October 20, 2020 | Legal News
Franchisor’s Lax Zoom Protocols Doom Lawsuit
Franchisors beware the perils of today’s ubiquitous videoconference technology. A startup franchisor recently learned this lesson in a case it brought against a prospect who the franchisor accused of feigning interest in the system to steal the franchisor’s secrets and develop a competitive business. Although the prospect never attended discovery day, he did participate in many weekly Zoom calls hosted by the franchisor about the system. The franchisor argued that the information disclosed on these calls—which were only to include prospects who had signed nondisclosure agreements and planned to attend discovery day—constituted protectable trade secrets. But the franchisor did not use any protection features, like a password or waiting room, in connection with the weekly calls. Nor did the call administrator follow the company’s policy of taking roll and removing anyone who did not belong. The calls were open to anyone who had the meeting ID, which did not change from week to week. These facts contributed to the court’s ruling that the franchisor had not taken reasonable steps to protect its trade secrets and therefore was not entitled to an injunction against the prospect.
The case offers a stark warning about the changing technological landscape created by the COVID-19 pandemic. Information conveyed over videoconferencing services must be protected in the same way that written information conveyed electronically is. Are you taking appropriate measures to protect your confidential information?