Novel social media lawsuit draws attention to new legal issues

Social media began as an amazing tool for maintaining personal social connections. Now, social media tools have evolved into incredibly valuable assets to businesses as well.  Marketing through social media tools can provide a company with a powerful client-base and lead to unlimited future clients. Companies with Twitter followers, LinkedIn connections and/or Facebook friends have larger outlets to publicize their business message and to maintain valuable relationships.  Using social media tools has obvious benefits to a company, but may also cause confusion and stress  without proper agreements and policies in place. A recent lawsuit is calling attention to the issues that may arise through the use of social media tools by companies, especially ones involving ownership of social media and valuation to the company.

The lawsuit was filed last year by Phonedog.com in the U.S. District Court in the Northern District of California against former employee Noah Kravitz. Kravitz worked for Phonedog.com, a site that reviews and sells phones and also has a blog component, for almost four years.  During that time he developed a Twitter account under the handle @Phonedog_Noah and eventually gained 17,000 followers.  He used the account to promote Phonedog’s services and, in turn, Phonedog profited from advertising revenue generated by more traffic to its website. In October 2010, Kravitz quit his job but he and Phonedog agreed to allow him to keep his Twitter account if he would tweet about them occasionally. Upon leaving, he changed his Twitter profile to @noahkravitz and kept his followers.

In the lawsuit, Phonedog makes claims for prospective economic advantage interference, conversion and misappropriation of trade secrets.  PhoneDog alleges that the Twitter list was a customer list, part of intellectual property owned by the company, and claims theft of company trade secrets by Kravitz.  Phonedog seeks damages of $2.50 a month per follower for eight months, for a total of $340,000.

Kravitz told the NY Times that the lawsuit was retaliation for his claim to 15% of the site’s gross advertising revenue due to his position as a vested partner and for back pay when he still worked for the website. Regardless of the motive, the Phonedog case falls in uncharted waters in the world of social media litigation.  It raises questions that have never been determined in the courtroom and will impact future cases.

The court may try to determine the value of followers and how much one Twitter follower is worth monetarily to a company. Phonedog claims the amount of $2.50 per follower comes from industry standards, although this is an arbitrary determination. A lot of the value derived by a Twitter account is tied personally to the “tweeter.” People follow because they are interested in information tweeted and they are not charged to follow. Phonedog could have kept its Twitter handle but when Kravitz left, the value of the content in the tweets became less interesting and followers left.  This is precisely why companies will hire high-profile bloggers and tweeters to bring the company the attention of their personal readers or followers.

Social media credential fraud, using social media to falsely position oneself as an expert in a given topic,  may also distort the valuation of a Twitter follower.  People known as social media strategists will intentionally follow tens of thousands, hundreds of thousands, or millions of Twitter accounts, in the hopes of getting a follow back, and then turn around and stop following that person. This tactic misleads their clients into believing they have a large number of followers without the need to follow a large number of people in return.

The ownership and trade secret issues are a much more slippery slope. Phonedog claims theft of its company trade secrets. Trade secret lawsuits must prove that a secret gives its business a competitive advantage and it has taken the steps to protect it. Twitter has a public setting and tweets and the followers of a Twitter account are not considered confidential information. Phonedog tries to make the distinction that the “password” to the account is the “trade secret.” Because Kravitz created the password while an employee, he stole it when he left. In the recent case Eagle v. Morgan involving a LinkedIn account, the court noted that a password cannot be a trade secret because it’s not something that a competitor can derive economic value from.

The reason why the account was opened could also be a huge factor in the case. If the account was opened on behalf of PhoneDog using Phonedog’s resources and company time to communicate with PhoneDog’s customers or build new customers, then Phonedog has strong ownership interest in the Twitter account. However, Kravitz told CNN that the account was linked to his personal e-mail address and he tweeted both personal and professional items while working for PhoneDog, such as tweets about sports, arts, and food. Without guidelines in his employment agreement and no company policy in place, ownership is hard to determine.

While the case is pending, more and more cases will continue to surface. If the Phonedog case goes to trial, it will be interesting to see what kind of precedent is laid down for future cases. I personally feel Phonedog's arguments are not strong and, currently, Kravitz seems to have sympathetic support.  Companies in the meantime must establish clear ownership and post-employment policies involving social media accounts and information and have clearly drafted confidentiality, non-disclosure and non-compete agreements.  Even with these measures, while the internet continues to evolve, so will the use of social media tools by companies and employees.  What may work today may fall short tomorrow.