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

by Downs Rachlin Martin PLLC
Contact

[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?

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Downs Rachlin Martin PLLC | Attorney Advertising

Written by:

Downs Rachlin Martin PLLC
Contact
more
less

Downs Rachlin Martin PLLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.