Popular music streaming Spotify service was recently hit with a $150 million for music artists who are taking issue with the way the service pays royalties for its music. The lawsuit, filed in California federal court, alleges that Spotify continues to “unlawfully reproduce and/or distribute copyrighted musical compositions … to more than 75 million users via its interactive commercial music streaming service.” Spotify allows listeners to select from and hear an on-demand large library of songs even though the listener does not own any of the music. For several years now, artists have complained that the way Spotify pays out royalties for its music is unfair to the musicians. Within this lawsuit, the musicians allege that Spotify has not properly obtained licenses to hundreds or thousands of songs in its library, let alone paid out royalties for those songs. For that reason, the artists argue, Spotify has committed copyright infringement, and the ceiling for damages under this action numbers in the hundreds of millions of dollars.

On the other hand, Spotify said that it pays royalties to all rights holders that it can locate but that "the data necessary to confirm the appropriate rights holders is often missing, wrong or incomplete." The company said that when it cannot locate them, it sets aside royalties in case that it eventually can locate them.

But David Lowery, the suit’s named plaintiff who teaches music business at the University of Georgia, said that the fact Spotify can’t find rights holders for music it allows users to play goes to the heart of the issue.

"The point is not that they didn't set aside royalties; the point is that they never got the licenses in the first place,” Lowery told NPR. “. . . Setting aside the royalty, what is that royalty based on? There's no license."

Lowery argues that Spotify should already line up the licenses to the music it makes available to users—before making the music available. On the other hand, Spotify and other streaming services have legitimate trouble both locating and verifying rights to a wide variety of music even after conducting due diligence. A win for Lowery, then, could have the potential to reshape the music streaming landscape.

Sources: https://www.washingtonpost.com/news/morning-mix/wp/2015/12/30/spotify-hit-with-150-million-class-action-for-copyright-infringement/?tid=ss_tw http://www.npr.org/sections/thetwo-way/2015/12/29/461381862/musician-david-lowery-sues-spotify-for-copyright-infringement http://www.reuters.com/article/us-spotify-lawsuit-idUSKBN0UD00020151230

For more information on this topic, please visit our Copyright Licensing service page, which is part of our Software & Copyrights practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm located in Dallas, TX.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.Additional information about the IP law firm and its IP law attorneys may be found at www.klemchuk.com.

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.