Streaming services such as Netflix, Hulu, Amazon, and Spotify, are all wonderful for consumers, but they can create problems for copyright attorneys.
In traditional retail, copyright holders are the only ones who maintain the right to reproduce and sell published content, including books, articles, videos, and music. But there’s a specific type of publishing license, called a mechanical license, that distributors can get to cover their reproduction of copyrighted works (such as the songs Spotify makes available to its customers).
According to a class action copyright infringement lawsuit recently filed against Spotify, the music streaming company allegedly violated copyright laws by failing to pay for mechanical licenses for numerous songs it was distributing to its listeners.
Shortly after the lawsuit was first filed, a representative of the company released a public statement, claiming the information necessary to identify the proper copyright holder is not always available. He insisted that, in such instances, Spotify sets aside licensing money for when the proper copyright holders could be found.
But according to David Lowery, the musician who filed the class action lawsuit, the statement is as good as an admission of guilt. Even if Spotify felt it was doing the best it could, the fact remains that copyright law requires you to pay the copyright holder before you can distribute their work. Lowery and his attorneys maintain that, by failing to do so, Spotify was violating U.S. copyright laws.
Lowery sued for $200 million dollars, but the two sides have agreed to settle the dispute for $43.4 million after a year and a half that included motions, countermotions, negotiations, and consolidating the claims of the class with another copyright lawsuit filed by a musician by the name of Melissa Ferrick.
If the settlement agreement receives approval from a judge, it will mean a win for both sides. Spotify will pay less than a quarter of the original claim amount (in addition to saving on legal expenses), while simultaneously pulling itself out of a legal dispute that gives the company a bad public image.
The streaming company will also be able to better protect itself from the possibility of similar lawsuits in the future because the writers of all songs that are currently registered with the U.S. Copyright Office have automatically been included in the class action lawsuit. That means many songwriters may have a surprise royalty payment coming for them in the mail, but it also gives Spotify the information it needs to find the copyright holders of all the songs it is currently distributing. Spotify will also be able to glean information from the current class members to improve its own database to make sure all future royalties are paid, including those to lesser-known musicians.
The class also wins by getting a guarantee of the $43.4 million, rather than facing the uncertainty of having to continue to dispute the legal matter before the court. No matter how sound their reasoning, one can never be 100% certain which side a jury will favor, and to spend hundreds of thousands in legal fees only to be left high and dry is a worst-case scenario.
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