From a birds-eye view, Cellular Accessories For Less, Inc. v. Trinitas, LLC appears to be a typical dispute between an employer and its former employee. However, a closer look reveals an issue new to the world of trade secrets—specifically, do LinkedIn contacts qualify as trade secrets? For now, they may: a federal judge in the Central District of California denied defendants’ motion for summary judgment last month, finding there were triable issues of material fact surrounding the question whether LinkedIn contacts were protectable trade secrets.
The case arose when defendant David Oakes, a sales account manager for plaintiff Cellular Accessories for Less (“Cellular”), a seller of mobile phone accessories to businesses, decided to strike out on his own after more than six years with his employer. During his tenure at Cellular, Oakes had signed an employment agreement requiring that proprietary information, including Cellular’s “customer base,” remains property of the company and may not leave the premises; he also signed a statement of confidentiality forbidding the knowing disclosure or use of plaintiff’s proprietary information without prior consent. In 2010, Cellular terminated Oakes, and Oakes started his own competing business, co-defendant Trinitas, LLC.
Among other copyright, tort and contract claims, Cellular alleged that Oakes misappropriated its trade secrets when he: 1) emailed himself a customer information file with 900+ personal and business contacts; 2) emailed himself contact information for the company’s purchasing agents, detailed billing preferences, pricing and at least one client strategy document; and 3) maintained his LinkedIn contacts after termination. Both sides moved for summary judgment.
It is well established that a customer list may constitute a protectable trade secret, but the amount of effort involved here in compiling the customer information file remained a genuine issue of material fact. Defendants claimed that all the information was easily obtainable though public sources and internet searches of Fortune 1000 companies. Plaintiff, on the other hand, declared that building its customer list had necessitated a significant expenditure of time and money because it “hire[d] and pa[id] employees who [were] tasked with cold-calling companies and working their way past the ‘gatekeepers’ to reach the right procurement officer.” The court found a genuine issue of material fact as to the economic value of the emails Oakes sent himself including plaintiff’s purchasing agent information, preferences and strategy plans.
The most interesting dispute here is whether Oakes’ maintenance of his LinkedIn contacts after his termination constituted misappropriation of trade secrets. Defendants argued that Oakes’ LinkedIn contacts could not possibly be considered trade secrets under the California Uniform Trade Secrets Act. Most importantly, defendants contended that all of Oakes’ contacts would have been viewable to any of his other LinkedIn connections, defeating any trade secret protection. In addition, defendants insisted that any competitor could search LinkedIn, or another online business directory, to easily recreate the list and identify the officers responsible for purchasing; in fact, Oakes located many of his contacts in response to suggestions made by LinkedIn. Furthermore, defendants asserted that Cellular authorized salespeople to disclose the identities of clients to potential customers as way of attracting new business, encouraged salespeople to use LinkedIn for business development and failed to inform employees that LinkedIn contacts were proprietary or confidential.
Plaintiff retorted that LinkedIn contacts are not automatically viewable because an account is only visible to the extent that the user chooses to make it public; even if a customer was visible in a salesperson’s contact list, seeing this listing would not necessarily divulge whether or not the contact was plaintiff’s customer. Because the court declined to take judicial notice of the functions of LinkedIn and the parties “did not make sufficiently clear whether and to what degree Oakes’ contacts were indeed made public (and whether this was done with [Cellular’s] explicit or implicit permission),” the court found genuine issues of material fact as to trade secret misappropriation.
Considering the millions of companies that use social media to build their businesses, this ruling merits attention. The concept that a social media account is anything but 100% public, and belongs to one’s employer, may be beyond the realm of understanding for the typical employee or juror. What’s more, companies cannot assume that judges understand the intricacies of social networking and the availability of privacy settings. Therefore, businesses should take affirmative steps to convince individuals and courts of their rights to trade secret protections:
1. Employers should educate their employees regarding the proprietary and confidential nature of customer information located in a social media platform. Companies should enforce clear rules regarding online privacy settings and train employees how to maintain barriers against disclosure.
2. Companies should require that employees’ personal social media accounts remain completely separate from their business accounts, which should be linked only to a company email address; business accounts should be made inaccessible to employees upon termination of their employment.
3. Corporations should frequently update their employment contracts, non-compete agreements, non-disclosure agreements and social media policies to redefine trade secrets in the context of online networking and spell out restrictive terms and conditions regarding the use of various social media platforms.
4. Businesses should keep track of all time and money spent to compile customer contact lists.
5. Organizations should maintain customer information in a password-protected internal database, rather than rely on social media accounts for their client lists.
While these methods should improve a business’s chances of maintaining trade secrets in the age of social media, the courts have yet to resolve the issue. In order to obtain clear guidelines, we will have to wait and see how the parties network their way through the courtroom.