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LinkedIn contacts - whose property?

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Linked in recently reported record revenues for Q4 of 2012, describing it as a "transformative year" at the end of which the company boasted over 200 million members in over 200 countries worldwide, up from 4,500 members when the site first launched in 2003.

One question which has got employment lawyers talking is what happens to an employee’s LinkedIn contacts when he or she leaves. In many cases, employers are only now beginning to think about this.  But it is a ticking time bomb; increasingly, we are going to see well connected employees moving on to a new job and taking their LinkedIn contacts with them. Upon arrival at the new company, the employee will update his or her LinkedIn profile, triggering an email to all of the contacts which announces the details of the new employer. Where the employee in question is a salesperson, trader, recruitment consultant or otherwise works in a business which is heavily dependent on client relationships, this could mean real damage to the former employer’s business.

The debate about ownership of contact lists – where we have got to

LinkedIn’s own terms and conditions provide that ownership of a LinkedIn user account remains with the individual; this much is clear. But ownership of the individual’s contacts is another question, particularly where the contacts are made during the course of employment and overlap significantly with the employer’s client list. In 2007, in the case of PennWell Publishing (UK) Ltd v Ornstein and others [2007] EWHC 1570 (QB), the High Court addressed the issue of ownership of an Outlook contacts list. A journalist, Mr Isles, had left Pennwell Publishing, and took with him a CD containing his email contacts list. He intended to use the list in order to set up a competing business. The list contained personal contacts that pre-dated Mr Isles’ employment with Pennwell, together with a large number of contacts he had made while working at Pennwell. The Court granted a permanent injunction preventing Ms Isles from using the entire database, ruling that it belonged to his former employer.

So far, there is only one UK case which has looked at contact lists in the context of social media, being Hays Specialist Recruitment v Ions [2008] EWHC 745. Mr Ions worked for Hays as a recruitment consultant. Having decided to leave and set up a competing business, but before handing in his notice, Mr Ions sent LinkedIn invitations to some of Hays’ clients and candidates. Hays did not know the extent of Mr Ions’ attempts to “link in” with its contacts (having evidence of this happening on only two occasions) and therefore applied to the High Court for pre-action disclosure of certain relevant documents. They sought this disclosure in order to be able to assess the merits of issuing a claim in relation to Mr Ions’ alleged misuse of confidential company information. 

Mr Ions accepted that he was LinkedIn to an unspecified number of Hays’ contacts, but had two arguments as to why no pre-action disclosure should be ordered. Firstly, he argued that this information was “part of his own knowledge base” gained over many years of working in the business. Secondly, he argued that once his LinkedIn invitations had been accepted by the relevant contacts, the information could no longer be said to be confidential.The basis for this assertion was that all of Mr Ions’ LinkedIn contacts would be able to access details of his other contacts, thus exposing the information to a wider audience.  The Court gave this argument short shrift, finding that it was Mr Ions’s actions in uploading email addresses to the LinkedIn site which involved a transfer of confidential information, meaning that Hays had an arguable claim, even if the information subsequently lost its confidential status.

Ultimately, the Court took the view that contact details obtained during the course of employment will remain the property of the employer. On this basis, the Judge granted the disclosure sought by Hays, providing an indication that the courts may adopt the same approach to information held on social media sites as that taken in relation to information held in Outlook in the Pennwell case.  However, the case did not go to a full merits hearing (presumably because a settlement was reached), and there was therefore no definitive ruling on this point. Unhelpfully, this means that for now, we cannot be entirely certain of the legal position regarding ownership of LinkedIn contacts.

Interestingly, a related question was considered by a New York court in 2010 in the case of Sasqua Group, Inc. v. Courtney, 09-cv-528 (ADS)(ETB), 2010 U.S. Dist. LEXIS 93442, resulting in different conclusions being drawn.  Again, it involved a recruitment company, Sasqua Group, which in this case had suffered the recent loss of its Managing Director, Ms Courtney.  Ms Courtney was the niece of the group’s owner, but she didn’t let that stand in the way of her leaving to set up a competing business. She was subsequently accused by her uncle of misappropriating its database of contacts, which Sasqua argued was protectable as a trade secret. 

Ms Courtney argued that the database was not worthy of such protection, because the information it contained could easily be replicated from a variety of sources.  In evidence, Ms Courtney took some time to explain to the Court how, if she “had amnesia tomorrow”, she would nevertheless be able to collate the contact information by using Google searches, LinkedIn, Facebook etc. The court was evidently persuaded by this and dismissed Sasqua’s claim. 

So in this case, contrasting with the view in Hays, the court afforded less protection to what was arguably a confidential client list because of the proliferation of access to such information on social media sites. Although the Hays case suggests otherwise, it is possible that this approach could be adopted in the UK courts. What is almost certain is that we will see further debate about the confidentiality of contact information accessible on LinkedIn and similar sites and, accordingly, doubts being raised about how protectable this information is.

Strategies for protecting your business

To date, employers do not generally seem to have focused on the issues which were key to the cases described above. Any lawyer can tell you that it makes good sense to have a social media policy in place, but the impression we have is that this is still rising up the corporate agenda and has yet to reach the top.

Whether contained in a social media policy or elsewhere, employers will be better protected if they make express provision for ownership of contact lists made in the course of employment. Where these are stored on LinkedIn, the employer may want to require employees to delete such contacts prior to termination of their employment and provide written confirmation that they have done so. As yet, including such provisions in a policy document or the employment contract itself is not common practice, and some employers may fear that their inclusion risks looking heavy handed. On the other hand, certain businesses such as recruitment companies, might take the view, having addressed their minds to the issue, that they cannot afford to miss out on this sort of protection.

Where appropriate, contractual provisions regarding ownership and deletion of client contact lists should be bolstered by well drafted post-termination restrictions which expressly prevent the employee from working for a competitor, soliciting/dealing with clients and poaching staff for a period of time following the termination date.  Employers alive to the risks posed by use of LinkedIn might tailor these restrictions, for example to provide that updating one’s LinkedIn profile to refer to your new employer and setting up your account to ensure that your contacts receive notification of this will be regarded as an act of solicitation, or more likely, dealing with clients.  Whether such a provision would be enforceable or regarded by a court as unduly restrictive of course remains to be seen, and as always with post-termination restrictions, will depend on the context. For this reason, such provisions should be in addition to, and separate from, more traditional wording around post-termination solicitation and dealing with clients and prospects. This will afford a court the opportunity to “blue pencil”, (effectively cross out) any unenforceable provisions, whilst allowing the remainder to stand.

Policing social media

Those employers who have appropriate protection in place will still face practical difficulties when it comes to the departure of key employees with valuable contacts. Imagine such an employee confirms to you that she has deleted all of her company contacts from LinkedIn. If a colleague is still LinkedIn to the departing employee and is willing to cooperate, this might enable the employer to check whether the contacts have in fact been deleted.  However, even if they have, the employee could have retained the contact details in some other format, and might also re-connect to her contacts on LinkedIn soon after.

The practical difficulties associated with evidencing an employee’s breach are illustrated by the Hays case. After having been threatened with injunctive proceedings by Hays, Mr Ions informed his former employer that he had in fact deleted his entire LinkedIn network, thus effectively destroying a potential source of evidence against him. One of the orders which Hays subsequently obtained therefore required Mr Ions to instruct LinkedIn to supply to Hays copies of all information in its possession relating to Mr Ions’ account. The fact that LinkedIn is incorporated in the US could of course give rise to difficulties in enforcing such an order – an issue which was not discussed in the judgment.

What this means in practice is that in order for contractual protection to have any real effect, the employer might need to take (or at least threaten) court action, seeking an injunction against the employee. These challenges are however no different from those existing in any other scenario involving breach of post-termination restrictions. Whilst the existence of such restrictions may have a useful deterrent effect, the only decisive way of dealing with former employees who insist on flouting their obligations is to threaten, and sometimes commence, court action. 

Some concluding thoughts

In a sense, the rise of social media does not really create new issues for employers; rather it provides a new context for the same old problems. What can be said for certain, however, is that employers who have anticipated these issues, and put appropriate contractual wording in place, will be better placed to protect their business than those who have not.

For more information, please contact Virginia Allen