Social Networks and Trade Secret Misappropriation: Can your company’s “friends” list be a trade secret?

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[author: Walter Judge]

Trade secrets are aspects of your company that, if discovered/used by a competitmyspace, social media, trade secretsor, could significantly impact your bottom line or your ability to compete in the marketplace.  Recently, a federal court in Colorado held that even something that appears to be publicly known – in this case, a business’s Myspace® profiles and “friends” lists – can be trade secrets.  It is, so far, the only court known to do so.

In this post, I will explore the trade secrets misappropriation claims related to the plaintiff’s social networks within a larger antitrust and unfair competition case.

Regas Christou, et al. v. Bradley Roulier, et. al.: The Facts

Plaintiff Regas Christou owns several trendy nightclubs in Denver.  Each club has an online presence, including a Myspace site.  Defendant Bradley Roulier is a former employee of Christou.  One of Roulier’s responsibilities as an employee of Christou was to develop the social networking profiles for Christou’s clubs.

Disco, social media, trade secretsIn 2003, while still employed by Christou, Roulier founded Beatport, an online marketplace for downloading electronic dance music.  Christou lent Roulier money to establish Beatport, and promoted and advertised for Beatport on his nightclub websites.  By 2005 Beatport was a commercial success as the online source for electronic dance music.  Roulier entered into negotiations to buy one of Christou’s clubs, but instead, while the negotiations were ongoing, opened his own competing club, Beta, in 2008.

Christou, on behalf of himself and his nightclubs, alleges in his lawsuit that Roulier used his ability to control DJs, through Beatport, to coerce them to play only at Beta and not at any of Christou’s clubs.  Christou’s lawsuit makes numerous antitrust and unfair competition claims against Roulier, Beatport and Beta, in addition to the trade secrets misappropriation claim.  The defendants made a motion to dismiss all of Christou’s, et al.’s, claims.

How Can a Public List Be Considered a Trade Secret?

According to Christou, et al., Roulier and the other defendants misappropriated plaintiffs’ log-in information for the clubs’ profiles on Myspace; lists of plaintiffs’ Myspace “friends”; lists of cell phone numbers and email addresses for DJs, agents, and promoters; and customer lists.  In analyzing whether to dismiss plaintiffs’ claims, the court looked to the eight factors used by many courts to determine whether trade secrets exist.

Roulier, et al., argued that a list of Myspace “friends” cannot, by definition, be a trade secret because it is broadcast to the world.  But the court noted that Christou, et al., had limited the access to the Myspace profiles, via passwords, to prevent access by anyone other than those personnel requiring access.  (Related post: How Much Secrecy is “Required” to Protect Trade Secrets?)  The court noted that social networking “friends” are more than simple lists of potential customers.

When a user of a social network “friends” a business, such as one of Christou’s nightclubs, that user allows the business access to the user’s personal information, including interests, preferences, contact information, and a built-in means of contact.  Like a customer list, the friends are a database of contact information for people (customers) who are already confirmed to be interested in one or more businesses (Christou, et al.’s nightclubs).

The court determined that the trade secret is not merely the friends’ names, but also their email addresses, their permission to be contacted, and the ability to notify them and promote directly to them via their Myspace accounts.  This information, according to the court, simply cannot be compiled from publicly-available sources.  The court found that Christou, et al., expended at least some effort and cost to develop the social networking aspect of its business (operating nightclubs) and the list of friends.

Lastly, the court considered whether Roulier, et al., could easily duplicate the list of friends.  The court found that any effort to duplicate Christou, et al.’s friends list would be theoretically possible, but time-consuming and costly, as it would require Roulier, et al., to individually contact each of the thousands of friends and ask for permission to “friend” them.

In sum, the court concluded that a business’s online lists of friends can be a trade secret.  Since this decision came in the context of the defendants’ motion to dismiss the claim before trial, the court did not conclude that Christou, et al., had proven that the friends list is a trade secret, but only that Roulier, et al., had not proven that the list could not be a trade secret.  Thus, the court allowed the claim to proceed.

What do you think – should a company’s social media “friends” list be considered a trade secret?