A Vital Decision on Social Media Ownership

Social media continues to grow at an extraordinary pace. Companies regularly introduce new social media platforms to the marketplace and seek new ways to utilize such platforms to advance their businesses. At the same time, the law has struggled to address novel issues stemming from social media—specifically as it pertains to intellectual-property ownership.

On June 16, 2023, in In re Vital Pharmaceutical, Case No. 22-17842 (PDR), the Bankruptcy Court for the Southern District of Florida (the “Court”) granted summary judgment to Vital Pharmaceuticals, Inc. in a dispute over ownership of several social media accounts Vital used to market products, and in doing so, the Court articulated a new standard for determining ownership of social media accounts.¹ Rejecting precedent from the Southern District of Texas, the Court acknowledged that prior decisions do not adequately address the new ways social media is used by businesses. The Vital decision provides guidance for companies in managing their social media accounts and developing social media policies. Below, we provide an overview of the Vital decision along with key takeaways and suggested guardrails for businesses in drafting social media policies.

Background

On October 10, 2022, Vital Pharmaceuticals and its affiliates (the “Debtors”) commenced chapter 11 cases. The Debtors, a manufacturer of Bang, a once-ubiquitous energy drink, received Court approval to sell their assets in the bankruptcy proceeding—including Twitter, Instagram, and TikTok account handles for the Bang brand. The Debtors heavily relied on social media marketing to sell their products and believed the sale of those accounts was necessary to maximize the value of their assets in any sale.² The Debtors’ former CEO, John H. Owoc, claimed ownership rights over the accounts in dispute, arguing that he used those accounts to develop his “persona” and market his personal brand. At issue before the Court was who owned those accounts: Vital or Mr. Owoc?

Prior Test

Before Vital, the most recent noteworthy bankruptcy court ruling on social media ownership was a case decided in 2015, In re CTLI, LLC.³ In that case, a bankruptcy court ruled that a Facebook account operating under the name of the debtor business belonged to the debtor, not the individual owner of the company who ran the account.⁴ There, the court found that using the name of the business as the account handle created a presumption of ownership in favor of the debtor. The court weighed other factors in favor of the debtor having ownership: the Facebook page included links to the debtor’s website; posts were generally business-related; and the owner gave employees access to use the account to post the company’s marketing status updates.⁵ While the owner had used the account for “personal” posts, the court noted that these were merely “subtle forms of marketing,” and those posts were not strong enough factors to overcome the presumption of ownership created by the account name.

Test Established by the Vital Court

In Vital, the Court observed that, with the rise of social media, the CTLI framework “gives too much weight to the name (of the account).”⁶ While the name of the account may be relevant, the Court noted it does not create a presumption of ownership. It further noted social media has evolved since the CTLI case was decided, and the prior standard is too narrow in suggesting “that any ‘personal’ posts that cultivate an individual’s reputation are really ‘business’ in nature — and therefore cannot overcome the presumption that the account rights are owned by the company — if the reputation being cultivated could serve a business purpose.”⁷

Instead, the Court adopted a new framework for determining social media ownership, which analyzes three elements: documented property interest, control over access, and use.⁸

• Documented Property Interest. Courts should look at “documents or evidence that a property interest in the account rights creates a rebuttable presumption that the party with the documented property interest owns the account rights.”⁹
  
  • Typical evidence includes terms of service and may also include an employer’s social media policy or employee handbook.¹⁰
• Control Over Access. A rebuttable presumption created by a documented property interest can be overcome by evidence of control over access to the account.
  
  • This would include evidence one party has exclusive power to access the account, the same party has exclusive power to prevent others from accessing the account, and the social media account enables that party to readily identify itself in any way as having that power.
  • The Court noted that evidence of control over access “will rarely overcome a rebuttable presumption created by a documented property interest. But, if neither party has a ‘documented property interest,’ then conclusive evidence of ‘control over access’ creates its own rebuttable presumption of ownership.”¹¹
• Use. If a party has both a documented property interest and control over access, the inquiry ends. But if there is a rebuttable presumption of ownership arising because of either a documented property interest or control over access but not both, that can be overcome by evidence of “use” of the account.¹²
  
  • Because social media is constantly evolving, the Court found there is no fixed set of factors, but courts may consider, among other things, who created the account and whether the account uses the name of the business or individual; is for the exclusive purpose of marketing; or is used by a person to promote multiple businesses or products but whose promotion largely depends on their persona and they are compensated for such promotion.¹³
  • The Court also mentioned that if changes to the account at issue would be required based the Court’s ruling (i.e., removing the company’s logo from the account or changing passwords), that would lend itself to favoring one party over the other.¹⁴

Key Takeaways

Although there is a dearth in jurisprudence since CTLI addressing social media ownership questions, absent statutory guidance, the Vital court’s decision provides guidance to other courts on how to balance these issues and to businesses on how to craft safeguards to protect their social media capital. Here are a few key takeaways for businesses to implement in their social media policies:

• Draft clear documentation addressing ownership. Including language in any employment agreements that specifies the company’s ownership of any social media account is important to establishing ownership of the accounts. This was the factor the Court weighed most heavily in its ruling. 
• Documentation should also indicate who controls the accounts. The company should maintain control over the account, including passwords, usernames, and personnel access, and should consider including clear language in its social media and employee policies stating as much.
• Encourage only promotional posts or posts that are primarily promotional in nature on the accounts. While the Court acknowledged that “subtle” forms of marketing are preferred by businesses on social media, it is important to ensure that posts, however subtle, are ultimately related to the company, rather than an individual or employee.

^[1] In re Vital Pharm., 652 B.R. 392 (Bankr. S.D. Fla. 2023).
^[2] Id. at 399.
^[3] In re CTLI, LLC, 528 B.R. 359, 367 74 (Bankr. S.D. Tex. 2015).
^[4] Id.at 366 67.
^[5] Id. at 368, 372.
^[6] Vital, 652 B.R. at 406.
^[7] Id. at 406-07.
^[8] Id. at 407-08.
^[9] Id. at 407.
^[10] Id.
^[11] Id. at 407-08.
^[12] Id. at 408.
^[13] Id. at 410.
^[14] Id. at 411.