With the continually increasing popularity of social media websites like Facebook, Twitter, and LinkedIn, where members can be connected to friends, family members, co-workers, clients, and potential clients all by logging in to one account, it is understandable that companies and employers are concerned about the security of their trade secrets.  However, the distinction between what is part of an employee’s personal profile and what portion may belong to the employer is not an easy one to establish.  In the past few years, a number of lawsuits have been filed, by both employers and employees, alleging misappropriation of social media accounts under trade secret law.  However, a court or jury has yet to find at trial that a LinkedIn profile or a Twitter account contains protectable trade secrets capable of being quantified into recoverable damages.  This article summarizes a few of the recent cases involving social media and discusses some of the issues to consider when litigating these kinds of trade secret actions.

Recent Cases Alleging Misappropriation of Social Media

Christou, et al. v. Beatport, LLC, et al. was filed in December 2010 by Regas Christou, the owner of several nightclubs with national reputations as venues for electronic dance music. A former employee of Mr. Christou, Bradley Roulier, booked well-known DJs to perform at the clubs.  He also created, with financial and promotional support from Mr. Christou, Beatport, a popular online marketplace for electronic dance music.  After Mr. Roulier stopped working for Mr. Christou, he founded his own competing club.  Mr. Christou alleged that Mr. Roulier threatened DJs that their tracks would not be promoted on Beatport if they performed at Mr. Christou’s clubs.  In his cause of action for trade secret misappropriation, Mr. Christou alleged that Mr. Roulier and other defendants misappropriated the log-in information for his clubs’ profiles on MySpace, lists of friends and customers, and lists of cell phone numbers and email addresses for DJs, agents, and promoters.

On March 14, 2012, the court denied the defendants’ motion to dismiss the trade secrets causes of action.[1] The court first noted that whether the plaintiffs’ MySpace friends list was a trade secret was a question of fact.   After considering all the factors for determining trade secret status, the court then held that the plaintiffs had alleged sufficient facts to maintain their trade secret claim at the motion to dismiss stage.

On March 26, 2013, the plaintiffs dismissed their claims against Beatport due to an informal resolution and voluntarily dismissed the claims of all but the two clubs that featured electronic dance music.[2]  The case remained set for a jury trial beginning June 24, 2013.

Another lawsuit, PhoneDog v. Kravitz, filed in July 2011, involved the claims of PhoneDog, an interactive web resource that reviewed mobile products and services, against its former employee, Noah Kravitz.  While Mr. Kravitz worked as a product reviewer and video blogger for PhoneDog, he was given use of and maintained the Twitter account “@PhoneDog_Noah,” which generated approximately 17,000 Twitter followers during the course of Mr. Kravitz’ employment.  When his employment ended, PhoneDog requested that Mr. Kravitz surrender the Twitter account and Mr. Kravitz, in response, changed the account handle to “@noahkravitz” and continued to use the account.  In its complaint, PhoneDog alleged misappropriation of trade secrets, intentional and negligent interference with prospective economic advantage, and conversion.

On November 8, 2011, the court denied Mr. Kravitz’ motion to dismiss, finding that PhoneDog had sufficiently alleged a claim for misappropriation of trade secrets.[3]  Like the court in Christou v. Beatport, the court inPhone Dog v. Kravitz noted that to the extent that Mr. Kravitz challenged whether the password and account followers are trade secrets and whether Mr. Kravitz’s conduct constitutes misappropriation raised evidentiary issues more properly raised on a motion for summary judgment.  Id.  However, no motion for summary judgment was ever decided as the case settled on December 3, 2012 and Mr. Kravitz was allowed to keep both the Twitter account and its 17,000 followers.[4] 

One of the few trade secret lawsuits involving social media information that proceeded all the way through a bench trial is Eagle v. Morgan, a case brought by Linda Eagle, the co-founder of Edcomm, Inc., a banking education company that provided on-line and in-person services.  In May 2009, Dr. Eagle created a LinkedIn account with her Edcomm e-mail and used it for sales and marketing purposes.  However,  after her termination following the buyout of Edcomm by another company, Dr. Eagle’s LinkedIn password was changed and she was locked out of the account.  After Dr. Eagle filed suit in July 2011, alleging, inter alia,  unauthorized use of her name, misappropriation of name and publicity, identity theft, and conversion, Edcomm filed counterclaims for misappropriation, unfair competition, and conversion.

After a bench trial, the court entered judgment on March 12, 2013 for Dr. Eagle only on her claims for unauthorized use of name and invasion of privacy, finding that Edcomm used Dr. Eagle’s name without her consent for commercial purposes when it changed the content on Dr. Eagle’s LinkedIn page to provide information about Sandi Morgan, the interim CEO of Edcomm, even though the url still contained Dr. Eagle’s name.[5]  However, the court found that the evidence was insufficient to support Dr. Eagle’s request for damages and therefore did not award any compensatory damages to Dr. Eagle.

The court then entered judgment against Edcomm on its counterclaims for misappropriation, unfair competition, and conversion, finding that Edcomm never had a policy requiring that its employees use LinkedIn, did not dictate the precise contents of an employee’s LinkedIn account, and did not pay for its employees’ LinkedIn accounts. Edcomm also failed to put forth any evidence that Dr. Eagle’s contacts list was developed and built through the investment of Edcomm time and money rather than Dr. Eagle’s time and money.

The court’s description of the outcome in Eagle v. Morgan as a “somewhat mixed bag for both sides” highlights the importance of doing a cost-benefit analysis before making the decision to litigate over who owns a social media account.  While the primary lesson to be learned from these cases is that employers should have specific policies in place regarding personal and company social media, a secondary issue to consider is whether it is cost effective to litigate a trade secret case through trial, even if company policies purportedly establish ownership of social media accounts.  Because the issue of whether Twitter followers or LinkedIn connections is a trade secret is a question of fact, courts will not usually sustain a demurrer or grant a motion to dismiss on the ground that social media connections do not constitute trade secrets.  Thus, an employer or employee who files a complaint alleging trade secrets misappropriation should be prepared for the possibility of litigating the case at least through the summary judgment stage, if not through a jury or bench trial.  Further, because of the uncertainty of damages from a misappropriation, there is no guarantee that courts would even award damages because it would require the fact-finder to put a value on each friend, contact or follower.

Establishing a Company Policy Regarding Social Media that Best Effectuates Trade Secret Protection

In response to employers seeking guidance on social media issues, the National Labor Relations Board has issued multiple reports regarding the results of investigations in dozens of social media cases.  The third report, which can be found at http://www.nlrb.gov/node/5078, contains a sample media policy with general guidelines relating to posting content online as well as specific guidelines instructing employees, for example, not to register social media accounts using their work e-mail addresses.  While the sample media policy does not address all the factors discussed in Eagle v. Morgan (e.g. who pays for the account, who is responsible for the content), it provides a good starting point for employers seeking to establish ownership of social media accounts.  It is also a good idea to become more familiar with the options available to companies on social media websites, such as business pages and accounts on Facebook and LinkedIn.  When companies create separate social media accounts and allow their employees to post content and develop business on those accounts, they will not have to be concerned about the commingling of corporate trade secrets with personal social media posts and the possibility of misappropriation of those trade secrets after employees leave.

About the Authors
Ellen P. Liu is an associate at Sideman & Bancroft LLP.  Her primary practice areas include civil litigation and enforcement of intellectual property rights.  Constance J. Yu is a partner of Sideman & Bancroft LLP in San Francisco.  Her primary practice areas include civil litigation and business crimes defense.  Sideman & Bancroft LLP is a certified Women Owned Business Enterprise.  The firm is the largest women-owned provider of legal services in the Western United States, certified through National Association of Minority and Women Owned Law Firm (NAMWOLF) and Women’s Business Enterprise National Council (WBENC).


DealerNet Services

Face-to-face sales interactions are typically viewed as the most valuable activity by Sales Leaders.  5 years ago they were right. Nothing was more important than executing in the trenches.  But during those times, the trenches were out in the field.  In this post we will explore how the trenches have changed. Today, getting in the door is more difficult than executing face-to-face sales calls.

Today your sales people have multiple product specialists, overlays, and management support.  But these resources don’t engage until they get in front on someone.  The vast majority of training is focused on selling once you are face-to-face.  But buyers are much more informed today. This fact makes getting in the door more than half the battle.

The primary differentiator of today's top Sales Rep is the ability to prospect.  This could be prospecting for new business or different buying centers within existing customers.  Both are difficult.  Both are where the potential is.  Managing a relationship or taking orders from existing customers are table-stakes.  Opening new doors is a unique and difficult skill.  Few are really good at it. 

We have captured 5 modern prospecting best practices from top performers.  Download this tool to rapidly improve your prospecting results. 

I recently had a discussion with a Sales Leader about his team’s ability to prospect. 

He told me that, “Prospecting is a basic skillset all my reps should have.”

I asked what skills he was referring to.  He couldn’t articulate their prospecting strategy.  He basically told me they should make cold calls and “beat the streets”.  I then asked how they make phone calls and what their success rate is.  He gave me a blank stare.  "What do you mean?  They call and explain who they are and why they are calling.  Then they ask for an appointment."

As shocking as this example may seem, it is the norm.  A majority of sales people are terrible at prospecting.  They call the same buyer each week hoping something has changed. They open a phone call with what their company provides.  They knock on a door and leave a business card.  The success rate using outdated methods and poor messaging is under 5%.  And Sales Managers wonder why their people aren’t prospecting.

 

Why do sales people inflict so much pain on themselves?

 

• They are instructed to use outdated prospecting techniques
• They are resistant to change and make excuses such as, “our buyers aren’t on social media”
• Most sales training is focused on execution once in the door
• Organizations inhibit the use of modern prospecting methods
• They make the mistake of relying on someone else to prospect

 

How to get in the door:

 

1. Approach the right doors - some doors aren’t worth approaching.  Is your sales team focused on customers with the highest potential to buy your solution?  Or do they call on low value prospects and saturated customers?  Clearly define your target audience first. 
2. Buyer Centric Messaging - have you ever had a feeling that an advertisement was meant for you?  It may have been 1 out of 100 advertisements.  The goal is to make every communication speak directly to your buyer.  You should understand them so well they think you have their job.  Speak directly to the buyer’s fears, objectives, and personal wants.
3. Use Social Listening – understand what your buyer cares about.  Is there a better way than watching their behavior first hand?  This works whether using social prospecting, email, or phone.  Your buyers will give you the answer to the test and you aren’t cheating. 
4. Refine Writing Skills – produce succinct, clear, and compelling copy that drives an actionable response.  Think of how many more emails you send than conversations you have each day.  We communicate via the written word much more frequently than orally.  Yet we focus most of our time on improving oral communication skills.  Your prospects spend more time reading about you than listening to you. 
5. Incorporate Social Prospecting – LinkedIn is not a clogged channel.  Email and the phone are.  You can use relationships to get access to buyers.  Using social is more effective and less painful than cold calling.

Use this tool to spread these best practices across your sales organization.  Prospecting can be enjoyable and effective if approached correctly.

Part IV of A Business Model That’s Just Plain Bad For Business.

Do you want people who are going to tell you “What You Need To Hear” or do you want people who are going to tell you want you “What You Want to Hear?” If you are the later than you might as well stop right here because I am not here to stroke your ego, I’m here to make you money and make you proud of your business and of what your accomplishing.

Have you heard the expression that you need to “Spend Money to Make Money?” Have you heard the expression that you need to “Save Money to Make Money?” Let’s Get Real!

Bottom Line Growth is not sustainable only Top Line Growth is and only Top Line Growth will get you the results that will take you where you want to go with the rewards and pride that come with it. (Tell your bean counting consultants to put that in their pipe and smoke it.)

So how can you think or where did you get the idea that you will get the best Marketing, Sales, Service or Parts minds on the cheap? These people who are on the front lines day after day “Are you Business” and are the one who are going to make or break it.

Saving Money is all well and good but Making Money means that you are doing the right things to be successful and to be successful you need to have the kind of people that can get the results and this means you need to “Pay for Performance.”  If you want to save money save it on office supplies, Press your vendors for discounts, change your electric company but don’t think that a gift certificate for dinner or a pat on the back is going to recruit or retain the talent you need to be successful.

Let me ask you a question.  Were you born a business owner or did you have to pay your dues and earn what you have today? Did you seek out the companies that thought people with your experience and talent were a dime a dozen and didn’t want to pay what you were worth? I think not.

I stayed at the last Dealership I worked at because they knew the value of people from Management to salespeople to every worker there and paid accordingly. I and my co-workers made more money than we could at any other place and the Dealership made even more and were consistently in the top tier of highest average front and back end grosses- A business that PROVES this all out. How can this be? It is a direct result of sharing and respecting the people who make it happen for you. It means making an investment that unlike the stock market is guaranteed to pay off. There is no complex formula here to figure out.

 Do you want to attract Independent thinking people who can create value for your business? Then you need symbiotic relationships.  Or do you want parasitic people who are going to attach themselves to you on the cheap because they have few or no other options?

If you are the former, send me an e-mail at billcosgrove@dealernetservicesonline.biz and I will send you a commission plan that will attract and retain the talented people you need and should want if you want to be successful and stand above the rest.

By Bill Cosgrove
Pesident
DealerNet Services

In my last post “Bad Management It’s Also Just Plain bad for Business“ At Dealerelite.net, David Ruggles brought up a good point when responding to a comment made by Steve Richards.

Steve stated that "The retail culture incubates mediocrity and as gross profits continue their downward spiral good luck attracting quality sales personnel. Can you name another product that sells for $30K and pays a $100 commission?”

David replied that “Gross profits continue their downward spiral because the previous asymmetry in information has become more balanced, creating a more efficient market. While that might sound good to consumers, an efficient market leads to disintermediation.  For those not familiar with this term of economics, it means cutting out the middle man while the product becomes a commodity.  Can you name us another product that sells for $30K, where consumers expect to know our base costs, and 10% is considered to be an obscene profit by industry outsiders and many "insiders?”

My mission to get Dealers to improve their business model goes back to 2010 when I started discussing what I saw as a growing movement, which was a perfect time to execute due the pain caused by the recession,  in the Industry to commoditize the Automobile Industry and that is that I saw the Giants in this Industry buying up the vertical and convincing Dealers that they need to sell for one price and buy for another and our way of marketing is the right way. That is that in order to compete and move product you need to turn more product at a lower price to survive in today’s Marketplace. This plays right into the hands of the Mega Dealers who’s Business model is based on churning out more and more numbers at low marigins.

To do this they need more and more territory to churn those higher numbers to make their business model work. Where is that territory coming from? I think you know the answer to that.

Automobile Manufactures mandate Dealers to selling numbers which is the most basic contradiction in the Franchise model for the Dealer. The Manufacturer doesn’t really care where those numbers come from as long as they are met. After all the Manufacturers profit is built in and booked as soon as it leaves the factory to its destination.

You saw what happened to True Cars when they tried to reach into the pockets of the Manufacturer but who is looking out for the Independent Dealer? No One.

Between the Manufacturers and the Giants of the Industry owning or controlling the vertical from Inventory to marketing whose mission is churning higher and higher numbers you wonder if commoditization it is inevitable.

And believe me. If this takes place the Independent Dealer is not the only one that will be affected. All of us from Marketing firms to Consultants to any Vendor in the Industry will be fighting for less and less dollars as our customer base will shrink

Where do you think the Industry is headed? Right now Franchise Laws as David stated "By law, franchise laws in every state, a new vehicle can only be purchased from a franchised dealer.” Is this being circumvented by the creation of Mega Dealers? Will Franchises as they exist today become non-exisitent in the future?

Is the only way for the Independent to fight back to start running their businesses more effectively and efficiently. This is a topic that needs to be discussed because all of this it is already happening whether you want to open your eyes to it or not.

By Bill Cosgrove

http://dealernetservicesonline.biz