US collecting society The MLC has asked the courts to reject an attempt by Spotify to dismiss its lawsuit over the big bundling discount dispute.
We already know the arguments of both sides in this bust up and the latest court filing from The MLC doesn’t add anything to that. However, the collecting society insists that the complaints set out in its lawsuit cannot, as Spotify claims, be dismissed at this stage without full scrutiny.
The MLC says that, in the motion it filed last month, Spotify failed to meet the legal standard necessary for dismissal, first by “disregarding or mischaracterising well-pleaded allegations”, then by “relying on new purported facts outside of the complaint”, and finally by “making merits-based arguments concerning mixed questions of law and fact that are inappropriate for adjudication at this preliminary stage of this case”.
This dispute centres on Spotify reclassifying its premium subscription product in the American market as a music + audiobooks bundle, so that it can rely on a bundling discount in the compulsory licence that covers the mechanical rights in songs in the US. In practical terms, that means it pays less to music publishers and songwriters each month.
In order to qualify for the bundling discount, Spotify needs to show that the fifteen hours of audiobooks access that now comes with a premium subscription has more than ‘token value’. The MLC, which administers the compulsory licence, argues that, because most Spotify subscribers signed up for a music subscription, the audiobooks access does not have more than token value.
Plus, because audiobooks access was added to the main premium subscription product at no extra cost months before Spotify launched a standalone audiobooks subscription product, the main premium product isn't a true bundle.
Spotify obviously strongly disputes those claims, and the MLC expects to have to address the streaming service’s counterclaims as the litigation goes through the motions. However, it says, the issues it has raised in its lawsuit are complex and cannot be dismissed without the facts being presented by both sides being properly considered.
When it comes to the question as to whether or not the audiobooks access has more than token value, Spotify argues that the court can “decide that question” as “a matter of law”. Even though Spotify admits “the interpretation of the relevant regulatory language is a question of first impression”, which is to say the question hasn’t been considered in court before.
“That is wrong”, The MLC states. “The question of token value is inherently a question of fact that turns on an assessment of the value of the audiobook content access at issue to Spotify’s Premium subscribers and whether that value meets or exceeds the as yet legally undetermined threshold” under the compulsory licence. Therefore the MLC’s lawsuit should be allowed to proceed so that that assessment can take place.
Citing legal precedent, the MLC adds that - when considering a motion for dismissal - the court is obliged to accept that the “factual allegations” it set out in its lawsuit are true and to “draw all reasonable inferences in the MLC’s favour”.
Given that obligation, there are “at a minimum, disputed issues of fact” as to whether Spotify incorrectly defined its premium subscription as a bundle and therefore underpaid what is due to the MLC. “Those questions cannot be resolved at this stage”, the collecting society concludes.