Do your employees have profiles on LinkedIn? Are they connected to your customers? Must they “unfriend” your customers if they ever left your company? Maybe not! In Cellular Accessories for Less, Inc. v. Trinitas LLC, 2014 U.S. Dist. LEXIS 130518 (C.D. Cal. Sept. 16, 2014), a federal court ruled that whether a terminated employee who maintained his LinkedIn connections to his former employer’s customers engaged in misappropriation of trade secrets was for a jury to decide.
David Oakes worked as a Sales Account Manager for Cellular Accessories for Less, Inc., a seller of mobile phone accessories. During his employment, he signed an Employment Agreement and Statement of Confidentiality. The Employment Agreement stated that Cellular requested its proprietary information (including its customer base) “remains the property of [Cellular] and may not leave, either physically or electronically unless approved in writing by [the CEO].” The Statement of Confidentiality stated Oakes would not disclose or use Proprietary Information without Cellullar’s prior express written consent. Here, the term proprietary information included information which was not known by actual or potential competitors, generally unavailable to the public, created, discovered, developed, or otherwise became known to Cellular (presumably while the employee worked for Cellular), and which has material economic value or potential material economic value to Cellular’s present or future business.
Oakes was terminated on December 27, 2010. He subsequently started a company which directly competes with Cellular. Cellular sued him and his new company for damages and injunctive relief on claims including breach of contract, unfair competition, trade secret misappropriation, and intentional interference with prospective business advantage, among other things. With respect to the LinkedIn account, Cellular argued the contacts Oakes created while employed by Cellular were trade secrets protected under the California Uniform Trade Secrets Acts.
Both companies moved for summary judgment on a variety of points, including the issue of the LinkedIn contacts. However, the judge denied summary judgment regarding the LinkedIn contacts. He ruled there were issues of material fact and the question should be decided by a jury.
Oakes claimed Cellular encouraged its employees to create LinkedIn accounts and his list of contacts would have been viewable by any of his contacts, so they were not a trade secret. Cellular argued that this was not automatically the case because a LinkedIn accountholder could choose the extent to which his contact list is visible to his contacts. The Court declined to take judicial notice of the functions of LinkedIn and found that the parties had not made clear to what extent the LinkedIn contacts were made public (with explicit or implicit permission from Cellular). Additionally, the Court questioned whether Oakes’ methods of gathering contacts, including on LinkedIn, were sufficiently “sophisticated” or “difficult.” For example, LinkedIn automatically suggested contacts for Oakes to add. If the contact list was “easily discoverable through public sources” and did not involve a lot of effort to compile, it would not be considered a trade secret.
This case should serve as a warning to employers: encouraging employees to compile contact lists through the use of social media (which is designed to make connecting with many people easy) could come back to haunt you when the employee leaves. If an employee separates from your company, your valuable contacts and customers could wind up in the hands of a competitor. Even if you ultimately succeed in limiting or preventing its use, the fight could be expensive and time-consuming. While no final decision was made here, one point is clear; employers and employees must take all possible steps to protect contact lists. In this case, the company should have required the employee take all possible steps to protect his contacts from public disclosure. You should consult with competent labor and employment counsel about drafting employment agreements, restrictive covenants, and policies which will ensure your contact/customer lists and other information and property is properly protected.
Brody and Associates regularly provides counsel on employment agreements, covenants not to compete, and employment litigation in general. If we can be of assistance in this area, please contact us at firstname.lastname@example.org or 203.965.0560.