Businesses have long been able to protect their list of customers as a trade secret, keeping the information out of the hands of competitors. But should the list of customers in a business’ Twitter account be granted the same confidential protection?
The United States District Court for the Northern District considered this question in a recent case. PhoneDog v. Kravitz, 2011 U.S. Dist. LEXIS 129229 (N.D. Cal. Nov. 8, 2011). The plaintiff, PhoneDog, used a variety of social media – including Twitter – to share reviews of mobile products and services with its readers. The defendant, Noah Kravitz (“Kravitz”), was a product reviewer and video blogger for PhoneDog. The company permitted Kravitz to use the Twitter account “@PhoneDog_Noah.” Kravitz used the account to disseminate information and promote PhoneDog services on behalf of the company. He generated approximately 17,000 Twitter followers during the course of his employment. Kravitz used a password to access the account.
PhoneDog claimed that all of its “@PhoneDog_Name” Twitter accounts, as well as the passwords to those accounts, were proprietary, confidential information. When Kravitz ended his employment with PhoneDog in October 2010, the company asked him to stop using the Twitter account. However, Kravitz instead changed the name (or “handle”) of the account to “@noahkravitz” and continued to use it. PhoneDog, alleging that Kravitz’s behavior caused it to suffer at least $340,000 in damages, brought suit against Kravitz for misappropriation of a trade secret and three other claims. Kravitz filed a motion to dismiss the claims.
A motion to dismiss allows a court to terminate a lawsuit that fails to state a claim upon which the plaintiff can receive relief from the court. When considering a motion to dismiss, a court must accept all of the plaintiff’s allegations as true and construe them in the light that is most favorable to the plaintiff. Bell Atl. Corp. v. Twombly¸550 U.S. 544, 570 (2007). Kravitz argued the claim should be dismissed because neither the identity of the account followers or the password to the account constituted trade secrets. Under the California Civil Code, a trade secret is defined as information that:
1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
California Civil Code, sec. 3426.1(d)
Kravitz claimed the list of followers was not secret because the information was publicly available on Twitter. He also claimed that the password was not a trade secret because the password itself did not derive any actual or potential independent economic value. Kravitz also argued that PhoneDog failed to allege any act by him that would be considered misappropriation. Under the California Civil Code, misappropriation is defined as the:
1) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means;
2) disclosure or use of a trade secret of another without express or implied consent by a person who:a) used improper means to acquire the knowledge of the trade secret;b) at the time of disclosure of use, knew or had reason to know that his or her knowledge of the trade secret was:
i.) derived from or through a person who had utilized improper means to acquire it;ii.) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; oriii.) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use
c) before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake
California Civil Code sec. 3426.1(b)
The Court found that Kravitz failed to show any basis for a dismissal of the misappropriation claims. The Court determined that PhoneDog described the subject matter of the trade secret with sufficient particularity and that Kravitz had refused to stop using the password and account despite the company’s requests. Additionally, the Court found that determining whether Kravitz’s behavior constituted misappropriation required consideration of evidence, and thus the claim could not be dismissed.
The future decisions in cases such as this will be very significant for businesses who use Twitter or similar social networking tools as a means of collecting a group of potential customers and establishing a professional relationship between them. It is yet another example of how traditional trade secret law will need to adapt to a world where the relationship between businesses and customers continues to operate more and more online and thus in a less confidential setting.
© 2012 Nissenbaum Law Group, LLC