In its recent decision in Vital Pharmaceuticals, Inc. v. Owoc (In re Vital Pharmaceuticals), No. 23-1051 (PDR), 2023 WL 4048979 (Bankr. S.D. Fl. June 16, 2023), the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) set forth a new framework for determining ownership of a social media account and, specifically, whether an account belongs to a company or an individual that operates a social media account used to promote the company. In the evolving world of technology and social media, the new framework provides a useful guide to help businesses try to ensure their ownership of these fundamentally important and valuable assets both in and outside bankruptcy cases.
Factual Background
Vital Pharmaceuticals and its affiliates (collectively, “Vital”) manufacture and sell to retail customers various energy drinks, including most prominently “Bang” energy drink. Bang attributes its success in large part to its social media marketing, which previously prominently featured its founder, sole shareholder and former chief executive officer (the “Former CEO”). The Former CEO and/or his wife, a former senior vice president of marketing for Vital, created three of Vital’s many social media accounts. The three accounts referenced both “bangenergy” and “ceo” in the handle (or user name) (the “CEO Accounts”).1 The Former CEO maintained the passwords for the CEO Accounts and often posted content to the CEO Accounts himself. However, he also provided access to the accounts to other Vital employees, who were permitted to create and post content to the CEO Accounts without the Former CEO’s approval. Based on evidence presented to the Bankruptcy Court, approximately 75% of the posts to the CEO Accounts primarily promoted Bang energy products, while approximately 25% primarily promoted the Former CEO’s individual persona.
Following an adverse arbitration award and amid other mounting litigation, Vital filed for chapter 11 bankruptcy protection in October 2022. Shortly after the bankruptcy filing, Vital’s board fired the Former CEO and his wife and demanded they return all company property. However, they refused to turn over the passwords to the CEO Accounts. In response, Vital commenced an adversary proceeding and moved for summary judgment against the couple seeking a declaration that the CEO Accounts were Vital’s property and requiring turnover of the accounts to Vital’s bankruptcy estates.
Bankruptcy Court Decision
The Bankruptcy Code defines “property of the estate” broadly to include “all legal or equitable interests of the debtor in property as of the commencement of the [bankruptcy] case.”2 Courts generally look to applicable state law to make determinations about what constitutes a debtor’s property.3 However, there is very little state law statutory guidance on property rights in social media accounts and only scattered and inconsistent prior case law dealing with determining ownership of social media accounts under common law.4
Prior to the Vital decision, the few courts addressing the issue of ownership rights in social media accounts have relied upon the standard articulated in In re CTLI, LLC, 528 B.R. 359 (Bankr. S.D. Tex. 2015), a previous bankruptcy decision that considered ownership rights in social media accounts between a company and an owner of the company. The CTLI court and other courts considering the issue since that time have concluded that accounts bearing the name of the business create a presumption that the accounts are property of the estate under section 541 of the Bankruptcy Code.5 The Vital court, however, believed that such a presumption was outdated because social media has continued to evolve since the almost 10 years since CTLI was decided. In its place, the Vital court set forth the following new framework for determining whether ownership of a social media account lies with a company or an individual:
- Documented Property Interest: If there is an agreement that provides evidence of a property interest in the account, it creates a rebuttable presumption that the party with such documented interest owns the account rights. Relevant documents or evidence would include the social media platform’s account-opening document or terms of use and an employer’s social media policy or handbook that specifies ownership of accounts created by an employee while employed.
- Control Over Access: The rebuttable presumption created by a documented property interest can, but “rarely” will, be overcome by evidence of control over access to the account. Such evidence includes whether: (i) one party has exclusive power to access the account; (ii) that party has exclusive power to prevent others from accessing the account; and (iii) the social media account enables that party to readily identify itself in any way as having that exclusive power. In the absence of a documented property interest, evidence of control over access to the account creates a rebuttable presumption of ownership. If a party can demonstrate both a documented property interest and control over access, that ends the inquiry.
- Use: A rebuttable presumption arising from a documented property interest or control over access (but not both) can be overcome by evidence of “use” of the social media account. Evidence of use includes: (i) the name used for the account; (ii) whether it is used to promote one or more products; (iii) whether the account is used to promote a persona; (iv) how determination of ownership of the account would change its use; and (v) whether any required changes to the account’s use would fundamentally change the nature of the account.
In Vital, neither party was able to offer sufficient evidence of a documented property interest or control over access to the accounts. With no presumption arising out of a documented property interest or control over access, the inquiry hinged on the “use” prong of the test. The Bankruptcy Court focused on the fact that the CEO Accounts were primarily used to promote Bang energy drink. The Former CEO argued that he had used the CEO Accounts to create and promote a persona separate and apart from the Bang energy brand. However, the Bankruptcy Court ultimately held that the cultivation of the Former CEO’s persona was a small portion of the account’s use and much of it was incidental to the promotion of Bang energy products. Accordingly, the Bankruptcy Court entered summary judgment in favor of Vital on the issue of ownership of the CEO Accounts and ordered that the Former CEO and his wife turn over the accounts to Vital.
Implications
The Vital framework for determining social media account ownership provides updated and thoughtful guidance in a relatively undeveloped area of law. Although rendered in the context of a chapter 11 case, its multi-factor approach could be influential outside of bankruptcy given the glaring need for any sort of legal guidance on the subject.
On a more practical level, Vital suggests simple but important steps companies can take to establish their ownership over social media accounts:
- Companies should understand the particular social media platform’s account opening documents and terms of service when creating or directing an individual to create an account or when an individual does so on his/her/their own but is primarily promoting the business.
- Companies should have employees and, in particular, officers and directors sign an agreement specifically acknowledging the company’s ownership of social media accounts created for the purpose of or used primarily for promoting the business.
- Companies should also ensure they have access to and control of prominent company-related business accounts of employees, directors and, to the extent feasible, principals.
Following the useful standard laid out by the Vital court should position companies to successfully argue that they have ownership rights in social media accounts of individuals that are significantly tied to the business.
Footnotes
1 The CEO accounts specifically consisted of: (i) an Instagram account with the handle @bangenergy.ceo; (ii) a TikTok account with the handle @bangenergy.ceo; and (iii) a Twitter account with the handle @BangEnergyCEO.
2 11 U.S.C. § 541.
3 See, e.g., Butner v. United States, 440 U.S. 48 (1979).
4 See Kathleen McGarvey Hidy, Let Them Eat Cake: Social Media Accounts Property Rights, and the Digital Rights Revolution, 71 DePaul L. Rev. 47, 55-69 (2022) (discussing cases addressing social media account ownership); Tiffany Miao, Access Denied: How Social Media Accounts Fall Outside the Scope of Intellectual Property Law and into the Realm of the Computer Fraud and Abuse Act, 23 Fordham Intell. Prop. Media & Ent. L.J. 1017 (2013) (discussing application of various intellectual property regimes to social media accounts).
5 See, e.g., JLM Couture, Inc. v. Gutman, No. 20 CV 10575-LTS-SLC, 2023 WL 2503432, at *10 (S.D.N.Y. Mar. 14, 2023) (citing CTLI analysis in concluding likelihood of success in showing that social media accounts belonged to business rather than individual in preliminary injunction proceeding); Int'l Bhd. of Teamsters Loc. 651 v. Philbeck, 464 F. Supp. 3d 863, 872 (E.D. Ky. 2020) (citing CTLI in concluding that Facebook page belonged to union not individual).
