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Spotify pulls Kobalt into its legal spat with Eminem’s publisher

By | Published on Monday 1 June 2020


Spotify has pulled Kobalt into its ongoing legal battle with Eminem’s publisher Eight Mile Style. The streaming service claims that all the songs mentioned in the Eight Mile Style lawsuit were covered by its administrative relationship and licensing deal with the Kobalt company.

Eight Mile Style sued Spotify last year claiming that the digital firm had been streaming a whole load of Eminem songs in the US without ever securing licences to cover the mechanical copying element of the stream.

The copying of songs is covered by a compulsory licence in the US. However, for that compulsory licence to apply the user of music must send both paperwork and payment – at rates set in law – to the copyright owner.

Most streaming services hire companies like the Harry Fox Agency to handle all that admin. But – with the complexities around matching songs to recordings and the lack of a central database of current copyright ownership – plenty of songs were streamed without the right paperwork being issued.

That means the compulsory licence doesn’t apply and all those streams are infringing copyright. Which in turn means that whoever owns the copyright in any of those streamed songs can sue for statutory damages of up to $150,000 per work. And lots did, resulting in multi-million and sometimes multi-billion dollar lawsuits.

In theory the 2018 Music Modernization Act should have stopped all those lawsuits, though. It instigated the creation of a mechanical rights collecting society in the US which – like mechanical rights collecting societies in most other countries – will take responsibility for administrating and distributing any song royalties due on tracks where the streaming service doesn’t know what song is being exploited or who owns the copyright in that song.

The streaming services agreed to pay for that new collecting society to be set up on the condition that they wouldn’t be sued by any more songwriters or publishers over unpaid mechanicals. But that didn’t stop Eight Mile Style going ahead with its litigation.

It argued that Spotify hadn’t fulfilled its obligations under the MMA to avoid any new lawsuits over unlicensed songs. And also that the MMA stopping publishers from suing over past unpaid mechanical royalties was unconstitutional.

Having failed to get the whole matter dismissed on jurisdiction grounds earlier this year, Spotify has now submitted a new legal filing arguing that it was – in fact – licensed to stream Eminem’s songs via its dealings with Eight Mile Style’s rights administration partner Kobalt.

After referencing various statements made by Kobalt over the years that bigged up its role as administrator of Eight Mile Style’s rights – and then another lawsuit involving Eight Mile Style itself in which it specifically named Kobalt as its administrator – Spotify says that it was always led to believe that it should deal with Kobalt in relation to Eminem’s songs.

Which is why, it says, it – or, specifically, the Harry Fox Agency – sent the compulsory licence paperwork in relation to all those songs to Kobalt. And why it believed that a direct mechanical rights licensing deal it then agreed with Kobalt in the US in 2016 covered Eight Mile Style’s catalogue.

For its part, the Eminem publisher says that – while Kobalt has the rights to administrate its songs and collect any royalties due – it doesn’t have the right to license the smaller publisher’s repertoire. But, Spotify counters, why didn’t Kobalt say so? And why did Eight Mile Style bank all the royalty cheques sent its way over the years via Kobalt without ever telling the streaming service its admin partner couldn’t license its works?

Eight Mile Style “received royalty payments and observed billions of streams”, the streaming service states, and “it never once questioned Spotify’s authority to make music embodying those compositions available on Spotify’s service”.

The lawsuit says that, while the publisher now claims that it “was somehow ‘duped’ into thinking the compositions were properly licensed to explain away why it knowingly accepted and deposited royalty payments while remaining silent for years”, that claim “defies logic”.

More than that, the Eight Mile Style lawsuit “fails from the start for an even simpler reason: Spotify was, in fact, licensed by Eight Mile’s agent, Kobalt, to reproduce and distribute the compositions”.

While Eight Mile Style might now be saying its administration partner didn’t have the power to issue that licence, Spotify says that its deal with Kobalt actually includes an indemnity clause covering any such after-the-fact claims. “Those basic facts are why Spotify is now compelled to bring this third-party complaint against Kobalt”, it then states, adding that it only does so “reluctantly”.

For its part, Kobalt has already responded to the lawsuit, telling Billboard: “On initial review of [the new legal filing], Spotify mischaracterises the substance both of the services Kobalt provides to Eight Mile Style … in the United States, as well as the content of Spotify’s direct US licensing agreement with Kobalt. Kobalt has not breached its agreement with Spotify, and will vigorously defend against these baseless allegations”.