Universal Music and Sony Music are very keen indeed to see Warner Music’s licensing agreement with music AI company Suno. And not just because they’re nosey and really want to know how their rival’s Suno deal is working, although they almost certainly are and do.
But, they argue, having access to that deal is necessary as the two major record companies plough on with their copyright lawsuit against the AI business. That’s because Universal and Sony reckon that Suno entering into a licensing deal with Warner destroys one of its big arguments in that ongoing legal battle - which is that no viable market exists for licensing AI training.
In a filing with the courts in Massachusetts last week, Universal and Sony’s lawyers write, “for nearly two years, Suno has supported its fair use defence in this litigation by arguing that no viable market exists for licensing sound recordings as training data for generative AI models”.
And yet, they continue, in November last year, “Suno entered into the very type of agreement it claims is not feasible”, in the shape of its licensing deal with Warner.
The two majors potentially raise a good point here: if there’s no market for music AI licensing deals, how was Suno able to come to an agreement with Warner? Whether that argument cuts the mustard with the judge overseeing the case is another thing entirely.
Magistrate Judge Paul G Levenson - who is in charge of the discovery process in this legal battle, where participating parties exchange documents - hasn’t yet been persuaded that that potentially good point justifies Universal and Sony getting to scrutinise the Warner/Suno deal.
Seeking to convince Levinson of the strength of their argument, the two biggest majors say that a failure to force disclosure of the Warner/Suno deal would allow the AI company to “argue that no licensing market exists while simultaneously shielding from discovery the very agreement that proves the existence of, and Suno's participation in, that market”.
The majors’ potentially good point could also backfire - in that it might discourage other AI companies who are simultaneously negotiating music licences while also fighting label lawsuits from doing a deal. That’s because, if Universal and Sony’s argument prevails, it could set a precedent that means an AI company signing a deal with one label might weaken its case in any ongoing legal battles with other labels.
Universal and Sony may believe there’s no real risk here, because Suno’s licensing deal with Warner should scupper the “no viable market exists” argument if and when it’s presented by any other AI start-up. So if they can see that deal and prove an AI training market exists in this case, other AI companies will already have a weaker argument in any future lawsuits, oblivious of any deals they enter into.
Except the same could be said about Universal’s licensing deal with Suno rival Udio, which Universal’s lawyers have easy access to without Levenson’s assistance, and which also surely proves a licensing market for AI training exists. So why not just use that deal to counter Suno’s “no viable market” claim? Maybe Universal and Sony are just being very nosey.
Originally all three major record companies were involved in the lawsuit against Suno, which trained its generative AI model with millions of tracks scraped off YouTube without any licences from the music industry. Like Udio, which trained its model the same way, Suno argues that AI training constitutes fair use under US copyright law, which means it doesn’t actually need licences for the music it has used.
However, there are still a lot of grey areas in US law when it comes to the copyright obligations of AI companies. And while it remains legally unclear in what circumstances - if any - AI training is fair use, copyright owning companies like the major labels are able to exploit that legal uncertainty to force AI businesses to the negotiating table.
Because if it turns out AI training is not fair use and companies like Suno and Udio have infringed the copyright in millions of tracks, that could result in them being forced to pay eye-wateringly huge sums in damages, estimated to be hundreds of billions of dollars, or even trillions of dollars.
Which means it is easier and potentially commercially safer for AI companies to strike licensing deals now for a few billion dollars rather than take the risk of the courts awarding much more costly damages in the future. Even if there’s a chance the AI platform’s fair use argument could ultimately win in court giving them a free ride. Not least because it could be years before the various lawsuits are definitively decided.
All three majors were in licensing talks with Suno at one point, but so far only Warner has done a deal. It’s been reported that negotiations between Suno and Universal and Sony have reached a stalemate.
That’s because both majors are adamant that when they license AI platforms, any AI-generated music must be kept within the so-called ‘walled garden’ - inside the app in which the music was generated - rather than allowing tracks to be exported and then distributed to streaming services like Spotify. Udio agreed to that limitation, Suno so far has not.
It’s not clear if Warner has an entirely different AI licensing strategy or if there was something else Suno offered that got it to withdraw from the major label litigation and enter into a licensing deal.
Maybe the smaller major was just lured by a speedy pay day from a deal that also allowed it to offload gigs listing platform Songkick, which had been part of a since abandoned content and media division Warner was building at one point, and which transferred to Suno as part of its deal.
If the court forced Suno to share its Warner deal, Universal and Sony, at least, might get some clarity on why Suno and Warner entered into a partnership, even though Suno is clearly not willing to accept the kind of restrictions Universal wants put in place by music AI start-ups. Although, of course, that’s not the official reason why they’d like to see a copy of the agreement.
Levenson formally declined to force Suno to share the Warner deal as part of the discovery process in the Universal/Sony lawsuit earlier this month, concluding that that document’s “relevance is marginal” to the ongoing dispute.
However, Universal and Sony argue, that was partly because Suno has positioned its Warner deal as just a settlement of its legal battle with the music company.
But it wasn’t just a settlement of the past dispute, it was also a licensing deal. And when that deal was announced, Suno’s press release didn’t even mention any legal settlement, and instead bragged about having secured “a new partnership” with the music industry.
In their latest legal filing, Universal and Sony urge Levenson to change his position and force Suno to share its Warner agreement. And if he’s not willing to do that then, say the two remaining majors, Suno should be “precluded from arguing that no viable market exists for licensing sound recordings as training data for generative AI models”.