United States: Socially Aware: The Social Media Law Update - Volume 2, Issue 6 - November 2011

In this issue of Socially Aware, our Burton Award-winning guide to the law and business of social media, we discuss employment law considerations in "friending" a colleague; how an ex-employee's social media use can run afoul of non-compete or non-solicitation obligations to a former employer; a recent court decision in which a plaintiff was ordered to disclose her Facebook and MySpace passwords to opposing counsel; Facebook's privacy-related headaches in Europe; an overview of copyright troll Righthaven's recent string of defeats; an important decision in the Perfect 10 v. Google litigation regarding the availability of injunctive relief in copyright infringement actions; and FTC efforts to significantly expand the scope of what constitutes "personal information." All this, plus statistical snapshots of social media trends and Status Updates, our round-up of social media news items.

CAN "FRIENDING" EMPLOYEES LEAD TO LEGAL HEADACHES?

Online social networking, and its capacity to connect our professional lives to our personal lives, have introduced a variety of new legal issues in the workplace – issues that we explore regularly in Socially Aware. Many managers and supervisors have connected with subordinates on social networking sites, and have likely wondered about the practical and legal implications of doing so. Applying long-standing legal concepts to this new context, a number of potential issues stand out.

First, when a supervisor connects with a subordinate on a social networking site such as Facebook or Twitter, that supervisor may be put on notice of legally protected information. For example, an employer may learn of an employee's political affiliation, religious beliefs, sexual orientation, or health information. If an adverse employment decision is made against an employee after the employer discovers such information, it may appear as though the action was motivated by unlawful discrimination. Managers may also see employees' job-related postings, and find themselves in the difficult position of trying to determine how to address poor judgment without running afoul of legal protections for employee speech. (See our October 2011 issue of Socially Aware for more information regarding such protections.)

Second, employers could become more vulnerable to discrimination and harassment claims based on a supervisor's social media-related interactions with subordinates. For example, a supervisor might be discriminatorily selective with respect to those subordinates whom he "friends" via Facebook. Although a discriminatory "friending" pattern may be insufficient standing alone to establish legal liability, it might be used as a piece of corroborative evidence against the employer.

Further, people often say things in a personal capacity that would not necessarily be appropriate in the workplace; if a supervisor exhibits a sexist or racist point of view on his Facebook page, for example, this could add fodder to a claim of discrimination or harassment. On the flip side, supervisors may have an affirmative duty to take action if they learn of harassing social media-related postings that affect employees.

Finally, managers should consider that subordinates may feel pressured to accept a "friend" invitation, and that, if such invitation is accepted, the manager may end up learning more than he or she wanted to know about the accepting employee's weekend plans, job-related gripes, status updates and so forth. In some cases, a manager may find that less is more, when deciding whom to "friend" at work.

We here at Socially Aware do not want to be known as killjoys; we are big users of social media, and are loath to discourage "friending" of one's colleagues or anyone else. But with the explosive growth of social media blurring the traditional boundaries between one's professional life and one's personal life, employers should at least be aware of potential risks issues in "friending" employees. One does not need to be Nostradamus to predict a coming wave of employment-related claims focusing on social media-related interactions between supervisors and subordinates.

Sources: http://www.mofo.com/files/Uploads/Images/111018-MoFo-Tech-Fall-Winter-2011.pdf

OPEN KIMONO: COURT-COMPELLED DISCOVERY OF NON-PUBLIC SOCIAL MEDIA PAGES

Due to the widespread popularity of social networking sites ("SNS"), courts have had to determine how the rules of discovery apply to content stored on such sites. In addressing this issue, many courts have required parties to provide opposing counsel the SNS content – such as emails and Facebook wall postings – that is relevant to the action, but have generally left SNS account owners in control of access to their accounts. For example, a Nevada district court denied a defendant's motion to compel the plaintiff to grant the defendant access to the plaintiff's MySpace account in order to obtain allegedly relevant communications. Instead, the court determined that the "proper method for obtaining such information" was to serve a "properly limited" request for the production of relevant content. In a case where a plaintiff put the content of her former Facebook account and her state of mind at issue, a Connecticut district court required her to produce to the defendant all of the printouts of her account, which had been provided to her by Facebook, after an in camera review demonstrated that her initial determination of the relevancy of this information was too narrow. Although this decision may seem far-reaching, the defendant still had to rely on the plaintiff for production of the requested discovery.

Courts in New York and Pennsylvania, however, have expanded the methods of disclosure available to defendants for the discovery of SNS content. In Romano v. Steelcase, as discussed in a previous issue of Socially Aware, a New York trial court ordered the plaintiff to execute the necessary consent and authorization for the operators of Facebook and MySpace to provide the defendant with access to the plaintiff's personal accounts. And a recent Pennsylvania decision, while relying on Romano, appears to have gone even further than the New York court.

In Zimmerman v. Weis Markets, the Pennsylvania trial court required disclosure to opposing counsel of the plaintiff's passwords, user names and log in names in order to provide access to the non-public portions of the plaintiff's personal Facebook and MySpace profile pages. Zimmerman, a former employee of Weis Markets, had brought an action seeking damages for injuries resulting from an on-the-job accident. He claimed both embarrassment from the subsequent scarring and that "he ha[d] sustained a permanent diminution in the ability to enjoy life and life's pleasures." Upon review of the public portion of Zimmerman's personal Facebook and MySpace pages, Weis Markets discovered what it believed to be evidence that contradicted the claims – photographs taken after the accident depicting Zimmerman with his motorcycle and wearing shorts that left the scar on his leg "clearly visible." The Zimmerman court determined that, "[b]ased on a review of the publicly accessible portions of [Zimmerman's] Facebook and MySpace accounts, there was a reasonable likelihood of additional relevant and material information on the non-public portions of these sites."

In response to Zimmerman's argument that "his privacy interests outweigh[ed] the need to obtain the discovery material," the court determined that since he had voluntarily posted all of the pictures and information on his Facebook and MySpace pages and intended to share them with other users of the sites, "he [could not] now claim he possesse[d] any reasonable expectation of privacy to prevent Weis Markets from access to such information." Further, the court held that "[w]ith the initiation of litigation to seek a monetary award based upon limitations or harm to one's person, any relevant, non-privileged information about one's life that is shared with others and can be gleaned by defendants from the internet is fair game in today's society."

Commentators disagree on what Zimmerman ultimately means. One commentator suggests that such access is "equivalent to turning over a personal diary." Another explains that "forcing a party to hand over his or her log-in information is not the correct result," as it has the potential to provide the other side with access to irrelevant, non-discoverable, and/or private information. On the other hand, one commentator maintains that the policy "makes sense," arguing that "if there is proof of relevant information contained within a social media account, then that account should be accessible by the side seeking it." Another observes that, although these pages should be discoverable to an extent, the problem will be in deciding "where to draw the line," and expressed concern that parties would abuse such a rule as a way to wear down the opposing side. With such a mix of reactions, the issue is likely to become a hot topic as other courts determine whether to follow suit.

EMPLOYEE NON- COMPETE AND NON-SOLICITATION AGREEMENTS IN THE SOCIAL NETWORKING ERA

Employers have long used non-compete and non-solicitation agreements to prevent former employees from taking unfair advantage of confidential information, including client information, to which they received access during their employment. The growth of social media, however, is raising complex new issues for employers seeking to protect such company confidences from misuse by ex-employees. For example, if a former employee subject to a non-compete or non-solicitation agreement connects with a company client or former coworker on LinkedIn, could such connection result in a breach of the agreement?

Although there has been little definitive guidance from the courts to date, these issues have started to appear more frequently in litigation. In March 2010, for example, TEKsystems filed a lawsuit against a former employee for violating a non-compete and non-solicitation agreement based on her use of LinkedIn. TEKsystems alleged that the former employee violated the agreement when she "connected" with one of the company's contract employees on LinkedIn, asked whether he was "still looking for opportunities," and invited him to "come visit [her] new office and hear about some of the stuff [they] are working on." No ruling was issued, as the parties resolved the matter prior to adjudication; the case, however, is a reminder of just how easy it is for departing employees to connect with former colleagues and clients via LinkedIn and similar social media platforms, possibly in violation of their contractual obligations to former employers.

Employers seeking to enforce restrictive covenants may be interested to learn that at least one court has ruled that an ex-employee's use of social media did violate a non-solicitation agreement. In Amway Global v. Woodward, a former employee argued that his blogs and website postings could not establish violations of the nonsolicitation agreement because "such passive, untargeted communications fail as a matter of law to qualify as actionable solicitations." The Michigan district court rejected this reasoning, noting that "common sense dictates that it is the substance of the message conveyed, and not the medium through which it is transmitted, that determines whether a communication qualifies as a solicitation."

The Amway court further confirmed that "communications qualifying as solicitations do not lose this character simply by virtue of being posted on the Internet." Indeed, the Amway court found that the ex-employee's posts could constitute a solicitation even where the hosting site's readership is "diffuse and uncertain." Specifically, in Amway, the posting was viewed by nearly 100,000 people and the court still found that it qualified as a solicitation.

Still, whether a particular use of social media can rise to the level of a "solicitation" is fact dependent. Just as a telephone call, email, or meeting can be appropriate or inappropriate depending on its substance, some social media communications will be in breach of non-solicitation agreements while others will not. For example, in Amway, the court held that the former employee violated his non-solicitation agreement when he posted on his blog that he had decided to join a competitor and stated, "If you knew what I knew, you would do what I do." Although this posting was not directed at any particular individual, the court held that in light of its content, it "would readily be characterized as [a] solicitation" as it could clearly be read as an "invitation for the reader to follow his lead and join" Amway's competitor. On the other hand, had the former employee simply posted a neutral announcement indicating his decision to join a competitor, it is unclear whether the Amway court would have deemed the ex-employee to be in breach of his non-solicitation agreement.

We note that the Amway court tailored its analysis to the language of the governing agreement and found that, because the agreement prohibited employees against "encourag[ing], solicit[ing], or otherwise attempt[ing] to recruit or persuade" others to compete, it was "immaterial" whether any such attempt to do so was successful. Thus, one way for employers to address the current ambiguity as to what kinds of social media use will violate a non-solicitation agreement may be to include a provision expressly prohibiting the use of social media for improper solicitation and outlining the prohibited conduct. If the agreement specifically prohibits the former employee from initiating contact with former coworkers or clients through social media sites such as LinkedIn, a court, as in Amway, may be more inclined to find that a simple request to connect breaches the agreement.

Further, as part of a broader trade secrets protection program, employers can use confidentiality agreements as a step toward avoiding the loss of trade secret status. In order to address the particular risk of proliferation of confidential information through social media, employers can maintain strong confidentiality agreements that incorporate provisions explicitly regulating employee social media use as it pertains to confidential information. Such agreements should make clear that such information is the employer's property and is to be protected as such, especially online. Although there may be concerns about regulating employee social media use (e.g., free speech, concerted activity, and privacy law considerations that are outside the scope of this article), it is clear that employees have no greater right to breach a confidentiality agreement through social media than they otherwise would if not using social media. The bottom line is that the fact that an improper disclosure may occur through a blog or other social media service does not somehow exempt that disclosure from the reach of a lawful confidentiality obligation.

While social media presents new challenges to employers who seek to maintain the confidentiality of sensitive information and prevent unfair competition by departing employees, the legal issues arising in the context of social media in many respects are not so different from those we have seen in the past. These cases will likely continue to turn on the particular facts presented. With that said, certain themes appear to be developing:

• First, while protecting confidential information as trade secrets may be more challenging with the proliferation of social media sites, employers can support their efforts to do so by using confidentiality, non-compete (where legally permitted), and non-solicitation agreements.
• Second, having clear policies may help employers regulate social media use, particularly where such policies make clear that disseminating confidential information by posting online, including on their own accounts on sites such as Facebook and LinkedIn, is strictly prohibited.
• Finally, an employee cannot do through social media what he or she could not do otherwise.

To quote from the Amway decision, "it is the substance of the message conveyed, and not the medium through which it is transmitted," that carries weight.

A COPYRIGHT TROLL'S LAST STAND?

Suits by so-called "copyright trolls" are of keen interest to operators of social media sites, given that user-generated content, or, as some call it, "user-uploaded content," is a cornerstone of the social media experience. In the April 2011 issue of Socially Aware, we reported on a recent string of lawsuits filed by Righthaven, a company in the business of acquiring third-party copyrights for the purposes of identifying and bringing suit against possible infringers. In that article, we described several recent Righthaven claims against bloggers, forum posters, and other social media users based on their reposting and (re)use of online content. We also foreshadowed the possible demise of Righthaven's legal strategy, noting that courts appeared to be concerned that Righthaven's only interest in the copyrights at issue might be a financial one – a concern supported by an "assignment" of these copyrights to Righthaven that the Electronic Frontier Foundation ("EFF") called "a sham".

Recently, other courts presiding over Righthaven lawsuits have addressed the EFF's allegations, specifically, regarding the nature and manner of the assignment to Righthaven of the allegedly infringed copyrights, and the implications of that assignment for Righthaven's standing to sue.

Standing to sue for copyright infringement is described in the U.S. Copyright Act (the "Act"). Under Section 501(b) of the Act, only the legal or beneficial owner of an exclusive right in a copyright is entitled to sue for infringement. This requirement was included in the Act both to protect alleged infringers against a multiplicity of lawsuits and to ensure that copyright owners are made aware of, and given the opportunity to participate in, lawsuits affecting their legal interests. Although exclusive rights afforded to copyright owners under Section 106 of the Act are "divisible" and may each be assigned or transferred to third parties individually or collectively, the right to sue is not one of those enumerated exclusive rights. Therefore, an entity like Righthaven may only obtain the right to sue for infringement if a copyright owner also assigns one of its Section 106 exclusive rights in the copyright at issue (further, that entity may only obtain the right to sue for past infringement if the assignee expressly assigned such right).

Righthaven's standing to sue under Section 501(b) was precisely the target of the EFF's and Democratic Underground's allegations in Righthaven v. Democratic Underground, one of the actions referenced above. Righthaven had brought suit alleging that a message-board user, by posting four paragraphs from a 34-paragraph story from the Las Vegas Review-Journal ("LVRJ") on the Democratic Underground site, had infringed "Righthaven's" copyright. Righthaven alleged that it had acquired, via an assignment from Stephens Media LLC ("Stephens Media"), publisher of the LVRJ and Righthaven's original business partner, the rights in the underlying copyrights that were necessary for Righthaven to bring suit. (Righthaven has made the same or similar claims in most of the over 270 lawsuits that it has filed to date.)

In Democratic Underground, the court noted that the assignment purported to transfer to Righthaven all copyrights necessary for Righthaven to be recognized as the owner of the subject works for the purpose of being able to seek redress for infringement; however, the assignment did not assign to Righthaven a specific exclusive right. Further, in discovery, Righthaven disclosed to Democratic Underground a "Strategic Alliance Agreement" ("SAA") that had been entered into between Righthaven and Stephens Media before the assignment at issue and which, by its terms, governed all subsequent assignments between those parties. Section 7.2 of the SAA stated that notwithstanding any assignment, Stephens Media retained the exclusive license to exploit each purportedly "assigned" copyright for any lawful purpose, and that "[Righthaven] shall have no right or license to Exploit or participate in the receipt of royalties from the Exploitation of the [assigned copyrights] other than the right to proceeds in association with a [recovery in an action for infringement]." The SAA also gave Stephens Media the right to terminate any such assignments in good faith on notice to Righthaven, and entitled Stephens Media to a 50% share of any awards received by Righthaven in lawsuits that Righthaven later filed based on the subject copyrights.

The court's analysis of the assignment, viewed in light of the SAA, proved decisive in this case. Considering the nature of the rights held by Righthaven under the assignment and under the SAA, the court ruled that, given that the assignment did not assign to Righthaven the legal or beneficial ownership of any exclusive right in the subject copyright, Righthaven actually only possessed "the bare right to bring and profit from copyright infringement actions." The plain and simple effect of the SAA, it added, was to prevent Righthaven from obtaining, having, or otherwise exercising any right other than the mere right to sue, given that Stephens Media retained (or was granted back by Righthaven) all other rights and did not itself assign any exclusive right in the applicable copyright to Righthaven.

These rulings, and the fact that Stephens Media could terminate the assignment at any time and effect a complete reversion of the ownership, exposed the assignment as insufficient for the purposes of supporting Righthaven's standing to sue under the Act, as the EFF had sugguested originally. In an order dated June 14, 2011, the court dismissed with prejudice Righthaven's suit for lack of standing. In addressing Righthaven's claim that the SAA did not affect its rights under the assignment – an assertion the court called "disingenuous, if not outright deceitful" – the court ordered Righthaven to show cause why it should not be sanctioned for its failure to disclose Stephens Media as an interested party in this and other Righthaven lawsuits.

Sources: http://www.mofo.com/files/Uploads/Images/111018-MoFo-Tech-Fall-Winter-2011.pdf. Snapshot taken June 2011.

The decision in Democratic Underground has rippled through other suits brought by Righthaven, as both defendants and presiding judges have taken note of Democratic Underground's and the EFF's allegations regarding Righthaven's standing to sue. One such case is Righthaven v. Wayne Hoehn, in which Righthaven sued Hoehn, a registered contributor to madjacksports.com, for copyright infringement based on allegations that he posted an LVRJ article to that site. Hoehn, like the Democratic Underground, challenged Righthaven's standing to sue on the basis that Righthaven did not own any exclusive right in the article's copyright. In defending against Hoehn's assertion, Righthaven and Stephens Media sought to clarify the SAA by entering into evidence an amended version of that agreement, which they argued plainly showed that that the SAA was merely intended to secure Stephens Media's ability to continue to exploit the subject copyrights following their assignment, and not to limit Righthaven's right to sue for infringement. Finding Righthaven's claim (and the amended SAA) unpersuasive, the court noted that the amendment did not change the jurisdictional facts as they existed at the time the suit was filed, adding that the original SAA unambiguously qualified later assignments with restrictions and reversionary rights (i.e., an obligation to sue within 60 days, and Stephens Media's right to block any suit) such that, in the end, Righthaven did not actually own any exclusive rights.

The Hoehn court ultimately dismissed Righthaven's suit for lack of standing, and Judge Philip Pro held that the amended SAA, even if relevant, had failed to correct Righthaven's standing deficiencies because it still only gave Righthaven an "illusory right" to exploit the copyright. (He also ruled, almost as an aside, that Hoehn's use of the article was protected as fair use regardless of Righthaven's standing to sue.)

Various court orders in a more recent case show that Nevada's appetite for Righthaven's lawsuits may be waning. In Righthaven v. Pahrump Life, Righthaven sued a blog owner for allegedly reprinting LVRJ articles. In an order dated August 12, 2011, Judge Mahan reiterated concerns raised in Democratic Underground and Hoehn concerning Righthaven's standing to sue, supplementing earlier arguments by noting that Righthaven had violated local court rules in failing to list Stephens Media as a party with "a direct, pecuniary interest in the outcome of the case," despite the company's entitlement under the SAA to 50% of Righthaven's recovery. Addressing Righthaven's previous attempts to amend the SAA (and denying Righthaven's request to further amend that agreement), Judge Mahan commented that Righthaven's actions were "merely an attempt . . . to impermissibly change the facts pleaded in the complaint to manufacture standing" and to supplement its complaint with additional facts not present when the case was filed – an impermissible purpose under the Supreme Court's jurisprudence on standing. Although Judge Mahan requested further briefing on Righthaven's standing to sue, the order made clear that Righthaven would face a steep climb to establish standing and the merits of its claims, and invited Pahrump Life to argue why the case should be dismissed with prejudice.

As more recently reported, Righthaven's standing troubles are not limited to actions filed in Nevada. In an order entered on September 27, 2011 in Righthaven v. Leland Wolf, Colorado's Judge John Kane reiterated the holdings of various Nevada courts, including those discussed above, in dismissing Righthaven's copyright infringement suit against a defendant who had reprinted on his personal blog a Denver Post photo of a TSA agent performing a pat-down. In holding that Righthaven's "bare right to sue" was insufficient to support its standing to bring suit, Judge Kane added in dicta that to allow such suits to proceed would run counter to the constitutional goal of furthering the progress of the arts and the sciences. Specifically, he noted that a party with the bare right to sue "derives its sole economic benefit by instituting claims of infringement, a course of action which necessarily limits public access to the copyrighted work ... [which] prioritizes economic benefit over public access, in direct contradiction to the constitutionally mandated equilibrium upon which copyright law is based." Some commentators have noted that this Colorado decision may have a domino effect on the other 58 or so cases Righthaven has filed in Colorado, considering that Judge Kane is presiding over all of them.

The fallout from these rulings, which appear to have considerably narrowed Righthaven's room for legal maneuvering, has been dramatic and may signal an end to what some have called Righthaven's "sue-first-ask-questions-later" legal campaign. For example, on August 15, Judge Pro in the Hoehn case ruled to award Hoehn over $34,000 in attorneys' fees and costs, finding the award reasonable and supported by the defendant's arguments. Wired later reported that at an early September hearing in which Righthaven indicated its intent to appeal Judge Pro's order, Righthaven told Judge Pro that it might be forced to seek protection through bankruptcy if the order to pay attorneys' fees was not stayed.

Righthaven has suffered a similar fate in several cases since then. First, following the Hoehn ruling, Judge Kane ordered Righthaven to pay the defendant's legal fees. Second, on October 26, 2011, it was reported that Righthaven was ordered to pay $119,488 in attorneys' fees and costs in the matter of Righthaven v. Thomas DiBiase (another Nevada case that was dismissed in light of Righthaven's lack of standing to sue), representing "every dollar [DiBiase's attorneys] asked for in [the defendant's] fee request." And Ars Technica recently reported that due to Righthaven's inability to file its appeal on time or pay the over $34,000 that it was ordered to remit, Judge Pro authorized U.S. Marshals in Nevada to use "reasonable" force to seize nearly $64,000 in cash and assets from Righthaven, representing the original award plus further costs incurred since August 15, 2011. In the wake of all of these setbacks, it remains to be seen how long Righthaven's litigation campaign will continue to survive.

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Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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