Merlin Files Suit Against TikTok Triller for Breach of Contract Over Unpaid Music Licenses

Triller Faces New Lawsuit Over Unpaid Licensing Fees

The opponent of TikTok, Triller, is once again facing a lawsuit regarding allegedly unpaid licensing fees for music.

This time, the lawsuit has been filed by the musical organization responsible for Merlin, which handles the licensing of digital music for independent labels, distributors, and other stakeholders.

In the complaint submitted on Thursday (March 27) to the US District Court for the Southern District of New York, Merlin claimed that Triller breached the license agreement originally signed in 2020.

Details of the Complaint Against Triller

The complaint states that this agreement included a “Most Favored Nation” (MFN) clause, which requires Triller to provide Merlin with better terms if it offers higher fees to another music company for licensing.

Merlin alleges that during a previous case against Triller filed in 2022, it discovered that Triller had offered a higher fee to another recording company.

While Merlin’s complaint does not specify this other music company, it appears to be Sony Music Entertainment, which had also sued Triller in August 2022, claiming that Triller owed “millions” of dollars in licensing fees for music owned by Sony that was used on the platform.

Subsequently, Triller and Sony reached an agreement where Triller agreed to pay $4.57 million, but during the case, Merlin claimed that it discovered Triller had given Sony a better licensing deal than the one signed with Merlin. As a result, Triller became responsible for paying the difference to Merlin.

Merlin and Triller had “come to an understanding” that the former was owed $2.55 million, but according to the complaint, Triller never made this payment.

“Merlin still has not received information on how Triller intends to resolve this issue. Merlin was promised a new order in November, but Triller has yet to provide these orders.”

— Merlin’s legal complaint against Triller

Moreover, the complaint asserts that Triller neglected another part of its agreement with Merlin. Under the 2020 licensing agreement, Triller was to issue warrants for a specific number of its shares, granting Merlin the right (but not the obligation) to purchase these shares at a predetermined price.

Merlin claims that its agreement with Triller demanded the social media platform to honor this warrant, even in the event of a sale or merger with another company.

Triller did, in fact, undergo a merger. After numerous failed attempts to go public, Triller finally succeeded last year with the help of AGBA, a Hong Kong financial services firm.

The newly formed Triller Group began trading on Nasdaq in October. Merlin contends that its warrant for Triller was supposed to be converted into a corresponding number of shares in the new Triller Group, but this conversion did not occur.

“Triller … could not comply with the conditions of the warrant, including, among other things, failing to confirm in writing that the successor company to Triller Hold Co LLC would provide Merlin with the units, securities, or assets to which it was entitled,” the complaint states.

The court is being asked to recover $2.55 million in licensing fees, plus interest, and to compel Triller to honor the warrant it issued to Merlin, or alternatively, award damages for the failure to comply.

Merlin’s lawsuit is the latest in a series of legal challenges against Triller, which has reportedly faced financial difficulties prior to merging with AGBA last year.

In addition to this lawsuit, Triller also initiated legal action against Universal Music Group in 2023 for unpaid licensing fees. More recently, a hedge fund belonging to investment manager Yorkville Advisors sued Triller for an alleged unpaid debt of $33.5 million that was reportedly inherited from AGBA during last year’s merger.

By early 2024, leading up to a proposed IPO, it was reported that Triller was facing $23 million in unpaid music licensing fees.

As part of the merger, the new Triller Group set aside 50 million shares intended to “facilitate Triller’s future settlement of certain legal and financial obligations.” When Triller Group began trading in October of the previous year, these shares were valued at $222.5 million.

Additionally, Triller raised $50 million in a financing round in January, led by KCP Holdings, which acquired $14 million worth of equity in Triller Group at $2.20 per share.

As of mid-morning on Monday (March 31), Triller shares were trading at $0.64.