Can "Friends" Be Trade Secrets?
Unfair competition litigation frequently involves disputes over whether information actually constitutes a trade secret. Given the prevalent use of social media by both businesses and individuals, it is not surprising that courts have begun to address whether such information can be a trade secret. In November, a California federal court refused to dismiss a claim that Twitter account information was protected as a trade secret. A recent decision from the District of Colorado opened the door to allowing businesses to protect their Facebook and MySpace “friends” list as a possible trade secret.
In Christou v. Beatport, LLC [pdf], the plaintiffs, including several Denver area night clubs, brought numerous claims against a former employee and the companies that he founded. The claims included an allegation of misappropriation of trade secrets. Specifically, the plaintiffs alleged that the defendants misappropriated their login information to access profiles on MySpace and lists of MySpace “friends.” The defendants moved to dismiss this claim, arguing that the plaintiffs failed to allege sufficient facts to demonstrate that their MySpace profile and “friends” list qualify as trade secrets.
Colorado has adopted the Uniform Trade Secrets Act and defines a trade secret as the “whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, list of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value.” C.R.S. § 7-74-102(4). Additionally, the owner of a trade secret must have “taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.”
To determine if the MySpace lists could potentially constitute trade secrets under Colorado law, the court looked to eight factors:
(1) whether proper and reasonable steps were taken by the owner to protect the secrecy of the information; (2) whether access to the information was restricted; (3) whether employees knew customers’ names from general experience; (4) whether customers commonly dealt with more than one supplier; (5) whether customer information could be readily obtained from public directories; (6) whether customer information is readily ascertainable from sources outside the owner’s business; (7) whether the owner of the customer list expended great cost and effort over a considerable period of time to develop the files; and (8) whether it would be difficult for a competitor to duplicate the information.
Applying these factors, the court first noted that the plaintiffs took reasonable steps to protect the secrecy of their information because they secured the profiles through web profile login and passwords. Further, the login and password information was restricted to personnel, including the former employee, who required access in order to promote the night clubs.
The court also found that the defendants could not have gleaned the list of names from general experience. Rather, the list of “friends” was more than a simple list of names of potential customers. In its analysis, the court noted that “‘[f]riending’ a business or individual grants that business or individual access to some of one’s personal information, information about his or her interests and preferences, and perhaps most importantly for a business, contact information and a built-in means of contact.” The names themselves, readily available to the public, are not the important factor.
The court also noted that the plaintiffs expended at least some cost and effort in developing the social networking aspect of its business. In fact, while employed by plaintiffs, the former employee defendant was paid to assist in building, maintaining, and using the lists and profiles.
After analyzing the relevant factors, the court denied the motion to dismiss, concluding that the plaintiffs had alleged sufficient facts to maintain their trade secret claim as to the MySpace information. Because the existence of a trade secret is inherently fact-specific, it remains to be seen whether this claim will ultimately succeed and whether other employers will be able to assert trade secret protection for social media information. Given the use of social media and the ease with which electronic information can be copied or transferred, this will become an increasingly common claim in litigation.