Employment, Intellectual Property and Technology

How much is too much? The Federal Court grants leave to disclaim a Litigation Funding Agreement with an 80% funder’s premium

9 March, 2020

In a recent article we asked the question: who owns my social media content? In this article we take that enquiry one step further, and tackle the issue of ownership of the social media accounts themselves.

Businesses are increasingly realising the value of social media, with platforms such as LinkedIn and Twitter often at the heart of their marketing, communications and branding strategies. Further, social media connections and followers are nowadays an important source of new clients. In a world where workers use their social media accounts to promote and grow their employers’ businesses, our traditional notions of social media account ownership are increasingly challenged. In fact, in circumstances where social media connections are developed at the instruction of, and provide a benefit to the business itself, businesses may be surprised to learn that their employees’ social media presence may be an asset belonging to the business itself, rather than the individuals who maintain the accounts.

The seemingly clear line of social media account ownership is blurred by the fact that individuals are often tasked with building the social media presence of their company, but often use their own established social networks to do so. To assist in this business-related social media development, businesses will often pay for employees to use upgraded platforms like LinkedIn Premium, and of course provide remuneration and the resources required to develop professional networks on behalf of the company.

So if both the business and the individual have contributed, who owns the account? What happens at the end of the employment relationship? Is it the individual or the business who owns the hundreds of connections that have been developed during the course of the individual’s employment?

While Australian law in this area remains unsettled, a NSW Supreme Court interlocutory hearing demonstrated judicial willingness to recognise social media misuse as an actionable right. Considering this case in the context of UK and US decisions will provide a clearer, albeit incomplete, understanding of how the law currently deals with the ownership of social media accounts.

What do the courts say?

Australian case law

The NSW Supreme Court considered the issue of LinkedIn connection ownership in Naiman Clarke v Tuccia [2012] NSWSC 314. This case concerned the recruitment company Naiman Clarke alleging that a former employee took names from the company’s candidate database and connected with them via LinkedIn. She then used those connections to solicit clients when she began working for a competitor.

Since the recruiter had only been able to make those LinkedIn connections by virtue of her access to the company’s database, Naiman Clarke claimed the recruiter had misused company information for her personal benefit and therefore breached her duty of confidentiality under s 182(1) of the Corporations Act 2001 (Cth).

The Court held, in an interlocutory decision, that client lists constitute confidential information. Therefore, the recruiter’s use of this confidential information without Naiman Clarke’s consent for the purpose of boosting her LinkedIn connections amounted to a breach of confidentiality.

Unfortunately, although this case is indicative of where the law in Australia might be headed, it doesn’t deal directly with the ownership of the recruiter’s LinkedIn connections themselves, focussing instead on the confidentiality of the client lists by virtue of which the LinkedIn connections were made.

UK case law

Although only a first step towards the development of Australian jurisprudence on this point, the decision in Naiman Clarke, suggests that the Australian courts’ approach is in line with the approach taken in the UK.

The UK High Court in Hays Specialist Recruitment (Holdings) Ltd v Mark Ions [2008] EWHC 745 was the first UK case to consider the risk of appropriation of confidential company information in online networking sites.

The case concerned a Mr. Ions, who was employed by Hays between 2001 and 2007, during which time he copied confidential information concerning clients and contacts of Hays. He subsequently resigned and established his own rival agency. An inspection of Mr. Ion’s email account revealed that he had invited two of Hay’s clients to join his LinkedIn network.

The Court held that the employer had a right to compel Mr. Ions to disclose all LinkedIn connections he had made while at Hays. The Court considered Mr. Ion’s use of those new connections to kick-start his competing recruitment company to be a breach of his duty of fidelity to Hays.

This approach was followed by the English High Court in Whitmar Publications Limited v Gamage [2013] EWHC 1881 (Ch), which involved 3 ex-employees of Whitmar starting up a rival company using business contacts they had gained while employed at Whitmar. The Court granted an interim injunction requiring the former employees to return access, control and management of the company’s confidential information, which the Court found to include one of the ex-employee’s own LinkedIn accounts. Because the employee had only registered and maintained the LinkedIn account at the instruction of Whitmar, the Court was satisfied that the employee had grown her LinkedIn connections entirely for Whitmar’s benefit, and therefore the account belonged to Whitmar, not the employee.

US case law

In the US, the story is much the same. In the 2012 case of Christou v Beatport 849 F.Supp.2d 1055 (2012) a company’s MySpace “friends” were held by a court to be more than a mere customer list – those contacts were akin to actual or at least potential customers of the business, and therefore the company was entitled to recover the login details for the MySpace page.

Similarly, in Phonedog v Kravitz (United states District Court, N.D. California, Case No 11-03474, 8 November 2011) the court refused to dismiss a claim by a business that it owned a Twitter account set up by one of its employees. This case was slightly different, as the Twitter account, although operated by the employee, was in the name of the business itself. Upon termination, the employee attempted to retain the account by changing the name to his own. The business was successful in recovering the account.

What the case law tells us

These cases suggest that the courts in Australia, the UK, and the US will not shy away from holding that a business owns, or has rights to, an employee’s social media accounts or connections, provided that profile and its connections were established and maintained during the course of employment, and for the benefit of the company. This is especially so where an element of dishonesty or impropriety is involved, as was the case in most of the above examples.

The difficulty of the courts’ approach in reality is that most employees use their existing social media accounts to perform any professional business development duties; finding the point at which those accounts become more for the benefit of the company than the employee, and which contacts were made because of the company’s, rather than the employee’s, information, remains a significant challenge for courts and law-makers alike.

LinkedIn terms of service

Perhaps in response to the recent legal debate in this area, LinkedIn has recently updated its terms of service to clarify issues around account ownership. LinkedIn’s terms of service state that the account holder is the owner of the account, but that if an employer has paid for an upgrade (for example to LinkedIn Premium), then the employer has the right to control access to those premium features, and to view usage reports relating to the employee’s use of the premium service.

It is arguable that this arrangement allows employers to claim control over connections made by the account-holder while using the paid features. Conversely, the terms of service update may more firmly cement account holders’ ownership of their accounts and connections. One thing is clear – the terms of service constitute a contract between LinkedIn and the account holder themselves, and would not bind the employer of the account holder if there is no privity of contract.

As yet, the courts have not considered an account or connection ownership dispute in light of the updated terms of service. Whether courts will have regard to LinkedIn’s views on ownership and control remains to be seen.

So, what does all this mean?

Undoubtedly, the digital age has seen a rapid increase in the commercial value of social media in the workplace – it is now one of the most dominant tools for marketing and attracting clients. The cases above show us that questions around who owns these valuable digital assets are far from settled. To ensure that this value is not lost when employees leave, and to minimise the risk of lengthy and expensive disputes, businesses should consider taking the steps below to secure their rights in social media contacts.

Social media policy

Businesses should ensure they have a robust social media policy that conclusively establishes the employee and employer’s rights regarding the ownership and control of social media accounts. Where possible, businesses should create their own profiles and ensure they are used solely for the business’ purposes, as this will afford them a far stronger claim of ownership in the event of a dispute. If you ask your workers to use their own social media accounts in the course of their duties, ensure that, at the beginning of the employee’s time at the organisation, a list of which clients were already contacts of the employee is agreed upon. It is essential that your social media policy deals with how new connections they make at work will be dealt with when their employment ends.

Express agreements

For added clarity and protection, businesses may consider entering into express agreements with their employees. These agreements should clearly set out employee rights and responsibilities as regards social media, and should ensure those responsible for maintaining a business’s own social media accounts understand from the outset:

they maintain a corporate account which is not to be mixed with their personal accounts;
ownership of the account remains with the business;
the business controls the passwords; and
any expectations concerning social media accounts should be confirmed in the early stages of the employment relationship in order to avoid confusion if that employee wishes to move on.

If client contacts are particularly valuable to a business, it may also consider entering into confidentiality agreements or non-disclosure agreements, which expressly include social media connections as part of a business’s confidential information. Not only will this convey a strong message to employees about the employer’s expectations, but in the event of a dispute it will also help demonstrate to a court that the business took active steps to preserve its confidential information.

Employment contracts

One of the easiest ways to protect a business’ rights to social media connections is to include strong post-employment restraints in its employment contracts. Employment contracts can provide deadlines for changing personal profile information, guidelines on how the individual may represent themselves in future, and a requirement that individuals disconnect from contacts they made purely as a result of their employment. Employment contracts should also prevent employees from soliciting the business’ clients, employees or other professional contacts, and can include a reference to the use of LinkedIn, and other social media accounts in the definition of “solicitation” within the contract.

If in doubt, get in touch!

It is clear from the above that having appropriate social media policies and practices is crucial for both growing and established businesses, and McCabes is here to help!

If you want help with strategies to protect your business’ confidential information, or more information about how to maximise the value of social media in your business, please contact Jimmy Gill, Principal, of the Intellectual Property and Technology Group.

If you want help drafting appropriate employment contracts, please contact our Employment Group.

This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation.

published by

Andrew Lacey

Managing Principal

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Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan

29 August, 2023

Government

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

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The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). 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The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. 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Published by Leighton Hawkes

18 August, 2023

Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.