The judge who ruled on the big legal battle between Eminem’s publisher and Spotify has declined to reconsider a side dispute involving Kobalt. As part of last month’s judgement in favour of Spotify, the judge said Kobalt had an obligation to indemnify the streaming service in relation to the litigation, meaning it would have to cover some of Spotify’s legal costs. Despite Kobalt’s best efforts, that part of the judgement stands, but can now be taken to appeal.
At the heart of this dispute was the allegation by publisher Eight Mile Style that Spotify streamed Eminem’s songs without a mechanical rights licence. Kobalt got dragged into the litigation because it provided rights administration services to Eight Mile Style.
Spotify argued that a 2016 licensing agreement it had with Kobalt incorrectly implied it covered the mechanical rights in Eminem’s songs, even though it did not, and therefore Kobalt should indemnify Spotify in relation to this litigation. Judge Aleta A Trauger agreed and then, last month, Spotify filed a motion for damages, asking Kobalt to cover some of its legal costs.
Kobalt, keen to not have to pay up, asked the judge to reconsider Spotify’s claims, arguing they relied on a misreading of the 2016 agreement and a misunderstanding of industry practice.
However, Trauger concluded last week that “Kobalt’s arguments for reconsideration” simply “restate arguments” made earlier in the case, meaning reconsideration is not necessary. But there are grounds for Kobalt to appeal. To that end, she paused the new dispute over how much money Kobalt should pay Spotify so that that appeal can go ahead.
Eight Mile Style sued Spotify for failing to properly license the mechanical rights in Eminem’s music in the US in the era before the Music Modernization Act and the creation of collecting society the MLC. The streaming service failed to fulfill the administrative requirements of the compulsory licence that covers mechanical rights in the US, meaning the songs were unlicensed and Spotify infringed Eight Mile Style's copyrights.
Spotify knew Kobalt provided administration services to Eight Mile Style, and its 2016 agreement with Kobalt said it granted “mechanical licensing rights to all compositions” the music rights company “administered”. However, it didn’t cover the Eight Mile Style songs, even though Kobalt administered them. Therefore, Spotify, argued, Kobalt should indemnify it for the subsequent copyright infringement claim.
As the wider case was going through the motions, there was an only slightly tedious debate about what “administered” meant in the context of the 2016 agreement, but the judge ultimately sided with Spotify, meaning Kobalt had an indemnity obligation.
The judge also dismissed Eight Mile Style’s core copyright infringement claim, despite concluding that Spotify’s management of song royalties was “seriously flawed”. That reduced the scale of Kobalt’s indemnity obligation. But Spotify nevertheless followed up with a demand for damages, basically that Kobalt cover some of its legal costs.
Keen not to have to pay that bill, Kobalt asked Trauger to reconsider her ruling, reopening the debate about how “administered” should be defined. In a filing last week, Kobalt argued that, according to Trauger’s ruling, “publishers would need to identify and exclude, on an ongoing basis, all compositions as to which the publisher has no US mechanical licensing authority but does have some other administration function”.
This would be “burdensome” and “at odds with the expectations and practices of both publishers and licensees in the music industry”, it added.
Actually, most licensees would almost certainly like there to be much more transparency on the songs side regarding which specific rights any one publisher and collecting society is licensing at any one time, though it is true they probably don't expect it.
Either way, with no new arguments provided, Trauger said she wouldn’t reconsider any of that. Instead, Kobalt should take the matter to appeal.
However, because there is now a new dispute between Spotify and Kobalt over what attorney costs should be covered - and even how that dispute should be settled - there were some extra technicalities to address in order for an appeal to begin.
Trauger has now dealt with those technicalities, granting Kobalt the permission it needed to proceed with its appeal. Meanwhile, she paused any payment to Spotify by denying its motion for damages, but “without prejudice to seeking such damages at a later date”.