Sunday, January 11, 2015

A Lesson For Pharma & Life Science Companies? -- From Cellular Cos. Trade Secrets Spat -- California Federal Trial Level

Back in October of 2014, Orrick Herrington & Sutcliffe's IP group put together a nice blog post on a case underway at the federal trial court level in the Central District of California. It was cleverly entitled "New Strings Attached" -- and for good reason.

The case raises the (at least to my memory) novel issue of whether a sales manager's LinkedIn contacts belong to his employer, or to him, post termination. It matters greatly that the manager signed agreements accepting that all customer lists were protectable trade secrets -- and that the manager actively worked on his LinkedIn contacts at the company's behest, during work hours. Some 900 of these "contacts" look to be customers or "potential customers" of the company. Here is a bit of the Orrick firm's post:

. . . .The case arose when defendant David Oakes, a sales account manager for plaintiff Cellular Accessories for Less (“Cellular”), a seller of mobile phone accessories to businesses, decided to strike out on his own after more than six years with his employer. During his tenure at Cellular, Oakes had signed an employment agreement requiring that proprietary information, including Cellular’s “customer base,” remains property of the company and may not leave the premises. . . .

The most interesting dispute here is whether Oakes’ maintenance of his LinkedIn contacts after his termination constituted misappropriation of trade secrets. Defendants argued that Oakes’ LinkedIn contacts could not possibly be considered trade secrets under the California Uniform Trade Secrets Act. Most importantly, defendants contended that all of Oakes’ contacts would have been viewable to any of his other LinkedIn connections, defeating any trade secret protection. In addition, defendants insisted that any competitor could search LinkedIn, or another online business directory, to easily recreate the list and identify the officers responsible for purchasing; in fact, Oakes located many of his contacts in response to suggestions made by LinkedIn. Furthermore, defendants asserted that Cellular authorized salespeople to disclose the identities of clients to potential customers as way of attracting new business, encouraged salespeople to use LinkedIn for business development and failed to inform employees that LinkedIn contacts were proprietary or confidential.

Plaintiff retorted that LinkedIn contacts are not automatically viewable because an account is only visible to the extent that the user chooses to make it public; even if a customer was visible in a salesperson’s contact list, seeing this listing would not necessarily divulge whether or not the contact was plaintiff’s customer. Because the court declined to take judicial notice of the functions of LinkedIn and the parties “did not make sufficiently clear whether and to what degree Oakes’ contacts were indeed made public (and whether this was done with [Cellular’s] explicit or implicit permission),” the court found genuine issues of material fact as to trade secret misappropriation. . . .

We will keep an eye on this one, even though (strictly speaking) it is not a life science case at all. It will have profound implications for pharma & biotech sales people, however, if there is a finding that LinkedIn accounts of a named individual (or the names linked there, at least) are the property of the individual's employer. I think it may turn on whether the employer encouraged the employee to actually mark the contact details (which enable direct communication) public -- or keep them "private".

Here is a PDF file of the ruling.

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