Social Media and Trade Secrets

Social Media and Trade Secrets

The various issues created by Facebook, LinkedIn, and other similar platforms lead to constant requests for input by management-side employment lawyers. Likewise, employers – especially those in industries with a heavy emphasis on relationships for research and development – are also focused on protection of their trade secrets and other confidential information. But the intersection between social media and trade-secret protection represents a new frontier – one with relatively little case law, but with substantial implications.

It’s Just A Customer List By Another Name

The most notable area in which social media can affect a company’s protection of its confidential information comes with the most common form of a trade secret: a customer list. Employers often encourage their sales personnel to use LinkedIn or other social media platforms to establish and strengthen relationships with actual and potential customers. Social media can be a great way to stay on a customer’s mind, update a customer on what the salesperson and the company are doing, and project an image of success. That said, what happens to that social-media account when salespeople leave and go to a rival company? They are walking out the door with a de facto customer list. It is likely that the names and contact information of some or all of a salesperson’s key client relationships will reside on that social-media account.

Make It Clear That The Company Owns The Social Media Account

This can be accomplished either by agreement or by a written policy, preferably one that employees sign. Even better, have your salespeople set up new social-media accounts when they commence employment so the company can deactivate or transfer the accounts when the employee leaves. Of course, many employees bring existing accounts with them when they start employment and prefer to add to their existing accounts. In that case, have the employees agree that at the end of employment, they will delete any business contacts that they established over the course of employment.

Insist On Privacy Settings

One good employee defense in a trade-secret action concerning a customer list is that the employer did not take reasonable means to protect its trade secret because anyone can look at the contacts of the company’s salespeople on LinkedIn and find the relevant contents of the customer list. In other words, the information is not a secret. The solution to this problem is simple: require employees to make their contact lists private on any social-media account that they use for business.

Address The Issue Of Status Updates

Employers frequently use restrictive-covenant agreements to prevent their employees from competing for a certain period after employment. One common provision in such an agreement is a non-compete provision, which prevents an employee from performing certain competitive acts in a given territory or a stretch of time after employment. But employees often pushback against such provisions and judges can be reticent to enforce them because of the view that they prevent an individual from making a living. Thus, employers will frequently use non-solicitation-of-customers covenants in place of (or sometimes in addition to) non-compete restrictions. Non-solicitation provisions prevent an employee from soliciting customers after the conclusion of an employment relationship. These restrictions are especially useful with salespeople and other categories of employees who have significant customer contact and relationships. Non-solicitation provisions are less onerous than non-compete restrictions and are usually easier to enforce. However, non-solicitation restrictions create proof problems that non-compete provisions do not. It is usually straight forward to show that a former employee is competing in a given territory. It can be harder to show that an employee solicited a customer because the question “what is solicitation?” is sometimes hard to answer. This is especially true in the social-media context. Say you have a salesperson named Pete who has agreed not to solicit actual or potential customers with whom he had contact for one year after the termination of employment. Pete resigns and then immediately posts a status update on LinkedIn or Facebook that he has left your company and joined a rival outfit. Or maybe Pete is really subtle and simply changes his employment information on those websites, meaning that his customers get an automatic update regarding the identity of his new employer. Assuming that Pete has connections to customers on LinkedIn and Facebook, has Pete violated his agreement? There is no definitive answer to that question, so it is up to a forward-thinking employer to plan ahead when drafting and revising restrictive covenant agreements. While no one can contract for every contingency, the status-update problem is one that can be solved by addressing that scenario in a non-solicitation covenant. Pete’s agreement should say that providing information on a new employer through social media will be considered to be a solicitation.

Originally published on Monday, 29 July 2013