United States: Craft Brewer Failed Attempt To Use Trade Secret Laws To Close The Door On Glassdoor Reviews

Last Updated: December 10 2018
Article by Robert J. Kaler

Robert Kaler is a Partner in Holland & Knight's Boston office

The public's increasing reliance on anonymous product and company reviews posted online often gives rise to complaints by the subjects of those reviews, especially when the reviews are negative or critical, and threaten to adversely affect the subject's business. The U.S. District Court for the District of Massachusetts (Saylor, J.) recently addressed some of these issues in the course of granting a motion to dismiss in Craft Beer Stellar LLC v. Glassdoor, Inc., Case No. 18-cv-10510, 2018 U.S. Dist. LEXIS 178960 (D. Mass. Oct. 17, 2008), a case in which a California company, Glassdoor, Inc., tried to respond to complaints from a franchisor, Craft Beer Stellar LLC (Craft), about negative reviews of Craft's business, and its owner, posted on Glassdoor's website.

After receiving a request from Craft objecting to the postings and asking for "assistance" in "reviewing" them, Glassdoor removed one of them, and advised Craft that it was doing so, until the posting conformed to Glassdoor's "community guideline" requirement that only higher level officials representing the face of a company be identified by name in a published review. After the posting was changed to conform to this requirement, however, Glassdoor allowed it to be re-posted online and declined Craft's subsequent request to remove it.

Craft then filed suit against Glassdoor alleging that the postings had contained trade secrets, e.g. sales projections, costs, margins, and franchisee store value, and that in publishing this information, Glassdoor had violated the federal Defend Trade Secrets Act, 18 U.S.C. §§ 1836, et seq.; the federal Computer Fraud and Abuse Act, 18 U.S.C. §§ 1030 et seq.; the Massachusetts trade secrets statute, Mass. Gen. Laws. Ch. 93, §§ 42 and 42A; and the Massachusetts Consumer Protection Act (Mass. Gen.Laws. Ch. 93A, §§ 2 and 11). Craft also alleged that Glassdoor had "aided and abetted" the alleged authors of the critical postings, identified only as "John Does 1-20," in various contractual breaches, torts, and other violations, and had engaged in civil conspiracy.

When Glassdoor asserted that it was immune from suit under Section 230 of the Communications Decency Act (CDA) – which provides that "no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider," 47 U.S.C. § 230(c)(1), and that "[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section," id. § 230(e)(3) – Craft argued that Glassdoor's actions in reviewing the posts and temporarily removing one of them until it was changed constituted "an act of creating or developing the post's content" that transformed Glassdoor into an information content provider not protected by the CDA. After carefully analyzing the issue, the Massachusetts U.S. District Court rejected Craft's argument, noting that the protections of the CDA are supposed to be liberally construed, consistent with Congress' intent to prevent the "chilling" of online speech, and to encourage self-regulation and screening by internet intermediaries without fear of being held liable for their efforts.

The Court also addressed the application of the CDA's Section 230 immunity to Craft's claim that Glassdoor had violated the federal Defend Trade Secrets Act (DTSA), 18 U.S.C. §1836, et seq., noting that one of the limitations of CDA's Section 230 immunity is found in subsection 230(e)(2), which provides that "[n]othing in this section shall be construed to limit or expand any law pertaining to intellectual property," thereby eliminating Section 230 immunity as to claims "pertaining to" intellectual property, which trade secrets are usually considered to be. Explaining that the initial question was whether the DTSA is a law "pertaining to" intellectual property for purposes of this carve-out provision of the CDA, the Court concluded that it was not, even though trade secrets are generally considered intellectual property, because the DTSA expressly provides that it "shall not be construed to be a law pertaining to intellectual property for purposes of any other Act of Congress." DTSA, § 2(g), 114 P.L. 153, 130 Stat. 376, 2016 Enacted S. 1890. Thus, the Court concluded that Craft's trade secret claim under the DTSA was subject to the immunity provisions of CDA§ 230, and accordingly dismissed it on that basis.

That left Craft's claim that Glassdoor had violated Massachusetts' misappropriation of trade secrets statute, Mass. Gen. Laws ch. 93, § 42. As to this claim, the Court assumed without discussing that the Massachusetts statute did "pertain" to intellectual property (presumably since trade secrets are considered intellectual property under MA law), and that therefore CDA Section 230 immunity did not apply. In this respect, the Court applied an important distinction between the federal DTSA on the one hand, and state law trade secret statutes on the other, which is that claims against internet website operators under state statutes are more likely to be considered outside the scope of the immunity provided under Section 230 of the CDA than claims under the DTSA.

Despite finding that Glassdoor was not immune from Craft's claim for violation of the Massachusetts Trade Secret Act under the CDA, however, the Court nonetheless dismissed that claim on grounds that even if the information in the postings could be classified as trade secrets of Craft, which is what Craft alleged, there was no way that Craft could prove that Glassdoor "used improper means, in breach of a confidential relationship, to acquire and use the trade secret" because it could not prove that it "shared a confidential relationship" with Glassdoor, which is one of the three basic requirements for a trade secret misappropriation claim in Massachusetts – the other two being that the information at issue is a trade secret, and that the plaintiff took reasonable steps to preserve the secrecy of the information.

In one sense, this case is a good example of the old maxim that "no good deed goes unpunished," since by trying to do the right thing in reviewing the offending posts for compliance with community standards, Glassdoor exposed itself to the argument by Craft that it had transformed itself into an internet content provider, and lost its immunity under the CDA. The Massachusetts court's decision to reject this argument, however, seemingly reaffirms Cicero's observation that "[t]he foundation of justice is good faith," helped out in this instance by the immunity provisions of the CDA. The case also highlights an important difference between the availability of CDA Section 230 immunity as a defense to federal versus state law trade secret misappropriation claims against internet website operators or other kinds of interactive computer service providers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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