury verdict finding that employer was liable for violating the federal Stored Communications Act (SCA) when employer intentionally accessed a private chat group on an employee’s MySpace account without having received authorization from the MySpace member to join the group); Moreno v. Hartford Sentinel, Inc., 172 Cal. App. 4th 1125 (Cal. Ct. App. 2009) (holding that an employee MySpace user had no reasonable expectation of privacy for a post the employee made on her MySpace page, despite the fact that the employee’s MySpace page identified her by her first name only and she deleted the post after six days).  6

 

UTSA, §1; Restatement (First) of Torts, §757, comment b. 

  other requests (including criminal and civil matters) if we have a good faith belief that the response is required by law.”7 In Romano v. Steelcase, 907 N.Y.S. 2d 650, 655 (2010), the New York Court of Appeals, New York’s highest court, went so far as to state that the plaintiff has no reasonable expectation of privacy “notwithstanding her privacy settings” because Facebook and MySpace did not guarantee “complete privacy”. While the privacy settings chosen by the original user shouldn’t be conclusive, they can serve as good evidence of how the company or individual seeking to assert trade secret protection thought about the information at issue, and of how broadly it was known and knowable before the defendant disseminated this information. A company’s customer list may qualify as a trade secret so long as the company seeking to assert a claim for misappropriation can establish (among other requirements) that it took reasonable steps to protect the secrecy of that information. Maintaining the secrecy of client lists has been particularly complicated by social media. While an employee is unlikely to use social media to blatantly post documents online entitled “Customer List and Trade Secrets,” an employee’s readily-accessible contact list on professional social networking sites such as LinkedIn could set the stage for an argument that a customer list has been disclosed and is no longer confidential. This would play out in the following way: an employee would use an employer’s confidential customer contact information to send a LinkedIn invitation to its customers. If the customer accepts, the employee and the customer will be electronically (and publicly) connected. The customers will then appear on a list of the employee’s contacts. One recent decision had found that this type of connection can strip a customer list of its trade secret                                                          7

 

Facebook Privacy Policy, http://www.facebook.com/#!/policy.php. 

  protection. In Sasqua Group, Inc. v. Courtney, No. CV 10-528, 2010 WL 3613855 (E.D.N.Y. Aug. 2, 2010), a magistrate judge for the United States District Court for the Eastern District of New York held that although an employer’s customer list can qualify for trade secret protection, “the exponential proliferation of information made available through full-blown use of the Internet [presents] a different story.”8 Sasqua Group is an executive search consulting firm specializing in the recruitment and placement of professionals for the financial services industry.9 When it parted ways with a former recruiter named Lori Courtney, Sasqua sought an injunction to preclude Courtney from misappropriating its trade secrets. According to Sasqua, Courtney had access to its customer database prior to her departure, and the database was the “lifeblood” of its business.10 The database contained client contact information, individual candidate profiles, contact hiring preferences, employment backgrounds, descriptions of previous interactions with clients, resumes and other information. From Sasqua’s viewpoint, the database was highly proprietary. Courtney, however, had a different perspective, and the Court agreed. Courtney testified that “virtually all personnel in the capital markets industry . . . have their contact information on Bloomberg, LinkedIn, Facebook or other publicly available databases.”11 During the hearing, Courtney was asked what she would do “if she had amnesia                                                          8

The opinion was later adopted by District Judge Spatt, See Sasqua Group, Inc. v. Courtney, 10-CV-528, 2010 WL 3702468 (E.D.N.Y. Sept. 7, 2010). See, Error! Main Document Only.Information Sharing on the Internet May Mean Fewer Confidential Trade Secrets, Michelle Sherman, 12 No. 11 E-Commerce L. Rep. 9 (November, 2010)  9

Sasqua Group, Inc. v. Courtney, No. 10-CV-528, 2010 WL 3613855 (E.D.N.Y. Aug. 2, 2010).  

10

Complaint at ¶ 32, Sasqua Group, Inc. v. Courtney, No. 10- CV-528, 2010 WL 3712928 (file Feb. 5, 2010).  

11

 

Sasqua Group, Inc. v. Courtney, No. 10-CV-528, 2010 WL 3613855 (E.D.N.Y. Aug. 2, 2010).  

  tomorrow, lost her blackberry” and “needed to identify” decision makers and prospective clients. She said she would use the internet and the vast amount of information available on it, which she claimed she could find through a five-minute search. Courtney explained that she could start with LinkedIn “because people put their whole profile on LinkedIn.”12 She explained that if she wanted to find the decision maker at a particular company, she could simply enter the name of the company in the search box. Seconds later, she would have a list of employees, their positions, current title, prior jobs, undergraduate school, dates of attendance, experience, objectives, and even contact information. If she wanted more information, she could do a search on Google and she would have thousands of search results, many of which pointed to news stories recounting companies’ hiring plans. Based on this testimony, the court concluded that the information publicly available “exceeded the amount and level of detail contained in the Sasqua database.”13 The clients, their contact information, and other data was readily accessible. It is important to note that Sasqua did not require Courtney to sign a confidentiality or non-solicitation agreement.14 Nor did the company take reasonable measures to protect the database in question. Its computers were not password protected and all employees had free access to the database, including at work and remotely from home. The database did not contain legends designating confidential information embedded within its pages to remind employees that the information was confidential.                                                          Id.  

12

13

Id.  

14

Id. at *18. 

 

  The database was shared with potential business partners without restriction.15 Firewalls and security software were not installed. As the court stated, “Sasqua failed to take even basic steps to protect the secrecy of the information contained in its database.”16

III. Connecting on LinkedIn: A Violation of An Employee’s Non-Solicitation and Non-Compete Agreement? In addition to the potential loss of trade secret protections, social media has also affected an employee’s obligations under a non-solicitation or non-compete agreement. Employees may find themselves (either intentionally or unintentionally) in violation of a non-solicitation or non-compete agreement with a former employer. In one recent case, LinkedIn serves as part of the basis for the employers claim that the employee violated the non-competition and non-solicitation provisions of their employment agreement. In this case, TEKsystems, Inc. v. Hammernick, Civ. No. 10-CV-00819, 2010 WL 1624258 (D. Minn. Mar. 16, 2010), TEKsystems, a Maryland company engaged in the business of recruiting, employing and providing the services of technical, industrial and office personnel, filed a lawsuit in the United States District Court for the District of Minnesota against three former employees Brelyn Hammernick, Quinn VanGorden, Michael Hoolihan and their new employer, Horizontal Integration, Inc. While working for TEKsystems, Hammernick signed an employment agreement that provided that, for a period of eighteen months following termination of her employment, she was prohibited from directly or indirectly approaching, contacting, soliciting, or inducing any person who had been a “Contract Employee” during the two-year period prior to the date of her termination and about whom she knew of by reason of her employment with                                                          15 Id.   16 Id. at *19.   

  TEKsystems, to: cease working for TEKsystems at clients or customers of TEKsystems, refrain from beginning work for TEKsystems at clients or customers of TEKsystems, or provide services to any individual, corporation, or entity whose business is competitive with TEKsystems.17 These restrictive covenants in Hammernick’s employment agreement did not reference competition, solicitation, or disclosure via social media specifically. The definition of “Contract Employee” in the employment agreement covers those IT professionals that Hammernick recruited and then placed on a contract basis with TEKsystems’ clients and customers, but who remain employed by TEKsystems.18 Several months later after leaving TEKsystems, Hammernick joined Minnetonka’s Horizontal Integration, where she now serves as the company’s business development manager.19 Among other allegations, TEKsystems said that Hammernick, in her new job, used social-networking sites to communicate with at least 20 of TEKsystems contract employees. The complaint cites LinkedIn connections with at least 16 TEKsystems employees as evidence.20 An exhibit to the complaint contains the following correspondence on LinkedIn between Hammernick and a TEKsystems Contract Employee, Tom:                                                          17

Complaint at ¶ 27, 28, TEKsystems, Inc. v. Hammernick, Civ. No. 10-CV-00819, 2010 WL 1624258 (D. Minn.filed Mar. 16, 2010)  18

Id. 

19

Id. at ¶ 33.  

20

Interestingly, similar to Courtney, Hammernick’s answer asserted that TEKsystem’s customer lists were publicly disclosed through social media and is no longer protected. Specifically the answer said that “Plaintiff, or its employees, have thrust said information into the public domain through the use of sites such as, LinkedIn and Facebook, and/or to
the extent Plaintiff encouraged its employees to place said information into the public domain.” Answer at ¶ 11, TEKsystems, Inc. v. Hammernick, 2010 WL 1624304 (filed Apr. 7, 2010).

   

  Tom— Hey! Let me know if you are still looking for opportunities! I would love to have come visit my new office and hear about some of the stuff we are working on!

Let me know your thoughts! Brelyn

**** Hi Brelyn, Indeed I am still looking. I have time, though! Lets get together. Where are you working these days? Your profile still has you working at TEK Systems. BTW - my email address is [email protected] if you would prefer the non-Linkedln route. Tom

Although this case looks as if it is blatant solicitation in violation of the Hammernick’s non-solicitation agreement, other potential claims involving LinkedIn and other social media may not be so clear. For example, consider whether the following scenarios would constitute solicitation:

 

•

A former employee bound by a non-solicitation agreement leaves his current employer to work for a competitor. He updates his LinkedIn profile to reflect his new position. LinkedIn then automatically sends a message to the employee’s contacts informing them of employee’s new position. The former employee is aware that LinkedIn automatically sends these to updates to all contacts.

•

A former employee bound by a non-solicitation agreement leaves his current employer to work for a competitor. He then sends a notice throughout his LinkedIn network announcing that he is newly employed and goes on to explain his job duties and responsibilities and the products he is selling. Some of his LinkedIn contacts are customers that he serviced while employed by his former employer and some are customers with whom he sold products to prior to

  beginning work with the former employer. Would his notice constitute an improper solicitation? •

What if the employee from the scenarios above added the former employer’s key customer contacts to his LinkedIn directly before his departure? What if he did not know he was going to leave his employer? What if he did?

•

Former employee rights an article about the industry and sends a message to all of his LinkedIn contacts, which include customers of former the employee.

•

Former employee starts a discussion on linked in about a hot topic in the former employer’s industry and a message goes to all of his LinkedIn contacts, including customers of the former employee. Does your analysis of the above situation change in light of the fact that many,

though admittedly not all, courts have held that contacting former clients regarding a change in employment constitutes a solicitation?21 The bottom line is that if courts are called upon to answer what kind of LinkedIn activity will support a claim for breach of a non-solicitation covenant; such cases will likely be decided on their own specific facts and circumstances. As a general matter, courts will likely treat communications within LinkedIn the same as they treat other forms of communication.22 The above scenarios suggest that the nature and degree of the LinkedIn activity will be critical in any analysis. IV. Planning for the Future: Protecting Your Clients from the Pitfalls of Social Media a. Maintaining Confidentiality of Customer Lists and Other Proprietary Information

                                                         21

See e.g., Merrill Lynch v. Schultz, 2001 WL 1681973, *3 (D.D.C. 2001) (noting that “such initiated, targeted contact is tantamount to solicitation because there is no reason to believe that a customer on the receiving end of such a [communication] does not assume that the [employee] wishes for him to transfer his account.”). 

22

This is based on ethics opinions in both New York and Oregon finding that “friending” someone via social media websites constitutes contacting that individual for the purposes of the Rules of Professional Conduct. See New York State Bar Association, Committee of Professional Ethics, Opinion 843 (9/10/10); Pennsylvania Professional Guidance Committee Opinion 2009-02 (March 2009); Oregon State Bar Opinion No. 2001-164 (January 2001). 

 

  As the Courtney case instructs us, if an employer wishes to preserve protection of its confidential proprietary information, it must take precautions to prevent employees from disclosing that information, including on social media sites. Employers should keep the following tips in mind to help ensure customer lists achieve trade secret protection. •

Employers should restrict access to company information on a strict needto-know basis;

•

Expressly define confidential information to include client identities and contact information;


•

Unambiguously state that confidential information may not be used or disclosed for any purpose other than on behalf of the employer, including through social media;

•

Educate employees concerning the consequences of social media.

b. Addressing Potential Non-Solicitation and Non-Competition Concerns Raised by Social Media: One obvious takeaway from the Courtney and Hammernick cases is that both employer and employee must carefully negotiate non-competition and non-solicitation provisions to include social media considerations. From the employer perspective, here are important things to consider.

 

•

Employers may want to expressly preclude employees from contacting clients to notify them of the employee’s change in employment;

•

Employers should adopt clear social media policies, setting expectations concerning employee use of LinkedIn, Facebook, Twitter, blogs and other social media;

•

Be certain that current corporate policies (including employee contracts and handbooks) specify that communications made through an online social networking website such as LinkedIn, Facebook, etc. constitute a violation of the contract;

 

•

Update restrictive covenants currently in force to address social media concerns;

•

Require that the company be given rights of control of, or access to, the social networking accounts.

Conclusion The bottom line seems to be that lawyers can no longer think of social media as something they are not interested in, that they have no time for, that they don’t understand, that they have no use for, that they don’t see the benefit of, or that is for their kids. You can’t protect your clients from the problems raised by social media if you don’t understand it. It is an evolving area that is only now developing and if you don’t get ahead of the curve you may never catch up.