Finding yourself on the receiving end of a copyright infringement lawsuit can be a recipe for business disaster. This week’s BL Business Branding series entry explores a recent multi-million dollar lawsuit filed against dessert giant Crumbl for its use of trending music in the social media advertising used to build its cookie empire.
Warner Music Group Corp (WMG) recently filed a nearly $24 million lawsuit against cookie maker Crumbl, LLC for copyright infringement for use of copyrighted musical works in social media advertising. Originally founded as a single store in Utah back in 2017, Crumbl has grown to have 1,000 global storefronts and 29,000 employees. WMG alleges that Crumbl’s growth is fueled almost entirely by its social media marketing featuring the copyrighted works. Crumbl has 9.8 million followers on TikTok and 6.1 million on Instagram.
The lawsuit refers to 159 different popular songs by artists such as “Dua Lipa, Bruno Mars, Lizzo, Taylor Swift, Mariah Carey, Ariana Grande, and Beyoncé” that were used in Crumbl’s marketing efforts without permission. In an attempt to bypass the copyright protections on TikTok and Instagram, WMG claims Crumbl uploaded the music as “original sounds” in their posting, effectively claiming ownership over the trending audios.
After learning about the use of its copyrighted works, WMG sent a cease and desist letter to Crumbl on August 3, 2023, demanding the end of posting and removal of the infringing audio. Instead, WMG claims that Crumbl continued to post unauthorized music after receiving the letter, and even shared a cheeky TikTok with a cricket sound effect that said “We were gonna make a funny video to promote Mystery Cookie, but legal said we can’t use any trending audios 🥲.” WMG points to this video as evidence of Crumbl’s “willful” disregard for WMG’s copyrighted works, even though Crumbl itself has filed multiple lawsuits against other companies such as Dirty Dough and Crave Cookies for allegedly infringing on Crumbl’s intellectual property.
WMG compares Crumbl’s marketing strategy to that of Vital Pharmaceuticals’ promotion of Bang Energy, which was found liable for copyright infringement due to similar use of trending music in their social media posts in two 2022 lawsuits filed by Universal Music Group (UMG) and Sony Music Entertainment. WNG also filed a lawsuit against Vital Pharmaceuticals in September 2022, after which the company filed for bankruptcy and was acquired by Monster Energy.
This filing comes at a critical moment for Crumbl, which is reportedly eyeing a sale that could value the company at nearly $2 billion, according to a report from Reuters earlier this year. Crumbl has not filed a response at the time of this article’s publication.
What Can Businesses Learn From This?
While individuals on social media may be able to use trending songs in their personal videos shared with small private groups without issues, businesses posting on sites like TikTok and Instagram are not considered personal use and are therefore subject to additional licensing requirements. WMG claims that, by using its intellectual property without permission, Crumbl failed to allow the owner of the music to control how their music was used and failed to pay licensing fees to WMG and its artists.
Crumbl’s potential exposure to copyright liability at the same time it is (potentially) being considered for a sale could decrease the company’s valuation. Seeing how the first copyright infringement lawsuit opened the floodgates on Vital Pharmaceuticals in 2022, Crumbl may soon see additional filings from companies looking to get a piece of the financial pie. A careful review of intellectual property ownership and compliance is an important part of the corporate review process before a sale or acquisition and can help businesses maximize their value and reduce their financial risk.
Have any questions about how an intellectual property review can help maximize the value of your business? Contact our BL Trademark Team by reaching out to Seth Berenzweig at sberenzweig@berenzweiglaw.com today.