Spotify Slapped With a Second Class-Action Lawsuit…

Spotify

When it rains, it pours, and Spotify could soon be drowning in royalty litigation.  Just after Christmas, Spotify was served with a massive class action lawsuit with potential damages estimated at $150 million.  That case, driven by longtime artist rights advocate David Lowery, has now been followed by a separate suit from Gradstein & Marzanno, an LA-based firm.

This is a law firm well-versed in the nuances of music copyrights.  Gradstein has been successfully litigating on behalf of the Turtles against Sirius XM and Pandora, specifically over unpaid royalties for pre-1972 recordings.  The back-and-forth in those cases has been whether non-interactive digital radio should be paying for recordings that predate federal, US Copyright protection.

Details on second blow against Spotify are sparse at the moment, though Billboard notes that Gradstein is essentially copy-catting Lowery’s suit, filed by Michelman & Robinson, LLP.  Multiple class actions wouldn’t necessarily increase the overall liability by Spotify, but could certainly increase legal expenses and headaches.  In some cases, competing class actions can be consolidated, though multiple cases also means more litigators, and potentially more thorny issues uncovered.

Meanwhile, Spotify’s responses have been measured and terse, with CEO Daniel Ek and other top-level executives remaining quiet.  Through carefully-crafted statements, Spotify has already indicated that a reserve fund has been set aside to handle confusing or unresolved royalty issues, though the Lowery-led litigation hasn’t been convinced. “We are committed to paying songwriters and publishers every penny,” said Spotify global head of communications and public policy Jonathan Prince offered.  “Unfortunately, especially in the United States, the data necessary to confirm the appropriate rights holders is often missing, wrong, or incomplete. When rights holders are not immediately clear, we set aside the royalties we owe until we are able to confirm their identities.”

More as this develops.

Image by Seth Werkheiser, licensed under Creative Commons Attribution 2.0 Generic.

16 Responses

  1. BCAM

    I believe liability will be much higher than 150mm. Copyright infringement allows up to 150K PER infringement (i.e. per stream) if it can be shown to be willful. I doubt that will be too difficult given the copious amounts of press Spotify has gotten for not paying copyright holders correctly. While 150K/stream probably will not happen, even 1K/stream would amount in a judgement in the billions.

    Reply
    • Troglite

      IMHO, if they are found guilty, the damages SHOULD be punitive. The need to compensate artists is a significant factor, but it’s also the court’s responsability to preserve a fair and competitive marketplace which can only happen when the law is applied consistently and without bias.

      If the successful launch and rapid growth that spotify has enjoyed was achieved in part because they avoided delays and costs associated with securing licenses in advance, then it represents an unfair market advantage for any streaming company that did incur the time and cost of properly securing those licenses. I believe those ill gotten gains should be taken into account within any settlement or ruling.

      Reply
    • Gotta Love the DMN Commenters...

      You can believe whatever you want about the liability being much higher, but you’re just completely wrong.

      Copyright infringement, however does NOT allow up to 150K PER infringement (i.e. per stream).

      It provides for 150K per WORK, if the infringement is deemed willful. That means, even the willful infringement – illegally streaming – a single song 50,000,000,000,000,000,000,000 times, will still only yield a $150,000 statutory penalty.

      In addition, it will be EXTREMELY difficult to prove willful infringement, given the state of the music licensing landscape, the years Spotify spent negotiating publishing licenses before the U.S. launch, the amount of royalties they have paid out, and their having set up the unpaid royalties “escrow account.”

      Reply
      • Anonymous

        what do you mean, hard to prove willful infringement? that’s the easy part – they absolutely knew (or should have known, but come on – they knew) that in order to get compulsory licenses they had to send notices to the owners. Knowing that, they chose not to send notices as required by law.

        That is literally willful infringement: they knew how to get the licenses, they chose not to take the steps required to do so, they used the copyrighted works anyway. That is willful infringement.

        Willful infringement doesn’t require malice – just a knowledge that you’re infringing. They knew.

        Reply
        • GGG

          A good lawyer can probably easily argue they were in the process of administering money/still figuring out who to administer to. If there’s no contractual time limit set for when they HAVE to pay out by, it’ll be hard to prove they never planned on doing so.

          Reply
          • Anonymous

            To get the compulsory license under the statute, you have to send the notice within 30 days of use. The notice requirement is completely separate from the payment requirement, and this is completely about Spotify’s failure to meet the notice requirement (or it should be anyway).

            Under the actual law, as it stands now, Spotify should 100% lose. In fact, it’s horrible for publishers/songwriters if Spotify wins.

            Of course, I’m sure the judge will find a way around the law.

          • Troglite

            +1

            “Data quality” and “the intent to compensate” are nearly irrelevant. I believe Spotify is intentionally introducing these topics as a distraction from the core issues which all revolve around licensing and notification. I am sad to see how effective these distractions have been within the press coverage of these legal actions. Hopefully the judge won’t be so easily fooled.

  2. MikeKnoxMus

    Since most consumers have a “Music is Free” attitude which was encouraged by the industry and musicians just like Mr Lowery, isn’t it a bit too late to sue because royalties aren’t being paid? Really, very few under 35 buy CDs, and publishers and labels are in a frenzy over who gets the crumbs from this Ponzi scheme of SPOTIFY, etc Actual musicians are last in line. And in “class action” lawsuits the only ones who make $ are the lawyers!!!

    Reply
  3. Anonymous

    Ek went about running Spotify the completely wrong way; 2003 mindset for 2015 issues. Pirates shouldn’t be tasked with running music corporations.

    Streaming is the future and will succeed, but Spotify will be forgotten just like MySpace.

    Reply
  4. Anonymous

    In the end it’s unlikely these lawsuits will amount to much more than examples of activism. It is very difficult to get a class certified by the court and the impending negotiations with the NMPA will likely lead to a pool of money that unpaid publishers/songwriters can opt into to collect what they are owed. If this remedy is in place, it’s unlikely that a judge will want to hear the case at all.

    Reply
  5. superduper

    Maybe this is it. Maybe this will be the beginning of the end of Spotify and streaming as we know it. I’m just thinking of why Spotify may have done this. Maybe they couldn’t afford it? Whatever it is, if the lawsuit is successful it could have a massive impact on the music industry (and in a good way).

    Reply

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