Crumbl Cookies declares victory in trade secret case; rival Dirty Dough happy with preliminary injunction denial
The restaurant company secured an order for the return of its trade secret information from rival Dirty Dough, but its request to halt Dirty Dough’s franchising activity was denied.
Crumbl Cookies’ ongoing lawsuit against rival Dirty Dough reached a split conclusion last Friday. U.S. District Judge Howard Nielson denied Crumbl’s request for a preliminary injunction, however ordered Dirty Dough to return Crumbl’s trade secret information.
The injunction motion was initially filed in September, when Crumbl asked Dirty Dough to return its trade secrets and issue a public statement admitting the company had stolen information. Crumbl also asked for a pause on future openings until it was determined its information was no longer being used.
According to a LinkedIn post from Crumbl Founder/CEO Jason McGowan, the company has secured a stipulated order in which Dirty Dough has agreed to return Crumbl’s trade secret information. McGowan said “Crumbl is pleased and strengthened” by the court order, which “reinforces our effort to safeguard our intellectual property.”
This so-called cookie war started last summer when Crumbl filed a lawsuit against Dirty Dough, accusing the company of “forming businesses copying Crumbl’s processes, trademarks, and trade dress in a confusingly similar way.”
According to an earlier statement from McGowan’s LinkedIn page, “one of the defendant’s brothers, who we also believe was involved in the defendant’s business, was a former corporate employee of Crumbl who has access to our recipes, schematics, processes, and other proprietary information.”
He said Crumbl was alerted by a whistleblower that the defendant “misappropriated the information.”
Dirty Dough fired off a response to the post, denying the allegations and sharing that it will “vigorously defend against and defeat Crumbl’s legal claims.” Dirty Dough added that its business model extends beyond cookies, and also launched the hashtag #UtahCookieWars to garner support, along with marketing campaigns with messages like, “We don’t file lawsuits, we just have a better cookie.”
Dirty Dough was founded 2018 in Tempe, Arizona, by Bennett Maxwell. According to the court ruling, his brother Bradley Maxwell invested in Dirty Dough while still employed at Crumbl.
“During the last week of his employment, Bradley Maxwell downloaded 66 Crumbl recipes and other Crumbl information from Crumbl’s internal password protected server onto his personal cloud drive,” the order read.
It went onto state: “The court also has very little doubt that Bradley Maxwell acted unlawfully – and no doubt that he acted unethically – when he kept the Crumbl information after his employment was terminated and when he disclosed that information to Dirty Dough. The court has little doubt that at least some of the Crumbl information at issue in this case meets the definition of a trade secret.”
Further, the court noted that Bradley Maxwell signed two confidentiality agreements with Crumbl that obligated him not to disclose the types of information he shared with Dirty Dough.
In response to the court’s ruling, McGowen wrote: “Crumbl’s commitment to innovation, quality, and integrity remains strong. Pursuing this legal route was an essential step in our determination to protect the brand and our franchisees. We want to express our sincere gratitude to our devoted customers, franchisees, and team members for standing with us. We will continue to strive for excellence, providing our customers with the unique and beloved products they have come to expect …”
Franchising activity request rejected
That said, the court rejected Crumbl’s additional request to halt Dirty Dough’s franchising activities. The judge noted that the move could force Dirty Dough out of business, and added that Dirty Dough’s growth isn’t solely attributable to the use of Crumbl’s information.
The judge notes, “Crumbl argues that Dirty Dough’s extraordinarily rapid growth can only be attributed to its use of Crumbl’s information. But even if Crumbl’s explanation for Dirty Dough’s rapid success is possible, Crumbl has not demonstrated that it is probable, or even likely …Regardless of Crumbl’s motivations for bringing this action against a rapidly emerging direct competitor, its request that the court bar Dirty Dough from expanding in the market while this suit is resolved would be profoundly anti-competitive in effect.”
Regarding Crumbl’s request for a corrective public statement from Dirty Dough, the judge wrote, such a request “is not directed to that injury at all. Rather, it appears to be intended to redress an entirely different injury; the presumably embarrassing and perhaps undeserved fallout that Crumbl has suffered in the court of public opinion as a result of the advertising and public relations campaign Dirty Dough launched in response to this action.”
In a statement shared with Salt Lake City’s Fox 13, Bennett Maxwell said he was happy Crumbl’s motion for a preliminary injunction was denied, and accused Crumbl of filing the lawsuit to stifle competition.
Another lawsuit dismissed
Crumbl’s back and forth with Dirty Dough has been ongoing for over a year now, but it’s not the only battle Crumbl has faced of late. In May 2022, Crumbl also sued cookie company Crave for similar reasons, including “confusingly similar” marketing materials. Last month, Crumbl filed a stipulation to dismiss all claims against Crave, as the two companies reached an amicable settlement.
Crumbl Cookies more than doubled its footprint last year and is one of the fastest growing chains on Datassential’s Top 500 list. It now counts about 700 locations and generates nearly $985 million in sales, from 326 locations and $390 million in sales in 2021. According to Dirty Dough’s website, there are just over 30 locations with over 60 listed as “coming soon.” Crave’s website lists 14 locations.