The Business of Social Media: Protecting Trade Secrets & Trademarks in a Socially Networked World

Social media and social networking are the buzz words du jour. Once upon a time it seemed as if those who were “out of it” would be those without an e-mail account, but now practically everyone has an e-mail account, even grandparents! Like those without an e-mail account of yester-year, today if you do not employ social media and engage in social networking you are behind the times. Perhaps not surprisingly, given the relative infancy of everything social, from media to networking, and the fact that the phenomenon hit big practically overnight in business terms, many law firms, professionals and companies are behind the proverbial eight ball and trying to catch up.

The use of social media, from Facebook to Twitter to MySpace were originally quite social and perhaps even driven by a youthful desire to fit in.  While there is still an important and perhaps even overwhelming social component to many social networking websites, today social media is a tool.  Social media is used not only by the young to make personal connections, but increasingly it is being employed by organizations and professionals to build their businesses and interact with their customers and potential customers. As use of social media increases in business, so do the risks. In real terms the Internet, which feels like it has always been around, hasn’t been around in popular form for even a full generation, and social networking websites have been around only a fraction of a generation. What this means is that the norms that govern its use are in flux, particularly for those late to the party who may not really understand the viral and communal nature of the phenomenon.

Ask yourself this: do you realize how easy it is to inadvertently reveal confidential information through online interactions? You will undoubtedly say yes, but allow me to suggest that there is a difference between “realizing” and truly understanding the magnitude of the harm that can be created. I am talking about trade secrets. Trade secrets are a critical business asset, but they remain as such only so long as they remain secret. With all of your employees having access to the Internet at home and at work you need to be afraid, very afraid. Even those who are not intending to be malicious can ruin your competitive advantage by not appreciating the need to keep information confidential that they seemingly innocently released. On top of the obvious trade secret challenges, the growth of social media has also resulted in new opportunities for trademark infringement, thus requiring brand owners to adapt their enforcement programs.

“Make sure you understand what social media is, at least on a basic level. Unless you have at least a basic understanding, it will be hard to guide your business so it uses social media appropriately and to recognize potential issues related to its use,” says Rebecca Edelson, a partner in the Los Angeles offices of Steptoe & Johnson, who is head of the firm’s trade secret practice group. “It is imperative to educate your marketing people so they understand that there are potential issues related to use of social media. While social media can be a valuable tool to the company, it can also be a serious danger area with minefields scattered about. It is thus important that the company’s marketing people seek out and heed legal counsel’s advice so that this tool will not be misused and cause injury, often irreparable, to the company instead of being an asset to it.”

You cannot, however, let the inherent threats of social media scare you away. There is just too much to be gained to ignore social media. Brian J. Winterfeldt , a partner in the Washington, D.C. offices of Steptoe & Johson, specializes in trademarks and Internet legal issues. When working with clients new to the social media world he says he first tries to get them to realize just how important a platform it can be for business. “The demographics on users of social media can be surprising – a large percentage are over 35, and have six-figure incomes. These users have a lot of buying power and are often making the purchasing decisions for their households. Once they know this, clients can grasp the importance of both using social media proactively and of protecting their trademarks and brands, and are willing to prioritize learning more about social media.”

But what is the risk? In the trade secret arena you could lose everything through inappropriate use by you or your employees, and the same is true in the trademark context as well. Winterfeldt explains: “to avoid compromising the integrity of clients’ brands, it needs to be used correctly – for example, although communication through social media may be a bit faster-paced and more casual than traditional marketing communications, proper trademark usage is still important.” The moral of the story here is that your trademark remains a trademark only so long as it continues to distinguish your goods or services. One of the big fears for trademark owners is that the trademark will become generic; synonymous with the good or service. If it does then the trademark is lost forever. This happened with one time trademarks such as escalator, aspirin, kerosene and trampoline. All started as trademarks and all became synonymous with the product. Not only do you need to police your employees, but you need to make sure that others are not using your trademark as a noun. There is a reason that Johnson & Johnson markets bandages as “BAND-AID® brand adhesive bandages.” The product is “bandages” and the trademark is “BAND-AID®.” In a world of 140 characters per message on Twitter you need to be mindful of the dangerous and police your trademarks accordingly.

While appropriate use of trademarks in social media outlets is fine, the use of trade secrets or even sensitive topics in social media outlets is not acceptable. “Everyone — marketing people, HR managers, and all other employees need to understand that the company’s confidential information ordinarily should not be used in connection with social media,” says Edelson. “Therefore, one or more people who know what the company considers to be its confidential information or trade secrets needs to be involved in developing policies as to what categories are information are not permitted to be injected into social media, assuming the company permits use of social media at all.”

What should businesses do? Here are some recommendations.

Trade Secret Recommendations from Rebecca Edelson:

  • Promulgate policies for employees reflecting the company’s expectations regarding use of social media.
  • Keep a tight rein on use of social networking media even for business purposes to reduce the risk of inadvertent loss of confidential information.
  • Thoroughly investigate any social media provider under consideration before going forward. For example, investigation at the front end may reveal that the provider’s site under consideration is particularly vulnerable to hacking or that the provider’s policies reflect that it owns whatever information is posted on its site.

Trademark Recommendations from Brian :

  • Develop a social media policy if they do not yet have one. A policy is a must for any organization that is going to use social media proactively, in order to clarify who is authorized to speak on behalf of the company and how the company’s trademarks must be used, among many other guidelines. Policies should also be living documents that are updated regularly to reflect new platforms, technologies, and trends.
  • Listen to the users of their social media resources. Social media users tend to be an active and vocal group, and will provide valuable feedback as to how they would like to see the client using social media. Users who are loyal to a brand can also serve as “eyes and ears” in order to identify instances of potential infringement – while this is not a substitute for an organized enforcement program, it can still be a very valuable avenue for uncovering content of concern.

As with anything in life, the more you know the better prepared you will be.  You can join Rebecca and Brian for teleconference presentation on this topic presented by the Practising Law Institute on Thursday, January 27, 2011 from 1pm to 2pm EST.  The title of the presentation is Protecting Trade Secrets and Trademarks in the World of Social Media. Continuing legal education credit is available for lawyers, but that is not to suggest that other professionals and business people should not attend. This will be an excellent way to learn the issues in a casual setting and jump start your appropriate advance into the world of social media and social networking.


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One comment so far.

  • [Avatar for Robert Samuel]
    Robert Samuel
    January 24, 2011 10:49 pm

    Great article Gene. I have a lot of friends in corporate. This very thing has happened many times over.