The Second Circuit Court of Appeals recently decided an important case involving the ownership of social media accounts that employees use in connection with their employment. JLM Coutoure v. Gutman, (2024).
In this case, the employee, Hayley Paige Gutman, signed an employment agreement with JLM to design a line of bridal wear in exchange for a salary plus “additional compensation” tied to the sale of the products she designed. Gutman also agreed: (1) not to use her name (or any derivatives of her name) in commerce once JLM registered a trademark thereof; (2) that various categories of creative material she produced would be JLM’s property; and (3) to certain noncompete, non-solicit, and nondisclosure restrictions. The agreement was silent on social media account ownership.
During her employment, Gutman created a Pinterest account and an Instagram account using the handle “@misshayleypaige,” which was a derivative of her name that she had used for other social media profiles not in dispute. The Pinterest and Instagram accounts were created using Gutman’s name, personal cell phone number, and a personal email account that she also used for work purposes. Gutman also created her own passwords.
JLM did not direct Gutman to open the accounts; however, over time the Pinterest and Instagram accounts served as “critical advertising platforms” for JLM’s products. The accounts depicted JLM’s bridal gowns, provided information about JLM’s promotional events, and were used to respond to sales inquiries. Other JLM employees assisted in managing the accounts and responding to customer messages and eventually at least two other employees had access to the Instagram account.
In 2019, JLM and Gutman attempted to negotiate amendments to the employment agreement but were unsuccessful. Gutman subsequently changed the passwords on the accounts and refused to give JLM access. JLM filed a lawsuit against Gutman alleging that she breached her employment contract in part by not giving JLM access or use of the accounts.
The lower court found that ownership of the accounts belonged to JLM. However, on appeal and applying well-established property law, the Second Circuit found otherwise stating that the first step in deciding ownership determination is to determine the original owner of the account. Here, the Second Circuit stated that if Gutman created the accounts using her personal information and for her personal use, then those rights belonged to her, no matter how the account may have been used later.
The Second Circuit then remanded the case back to the lower court to make the determination under the correct principles and if the lower court concluded that Gutman owned the account at creation, it would then need to decide whether JLM subsequently took ownership of the accounts by operation of the employment agreement or some other agreement between the parties. Importantly, the Second Circuit confirmed that traditional principles of property law guide the analysis and the fact that Gutman transferred some or all of her rights in particular content posted on the accounts does not by itself support an inference that she transferred ownership, nor does it matter that Gutman allowed others to assist in managing the account.
Takeaway for Employers
This case underscores the importance of making clear in a written agreement that all social media accounts that employees are expected to create and administer as part of their job duties are exclusively owned by the employer or assignable upon request by the employer. This includes all content used on the account and account handles. Employers should also require that any such accounts be created only using the company’s email address and contact information. It would also be good practice to ensure that such accounts are dedicated to work function and content thereby making ownership clearer and/or assignment less objectionable.
Our Intellectual Property and Labor & Employment teams will continue to monitor this development.
For further information, please contact:
Arthur Schaier
Partner
203.575.2629
aschaier@carmodylaw.com
Nick Zaino
Partner
203.578.4270
nzaino@carmodylaw.com
This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.