By: Ilya Mirov,

Lawsuit Filed Against Spotify

Spotify, the world’s largest streaming service, has recently been sued by Wixen Music Publishing for allegedly using several thousand songs without a license and without compensation to the publisher.[1] According to Wixen, over 20% of the 30 million songs hosted on Spotify are unlicensed, and the plaintiff is asking for damages of at least $1.6 billion as well as injunctive relief.[2]

Wixen was founded by Randall Wixen in 1978 and licenses the catalog of more than 2,000 artists, including such notable artists as Tom Petty, Jefferson Airplane, the Beach Boys, and Rage Against the Machine.[3] Wixen’s artist songs make up five percent of all the music streamed on Spotify. [4]

Wixen’s lawsuit is just the latest of several legal actions that Spotify has been involved with in the past year.[5] These lawsuits against Spotify have been seeking compensation for songwriters and the copyright holders, who have struggled financially as the music industry has shifted away from physical album sales towards a streaming business model.[6]

Wixen’s legal action against Spotify may have been spurred by a recent proposed settlement involving rights holders and Spotify in Ferrick v. Spotify SUA Inc, No: 1:16-cv-8412 (S.D.N.Y.).[7] On May 26th, Spotify reached a settlement in a class action lawsuit which was consolidated out of two lawsuits brought by Melissa Ferrick and David Lowery involving compositions that Spotify streamed without paying for a license.[8] The settlement calls for Spotify to pay $43.45 million in compensation to the rightsholders for past infringement.[9] A resolution of all copyright disputes would allow Spotify to move forward trouble-free in its initial public offering expected later this year.[10] However, Wixen opted out of the proposed settlement in favor of pursuing its own legal action.[11]

The Music Modernization Act

All of this comes on the heels of what could be the most substantial update to copyright law since 1998.[12] If passed, the Music Modernization Act (MMA) promises to bring copyright laws into the 21st century.[13] The bill has been introduced to the House, and a mirrored bill was introduced in the Senate on January 24, 2018, with co-sponsors from both parties.[14]

The bill addresses key difficulties in music licensing that currently lead to digital music companies, like Spotify, regularly failing to pay songwriters and copyright owners for distribution of their songs. [15] Companies like Spotify often file bulk Notice of Intentions (NOIs) with the Copyright Office that allow them to obtain a license for music for which ownership information cannot be found. [16] Since this process was first instantiated in 2016, there have been an estimated 45 million NOIs filed with the Copyright Office.[17] This NOI process has taken millions in income away from songwriters who must rely on streaming services to link artists to their songs and issue fair payment.[18] The MMA will update the NOI process so that music creators can more often get payment for their work, thereby also reducing liability for digital companies who play the music.[19]

Second, the bill would establish a Mechanical Licensing Collective (MLC), an agency that would have streaming services compensate songwriters for the mechanical royalties earned through the streaming of licensed music content.[20] In exchange, the collective would allow digital providers, such as Spotify, to have blanket usage licenses for songs.[21] The MLC’s function would be to provide streaming services with efficient access to the information they need in order to know which songwriters to pay for songs.[22]

Third, the legislation would give both publishers and songwriters representation on the board of the MLC to ensure that its operations remain transparent and fair to both the streaming services and the creators.[23] The MMA would also provide songwriters with a chance to obtain fair-market mechanical royalty rates in the Copyright Royalty Board (CRB) proceedings that set royalty rates every five years.[24] Currently, CRB judges determine royalty rates based on an outdated standard, which will be replaced by the “willing buyer/willing seller” standard. This new standard will set rates based on open market negotiation between buyers and sellers.[25]

Fourth, the bill proposes an overhaul for the rate court system. Currently the American Society of Composers, Authors, and Publishers (ASCAP) and the Broadcast Music Inc. (BMI)– the two largest performance rights organizations in the country– are assigned a single judge who handles all rate court cases. The MMA would randomly assign a district judge in New York’s Southern District to each case going forward, and would allow those judges to consider relevant market-based evidence in determining the performance rate given to songwriters.[26]

Perhaps the most critical of the four changes promised by the MMA would be the creation of the Mechanical Licensing Collective, the new agency which would be responsible for creating a public database containing song ownership information, helping songwriters identify which songs haven’t been attributed to them and streaming services avoid lawsuits for not properly attributing rights to the holders of songs on their services.[27]

 

[1] Amanda G. Ciccatelli, Spotify Sued by Music Publishing Company for Unauthorized Use of Thousands of Songs, IPWatchdog (January 31, 2018), http://www.ipwatchdog.com/2018/01/31/spotify-sued-music-publishing-wixen/id=92993/.

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] See Ciccatelli, supra note 1.

[7] Id.

[8] Robert Levine, What Will Spotify’s $43 Million Class Action Settlement Mean For Songwriters and Publishers?, Billboard (May, 30, 2017), https://www.billboard.com/articles/business/7809818/spotify-43-million-class-action-settlement-songwriters-publishers-analysis.

[9] Id.

[10] Id.

[11] Amanda G. Ciccatelli, Spotify Sued by Music Publishing Company for Unauthorized Use of Thousands of Songs, IPWatchdog (January 31, 2018), http://www.ipwatchdog.com/2018/01/31/spotify-sued-music-publishing-wixen/id=92993/.

[12] Rep. Doug Collins (R-GA.), The Music Modernization Act Will Provide a Needed Update to Copyright Laws, The Hill (January 10, 2018), http://thehill.com/blogs/congress-blog/technology/368385-the-music-modernization-act-will-provide-a-needed-update-to.

[13] Id.

[14] Ed Christman, Senate Moves Forward on Music Modernization Act, Billboard (January 24, 2018), https://www.billboard.com/articles/business/8096006/senate-bill-music-modernization-act-licensing-reactions.

[15] Rep. Doug Collins (R-GA.), The Music Modernization Act Will Provide a Needed Update to Copyright Laws, The Hill (January 10, 2018), http://thehill.com/blogs/congress-blog/technology/368385-the-music-modernization-act-will-provide-a-needed-update-to.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] See Collins, supra note 15.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] Ed Christman, Senate Moves Forward on Music Modernization Act, Billboard (January 24, 2018), https://www.billboard.com/articles/business/8096006/senate-bill-music-modernization-act-licensing-reactions.

[26] Id.

[27] Micah Singleton, Congress May Actually Fix Music Royalties, The Verge (January 26, 2018), https://www.theverge.com/2018/1/26/16931966/congress-music-modernization-act-licensing-royalties.

Image Source: https://techcrunch.com/2018/01/02/spotify-faces-1-6-billion-lawsuit-from-music-publisher-wixen/.