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Spotify responds to David Lowery’s mechanicals lawsuit

By | Published on Tuesday 16 February 2016


Spotify has fired its first shot in the big mechanical rights battle over there in the US, with the focus of this round being David Lowery’s attempt to make his litigation a class action.

As previously reported, musician Lowery – a vocal critic of many a streaming music service – sued Spotify late last year, claiming that the company had infringed his copyright by not properly licensing the so called mechanical rights in his songs.

It’s no secret that the licensing of mechanicals by digital services in the US is a mess. Mainly because the licensing of mechanicals by record labels for CD and download releases was never great to start with, and when the on-demand streaming services came along needing licences for 30 million+ tracks all at once, the whole system collapsed.

On-demand streaming services exploit both the mechanical and the performing rights in songs, meaning that companies like Spotify need licences for both. The music publishing sector has traditionally licensed the two elements of the copyright separately, but since the rise of digital – and the increased need for combined mechanical/performing right licences – in most countries the publishers have managed to work out a way of offering joined up licences, usually by publishers and different collecting societies collaborating.

In the US, collective licensing rules (in the main) have prevented this from happening, so while a streaming service can cover performing rights via the societies like BMI and ASCAP, mechanical rights need to be licensed separately. This process is complicated because there is no direct counterpart in the US to the UK’s mechanical rights society MCPS, so licensees need to locate each and every rights owner separately, though in theory middle-man companies like the Harry Fox Agency, which Spotify engaged, can help with that process.

Spotify doesn’t actually need permission from rights owners to exploit the mechanical rights, because in the US a compulsory licence applies. However, the terms of that licence say that the licensee must alert a rights owner of their intent to use their songs, and then pay royalties at a statutory rate.

It is Spotify’s failure to provide those alerts and pay those royalties that is at the heart of Lowery’s lawsuit. Spotify blames bad data. That is to say, the music industry’s bad data, not Spotify’s. If only there was a decent database of song ownership, and then another database that told a digital platform what song features in any one track, then it could and would send out alerts left, right and centre, and pay every publisher and every songwriter what they are due. But no one made those databases, so what’s a DSP to do?

Lowery’s lawyers argue that it is actually quite easy to identify who owns their client’s works with an online search, and anyway, the compulsory licence deals with the problem of bad song ownership data, by giving the licensee the option to send the alert and statutory royalties to the US Copyright Office until the owner of any one song copyright can be found. And Spotify did not do this. Boom!

Though, even if we ignore the fact that formalities of the compulsory licence are routinely ignored by the music industry, Spotify would likely counter that, anyway, that provision doesn’t overcome the lack of a database that tells it what songs are contained in what recordings. Given song titles aren’t always unique, even if it filed alerts with the Copyright Office, how would it know what song the alert should relate to? Could the alert just include the ISRC code associated with the recording?

So rumbles on the data debate at the heart of this legal battle, though Spotify’s first legal filing in response to Lowery’s lawsuit only really skirts around the issues, because the point of this response, as we said, is the class action status of the original litigation.

Lowery’s argument is that because Spotify didn’t comply with the terms of the compulsory licence, there is no licence, and that’s copyright infringement. So, forget the statutory royalties Spotify has been setting aside all these years, the statutory damages for wilful copyright infringement can go up to $150,000 per track. If this is a class action, so that any affected songwriter could pursue damages if Lowery prevailed, well, that could be expensive.

Which is why it is important for Spotify to try to tackle the class action bit first; because a better worse case scenario is fighting Lowery alone, without the prospect of having to pay damages to hundreds, if not thousands, of songwriters if it loses.

Spotify cites a number of reasons why Lowery’s lawsuit should not be granted class action status in its response, not least a precedent set in a 2013 case between the FA and YouTube in which it was said “copyright claims are poor candidates for class action treatment”. Spotify’s lawyers then argue that Lowery’s lawsuit proposes “an improper ‘fail-safe’ class”, that the proposed class “is not ascertainable” and that it “lacks the commonality required”.

A big part of that relates to the same old data issues – ie how do we know what songs have been exploited without licence, and therefore who’s in the class, without the super database that would have fixed this problem to start with.

As previously noted, opinion is divided in the publishing and songwriter community on this whole squabble, between those who reckon that a company with Spotify’s funding should have found a solution to this data problem years ago, and those who reckon the whole matter is rather embarrassing for the music industry itself, and that publishers and on-demand streaming services (because it affects them all) should work together on a solution.

For now, Lowery’s lawsuit, and another filed by Melissa Ferrick, will continue to go through the motions. You can link through to Spotify’s submission via this critique of the service’s arguments on the Music Technology Policy website.