Music publishing, streaming
Another US lawsuit has been added to the mounting litigation against Spotify and the streaming platform’s alleged failure to pay mechanical royalties in the USA for the right to ‘copy’ a song (rather than the ‘performing’ right).
In fact there were three developments: an objection to Spotify’s proposed settlement of the original class action on this issue, a rebuttal of its most recent legal arguments, and a brand new lawsuit.
Hypebot’s take is this: “The recorded music industry is in the midst of a renaissance thanks to revenue from a single source – streaming. But a growing string of lawsuits filed by songwriters and publishers, and an aggressive new legal tactic by Spotify, threatens the company’s pending IPO and could derail the industry’s delicate recovery”
US law provides a compulsory licence covering mechanicals, but this put Spotify under an obligation to contact (and pay) the copyright owners of every song it streams (or in default of finding an owner, alert the US Copyright Office) and Spotify hired the services The Harry Fox Agency to undertake this role. The fact songwriters and music publishers were receiving payment for their performing right via collection societies such as ASCAP and BMI but not their mechanical royalties that were due from Spotify prompted litigation, notably a class action lawsuits against Spotify by musicians David Lowery and Melissa Ferrick.
The digital services argued that a lack of reliable copyright data, in particular a database that states which song copyright(s) are contained within a recording makes it impossible for them to discover who songwriters / publishers actually are – and this precludes Spotify from gaining necessary permissions required by the compulsory licence.
Spotify ultimately settled two class actions which had been merged into one by the courts and announced a separate deal with the National Music Publishers Association that it hoped would stop any future mechanical royalty lawsuits being filed.
In a new lawsuit filed earlier this year by by Bluewater Music Services and Bob Gaudio pursued the same claims as the earlier litigation, and added that the NMPA settlement “did nothing to resolve the outstanding issues”. However Spotify then responded with a more forthright legal argument: That mechanical royalties should / could not be payable on a stream and why would their streams not be covered by precedents that decided that the likes of personalised radio services only needed performing right licences.
The plaintiff’s attorney Richard Busch responded to this in a new submission to the court saying “it is clear that mechanical licences are required to engage in the process of interactive streaming, and the industry has reached a consensus on this topic” and that mechanicals would apply to on-demand streaming platforms adding “Numerous courts and other sources have specifically noted the distinction between Spotify’s interactive streaming service and other non-interactive services” and “While Pandora [et al] may be able to get by on public performance licenses alone, the same cannot be said of Spotify and its interactive streaming service. Once this distinction is taken into account, one need not look further than the very case law cited by defendant to realise where defendant’s argument falls apart”.
In addition, another mechanical royalties lawsuit has been filed in Nashville (and also led by Busch) on behalf of seven independent publishers: A4V, J&J Ross Co, Lakshmi Puja Music, Lindabet Music Corp, Music By Shay, Music Of The West and Swinging Door Music.
A document titled ‘Objections To Proposed Class Action Settlement Agreement’ was filed with the New York courts earlier this week.
The NMPA settlement is being challenged by a large group of songwriters and publishers had objected to the $43.4 million settlement of the class action brought against Spotify by Ferrick and Lowery, including Tom Petty, Kenny Rogers, Zach De La Rocha and Tom Morello of Rage Against the Machine The Black Keys’ Dan Auerbach and David Cassidy, urging the court to reject the settlement, saying “The Settlement Agreement is procedurally and substantively unfair to Settlement Class Members because it prevents meaningful participation by rights holders and offers them an unfair dollar amount in light of Spotify’s ongoing, willful copyright infringement of their works …. the Settlement agreement is procedurally and substantively unfair to settlement class members because it prevents meaningful participation by rights holders and offers them an unfair dollar amount in light of Spotify’s ongoing, wilful copyright infringement of their works”.
Spotify’s most recent ‘motion for a more definite statement’ which argued that the lawsuits filed in July by Bluewater Music Services and Bob Gaudio were lacking detail and legal argument and took it for granted that mechanical royalties were due has been rejected that motion on Thursday by Judge Jon Phipps McCalla who agreed that the plaintiff’s arguments were already sufficient for the case to proceed. Spotify could now file a motion to dismiss the case using the ‘no mechanicals are due, mate’ argument.