Virtual Tug-Of-War: The Importance of Clarifying Ownership of Branded Social Media Accounts

Background

Recent litigation between wedding dress and shoe designer Hayley Paige Gutman and her former employer, dressmaker JLM Couture, over the “Miss Hayley Paige” social media accounts created during her tenure with the brand emphasizes the importance of clarity of ownership and control of branded social media accounts. What began as a difference in opinion between Gutman and JLM regarding the style of content being posted to the disputed social media accounts resulted in the dissolution of the employment relationship and years of litigation, resulting in the conclusion that the individual employee rather than the company owned the contested accounts. As a result of the dispute, JLM lost the benefit of over one million followers that had subscribed to the branded accounts.

JLM sued Gutman in December 2020 for various claims, including trademark infringement, breach of contract, and control of the disputed social media accounts. In the 2020 lawsuit, JLM claimed Gutman created the social media accounts in her capacity as an employee, making JLM the rightful owner of the accounts. They further claimed that Gutman later locked JLM out of the accounts and promoted competitors’ products, violating her noncompetition agreement. Gutman, however, maintained that the accounts were always personal in nature and use.

Courts grappled with the correct approach to analyzing social media account ownership and control throughout the appeals process. The district court attempted to establish a novel test, which was ultimately rejected by the Second Circuit on appeal. Instead, the Second Circuit utilized a simple property analysis to determine who owns the accounts, looking at who the original owner of the contested accounts was and whether that ownership interest transferred from the original owner at any point.

Following the Second Circuit’s analysis, the district court reversed its initial finding in favor of JLM and ordered JLM provide Gutman with all usernames and passwords, or other related information, regarding the contested accounts within the week. Under the Second Circuit’s property analysis, the district court highlighted that Gutman created the account with her personal information and linked it to another personal social media account, which supported Gutman’s claim that she was the original owner of the accounts. Further, the district court found that JLM failed to present sufficient evidence of a transfer of that ownership from Gutman to JLM.

The Settlement Agreement

Mere weeks after the district court ruling, a Delaware bankruptcy court approved a settlement agreement between the parties on May 24. According to the agreement, Gutman is required to pay JLM $263,000 to resolve the dispute but is released “from all rights, restrictions, and/or obligations to JLM,” and regains the right to compete with JLM. The agreement also grants Gutman exclusive ownership of the contested intellectual property portfolio, including use of the Hayley Paige name and corresponding social media handles.

Key Takeaways

Although Gutman and JLM’s issues were resolved in Chapter 11 proceedings, this years-long dispute raises important questions regarding the ownership and control of branded social media accounts. The traditional property-ownership approach of the Second Circuit provides some clarity for companies and influencers attempting to discern ownership interests in the digital space.

As the power of social media marketing continues to grow, companies working with individuals in the digital marketing and social media spaces should remain apprised of the legal implications of account ownership and appropriately delineate those ownership interests. The consequences of losing access to branded social media accounts that have been carefully curated over months or years and have built a following should not be overlooked. To help display clear ownership interests, companies should consider establishing account ownership at the point of creation, creating branded social media accounts in the company or brand’s name, and clearly setting out ownership rights in any employee or influencer agreements to avoid questions or disputes down the road.

Additional research and writing from Kendall Murphy, a 2024 summer associate in ArentFox Schiff’s Washington, DC office and a law student at The George Washington University Law School.