Social Hour

Ten ways for in-house counsel to protect the company.

By Darin Klemchuk

In-house counsel should give careful thought to the problems social media presents, how it affects the workplace, and how to address its usage by employees and third parties. Unlike other venues, such as blogs, social media has the capability to dramatically increase employee and intellectual property issues by providing a much larger and better connected audience. The following are some specific, brief considerations that in-house counsel should analyze.

1. It’s gone in a flash (or click). Even inadvertent statements or posts can innocently give away a company’s trade secrets and confidential information. Care must be taken to educate employees about proper use of social media and how to safe-guard important data. Examples of this include disclosure of product launches and other sensitive information. Once tweeted, that new product feature is known to the world, and there is nothing that can be done.

2. Employee posts may be protected speech. The National Labor Relations Board has ruled that certain employee gripes made publicly on social media at the company’s expense are concerted activity protected under the National Labor Relations Act and therefore are not properly the subject of employee ter-mination. Employers should take caution in disciplinary action involving such posts. The NLRB is watching. Several cases have been filed by employees claiming retaliatory firing due to online posts and comments.

3. Employee posts may subject the company to liability. Companies have been sued for deceptive trade practices and false advertising based on fake reviews and untrue statements published online. Another area of potential liability is disparaging or defamatory employee posts about a competitor’s products. These risks should be communicated to employees. A clear line needs to be drawn between online posts as an employee and online posts as part of the employee’s private activities.

4. Employee posts may create federal administrative action. The Federal Trade Commission promulgated new regulations in December 2009 that require disclosure of any connections between an endorser and a company’s products and services. Employees who puff or exaggerate a company’s products or services, even if completely truthful, without disclosing their employment relationship run the risk of subjecting the company to administrative action by the FTC. Employers should take care in educating employees about the disclosure requirements. A violation could lead to administrative action against an employer even if it was unaware of the sponsored endorsement. These concerns also include bloggers who are paid or provided with a free product to review.

5. Social media provides a much bigger, real-time audience for yesterday’s problems. All the issues facing companies and employee relations—from discrimination and harassment to embarrassing pictures and comments at the office party—may be played out in a very public arena at the speed of light. Being on the losing end of an embarrassing video that went “viral” can devastate a company’s brand. Employers should incorporate social media policies and simple guidelines into employment manuals and educate employees on proper usage.

6. Be careful using social media as a recruiting tool. While searching social media is a highly useful method for screening potential job applicants, some legal risks are asso-ciated with it. The personal nature of social media provides potential employers with ample opportunities to learn extensive information about employment candidates that ordi-narily would not be disclosed on a resume. To avoid claims for discriminatory hiring, companies should exercise care in using this information. One approach is to segregate the re-searcher and the hiring decision-maker to ensure that any sensitive or protected information is not presented to the hiring manager—and there-fore could not have played a role in the decision.

7. Registering usernames is a cost-effective, protective measure. One of the best ways to prevent trademark infringement is for a company to register its name and key brands as usernames on social media sites to prevent cyber squatters and other infringers from controlling the user-names. Proactive registration is much less expensive than attempting to recover the username.

8. Social media policies are becoming a best practice. Companies should incorporate policies into their employee handbook or develop separate guidelines. In addition to the concerns outlined in this article, a policy should address who owns social media accounts, usernames, posts, and other content. Finding out down the line that an employee or independent contractor owns a Twitter handle and its associated posts can be a painful lesson for a company. There has already been litigation over who owns this online material. Companies should not wait to address this issue and should use contracts that clearly define these rights.

9. The best defense is a good offense. Proactively monitoring brand and trademark usage on social media is often the best strategy to protect trademark and other IP rights. Often, a company can get a third party to stop using its trademarks or brand names with a simple request or through using the IP policies of media companies. This is usually a better and less expensive route than waiting and filing litigation later. Facebook, Twitter, and eBay all provide mechanisms to address IP disputes. The Digital Millennium Copyright Act also provides a takedown procedure used by many companies. While the DMCA expressly applies to copyrights, the safe harbor provides a road map for potentially addressing other IP disputes.

10. Social media adds litigation considerations. Because it aggregates millions of users, the public relations aspect of social media should be considered before commencing litigation. The trademark infringement case between The North Face and The South Butt, for example, was played out heavily on social media. Typical aggressive litigation tactics may backfire and actually increase traffic to a sympathetic defendant’s Web pages. Careful thought should be given to these consequences before suit is filed. Additionally, lawyers should check local rules to ensure that they do not run afoul of juror pool research and inadvertent contact regulations.

Social media has not only opened up new avenues for communications and brand marketing but has also added entirely new ways to infringe on those efforts. Making sure that your brand and company are protected in cyberspace isn’t just important; it’s an integral part of how companies and their employees must communicate today.TBJ

Darin KlemchukDARIN KLEMCHUK, the founder and managing partner of Dallas-based Klemchuk, focuses on all aspects of intellectual property, with an emphasis on patent, trademark, copyright, and trade secret litigation.

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