“Handle” with Care: Second Circuit Clarifies Ownership Test for Social Media Accounts
Friday, February 9, 2024

As businesses and content creators increasingly depend on innovative online marketing strategies, ownership of social media accounts has gained significant value. A well-known social media handle – and that handle’s legion of followers – can be an invaluable component of a business’s or creator’s brand. Content creation is occurring across social media platforms, in many cases by influencers and brand employees.

Determining who owns a social media handle, and evaluating the question of how a business comes to own a handle, is critical for anyone engaged in online marketing. However, in tension are traditional property principles of ownership and a divergent analysis that would lean into considerations of “the dynamics of social media.”1

On January 17, 2024, the Second Circuit issued its second decision in JLM Couture, Inc. v. Gutman, bringing clarity to how courts around the country may strike that balance and articulating a standard that seeks to reconcile the unique dynamics of social media within the existing property law framework.

Background

JLM Couture specializes in luxury bridal apparel. Hayley Gutman is a fashion designer, social media influencer and former employee of JLM. In 2011, Gutman began to design bridal dresses for JLM and signed an employment agreement that included a noncompete clause. It also granted JLM exclusive rights to use and trademark the name Hailey Paige and variations thereof.

In her early years of employment, Gutman opened Pinterest and Instagram accounts under the handle “misshayleypaige,” a derivative of her birth name. These accounts were created using her name, her personal cell phone number and a personal email that she used for work purposes. She was not directed by JLM to create the accounts.

Notably, Gutman used the social media accounts to display aspects of her life and her personality. But the accounts also came to serve as advertising platforms for JLM and were used for promotional purposes, including posting Hayley Paige designs. Gutman’s involvement included advertising efforts such as live-streaming bridal content and videos featuring Gutman describing wedding dress production and preparation for runway shows. She also used the social media platforms’ messaging functions to respond to sales inquiries for JLM products. Moreover, Gutman shared the responsibility of handling the account with another JLM employee. These accounts amassed millions of followers.

In 2019, the parties attempted to negotiate amendments to the employment contract. JLM proposed terms specifying duties for Gutman, including social media monetized opportunities. Gutman declined. In November 2019, she locked JLM out of the Instagram and Pinterest accounts, and informed JLM that she would not be posting any JLM-related business to the social media accounts going forward.

In response, JLM commenced a lawsuit in the Southern District of New York, asserting claims for breach of contract, conversion and trespass to chattels based on Gutman’s control of the disputed accounts, and her alleged competition with JLM.

The District Court’s Decision

In the underlying case, the district court issued a preliminary injunction that granted JLM sole control of the disputed accounts. The district court looked to cases cited by JLM that identified factors “at the core of a proper social media account ownership inquiry."2

These factors included:

  • Whether the account handle reflects the business or entity name
  • How the account describes itself
  • Whether the account was promoted on the entity’s advertisements or publicity materials
  • Whether the account includes links to other internet platforms of the entity
  • The purpose for which the account was used, including whether it was tied to promotional or mission-oriented activities of the entity
  • Whether employees or members of the entity had access to the account and participated in its management.

The district court further stated that the factors can be distilled into three overarching categories:

  • The manner in which the account is held out to the public
  • The purpose(s) for which the account has been used
  • Whether employees of the business accessed the account in furtherance of business interests.

In adopting this multi-factored approach, the district court emphasized that the disputed accounts were held out as official accounts of JLM, and Gutman had consented to JLM trademarking her name. It reasoned that the facts showed the accounts were created using the brand name (assigned from Gutman to JLM), referenced JLM products and projects, and, when examining the content holistically, the personal content did not outweigh the business nature of the accounts. On this basis, the district court found that JLM was likely to succeed on its claims of ownership over the disputed account.

The Second Circuit’s Opinion

On appeal, the Second Circuit concluded that the district court erred in its approach to determining ownership of the social media accounts. While the district court expressly declined to consider whether Gutman owned the disputed accounts at the time of their creation, the Second Circuit focused its analysis exclusively on the importance of determining the original owner of the accounts.

The Second Circuit concluded that while determining the ownership of social media accounts is a novel exercise, it does not require a new six-factor test. The Court stated that like other new technologies, this issue can be accommodated “within existing legal frameworks,” and in this case, the disputed accounts should be treated like any other form of property. This analysis includes a first step of determining the original owner.

The Court summarized its holding this way: “The analysis of social-media-account ownership begins where other property-ownership analyses usually begin – by determining the account’s original owner. The next step is to determine whether ownership ever transferred to another party. If a claimant is not the original owner and cannot locate their claim in a chain of valid transfers, they do not own the account.”3

On remand, it is expected that the district court will provide further analysis of how best to determine the original owner in the context of social media accounts.

Implications

In many cases, social media accounts will be created by employees on behalf of the business entity. In others, an intrepid employee may create a vibrant personal account that only later is leveraged for business purposes. In either case, clear documentation of ownership is critical at the time of an account’s creation.

If you are a business seeking to market through social media accounts, ensure that the contractual language of employment agreements is detailed and clearly requires transfer of business-directed social media accounts to the corporate entity. If you are a content creator, establish clear boundaries between your personal handles and any accounts used in furtherance of an employer’s or partner’s brand. Whether an account owner permits others to assist in managing the account, or whether one of the parties holds itself out as owning it, holds no bearing on the determination of who is the original owner.4

1JLM Couture, Inc. v. Gutman, 616 F. Supp. 3d 359, 375 (S.D.N.Y. 2022).

2JLM Couture, Inc. v. Gutman, 616 F. Supp. 3d 359, 377 (S.D.N.Y. 2022) (citing cases In re CTLI, LLC, 528 B.R. 359 (Bank. S.D. Tex. 2015) and Int'l Bhd. Teamsters Loc. 651 v. Philbeck, 464 F. Supp. 3d 863 (E.D. Ky. 2020)).

3JLM Couture, Inc. v. Gutman, 2024 U.S. App. LEXIS 1050 (2d Cir. 2024).

4Id. (citing Meisels v. Meisels, 630 F. Supp. 3d 400, 411 (E.D.N.Y. 2022) (management of rental property not probative of ownership); Porter v. Wertz, 53 N.Y.2d 696, 698, 439 N.Y.S.2d 105, 421 N.E.2d 500 (1981) (permitting suit for recovery of a painting purchased from a middleman who lacked authority to sell the painting)).

 

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