Many employers, particularly in the entertainment and media industries and word of mouth marketing (WOMM) companies, encourage or require their employees to obtain and actively use Twitter accounts to communicate with customers or users or potential users of a company’s products or services. But what happens to those Twitter accounts and their followers when employees leave and go work for a competitor or start their own competing business? A departing employee may assume that these accounts and followers belong to him or her. And the company may assume that these accounts and their followers belong to it since the requirement that its employees open and maintain Twitter accounts is an extension of its branding effort and, in some cases, as a source of, or feeder for, advertising revenue.
A District Court in the Northern District of California was poised to answer the questions of who owns Twitter accounts and what they are worth in the closely watched case of PhoneDog v. Kravitz, Case No. C 11-03474 (N.D. Cal.). It was reportedly the first lawsuit to claim that Twitter accounts and their followers belonged to the employer and to allege a value per Twitter follower ($2.50 per follower, per month). While PhoneDog settled on December 5, the case survived two rounds of motions to dismiss with the court and provides some guidance on how an employer can establish ownership and value damage caused by the theft of these accounts.
By way of background, PhoneDog is an interactive mobile news and reviews web resource. It reviews the latest mobile products and services across all carriers and platforms, and provides users the resources they need to research, compare prices, and shop from those providers that fit their needs. The company’s website attracts approximately 1.5 million visitors each month and its videos reach an average of 3 million viewers per month. PhoneDog derives its income from paid advertisements on its website. It uses a variety of social media, including Twitter, Facebook, and YouTube to generate pageviews on its website, as well as to market and promote its services. In order to generate pageviews, the company requests that its employees maintain Twitter accounts to use in the scope of services they perform for it. PhoneDog agents and employees tweet links directing followers of its various Twitter accounts to its website, which in turn drives traffic to the company’s website and generates advertising revenue for PhoneDog.
PhoneDog alleged in its first amended complaint that there are details about its relationship with its advertisers, Twitter followers and website users that are trade secrets, including the passwords to its Twitter accounts.
PhoneDog hired Noah Kravitz as a product reviewer and video blogger. As part of his job, Kravitz submitted written and video content to the company which was transmitted to its customers via its website and the Twitter account that was used and maintained by Kravitz: @PhoneDog_Noah (the “Twitter Account”). Kravitz had access to the Twitter Account’s password.
PhoneDog alleged that Kravitz suddenly resigned his position in October 2010. Following his resignation, PhoneDog requested that Kravitz relinquish use of the Twitter Account. Instead, Kravitz allegedly used the account’s password to merely change its handle to “@noahkravitz” and continued to use the account. Kravitz then obtained a full time position at TechnoBuffalo, a PhoneDog competitor. The pleading further alleged that Kravitz continued to use the Twitter Account under the new handle to promote his and his new employer’s services to PhoneDog’s customers, the 17,000 followers of the Twitter Account.
In its first amended complaint, PhoneDog alleged claims for misappropriation of trade secrets, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage and conversion.
To support its claims for interference with prospective economic advantage and to establish damages, PhoneDog successfully argued in opposition to a motion to dismiss that its advertising revenue was reduced by the alleged redirection of advertisers to Kravitz’s new employer, resulting in reduced website traffic.
While this case settled, it highlights the potential importance of employers having a written agreement as to the ownership of social media accounts and having a formula to value social media. As to the former point, citing to recent high profile defections at the BBC and CNN, Kravitz argued in his motion to dismiss that industry precedent is that a departing employee is free to change his or her Twitter handle and keep his or her followers, absent a written agreement to the contrary.
The potential value of a written agreement is highlighted by another recent case. In Ardis Health, LLC v. Nankivell, Case No. 11 5013 (NRB) (Oct. 19, 2011, S.D.N.Y.), a former employee refused to return the access information for Ardis Health’s social media and related websites. Relying on an agreement the employee signed, Ardis was able to obtain a preliminary injunction compelling the return of the stolen information.
Educating business on the value of social media – or a Twitter “follower” or a hit on a webpage – is a constant task for WOMM companies. The Word of Mouth Marketing Association (WOMMA) and others continually educate business on the value of social media. But no court has yet to put a value on a Twitter “follower”. Until and unless a uniform standard of measurement is established for these “commodities,” companies, like PhoneDog, will need to think about and document how they might measure the value of such things.
To attempt to obtain trade secret status of passwords on social media accounts – and thereby protect access to the account’s followers – adequate steps must be taken to establish their independent economic value and maintain their secrecy. Additionally, to establish that the passwords and accounts are the company’s confidential information and not the employee's, employment agreements should clearly establish that these accounts are for business use only, not for personal use, and should spell out that the passwords, the handles, the accounts and the followers they generate are the confidential property of the company. Moreover, such policies should require employees to return all social media logins and passwords at the termination of employment. In the absence of such agreements, courts may look at factors such as who set up the account, whose name the account is in and other indicia of ownership to determine who owns the account. These policies may also identify that each “follower” or “friend” has value to the company. Additionally, companies may consider placing a value, in writing, on each such commodity.