Cultivating Confidential Information in a Viral World

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Seven in 10 Americans use social media, according to the Pew Research Center’s 2018 Social Media Fact Sheet. Business articles such as Forbes’ “2018’s Biggest Social Media Trends for Business” recognize that social media provides businesses with a rich, real-time source of customer information.

Social media may sprout business opportunity, but it also compounds existing challenges to predictably protecting critical, secret business information. Enforcing confidentiality, noncompete and nonsolicitation clauses and trade secret rights is laden with uncertainty about whether on any given day a given court will issue injunctive relief. Geography and technology heighten uncertainty with operations and employees crossing states and the transmission of highly confidential information across state lines.

Variety in state trade secret law propagates complications. Since publication of the Uniform Trade Secrets Act, states have moved toward a more uniform approach. In 2013, Texas joined the majority, adding Chapter 134A, the Texas Uniform Trade Secrets Act (TUTSA), to the Texas Civil Practice and Remedies Code. TUTSA Section 134A.002(6) includes as “trade secrets” specific types of information—e.g., formulas, patterns and devices—and also includes lists of actual or potential customers.

Treating customer lists as protectable trade secrets has deep roots in Texas case law. Courts of appeal, including Dallas with 1993’s Rugen v. Interactive Business Systems and Houston with 2007’s Sharma v. Vinmar International, long stated by rote that a trade secret may consist of any formula, pattern, device or compilation of information used in business that provides opportunity to obtain an advantage over competitors who do not know or use it, and that it may include a list of customers.

Though this case law may have informed TUTSA, it is not controlling in all instances. In 2017’s Baxter & Associates v. D&D Elevators, the Dallas court of appeals explained that, via Section 134.007(a), TUTSA displaces conflicting trade secret case law.

TUTSA requires that a trade secret have economic value derived from secrecy; it must have actual or potential economic value from not being generally known to others, and it must not be readily ascertainable by proper means. Another requirement is taking reasonable measures to keep the information secret. Proper means include independent development. Improper means include theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, to limit use, or to prohibit discovery of a trade secret, or espionage.

Blossoming social media use increases the risk as employees may connect with customers through external social media platforms. Employers may be oblivious to or may encourage these connections without considering that they do not die on the vine with the end of employment. A profile update may result in hundreds or more connections receiving automatic notice of new job and contact details. LinkedIn prompts network connections to send congratulations. Curious clients may then follow links and learn more about another business.

Employers and employees have started staking out positions. The dispute in 2017’s Bankers Life and Casualty v. American Senior Benefits, in the Illinois court of appeals, involved a former sales manager who agreed to not solicit employees. He sent LinkedIn requests to former co-workers who, if they clicked his profile, would see and could click on a job posting for his new employer. The court found that generic emails—a request to form a professional networking connection—created options for the recipient for which he could not be held responsible.

In the Southern District of New York’s 2016 MasterCard International v. Nike, MasterCard claimed that former employees provided Nike confidential information. The defense pointed to MasterCard employee LinkedIn profiles that displayed information about the nature of their work, expertise and capabilities. This, they argued, showed that certain information was not confidential.

2014’s Cellular Accessories for Less v. Trinitas was a California federal suit against an employee who, before being fired, emailed himself a file with 900-plus personal and business contacts. He then maintained his LinkedIn contacts and started a competing business in Texas. He also claimed that his former employer encouraged employees to cultivate LinkedIn accounts and that the account contacts were viewable to others—that they were not confidential. The court declined to take judicial notice of how LinkedIn functions, leaving factual disputes as to whether the contacts were confidential and whether the former employer had consented.

Social media networks may provide competitors a path to customer information. LinkedIn claims the world’s largest professional network with more than 546 million users and provides instructions and help for viewing another’s connections. By default, direct connections can browse each other’s networks for additional connections. New connection updates cannot be removed from a user’s feed, so, as new connections form, LinkedIn may automatically post that news in a feed seen by others.

The seed of the Trinitas defense, if mature, could bear fruit for competitors who mine social media, through former employee or not, for customer information. This should give pause to employers who are not aware of the extent of employee-customer online connection or the type of information social media reveals.

Perhaps blurred is the effect of an employee’s online presence as it relates to an employer’s goodwill with customers. Employers developing business should guard against the risk that social media platforms pose to protect confidential information, including customer identity, contacts and preferences. This includes the risk of failing TUTSA and common-law standards for trade secret protection. Careful employers also will be mindful of the growing number of states prohibiting employers from requiring that employees provide access to an employee’s social media accounts.

TUTSA does not pre-empt contractual remedies. Protecting secrets means consistent best practices: policy acknowledgments, confidentiality agreements, limiting employee access, training employees to protect confidential information, auditing compliance, and investigating a departing employee’s next job if warranted.

Employers should assess social media use with and about customers. Employers may tailor policies and agreements to:

  • Prohibit or regulate social media use with customers.
  • State that customer and potential customer connections belong to the employer.
  • Anticipate audit compliance.
  • Require proof that an exiting employee has deleted customer connections from accounts.
  • Describe the type of social media contact that violates post-employment covenants.

These measures may reduce the risk that social media poses to the cultivating and protecting of confidential information.

Lizzette Palmer is board certified in labor and employment law by the Texas Board of Legal Specialization and has more than 20 years of employment counseling and litigation experience. Before forming Palmer Law, she worked as an assistant general counsel to two Fortune 500 energy companies and as a trial lawyer in firms.



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