Spotify, the world’s largest music streaming service, was sued last week for over $366 million by two music publishers, Bluewater Music Services in Nashville and a group of companies affiliated with Bob Gaudio, the award-winning songwriter and member of Franki Valli and the Four Seasons.

Closeup of earbuds and smartphoneEach plaintiff claims in their lawsuit that Spotify failed to comply with the requirements of Section 115 of the U.S. Copyright Act for obtaining mechanical licenses to use the plaintiff’s songs on Spotify’s streaming service, thereby infringing the plaintiff’s copyrights. Under U.S. law, streaming companies like Spotify are not required to negotiate mechanical licenses with publishers, but they must send publishers written notices of their intention to obtain compulsory licenses. The plaintiffs claim that Spotify did not provide proper notices to them and continued to stream their songs without mechanical licenses.

When a stream occurs, it utilizes two of the exclusive rights granted to a copyright owner of a song, the reproduction right and the communication right. In the music publishing business, those are known as “mechanical rights” and “performing rights.” Performance rights are licensed in the U.S. by performing rights organizations, like ASCAP, BMI and SESAC, which each represent different catalogs of songs. Mechanical rights in the U.S. are licensed primarily through The Harry Fox Agency, which acts as a licensing agent for music publishers, but mechanical rights in many songs must be obtained from individual publishers or songwriters, who can be challenging to locate and communicate with.

This is not the first time Spotify has been admonished for failing to implement adequate procedures to notify song proprietors of Spotify’s intention to add their songs to its playlist. In 2016, Spotify reached a $30 million settlement with the National Music Publishers’ Association (NMPA) for unpaid mechanical royalties and Spotify recently settled a class action suit by a group of songwriters led by David Lowery for $43.3 million. The largest members of the NMPA are the major music publishing companies, whose parent companies own a combined 18% of Spotify, according to the recent lawsuits. The lawsuits claim the three major U.S. record companies stand to make $700 million each if Spotify pursues a public offering (which is anticipated this year), thus fostering speculation those companies settled the lawsuits to protect that windfall.

In those prior lawsuits, Spotify emphasized the difficulty of identifying and contacting each song publisher and the company agreed in the settlements to “work collaboratively to improve the gathering and collecting of information about composition owners to help ensure those owners are paid their royalties in the future.” The complaints in the recent lawsuits claim that Spotify has “built no infrastructure capable of collecting compositional information and failed to ask for such information.”

In most countries outside the U.S., mechanical rights are licensed via a centralized collective licensing organization, which represents all the song owners in the particular country. Even if music publishers license their songs directly to a streaming service, the mechanical rights “society” in their country usually handles the administration associated with collecting and paying out the royalties due. In the U.S., there is no industry-wide or national organization to assist with processing mechanical licensing and collecting mechanical royalties

Although the U.S. music industry has acknowledged that a global music rights database is necessary, no one has yet made it a reality. Everyone seems to agree that songwriters and music publishers should be paid properly when their songs are streamed, and some argue it is the responsibility of the well-financed streaming firms to design a system to identify songs and make appropriate payments. Others argue the music publishing establishment should create a industry-wide system for identification and payment.

If the U.S. were to adopt the nationwide collective licensing model utilized in almost all other countries and create a centralized mechanical licensing entity, the recent lawsuits against Spotify would never have been necessary. Unfortunately, that is not likely to occur due to the entrenched and vested business interests involved, and the reluctance to collaborate and share databases of song information, which many consider to be proprietary.

Copyright: <a href=’https://www.123rf.com/profile_pasta77′>pasta77 / 123RF Stock Photo</a>

An ugly dispute between two reality stars has the potential to create precedent on the responsibility of television networks for posts by its talent on social media sites.

The protagonists are Mykel Hawke and Joseph Teti, both veterans of Special Forces. The seeds were sown when Teti, who was Hawke’s former employee, was given a show by Discovery Network called Dual Survival. Hawke already had a similar show on Discovery, entitled Man, Woman, Wild. Things only got worse after Hawke’s show was cancelled. The parties traded attacks on Facebook. Hawke accused Teti of complicity in a fatal helicopter crash and of misrepresenting his military service. Teti questioned Hawke’s mental health. Litigation ensued.

The battle ultimately involved four juridsictions. In Texas, Hawke sought a protective order against Teti’s alleged stalking. Teti’s riposte was to file a defamation action in North Carolina. Hawke counterattacked in South Carolina, bringing his own suit for defamation and tortious interference. In a creative move, Hawke’s lawyers named Discovery as a co-defendant in this action. Their theory is that Discovery is responsible for the social media posts of its employee Teti. The complaint alleges that Discovery “failed to take action to stop the defamatory statements from being posted online,” and failed to “adequately train personnel in public interaction, when and what types of communications employees should say publicly and/or put into print.”

Teti was dismissed from the South Carolina suit for lack of personal jurisdiction. Discovery, now sole defendant, moved for summary judgment and subsequently removed the case to federal court in Maryland.

Discovery’s first argument for summary judgment goes to the underlying alleged defamation: simply that the facts will not support a claim that Teti’s statements meet the legal standard for defamation.

The network moves on to rebut its alleged direct liability for the posts. It says that in response to Hawke’s complaints about Teti’s posts on the official Dual Survival Facebook page, it applied a filter to block any posts containing Hawke’s name. It also claims that Hawke has been unable to state with certainty whether particular statements were made on an official page or on Teti’s personal social media accounts. Discovery also denies that it ever directed or encouraged Teti to say the things he did.

As far as vicarious liability goes, Discovery argues that Teti’s remarks were “outside the course and scope of his duties at Discovery.” It asserts that Teti made the posts entirely on his own, on his own time, not on the set, and using his own internet connection and devices.

Discovery also makes an interesting statutory argument under Section 230 of the Communications Decency Act. That section provides that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” It is due to this section that, for example, it would likely have been futile for Hawke to sue Facebook itself for the contents of the Dual Survival Facebook page. Discovery argues that by creating and administering the page on which third parties could share content, it should be likewise regarded as an “interactive computer service” with complete immunity from Hawke’s causes of action.

In just a few short years, social media have transformed our world. Cases such as this one have the potential to establish the legal principles that will guide parties’  behavior going forward.