The following is a case comment on the recent English litigation (Whitmar Publications Limited v Gamage and Others) where an injunction was granted to restrain ex-employees from using LinkedIn contacts.
When an employee leaves an organisation and moves to another firm the previous employer will be keen to protect confidential information. Trade secrets, business know-how and client lists consist some of the data that a company will seek to keep privy. In the digital economy protection of this type of information has become increasingly challenging. Technology allows seamless copying of information and the ability to transfer and store information rapidly. Additionally, social media networks provide individuals a mechanism to build and maintain contacts through the course of their employment. However, commercial law and the laws governing confidential business information subsist from an era before Facebook, Twitter and LinkedIn. The result is that lawmakers are presented with entirely novel challenges.
Whitmar Publications Limited v Gamage and Others
Last month (July 2013) the High Court granted injunctive relief against a former employee holding that LinkedIn contacts can constitute confidential information. Whitmar Publications Limited v Gamage and Others ([2013] EWHC 1881 Ch; Judgment 4 July 2013), is thought to be the first time that a court in the UK has been called upon to decide on the status of LinkedIn contacts. However, it is important to bear in mind that this was not a final hearing; the injunction was granted pending a full trial.
Three of the defendants in the case were ex-employees of Whitmar. The employees had agreed to resign from Whitmar on the 7th January 2013 with their employment terminating at the end of January. The fourth defendant was the private limited company the ex-employees had subsequently incorporated and worked for: Earth Island Publishing Limited. Earth Island Publishing was found to be direct in competition with Whitmar. With regard to the LinkedIn, it was found that on the 4th February 2013 a press release was issued to a large number of individuals inviting them to an informal launch event for Earth Island Publishing. The problem was that Whitmar’s LinkedIn groups appear to have formed the basis of the email addresses to which the press release was sent. The court held that one of the defendants Ms Wight had been “responsible for dealing with the Linked-In groups as part of her employment duties at Whitmar.” It was held that there had been an improper use of Whitmar’s confidential information. The court granted a “springboard” injunction preventing the defendants from using this data.
Ownership of LinkedIn Contacts
An issue of uncertainty in this area concerned the fact that LinkedIn’s site terms and conditions state that the ownership of the account is personal to the account holder. On the basis of this it appeared safe to assume that if an employee sets up an account they have ownership of that account.This would apply even if the account was set up on behalf of the business. This is because there is no other term or condition to suggest that an account would automatically revert to the business if the account was set up in the businesses’ name. Unfortunately the court did not discuss in detail the issue of ownership. Nevertheless, the judgment suggests that if the account is in the name of the employer and maintained on behalf of the employer then contacts belong to the employer. As such these contacts would form confidential information. Yet, no hard-and-fast rule was offered to determine ownership.
The judgment, which is relatively short, does not conduct a detailed analysis of the inner workings of the Whitmar’s LinkedIn account. It is unclear what the specific agreement or day-to-day operational workings were conducted between Ms Wright and Whitmar. Thus, it is unclear how far this case will form the basis of a general rule that states that a LinkedIn account belongs to the company. Nevertheless the willingness of the court to grant an injunction suggests that a company does possess an ownership right over its LinkedIn contacts. However, the fact the ex-employees were setting up a competing business weighed heavily in favour of finding that the information was confidential. Where an employee gains contacts from a company’s LinkedIn account and establishes a competing business they are likely to fall foul of law on confidential information. Nevertheless, the acute issue of ownership of LinkedIn contacts was not directly addressed.
The lack of reasoning with regard to ownership of the account results in a considerable degree of ambiguity. For instance, take the example where a high-profile individual has their LinkedIn account managed by a third party who also works for the same employer. This account would be in the name of the individual and maintained on behalf of the individual but also on behalf of the employer. The employer has provided an employee to maintain the account to maximize this individual’s exposure on social media for the employer’s business. Which factor or factors determine ownership: the name on the account? Who originally set up the account? Who maintains it? Who pays for it?
Valuation of LinkedIn Contacts
It must be remembered that the decision is not final the case, the remedy granted was simply an interim injunction. If at the final hearing the court holds in favour of Whitmar, apart from the issue of ownership, it will be highly interesting whether the court sees fit to award damages. It is unclear how you could quantify loss in such circumstances. How much is a LinkedIn connection worth? Further, not all contacts on LinkedIn are business related but could simply be social and of no commercial value. Could a company assert a propriety interest over a social connection that existed before and will continue to exist even after the period of employment?
Whilst the case law on this area in the UK is sparse this issue has been dealt with stateside, although the cases do not provide much guidance. In the case of Eagle v Morgan (E.D. Penn. March 12, 2013) it was found that after an employee’s termination as CEO her password for her LinkedIn account was changed and her name and photo replaced with the subsequent CEO’s details. The US court held that it was unlawful for a company to block the former employee’s access to her LinkedIn account. Whilst the court held that the actions of the company were unlawful they rejected Eagle’s damages claim of $250,000.
Eagle claimed her LinkedIn contacts were worth $1 million in revenue annually. This sum was reached on the basis that a LinkedIn contact was worth $250 annually and Eagle had maintained 4000 LinkedIn contacts. Thus, three months use of the account equated to $250,000 the sum sued for in damages. However the court found this sum highly speculative. Importantly there was a lack of clear-cut evidence showing that Eagle had failed to secure an actual deal as a result of the loss of the LinkedIn account. Devastatingly for Eagle her own expert admitted to “guestimating” on the damages. Overall there was no clear connection between quantifiable revenue with use of LinkedIn.
The issue of ownership of contacts and their business value in the context of social media has also arisen in the litigation between the company PhoneDog and an ex-employee Noah Kravitz. For full information on the case visit Who owns a Twitter follower?: Noah Kravitz sued by PhoneDog for $340,000. The case involved an ex-employee taking Twitter followers instead of LinkedIn contacts. With regard to damages PhoneDog valued a follower on Twitter as was worth $2.50 per month to the company. Whilst the case ultimately settled out of court Kravitz retained the Twitter account and the followers.
Overall, these cases speak testament to the fact that enforcement can be extremely difficult. Calculating the financial loss of a business connection can be speculative and capricious. Moreover, courts are reticent to put a defined valuation on a LinkedIn contact for fear that this will be interpreted as an industry standard valuation. Yet, regardless of any decision with regard to damages, businesses should not bank on the calculation as a standard valuation. Given the multitude of entities operating on LinkedIn – some with turnover in the thousands, some with turnover in the billions – damages will be highly specific and should not be treated as applying across the board. What is clear is that when damages are hard to calculate more often than not people end up losing money. At the moment these cases offer little legal certainty and are not cost-effective.
The Need for Contractual Clarity
Do you own your LinkedIn contacts? Unfortunately the issues of ownership and damages are still up in the air. What we can take from the litigation so far is that if employers and employees want to avoid doubt they need to ensure that the have contractual safeguards in place. There is nothing preventing employers from entering into employment contracts that clearly define the status and use of social media. There should be clear-cut ownership agreements with regard to the business’s social media accounts. In other words employers should maintain entirely separate social media accounts for their business. Policies should be in place to clearly define that the account and everything associated with it is confidential information and belongs to the business. Ultimately there should be provisions to deal with returning or surrendering login information and keeping the information on the account confidential.
Image courtesy of on TheSeafarer Flickr
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