US judges refuses Spotify’s bid to throw out multimillion dollar lawsuit

Two Nashville, Tennessee judges have refused an application by Spotify to throw out a multimillion-dollar lawsuit.

The action filed by the independent music publisher and copyright administrator Bluewater Music Services Corporation, could cost the Swedish streaming service US$321 million.

But it is being watched carefully by the global music and tech sectors because it hinges on the vexed issue of whether streaming services have to pay mechanical royalties.

Bluewater Music initiated the lawsuit in July 2017, claiming over 2,300 examples of “wilful” copyright infringement.

It said it had in July 2016 terminated Spotify’s licence to stream the songs, which included Sam Gay’s 10,000 Pieces and Bob Morrison’s You’d Make An Angel Want To Cheat.

But Spotify had continued to stream the material regardless, it alleged.

Bluewater Music pushed for the maximum penalty of $150,000 per infringement because anything less “would encourage infringement, amount to a slap on the wrist, and reward a multi-billion dollar company, about to go public, that rules the streaming market through a pattern of willful infringement on a staggering scale.”

It additionally stated that Spotify had earlier not paid any mechanical royalties, and had also failed to negotiate a direct mechanical license.

Spotify has long argued that streaming does not require a mechanical licence.

It argued in court documents:

“The act of streaming does not reproduce copies of sound recordings or musical compositions, and equally does not distribute copies of either sound recordings or compositions.”

It adds streaming, by its very definition, cannot infringe upon either the production right or distribution right covered by mechanical licenses.

In asking to dismiss the suit, Spotify further claimed that only 1,372, songs could be involved, that many were administered and hence Bluewater Music had no basis for legal action, and it only had ownership to 23.

This was denied by the publisher, and to which the court agreed, saying it did have exclusive rights and licence.

Spotify’s stance on mechanical royalties (or lack of therefore) has seen it pay out millions of dollars to other associations.

In May 2017, it paid out $43.4 million to a class action by songwriters (who had asked for penalties amounting to $200 million) and settled with the National Music Publishers’ Association (NMPA) for a reported $30 million.

In January 2018, Wixen Music Publishing sued for $1.6 billion, for songs by major names including Tom Petty, Weezer, Neil Young, Rage Against the Machine, The Doors and Steely Dan, among others.

The Music Modernization Act will settle the argument of streaming services paying mechanical royalties in the US.

It calls for it to be formally recognised.

The Act has been passed by the US House of Representatives and US Senate unanimously and is currently just waiting to be rubber-stamped by President Trump.