Why Companies and Lenders Should Care About Social Media Account Ownership?

Social media accounts can have significant value. The ability to sell access to potentially millions of followers can affect a company’s sales price. A Florida bankruptcy court was recently faced with this issue.

The maker of Bang, the third leading energy drink in the United States, is in Chapter 11 bankruptcy. Through that reorganization, the company is looking for a buyer.

The energy drink business runs on marketing. Bang and its affiliated products operate more than 50 social media accounts including twenty Instagram accounts, eight TikTok accounts, five Twitter accounts, and twenty Facebook accounts. The company’s sole shareholder and former CEO claimed ownership of the @bangenergy.ceo and @bangEnergyCEO Twitter, Instagram, and TikTok accounts. His argument was that those accounts, “cultivate and market his persona as an explosive, high-intensity, unstoppable leader.” He also argued that he created or had the accounts created and posted messages and pictures to the accounts that were purely personal.

Bankruptcy Court Creates Test for Social Media Ownership

Before this case, only one other bankruptcy involved deciding the ownership of disputed social media accounts. The Florida bankruptcy court found the test used in that case was outdated for today’s social media environment. The court articulated a new test to determine ownership, focused on three issues:

• • Documented Property Interest, e.g. a contract
  • Control Over Access, does one party have exclusive access?
  • Use of the Account

The Court determined the most important consideration is a documented property interest. If there is a contract between the parties, that contract creates a presumption of ownership. That presumption of ownership can be overcome by showing that a different party had/has exclusive control over access to the account. If the documented property interest and control are both held by one party, that party is the owner and there is no further analysis.

However, if neither a documented property interest nor exclusive control over access is established, then courts consider the actual use of the account.

In this case, the Court was forced to look at the use of the account. The court found that the vast majority of the posts were for the marketing of Bang energy drinks or other related products, the accounts all contained links to the company’s website, and the Bang energy drink can had the CEO Instagram account handle on it. Based on this evidence, the Court found the company owned the accounts.

What this case tells us is if social media accounts are important to a business, then having a written contract spelling out ownership is the best practice. Had the company lost these accounts, its value would have decreased, and creditors would have received even less in a bankruptcy sale. For lenders, this means requiring borrowers to provide contracts related to the ownership of social media accounts is in their long-term best interest.

It is easy to think of products closely associated with individuals. George Foreman grills dominated the 1990’s kitchen counter appliance market. With the rise of influencer marketing, the link between brands and individuals is bound to grow. With that growth will come more bankruptcies and social media disputes. Having strong contracts in place can avoid these issues.

Across the firm, Phelps lawyers track emerging technology disputes and advise clients on their legal implications. Phelps’ Intellectual Property team tracks the latest issues in social media and influencer marketing and our Bankruptcy and Reorganization team tracks distressed asset issues.

If you have questions about social media accounts and influencer advertising contact Andrew Coffman, or the rest of the Phelps Intellectual Property team. If you have questions about bankruptcy or distressed assets contact Danielle Mashburn-Myrick or the rest of the Bankruptcy and Reorganization team.