Tuesday, January 17, 2012

PhoneDog Claims Tweets Are Worth More Than Two Cents`by Elaine Hirsch

Just how much is a tweet worth? The online world is watching an interesting legal case that raises questions about social media tools, such as Twitter. PhoneDog’s lawsuit, seeks an answer to the question of who owns social media accounts and how much value they provide.

PhoneDog, a popular mobile phone site, hired former employee Noah Kravitz (“Kravitz”) as a product reviewer and video blogger in April 2006. For over 4 1/2 years, Kravitz pushed written and video content to PhoneDog’s users via the Twitter account, “@PhoneDog_Noah.” PhoneDog claims that during the course of Kravitz’s employment, he generated a following of 17,000 Tweeters on the handle “@PhoneDog_Noah.” (PhoneDog v. Kravitz, No. C 11-03474 MEJ (N.D. Cal.)) (Amended Complaint p. 4). While a trivial Twitter account may seem to have no defined value in the business world, MBA Online opines that 73% of US-based companies use social media outlets as a main marketing resource. Twitter accounts, Facebook profiles, and Linkedin pages are potential sources of revenue and their misuse could cost a company millions of dollars.

Kravitz resigned from PhoneDog in October 2010. Eight months later, PhoneDog sued Kravitz, alleging that when he resigned, PhoneDog asked him to stop using the Twitter account “@PhoneDog_Noa” and that Kravitz refused to comply. Instead, he simply changed the handle to “@noahkravitz,” and he apparently continued to use the “@PhoneDog_Noah” Twitter account as a dummy account to prevent others from using it. Furthermore, PhoneDog alleges that Kravitz used the new handle to communicate with the 17,000 followers he generated during his tenure at PhoneDog.

PhoneDog asserts in its lawsuit that the Twitter account name “@PhoneDog_Noah” and the followers who tweeted with Kravitz under this name are the property of PhoneDog. Consequently, PhoneDog claims that Kravitz’s communications with the 17,000 followers are impermissible because such communications constitute misappropriation of trade secrets, interference with prospective economic advantage and conversion. PhoneDog is seeking $340,000 in damages, based on $2.50 a month per follower for eight months.

Kravitz's moved to dismiss the complaint; however, the trial court sustained PhoneDog’s trade secret and conversion claims. The court dismissed the interference claims as “conclusory and failing to meet the plausibility standard.” (Order on Defendant’s Motion to Dismiss Pursuant to FRCP 12(B)(1) AND 12(B)(6) at p. 11). Consequently, two claims: misappropriation of trade secrets and conversion apparently have no merit.

Neither PhoneDog nor Kravitz own the Twitter account “@PhoneDog_Noah.” At best, PhoneDog and Kravitz have a license to use the account. See Twitter's TOS: ("All right, title, and interest in and to the Services . . . are . . . the exclusive property of Twitter and its licensors"). The district court held that it could not decide at this moment who had a property interest in the account. This is understandable, given that this issue was barely touched on in Kravitz’s motion to dismiss, and the brief argument was muddled in subject matter jurisdictional issues.

Second, PhoneDog claims that the 17,000 Tweeters make up a customer list. A customer list under California law is a trade secret when efforts are taken to make the customer list a secret. Cal. Civil Code § 3426.1(d). The “customer list” here is not secret; people sign up on Twitter for free to chat with the reviewers on PhoneDog and other websites. PhoneDog did nothing to compile the list. Consequently, the alleged customer list cannot be misappropriated or converted under California law.

Some novel legal issues could be decided. The 9th Circuit is known for its creativity. Therefore, PhoneDog has a chance of winning, despite what the defense feels is a weak legal position. Could precedent be created in the social media world, as it relates to ownership of social media accounts and the value of of a Twitter follower?

A letter from PhoneDog to its fans indicates that it probably used a cost approach to value the 17,000 Twitter followers at $2.50 each per month. The CEO of PhoneDog stated that it had invested in Kravitz by sending him to trade shows and conferences all over the world and hired PR agencies to increase PhoneDog’s and Kravitz's exposure on media outlets.. PhoneDog appears to think it bought the Twitter followers by virtue of investing in Kravitz. Kravitz thinks PhoneDog could have bought the followers on ebay for a penny each.

Ultimately, PhoneDog bears the burden of proving both liability and damages. Even if PhoneDog is not successful, this case will likely cause employers to take unprecedented measures to preserve ownership over their social media sites.

Editor's note: Elaine Hirsch is affiliated with the MBA Online. Phone Dog's Twitter address is: https://twitter.com/#!/Phonedog.


Anonymous said...

Twitter is over rated as a source of advertising.

Legal Pub said...

Tend to agree that damages appear very speculative and liability even more questionable.

Video Guy said...

$2.50 per follower per month ??
I imagine if I started a youtube account that featured a new stripper each month it would not take long to acquire over 10,000 followers...loyal followers.

I'm covering the wrong subjects.

Anonymous said...

There is more to life than money video guy.

Anonymous said...

There is more to life than money video guy.

Anonymous said...

There is more to life than money video guy.

Video Guy said...

As a very young man I once worked for the father of a girl I was dating. He needed me to work for him on a Saturday when a problem suddenly arisen. I had plans to take his daughter out that day, beach, picnic...ect., and told him so.

His reply to me was this, "Ahh yes, love makes the world go round, but money greases the axises...now get your loverboy ass in here, we have work to do!"

~Jay said...

Video Guy: this is for anyone who dates my daugher: Do not touch my daughter in front of me. You may glance at her, so long as you do not peer at anything below her neck. If you cannot keep your eyes or hands off of my daughter's body, I will remove them for you.

~Dave said...

After making love, the young man rolled over, pulled out a cigarette and asked the girl if she had one at hand

"There might be some matches in the top drawer," she replied.

He opened the drawer of the bedside table and found a box of matches on top of a framed picture of another man. The jeolous youn man inquired, "Is this your husband?"

"No, silly," she replied, snuggling up to him.

"Your boyfriend then?" he asked.

"No, not at all," she said, nibbling at his ear.

"Well, who is he then?" demanded the young man.

Calmly, she replied, "That's me before the operation.

Video Guy said...

That’s a bit extreme Jay…keep that up and she’ll run from you as soon as she can. Better to teach her good judgment, but also let the boyfriend know your watching him. The last thing you want is for your daughter to ignore you when she is older, and deny you the right to see your grandchildren. If you have a strong bond and relationship with your daughter now, she will not want to disappoint you later. So if there is a boy she really likes....don't scare him away, she'll blame you for years and years if you do.

@Dave…LOL! I’ll add that joke to my collection.