Both Pandora and collecting society The MLC submitted strongly worded motions to the courts in Tennessee last week in an ongoing dispute over what royalties the streaming service should be paying. Both sides want the judge to now rule in their favour via summary judgement.
According to Pandora’s submission, The MLC is both “exploiting” and “abusing” its position as an “administrative middleman” to “overturn two decades of industry practice” through unwarranted litigation and “force upon Pandora a novel and incorrect interpretation of the Copyright Act”.
In its filing, The MLC insists that “the volume of evidence” it has submitted is “far more than necessary” to secure a summary judgement in its favour, and yet Pandora continues to “pour resources” into “litigating a refusal to accept the obvious”, relying on “semantic defences” and “red herrings”.
The legal battle centres on what royalties Pandora needs to pay the music industry on its main personalised radio service. With personalised radio, users get a personalised stream of music, but cannot pick specific tracks or albums on-demand.
In the US, it is generally agreed that personalised radio services - which are classified as ‘non-interactive’ - only exploit the ‘performing rights’ in music. Which means - on the songs side - they need licences from performing rights organisations like BMI and ASCAP, but not from the MLC, which administers the separate mechanical rights in songs.
But as soon as a user has on-demand access to music - making it ‘interactive’ - both performing and mechanical rights are being exploited, which means a service like Spotify needs licences from BMI/ASCAP and the MLC.
Pandora does offer a fully on-demand streaming product, for which it has an MLC licence. It also allows users of its free personalised radio service to access 30 minutes of on-demand functionality in return for watching an advert. When that happens, it pays MLC royalties as well as BMI/ASCAP royalties.
However, the MLC argues that because users of the personalised radio service can access that extra functionality at any time, the entire service should be classified as interactive, meaning mechanical royalties should be paid on every stream, including those delivered in a non-interactive way.
Ultimately the dispute comes down to how US copyright law defines ‘interactive’ and ‘non-interaction’ services, and how those definitions should be applied when a single service offers both. Pandora and The MLC are adamant that their respective interpretations of the law are correct.
Pandora also more generally criticises The MLC, which exists to administer the compulsory mechanical rights licence that is available to streaming services under US law. The terms of that licence are put in place by the Copyright Royalty Board, with The MLC processing the royalties that are then due and paying the money on to the relevant songwriters and music publishers.
In its latest submission, Pandora says that, with this litigation, The MLC is stepping beyond its remit as an royalty administrator and trying to “assume the role of regulatory enforcer”.
And that, Pandora continues, is unconstitutional, no less, because it means “a private, unaccountable, non-rightsholder entity” is seeking to become “a roving enforcer of the Copyright Act with no oversight or supervision from any entity of the federal government”.
The MLC does have the right in law to sue users of music who do not have the necessary mechanical rights licences. This came up in a recent legal battle between Pandora’s owner Sirius and another US collecting society, SoundExchange.
In that litigation, Sirius successfully argued that SoundExchange couldn’t pursue lawsuits over allegedly unpaid royalties because it wasn’t explicitly granted that power in copyright law, unlike The MLC.
In its filing, The MLC stresses that part of its role is to “engage in legal and other efforts to enforce rights and obligations” under the compulsory licence, efforts which, it adds, “include this action”.
Whether Pandora can convince the court that the MLC’s right to file lawsuits doesn’t extend to disputes like this one - over how the Copyright Act should be interpreted - remains to be seen.