The phenomena of social media and its near exponential growth has generated tremendous dialogue within the IP community about its impact. Facebook now has more than 640 million members, Twitter now has over 175 million users, and LinkedIn has more than 101 million users. Given these staggering numbers, and the inevitability that some users will eventually misuse or attempt to display confidential information or trade secrets of their employers, it makes sense to review the recent cases addressing trade secrets, as well as the steps a client can take to minimize that risk.
One of the first noteworthy cases comes from the Eastern District of New York and it illustrates the challenges that an employer may face when trying to protect a customer list in this new era. In Sasqua Group, Inc. v. Courtney, 2010 U.S. Dist. LEXIS 93442 (E.D.N.Y. Aug. 2, 2010), affirmed, Sept. 7, 2010, the plaintiff, Sasqua, was a recruiting and search firm that built its niche in the area of executives for the financial services industry. According to Sasqua, its founder, Christopher Tors, had worked for over 20 years as a precious metals and foreign currency trader for Goldman Sachs, AIG and UBS, and had used that experience to form Sasqua and compile a substantial client database. That client database included, among other things, client contact information, individual profiles, contact hiring preferences, employment backgrounds, descriptions of previous interactions with clients, and resumes. Tors claimed that he hired and trained his niece, Lori Courtney, as a recruiter for Sasqua. After Courtney left Sasqua to form a competing firm, Sasqua and Tors concluded that Courtney was using the contents of their client database, which they believed contained highly confidential information.
Because Sasqua did not have a written non-competition or non-solicitation agreement with Courtney, they commenced an injunctive action for misappropriation of trade secrets. However, in a withering opinion rejecting that effort, the U.S. District Court Magistrate who presided over the injunction proceeding found that their customer database and the information contained within that database were not trade secrets.
In particular, the Magistrate found it significant that Courtney was able to demonstrate in court how the information in Sasqua’s database could be found through internet searches of websites such as FX Week, Google, Bloomberg.com, and LinkedIn. The Magistrate was impressed with Courtney’s testimony about “how such a search could be conducted on Linkedin, which [Courtney] described as being ‘like Facebook but for business’ and as being more searchable than Bloomberg ‘because people put their whole profile on LinkedIn.'” (Sasqua Group, at p. 24).
The Magistrate was not troubled by the fact that Courtney admitted she did not use the internet to get the information at issue and all but conceded that she had taken it from Sasqua. In holding that the information was not confidential information or a trade secret, the Magistrate noted how the internet had changed the business landscape:
“The information in Sasqua’s database concerning the needs of its clients, their preferences, hiring practices, and business strategies, as well as Sasqua’s acquaintance with those decision-makers may well have been a protectable trade secret in the early years of Sasqua’s existence when greater time, energy and resources may have been necessary to acquire the level of detailed information to build and retain the business relationships at issue here. However, for good or bad, the exponential proliferation of information made available through full-blown use of the Internet and the powerful tools it provides to access such information in 2010 is a very different story” (Sasqua Group, at p. 39).
Three lessons can be drawn from the Sasqua Group decision. First, it is critical to have written non-competition, non-solicitation or confidentiality agreements with employees, contractors and vendors with whom confidential customer information may be shared. Second, an employer needs to have agreements and policies that make clear that sensitive customer information gathered while an employee is the property of the employer and is to be protected. Such an acknowledgement would have necessarily bolstered Sasqua’s claim of proprietary information at the TRO and preliminary injunction stage. Third, an employer has to ensure that its confidential customer information does not find its way into social media websites. This means that that the employer must monitor its employees’ social media profiles, descriptions and blogs to ensure that they are complying with the employer’s policies and agreements.