unlawful competition

Using LinkedIn could get you sued for breach of your restraint of trade agreement

Posted Tue, 15/06/2010 - 12:17 by Paul

A case, TEKsystems, Inc. v Hammernick et al, filed in the United States District Court for the District of Minnesota could signify a new trend in unlawful competition litigation in South Africa. The case involves a former TEKsystems, Inc. employee who was bound by non-solicitation provisions in her employment agreement with TEKsystems and who then contacted a number of people she was prohibited from contacting after her employment with TEKsystems came to an end. The interesting aspect of this case is that she contacted these individuals through LinkedIn, a very popular business networking and, increasingly, recruitment tool.

According to an article about the case by Renee M. Jackson at Nixon Peabody:

Brelyn Hammernick worked as a recruiter for TEKsystems, and signed a non-competition, non-solicitation, and non-disclosure agreement with TEKsystems. Hammernick’s employment agreement provided that, for a period of eighteen months following termination of her employment, she was prohibited from directly or indirectly approaching, contacting, soliciting, or inducing any person who had been a “Contract Employee” during the two-year period prior to the date of her termination and about whom she knew of by reason of her employment with TEKsystems, to: cease working for TEKsystems at clients or customers of TEKsystems, refrain from beginning work for TEKsystems at clients or customers of TEKsystems, or provide services to any individual, corporation, or entity whose business is competitive with TEKsystems. Importantly, these restrictive covenants in Hammernick’s employment agreement did not reference competition, solicitation, or disclosure via social media specifically.

The definition of “Contract Employee” in the employment agreement covers those IT professionals that Hammernick recruited and then placed on a contract basis with TEKsystems’ clients and customers, but who remain employed by TEKsystems.

When Hammernick’s employment with TEKsystems ended, she went to work for Horizontal Integration, Inc., also an IT staffing firm. The complaint alleges that, after her employment with TEKsystems ended, Hammernick unlawfully communicated, on behalf of Horizontal Integration, with at least twenty “Contract Employees” via LinkedIn, the premiere social networking website used for business and professional purposes.

The cause of action in this case is not new to South African law. South African employees are frequently bound by non-solicitation provisions contained in their employment agreements. Typically former employees fall foul of these provisions when they leave employment and attempt to solicit current employees to leave their employment and join those former employees at a competitor.

What is novel about the TEKsystems case and future, similar cases in South Africa is that the former employee, in this case Hammernick, allegedly solicited TEKsystems employees using LinkedIn. While the act of soliciting employees by sending a message over LinkedIn isn't, in itself, novel (it could just as well as been direct email, sms or instant messaging), the fact that it was over LinkedIn adds a dimension to the case. LinkedIn's purpose is to connect people for business purposes. Regardless of the content of the message Hammernick allegedly sent to TEKsystem's Contract Employees, using LinkedIn to send the messages seems to be a pretty compelling indication of her intent to enter into a business relationship with them while at her new employer and TEKsystems competitor.

Sending a message to employees may be a pretty clear breach of non-solicitation provisions but the case also raises an even more interesting and, potentially, troubling question: does the mere fact that you are connected to a person on a site like LinkedIn imply solicitation? Put another way: given LinkedIn's purpose as a business connector, would a former employee immediately be in breach of his or her non-solicitation undertakings if he/she remained connected to employees at the former employer on LinkedIn? This seems to me to be going too far but it remains to be seen how a court would interpret a connection on LinkedIn in this context? Finding that these connections create a presumption of a breach could mean that former employees would be required to terminate their connections to their former colleagues when they leave their employer. Such a finding would also have some disturbing privacy implications because a court would be interfering in personal relationships which may also be professional without any real evidence of improper conduct.

What is clear from this case is that local employers should consider the implications of connections across social networks when they frame their employees' contracts and their restraint and non-solicitation provisions in particular. These provisions should cater for these sorts of connections as well as privacy and similar sensitivities.

Changing perceptions of the social Web from a legal perspective

Posted Fri, 27/11/2009 - 08:29 by Paul

I was invited to speak at the IT Governance Forum/Conference yesterday in Rosebank. I spoke about social media and some of the legal challenges social media use introduces. I have this nagging feeling that many people don't take social media seriously enough to recognise that there are real legal challenges.

I made the point that social media is perhaps seen as a little warm and fuzzy and without all that much substance. There is a lot of emphasis on sharing and not all that much on the very real impact social media can have on a business' bottom line.

Many of the attendees at the event weren't familiar with Twitter, for example, and while Twitter might be seen as somewhat superficial, it can have a profound impact on a business if the right people spread bad reviews (or good, for that matter) to the right connections.

My slides are below if you are interested in the topics I talked about:

Social media: Legal and business challenges

View more presentations from Paul Jacobson.

Brandsquatting and your trade mark

Posted Sat, 20/06/2009 - 23:09 by Paul

I've just been listening to an interesting discussion in a recent episode of This Week in Law about the implications of brandsquatting on services like Twitter, FriendFeed and Facebook. You may be familiar with cybersquatting which occurs when a person registers a domain that person has no legitimate interest in and has registered largely for the purpose of re-selling it, typically to a trade mark owner, for a profit.

Cybersquatting is usually dealt with in terms of dispute resolution processes established in respect of those particular namespaces (ICANN's UDRP for .com, .org, .net and other top level domains and the .zaDNA's own dispute resolution process for the .za namespace). These dispute resolution processes are designed to be more informal than court proceedings and can be both more efficient and effective.

When it comes to brandsquatting the rules are a little different. You're no longer dealing with domain name registrations per se but rather the use of a folder on an existing domain, for example http://twitter.com/cocacola, which matches an existing brand or person's name.

Users who register accounts on services like Twitter, FriendFeed and Facebook and who claim usernames that are similar to or the same as existing brands or personalities may be doing so to leverage off the existing brand or personality to boost traffic, attention or even to harm that brand. These cases don't fall under the scope of the UDRP or zaDNA's ADR process and instead fall under the individual service's terms of service and possibly the relevant trade mark law. Fans often create accounts in the name of their favourite brands with the intention of creating fan-sites of a sort and the question then becomes whether to permit this use of a brand or shut down all unauthorised uses of the brand. The Coca-Cola page on Facebook was, if I remember correctly, created by two Coca-Cola fanatics and not by the Coca-Cola Company. The company agreed to let the group continue, presumably because of its overwhelmingly positive benefit for the brand.

On the other hand the Coca-Cola page on FriendFeed doesn't seem to be associated with the company itself or have much in the way of content about the brand. It is a relatively innocuous abuse of the brand but an abuse nonetheless.

The legal problems with these sorts of registrations include passing off which is when a person or service passes themselves off as an existing and often well established brand. This is a basis of unlawful competition as well as trade mark infringement in many legal systems, including in South Africa.

While remedies may include approaching a court to stop the passing off, this is an expensive and often time consuming process. Fortunately Twitter, Facebook and other services have provisions in their terms of use to deal with this (or they police this in the ordinary course of their business). Twitter, for example, specifically deals with this issue in its terms of service:

We reserve the right to reclaim usernames on behalf of businesses or individuals that hold legal claim or trademark on those usernames.

Facebook also has a few provisions dealing with brandsquatting. These provisions prohibit misleading account registrations or account registrations in other parties' names without consent. The Facebook Statement of Rights and Responsibilities also enable Facebook to terminate accounts for certain infringements of intellectual property.

FriendFeed's terms don't appear to address this issue explicitly but I have seen instances where FriendFeed staff act fairly decisively to address abuse of their system so brandsquatters shouldn't be too cavalier here either.

The point is brandsquatting is not tolerated either. The remedies may not be quite the same as those available for more conventional cybersquatting but remedies do exist. The only question is how readily the services concerned will take action against brandsquatters when these illicit activities are brought to their attention. Hopefully the action will be swift and decisive. If not, well, there are always the courts ...