A US judge has made something of a bombshell ruling in a $150,000 royalty dispute between collecting society SoundExchange and American satellite broadcaster Sirius.
The specifics of the royalty dispute itself are actually irrelevant, because Judge Naomi Reice Buchwald has thrown the case out on the basis that SoundExchange doesn’t have the power to file litigation in the federal courts on behalf of the recording artists and record labels that make up its membership. Which is a bit of a problem given SoundExchange will almost certainly want to file more litigation in the future.
Despite the protestations of the music industry, Buchwald concludes that the section of US copyright law that gives SoundExchange the power to collect royalties from the digital performance of recorded music “fails to confer” onto the society, “either expressly or impliedly, the authority to commence a legal action”. And we have to assume, she adds, that that was the deliberate intent of Congress.
There is “dearth of evidence, let alone substantial evidence for us to infer that Congress’s omission of any legal authority for SoundExchange” to pursue litigation was “anything but deliberate”, the judge goes on. And “absent such evidence”, it would be “wholly improper” for the court to grant the collecting society powers that Congress did not intend for it to have.
“Respectfully, SoundExchange firmly believes Judge Buchwald’s interpretation is entirely wrong on the law”, the rights organisation unsurprisingly says in a statement to Billboard. “Despite this unfortunate and incorrect ruling, it is an established and long-accepted fact that SoundExchange has the right to sue negligent providers to compel compliance and payment of mandated royalty fees”.
Sirius relies on the compulsory licence available under US copyright law that covers online and satellite broadcasting, meaning it can make use of recorded music without getting any bespoke licences from the record industry, providing it pays royalties to SoundExchange at rates set by the US Copyright Royalty Board. Which it does.
However, there was a dispute over how Sirius should be calculating the royalties it owes, mainly because the CRB rules differ for online and satellite services, and Sirius has some products that combine the two. SoundExchange argued that Sirius was interpreting the rules wrong and as a result not paying everything that was due, prompting its lawsuit in 2023.
As the case rumbled on, Sirius came up with its argument that SoundExchange didn’t have the right to file a lawsuit. It pointed out that the section of copyright law that provides the compulsory licence and defines the organisation that will administer that licence - ie SoundExchange - doesn’t specifically state that that organisation has the power to file a lawsuit if there is a dispute with a licensee. Which is true, it doesn’t.
However, SoundExchange - and various other music industry organisations - argued that that power could and should be implied by copyright law. Moreover, it has filed lawsuits before without any issues in the courts. And if SoundExchange can’t file lawsuits to enforce its members’ rights, that’s going to make enforcing those rights “unwieldy” and “unworkable”, with “absurd” results.
But Buchwald rejected all those arguments. Core to her decision is what copyright law says about the other compulsory licence covering music rights, that being the licence that covers the mechanical rights in songs and compositions.
When defining the organisation that administers that licence - The MLC - the Copyright Act explicitly says that that collecting society can enforce the rights it manages through the courts. Sirius insisted that, given the MLC’s power to sue was clearly stated in law, if Congress had intended for SoundExchange to also have that power, it would have said so.
Trying to find a reason for why the judge should nevertheless conclude that Congress had still implied that it has the right to sue, SoundExchange noted that copyright law does say that it can deduct the cost of “enforcing” its members’ rights from the royalties it collects. But Buchwald said that “enforcement” didn't necessarily mean litigation.
And while Buchwald’s conclusion that SoundExchange can’t pursue litigation may have “absurd” results, the judge basically says that isn’t grounds for her to infer into law something Congress did not intend. Basically, if Congress intends to do something “absurd”, then the absurdity should stand.
To be fair to the music industry, Buchwald’s ruling will make it much more complex for artists and labels to enforce the royalty rights they have in law when recorded music is used by online or satellite radio. And if SoundExchange and its music industry allies can’t force a reversal of Buchwald’s conclusion on appeal, it might have to get Congress to address this issue.
SoundExchange says it is currently considering Buchwald’s judgement and reviewing its options.