By: Robert C. Hackney
Can an Employer Use a Work For Hire Agreement to Claim Ownership of an Employee’s Social Media Accounts?
If the agreement is written the way we describe below, the answer is yes.
Trade Secret or Work for Hire?
A work for hire agreement is a contract between an employer and an employee that specifies that intangible property created by an employee while employed by, and being paid by, the employer, belongs to the employer.
In recent years, disputes have developed between employers and employees about social media accounts, including a somewhat famous case involving thousands of contacts in a Twitter account. The approach thus far by employers has been to claim that the accounts are, in effect, customer lists. If a Twitter account is a customer list, the argument goes, then it is a trade secret and is protected under trade secret law.
A trade secret is something of value that the employee learned during his or her employment, and that gives some advantage to the person with that information.
In the Twitter case, the employer, a company called PhoneDog Media LLC, sued the former employee in federal court in California. PhoneDog was seeking damages of $2.50 per Twitter follower for an eight month period, for a total of $340,000.
The argument that a Twitter account, for example, is a trade secret does not always hold up, typically because the information is ascertainable from outside sources. Most trade secret agreements say something like this: “As long as the trade secrets as referenced above remain unknown to the general public and are not readily ascertainable by proper means by third parties, the Employee shall hold in strict confidence and shall not, directly or indirectly, disclose or reveal to any person, or use for his own personal benefit or for the benefit of anyone else, any trade secrets…”
Trade secret law seems clear that if a third party can reverse engineer your trade secret, then it stops being a trade secret. There is nothing secret left about it.
One of the arguments of an employer is that this is not just a list that could be recreated by accessing public sources, but has more value since it is in essence a vetted list, a list of people who are engaged and interested in the topic, whatever that may be. That, the argument goes, takes it beyond just an ascertainable list that could be obtained from a typical list broker.
Information about who is on Twitter, or LinkedIn or Facebook or Instagram or any other social media platform can easily be ascertained by anyone willing to do the research. Many of the trade secret claims therefore, won’t be successful against a former employee.
In fact, the employee who was sued hired a Chicago law firm, who raised the following issue in an article on their website: “Can a public account, with a ‘followers’ list compiled of public Twitter members actually be considered confidential?”
The result of the PhoneDog case did not turn on the trade secret issue, so the Court did not really address the hot button topic as specifically as we would like. In that case, the employee used a Twitter account “@PhoneDog_(employee).” The account was used to disseminate information and promote PhoneDog services on behalf of PhoneDog. PhoneDog argued that not just this employee, but all of its “@PhoneDog_Name” Twitter accounts, and their passwords belonged to them. The court held that this account was the property of PhoneDog. This was a decision on a preliminary matter, and the case could have gone forward. We will never know what the final decision of the court would be since the case was settled between the parties after this preliminary order was entered.
Conversely, in Sasqua Group v. Courtney, a case brought in federal court in New York, a court held that an employer’s customer list was not a trade secret, because the employee argued that she could recreate the list from public sources if she ever developed amnesia. In addition, the employee had no noncompete or nonsolicitation agreement in place with her employer, a recruiting company for the financial services industry.
Now compare those cases to Christou v. Beatport, LLC, a case brought in federal court in Colorado, which focused on ownership of a MySpace list. The employer, a nightclub, used it to promote its business. The employee left the company and started a business in competition with his former employer. Of course, the former employer sued for taking its MySpace information. The employee argued that MySpace is information is not a trade secret. The federal court ruled that when you “friend” a person or a business, you get access to information about interests and preferences, and other personal information that is not typically public. The Colorado court held that this list could be considered a trade secret.
A federal court in New York, in the case of Art & Cook, Inc. v. Haber, addressed the trade secret issue in connection with a customer list taken by a former employee. The Court’s position was the lists that consist of just a compilation of publicly available information regarding a customer is not protected as a trade secret, even when the work involved in discerning the contact information was expensive and took substantial time and effort. Customer lists that include personal preferences, and other personal information that cannot be easily ascertained from public records are frequently held to be trade secrets. In this case, the list was just a compilation of contact information that could have been recreated, and thus was found not to be a trade secret.
So what happens if the list is a mix of just contact information for some individuals and preferential information on other individuals? The reality is that most lists are like this. That is where the confusion really comes in.
It appears that the whole trade secret approach is still a highly unsettled area of the law, and such attacks might fail based on the ability to obtain the information from a third source.
A Different Approach?
But, what if there were another approach?
What if an employer had an employee sign a work for hire agreement, which specifically addressed the issue of social media accounts?
Intangible property is typically included in a work for hire agreement. Information input into a social media account is intangible property, and is a form of intellectual property. A company has a right to protect its intellectual property.
To being with, an employer should clarify in the agreement that all data, including contacts, that is personal to an employee needs to be maintained by the employee on their own personal computer, and not on a computer that is part of the employer’s network or on the employer’s server. Clarifying that issue in the agreement separates the personal property of the employee from the property of the employer.
Work for Hire Language
Next, the agreement should include language such as this: “The Employee agrees that any inventions, ideas, developments, methods, improvements, discoveries, innovations, works of authorship and any other intangible property, including but not limited to Twitter, Facebook, Instagram, LinkedIn or other social media accounts or platforms used to communicate with Company customers (hereinafter collectively referred to as “Intellectual Property”), whether patentable or not, which are developed, partially developed, considered, contemplated or reduced to practice by the Employee or under his direction or jointly with others during his relationship with the Company, whether or not during normal working hours or on the premises of the Company, shall be considered “Works for Hire” for the exclusive use and benefit of the Company. The Company shall own all rights to any Works for Hire, including all copyrights and the right to market (or not to market) any such property, and the Employee agrees to assign and does hereby assign to the Company (or any person or entity designated by the Company) all his or her right, title and interest in and to all Works for Hire and all related intellectual property.
The Employee specifically acknowledges that his compensation and benefits constitute full payment for any Works for Hire and waives any claim of right to the Company beyond his present ownership interest.”
Noncompete Language
The agreement should also include noncompete language, in substantially the following form:
“Employee shall not, during the term of the business relationship between the parties described herein, and for a period of two (2) years thereafter, own, manage, operate, control, engage in or participate in the ownership, management, operation or control of, any business, partnership, corporation, enterprise or concern which is engaged in a business the competes directly with the business as conducted by the Company.”
Non-solicitation Language
The agreement needs to include non-solicitation language such as the following: “Employee shall not, during the term of the business relationship between the parties described herein, and for a period of two (2) years thereafter, persuade or attempt to persuade any customer or client, or any potential supplier, agent, joint venture partner, investor, customer or client, not to buy from or do business with the Company, or to buy from or do business with another company with regard to products or services which are a part of the business of the Company.”
No Raiding
The agreement needs to make clear that the Employee promises to not raid the Company after his or her departure, by using language similar to this: “Employee shall not, during the term of the business relationship with the Company, and for a period of two (2) years thereafter, whether on the Employee’s behalf or in conjunction with or on behalf of any other person, firm or company, solicit, encourage or entice away from the Company (or attempt to do so) any officer or employee (whether or not such person would commit a breach of contract by so doing).
Non-interference
Finally, the agreement should also say something like this: “During the term of the business relationship between the parties described herein and thereafter, the Employee shall not interfere or seek to interfere with the continuance of services, equipment, materials, supplies or other goods to the Company (or the terms relating to such service, equipment, materials or supplies), from any vendor, subcontractor, supplier or other person or business entity who has been supplying services or goods to the Company.”
Conclusion
Part of the problem with the situations referred to in the cases discussed above is that there were no agreements relating to confidentiality, non-solicitation or competition in place, let alone work for hire or trade secrets, and in one case an agreement had been presented to an employee some time after employment which he refused to sign. The problem can be alleviated by having the employee sign an agreement with all of these provisions at the beginning of the employment, and with these agreements in place, the ownership issue of this intellectual property will be resolved in advance.