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Court Rules Passwords Are Property

A Texas judge’s ruling that social media passwords can be considered business property has set off a new debate about privacy and legal precedent that could affect future bankruptcy cases. The ruling, according to analysts, serves as a warning that business owners who use social media accounts to promote their companies may be required to hand over account passwords after they leave their firm.    

U.S. Bankruptcy Judge Jeff Bohm, who issued the ruling earlier this year, wrote that “the landscape of social media is yet mostly uncharted in bankruptcy.” He compared social media accounts to subscriber lists, though, arguing they “provide valuable access to customers and potential customers.”

The Texas case has since made national headlines because Bohm’s ruling led to business owner Jeremy Alcede spending seven weeks in jail. Alcede, who put his company, Tactical Firearms, into bankruptcy to stop a bank from foreclosing, refused to turn over a Facebook and Twitter password to the gun shop’s new owner. Bohm ordered Alcede held in jail until he provided the passwords. Adding to the case’s complexities, Alcede is a vocal supporter of the Second Amendment who posted rants against President Obama on his social sites.

Legal experts consider the Alcede case an important one as social media continues to gain popularity. “The moral for people is you have to keep your personal life separate from your business life,” Benjamin Stewart, a Dallas-based bankruptcy lawyer, told the Associated Press. “If your business is something you feel very passionately about, it can be hard to separate those things.”

Alcede did eventually hand over the passwords, although he maintains he did so to “deal with various personal issues, including health problems he developed while jailed,” the AP reported. Alcede believes the social media site passwords are his personal property, not the gun shop’s.

Analysts aren’t sure if the Bohm ruling will extend into other business dealings like acquisitions or succession plans, but contend that companies are increasingly viewing social media accounts as protected property. Under this standard, employees who leave a firm may not be able to tap into certain business accounts – even if they set them up themselves – to later pull customer contact information.