The United States District Court for the Northern District of California recently ruled that PhoneDog, an “interactive mobile news and reviews web resource,” could proceed with its lawsuit against Noah Kravitz, a former employee, who it claims unlawfully continued using PhoneDog’s Twitter account after he quit. PhoneDog v. Noah Kravitz, No. C11-03474 MEJ, 2011 U.S. Dist. LEXIS 129229 (N.D.Cal.)(James)(November 8, 2011)(unpublished).
PhoneDog asserted 4 causes of action, two of which arose from its contention that Kravitz unlawfully misappropriated and/or converted PhoneDog’s trade secrets: namely, the compilation of subscribers to its Twitter account and the password used to access the account. And it was these claims anchored in PhoneDog’s trade secret claims that survived Kravitz’s motion to dismiss.
PhoneDog reviews mobile products and services and provides users with the resources that they can use to research, compare prices, and shop from mobile carriers. Kravitz worked for PhoneDog as a product reviewer and video blogger. He was given access to PhoneDog’s Twitter Account “@PhoneDog_Noah”, using a password and used the Account to send out information and promote PhoneDog’s services on its behalf. The centerpiece of PhoneDog’s trade secret claims are that all PhoneDog_Name_Twitter Accounts and the passwords to such accounts used by PhoneDog’s employees -- like the one to which Kravitz was given access to and use of – constitute proprietary, confidential information. PhoneDog contends that the Twitter Account to which Kravitz was allowed to use on its behalf generated about 17,000 Twitter followers during Kravitz’s employment.
Kravitz countered by arguing that the Twitter Account cannot be a trade secret because the names of the Twitter Account followers are, and have always been “publically available for all to see at all times.” The passwords, he argues, are not trade secrets because they don’t derive any independent economic value as required under the Uniform Trade Secrets Act (“UTSA”), since they don’t provide any “substantial business advantage.” Instead, all they do, Kravitz contends, is permit the individual logging in to view information that is already publicly known. He argued that the password is also not protectable as a trade secret because he, and not PhoneDog, initially created the password, and that PhoneDog did not take reasonable efforts to maintain its secrecy.
In addition, Kravitz contended that PhoneDog failed to allege that he engaged in any act that constitutes “misappropriation,” as it is defined under the UTSA. Instead, he argued, PhoneDog merely alleged, in conclusory terms, that he used “improper means” to obtain the Twitter password and to continue to use the Twitter Account, which belonged to it, rather than him.
The Court denied Kravitz’s motion to dismiss both the misappropriation of trade secrets and the conversion claims. As to the misappropriation claim, the Court held that PhoneDog had described the subject matter of the trade secret with “sufficient particularity” and satisfied its pleading burden as to Kravitz’s alleged misappropriation by alleging that it had demanded that Kravitz relinquish use of the password and Twitter Account, but that he has refused to do so. And, with respect to Kravitz’s challenge to PhoneDog’s assertion that the password and the Account followers do, in fact, constitute trade secrets -- and whether Kravitz’s conduct constitutes misappropriation, the Court ruled that the such determinations require the consideration of evidence outside the scope of the pleading and should, therefore, be raised at summary judgment, rather than on a motion to dismiss.
The Court followed a similar approach in denying Kravitz’s motion to dismiss PhoneDog’s conversion claim. Kravitz challenged such claim on the ground that PhoneDog had not sufficiently alleged that it owns or has the right to immediately possess the Twitter Account. He also argued that PhoneDog failed to adequately allege that he had engaged in his alleged act of conversion “knowingly” or “intentionally.” The Court, however, found that these issues lie “at the core of [the] lawsuit” and that, accordingly, an evidentiary record outside the pleading had to be developed before the Court could resolve such fact-specific issues.
The last two of the claims were dismissed by the Court, both of which alleged interference with prospective economic advantage – one intentional, and the other negligent. The basis for the dismissal of these claims was that California law does not protect “mere ‘potential’ relationships that are ‘at most a hope for an economic relationship and a desire for a future benefit.” Here, the Court found that it was unclear who the “users” of PhoneDog’s mobile news and review services are -- in other words, whether they are the 17,000 Account followers, consumers accessing PhoneDog’s website, or some other individuals, and what the nature of PhoneDog’s purported economic relationship is with these users. The Court also agreed with Kravitz that PhoneDog had failed to adequately allege any actual disruption of the relationship between it and its users or actual economic harm. With respect to the negligent interference with prospective economic advantage claim, the Court also agreed with Kravitz that PhoneDog had failed to allege that Kravitz owed it a duty of care.
The writer eagerly awaits the decision of this Court once a complete evidentiary record has been developed. However it ultimately rules, though, one can rest assured that this is but one more chapter in what we can anticipate will be a long line of cases addressing the issues of whether social media passwords and social media analogs to the classic customer list are “trade secrets,” and who, if anyone, truly “owns” them? And, more broadly, whether any information available on the web can be considered a "trade secret."