Spotify hit with second US songwriter lawsuit – this time for $200m

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It’s been a challenging start to 2016 for Spotify’s business affairs team.

First, right at the end of last year, the streaming company was served a $150m class action lawsuit from songwriter and artist David Lowery.

It claimed that Spotify “unlawfully reproduces and/or distributes copyrighted musical compositions” in the US market and “profit[s] off its own unlawful conduct”.

In short, Lowery argues that Spotify has publicly acknowledged that it has not correctly paid US mechanical rights owners the money they are due – and that the company is subsequently making interest by keeping hold of this sum.

Now Spotify has been hit by a second lawsuit, this time arguing that songwriters should get more than $200m from Daniel Ek’s company.

US songwriter and publishing company owner Melissa Ferrick filed her class action complaint in the US District Court in Los Angeles on Friday (January 8).

Like Lowery, Ferrick is claiming damages for Spotify’s alleged “wholesale copyright infringement” on behalf of all songwriters whose musical compositions were “reproduced and distributed without a license during the last three years”.

It argues: ‘Spotify did not have and does not have a comprehensive system of music publishing administration in place necessary to license all of the songs embodied in phonorecords which it ingests and distributes by means of interactive streaming and temporary downloads. Rather than decline to distribute phonorecords embodying musical compositions that are unlicensed, however, Spotify elected instead to engage in wholesale copyright infringement.’

“Spotify has elected to engage in wholesale copyright infringement.”

Melissa Ferrick lawsuit

Ferrick, who owns the companies Nine Two One Music and Right On Records/Publishing, claims that her own songs have been streamed “approximately one million times” on Spotify without appropriate mechanical licenses.

Her suit echoes Lowery’s assertion that songwriters whose copyright has been infringed are entitled to recover up to $150,000 in statutory damages for each unlicensed composition played on Spotify.

Ferrick cites Spotify’s recent announcement that it was building its own publishing royalties database as evidence of its wrongdoing.

“The known failure by Spotify to obtain licenses for all of the musical compositions that it is exploiting caused it to recently announce that it ‘will invest in the resources and technical expertise to build a comprehensive publishing administration system to solve this problem’,” reads the lawsuit.

“That is an investment and process that Spotify should have undertaken before it decided to reproduce and distribute phonorecords embodying unlicensed musical compositions to the Service’s millions of users, not over four years after Spotify launched the Service in the United States.

“At this point, Spotify’s failure to properly obtain licenses is much more than what it euphemistically describes as an “administration system” problem; it is systemic and willful copyright infringement for which actual and statutory damages are the remedy.”

Ferrick is being represented by the Los Angeles law firm Gradstein & Marzano.

You can read the full lawsuit through here.

In response to Lowery’s lawsuit – which you can read in full through here – Spotify spokesperson Jonathan Prince commented: “We are committed to paying songwriters and publishers every penny. Unfortunately, especially in the United States, the data necessary to confirm the appropriate rightsholders is often missing, wrong, or incomplete.

“When rightsholders are not immediately clear, we set aside the royalties we owe until we are able to confirm their identities. We are working closely with the National Music Publishers Association to find the best way to correctly pay the royalties we have set aside and we are investing in the resources and technical expertise to build a comprehensive publishing administration system to solve this problem for good.”

The timing of Lowery’s suit was intriguing: it was filed just days after Spotify announced that it was investing in its very own comprehensive global rights database for publishers and songwriters.

Spotify is believed to be working in conjunction with the US National Music Publishers’ Association and other worldwide publisher organisations to build the database.Music Business Worldwide

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  • Bret Branon

    Couple things here. Where did Spotify get copies of her music from? Is there some blame there? And the million times number confuses me. Is that an estimate? Quickly reviewing her downloads/likes/views/listens on youtube and soundcloud some might estimate a lower number.
    The suit mentions the Harry Fox Agency as the outsourced ‘ill equipped’ publishing company that Spotify used to help get clearances. HFA as the leading provider of mechanical rights clearances in the U.S., demonstrates that Spotify is at least trying to meet artists more than halfway.
    I think some leeway should be given to new technologies to have time to develop the infrastructure to fairly compensate the artists. I don’t think you can convince investors that you are building the ultimate rights clearance admin software before you build the successful streaming product that is supposed to finance that effort. It seems commerce is dragging publishing into the future, to protect publishing’s own customers.
    Unlike Netflix music streaming isn’t building its content collection from the top down. Music streamers are building their libraries from both ends simultaneously. Add to that the eleven years longer that Netflix has been in business than Spotify, and it makes the achievement that much more noteworthy.

    Good article. Thanks again Mr. Ingham.

    • Perfectly stated….”commerce is dragging publishing into the future”

    • Martin Lindhe

      You’d need to lobby to change US copyright law then. Until then, streaming copyrighted material without proper licensing is illegal.

      • 8thEnder

        You are not incorrect. The point is who is at fault for which this illegal act was made possible. If Spotify who will have contracts with the distributors from which they obtain their music stating “by signing this agreement you hereby confirm that you have the right to enter into this agreement” followed by a whole lot of indemnity clauses, then it falls upon the distributors to come up with a reason why they supplied Spotify with material in which they had no right to exploit in that way. The distributors then turn to the labels, having contracts with them, with the same question and then… there is silence.

        Streaming music without the right to do so is illegal. .

        Most labels do not need a publishing agreement in place to distribute the master recording to a distributor/aggrigator for sale, but the problem here is labels using aggrigators which handle distibution to both retail stores as well as streaming sights. THEN the label needs an agreement with the artist to do both things.

        In most cases I can almost garauntee you… That is not happening.

        The point Spotify is making about publishing royalties and not knowing where to send them is not uncommon in todays music business, because a lot of Artists and Independant labels who know nothing about publishing haven’t dealt with them properly.

        At the end of the day, Spotify are at dault for streaming music they did not have the right to stream, however that blame lays elsewhere.

        I know it’s a lot easier to blame the large multi-million dollar company then a small independant artist who stuffles to out food on the table, bit that is how it is.

        • Martin Lindhe

          I’m not sure I understand your point. Spotify is illegally streaming unlicensed music. Note: UNlicensed – not incorrectly licensed. How on Earth is Spotify not to blame for that?

          • 8thEnder

            Read my other comment. It can’t be unlicensed because the government provides a compulsory license.

            If the music gets to Spotify, and it shouldn’t be there… That is the labels fault, the distributors fault, or the songwriters (if working in a collaboration with another songwriter who did not give permission).

            At the end of the day, these companies (labels/distro/streaming services) have indemnity clauses in place that protect them from this sort of thing.

            This lawsuit is not about playing unlicenced music, its about playing music they don’t have the right to play, but not from a missing or, as you correctly pointed out an incorrectly licensed song.

            I can tell you right now, how easy it is to use an aggrigator or distrobution company and provide them music that they will send to retail stores and to streaming sites. I can also tell you I know of 5 indie labels that don’t actually sign publishing agreements with songwiters that push to a distro that supplies music to Spotify.

            It’s not Spotify’s fault labels and songwriters don’t know how to read or sign a proper contract that will deal with this thing, or in most cases even know its an issue that needs to be dealt with seperatly to begin with.

            Its actually astonishing really.

          • Martin Lindhe

            You are mistaken. Labels are irrelevant in this matter. Insufficient or incorrect publishing data provided to aggregators are also irrelevant in this matter.

            This is about that Spotify have been streaming songs THEY NEVER HAD ANY LICENSE OF ANY KIND TO STREAM.

            Read up on compulsory license & what a streaming service (no one else) must do prior to streaming, and what the options are for when a publisher is “unknown”.

          • Matthew Weiss

            Has nothing to do with licenses. If someone streams copyrighted material the copyright owner would have to say “take it down.” There’s no class action lawsuit for this.

            The lawsuit is about unpaid streaming royalties.

            Anyway, as a content provider my issue with Spotify is that there’s no way to track streaming activity. It blows my mind that any artist, label, or publisher would enter an agreement with a company that doesn’t tell you what it’s doing.

  • 8thEnder

    You know what?

    I think people need to read their contracts with labels and publishers more carefully, and also understand what is actually happening when they provide their music to an aggrigator (one source from which Spotify get their music) to exploit part of they rights.

    As a music label, in EVERY contract I’ve signed with an aggrigator there is the wording that the label “has the right to enter into this agreement” meaning the label has the right to distribute the music. And the only way that is possible is if it is in the contract between Label and Artist that the label has full rights of exploitation of both the “Master Recording” (the audio you here) and the “Underlying Composition” (the music that created that recording).

    More often then not in todays music business, there are so many tiny labels that have not sorted out the publishing side of the music that they have signed and don’t realize that they, the label, only have the right to half the “work” and therefore need permission, often in a seperate contract, to exlpoit the “work” by means of streaming (and other neighbouring rights).

    In the end, to quote some Cool Hand Luke, “What we have here is a faliure to communicate.”

    Outside the “Big 3” labels A LOT of the smaller independant record labels, there are some people who just have no clue as to what they are doing, and sign deals to exploit music they have absolutely no right, or atleast not the full right to.

    Maybe Spotify are at fault, maybe they aren’t. Maybe they are complicit? I don’t know. But I do know they aren’t stupid. I know they’ll have contracts with the aggrigators or labels that ensures the supplyer of the music has the full right to exploit and enter into that agreement. So Spotify are not the ones that should be sued, it should be the labels that exploited the Artists work without the full right to do so.

    This is ALL a result of uneducated Artists who have know idea what rights they hold or what these rights mean, and labels as I said before, not having a clue how the industry and intellectual property works.

    As crazy as this all sounds, and as much press as this shit gets every day…

    … it’s all just a huge misunderstanding.

    Good luck with suing all the independant labels!

    • 8thEnder

      On the Publishing side of things, the purpose for Spotify setting up their own “Publishing Administration” (key word: administration) is to ensure money doesn’t get lost in the ether, and to make sure the money is “there” when artists or the artists publishers come to collect it. Doing this is very admirable.

      This also comes out of neccessity since then they can exploit the music world wide. This further reduces errors, lawsuits, and overhead on their end while creating a more managable, singular, seamless and transparent business model.

      Just my thoughts.

      • Martin Lindhe

        Yes, and it should have happened before they started streaming anything.

        • 8thEnder

          Ideally yes. But still not illegal. That part of there business would be being set up for simplicity, control over where the money goes and a recognition that more and more artists are not wanting to work with labels anymore and wanting to go direct to streaming.

          • Martin Lindhe

            I don’t understand how this is not crystal clear?

            1. Streaming service must obtain a license from publisher prior to streaming,
            2. A notification of Intent to the publisher must be sent prior to streaming
            3. If the publisher is UKNOWN, streaming services can notify Library of congress of their intent to stream (also prior to streaming), and pay royalties into a form of escrow

            — Spotify did NONE of the above to a quite a big chunk of their catalog. This is illegal. End of story.

    • Martin Lindhe

      I don’t see how that is relevant. Aggregators are not on the hook for supplying publishing data to streaming companies. Streaming companies must & pay songwriters/publishers *directly*. If they don’t – they’re breaking the law. Plain & simple.

      • 8thEnder

        Aggrigators distribute the music supplied to them to retail stores and streaming sites, like iTunes, Beatport, etc.

        You are very correct, Spotify must pay songwriters/publishers directly, but in the case where the publisher is unknown who are they supposed to pay?

        • Martin Lindhe

          If the publisher is unknown, they should not add the songs to their service in the first place.

          • 8thEnder

            Wether that right is asigned to a publisher, label or stays with the songwriter, there is always a publisher.

            The question is, Who gets this money that spotify has in their hands. Just because it isn’t known is not a reason for not playing it. Sounds bad, but that’s how it is.

          • Martin Lindhe

            Yes, there always IS a publisher. That doesn’t mean that Spotify automatically knows who it is. In many cases they didn’t know, and didn’t bother to find out. That is why they are getting sued.

            “Just because [publisher] isn’t known is not a reason for not playing it”

            Huh? There is INDEED a good reason to NOT stream unlicensed music: it is against the law.

        • Matthew Weiss

          Whoever makes the copyright claim which would be settled privately, or in a court.

    • Martin Lindhe

      “Maybe Spotify are at fault, maybe they aren’t.”
      They definitely are.

      “.. Spotify are not the ones that should be sued, it should be the labels that exploited the Artists work without the full right to do so.”

      Nope – this is has nothing to do with the labels nor the distributors. Streaming is different from digital sales (like iTunes Store). Streaming companies must notify & pay songwriters / publishers *directly* – and it’s their responsibility to track down who they are.

      Spotify chose to ignore this when they didn’t have enough information and streamed this content anyway. That is willful copyright infringement, and that’s why they are rightfully being sued.

      • 8thEnder

        And when I as a label, don’t have proper publishing rights, I submit my labels music that I signed to an aggrigator for distribution and they supply the music to Spotify… Who is at fault for that?

        • Martin Lindhe

          Interesting question, but not at all what this lawsuit is about. This lawsuit is about Spotify streaming content without having any publishing license at all (not having incorrect data).

          • 8thEnder

            Spotify doesn’t need a “publishing license”, they receive a compulsary license (for mechanicals) and pay a rate set by the government. In the case of performance royalties, that is paid to the PRO (performing rights organization) like BMI, ASCAP, SOCAN, etc.

            So you see, there is no required license needed to stream the music. Other than maybe a state / provincial license or permit. In Canada they need a license from SOCAN. this type of license is a one time blanket fee. Payment of the performing royalties are on a use basis paid by SOCAN from the fees collected.

          • Martin Lindhe

            (This is not about performance royalties.)

            There’s ABSOLUTELY a need for a license to stream music. That’s what the law we’re talking about is about, and that’s the issue right there – Spotify *didn’t obtain compulsory licenses* for a huge amount of tracks. They didn’t pay a cent to anyone for those streams in question either. They didn’t send a notification of intent to anyone. They didn’t notify the Library of Congress either (which is an option in cases when the publisher is unknown).

            In short – they decided to stream it anyway, without any license, and hope for the best.

            That’s a willful copyright infringement.

          • arftenall

            In other jurisdictions the licence fe includes both a performing AND mechanical portion.

          • 8thEnder

            This is what I thought.

          • Martin Lindhe

            Yes, but not so in United States. This lawsuit is (only) about US copyright law and streams within the US.

        • arftenall

          The labels. They are licencing usage on behalf of the creator. They can only licence what they a ‘re contractually permitted to licence.

          • 8thEnder

            This was a loaded question, and I concurr with your answer.

          • Martin Lindhe

            Again – this lawsuit is not about Spotify being given *false* or *incorrect* licensing information.

            In these cases, Spotify has properly licensed & paid royalties to the master recording right holders.They have also properly licensed & paid performance royalties via collection societies.

            What they failed to do in these cases was to obtain mechanical licenses, notify the publishing rights holders (in advance) & pay publisher royalties.

            That is illegal.

    • arftenall

      Surely, most of the artist /creators and /or publishers are members of globally affiliated mechanical collecting societies in their countries of domicile? As I understand it a streaming service must be licenced in a country to operate. That being the case, would not (should not) that license fee contain a mechanical portion?

      • Martin Lindhe

        No, collecting societies only handle performance licenses/royalties in the United States.

  • john truelove

    I despair!
    With baddies such as Pandora and Google running around playing fast and loose with our rights, the misguided, deluded, rapacious Americans and their lawyers go chasing after the only streaming company that, from my experience (as both a publisher of tens of thousands of works, and as a creator), are really trying to do the right thing, and have done from the very start.
    Go ahead you septic tanks, bury Spotify! Cos that will leave the field clear for companies with far lower rates, far less scruples and with far less interest in seeing creators and rightsholders getting a fair share. Good work!

    • Martin Lindhe

      You can’t build your whole business around copyrighted content without first securing the licenses to do so. Spotify is basically says “it’s too complicated to figure who has the rights to what, so therefore we’re just gonna skip it” . That is willful copyright infringement, and just plain illegal.

      • arftenall

        They don’t “skip it”, they licence with either a publisher directly, or through the collecting society (P/MRO) in the jurisdictions they are streaming to.

        • Martin Lindhe

          They do indeed skip it. In the US they cannot make a deal with a collecting society for mechanicals. They simply don’t handle that. And in cases when they didn’t know who the publisher is, Spotify decided to skip the whole mechanical license and stream anyway.

          That’s why they’re being sued.

    • arftenall

      Be interested in who’s bankrolling these actions.
      In my experience some countries collecting societies issues licenses to streaming organizations which include a mechanical component.
      These appear to be ambit claims which tie up good people who appear to be trying to do the right thing by both the consumer and the creator, and hamstring their services.

      • Martin Lindhe

        Other countries’ laws & procedures are irrelevant in this lawsuit. In the US, mechanical licenses are handled completely separately from performance licenses. Streaming services are well aware of this.

    • Matthew Weiss

      Are you a musician, producer, or music publisher?

      • john truelove

        All of the above Matthew. My company, while principally a music publisher with a footprint in most territories, also looks after some master rights, which go through all the major digital services, including Spotify