Eminem Sues Spotify!  At least that’s what one might take away from headlines regarding a copyright case that could find its way to the Supreme Court next year.  But the reality of this latest in a string of copyright infringement suits against Spotify, is that the artist Eminem isn’t even involved. His publisher, and partial composer of the #1 hit single, “Lose Yourself,” is filing the lawsuit independently from Eminem.  This is just a first indication of the complexity of copyright law in the digital arts, and tells an interesting story for those looking to protect IP in the digital arts 

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Setting the Stage

To set the stage for this face-off between musical powerhouses, let’s look at the two primary licenses that artists, publishers, and streaming services deal with. 

Production companies, those recording and producing a song, sell a “master license” to streaming services. There may be many master licenses that a streaming service has to choose between, since each different recording of a song over the years requires a different master license to be streamed.  If Spotify streams the original studio recording of Maroon 5’s Memories, one master license is required, while a second is required if a live performance version at Red Rocks is streamed.  If Spotify streams a cover band version of this song, a third master license would be needed for that instance.

Despite the number of master licenses, they are typically owned by a large production company like Sony, Universal, or Warner Brothers, and are therefore straightforward to track and pay for, so there’s generally not a lot of litigation surrounding these. 

A second type of license that streaming services must obtain for every song that is streamed, is a “Mechanical License,” and these are more complicated, harder to track, and the reason that Spotify could find itself before the Supremes. Mechanical licenses arose during the age of player pianos, when artists first had to start seeking payment for a machine rather than a human performing their songs.  Additionally, mechanical licenses must be sought from a song’s composer and must include anyone who created music and/or lyrics. Quite a few different people can be involved in the composition of a song and sometimes those people don’t even include the artists themselves. For instance, Eminem’s Lose Yourself has three composers including Eminem.  Understandably, the number of entities that may own a Mechanical license tends to be far greater than the number of Master rights owners, and the Mechanical rights owners tend to be smaller entities.  This makes tracking down owners of Mechanical licenses much harder.   

If you’re a streaming service with 20 million songs, many of which are different artist’s renditions of the same original song, and many of those artists are smaller names with maybe a handful of songs, it becomes very challenging to figure out who you might pay for the mechanical licenses. You may even have to calculate a split in a license between the various composers involved. 

Because of this potential confusion, most of the litigation surrounding streaming services over the past decade has dealt with mechanical licenses, not master licenses. 

How Did We Get Here?

Over the years, Spotify has been sued many times for copyright infringement because they’ve allegedly failed to pay on mechanical licenses. In almost every case, they’ve settled — for hundreds of millions of dollars at times. It’s been one of their biggest challenges, and until last year threatened their IPO. Since there was never a case that made it past settlement, we don’t have conclusive proof that Spotify fails to pay composers on mechanical licenses.  However, given the number and size of the settlements, the facts that emerged in those cases, as well as the technical challenges of paying mechanical licenses, there’s a good chance that they have been failing to pay some, if not many, mechanical licenses.

One of these lawsuits occurred several years ago, with the National Music Publishers Association (NMPA). The complaint of the lawsuit stated that, stretching back to 2011, Spotify had racked up between $60 million and $120 million in unpaid songwriter royalties. Spotify settled the case before trial. But, as a result of that settlement, several very large publishers became major equity holders in Spotify, who along with the NMPA, drafted the Music Modernization Act (MMA), which passed in 2018 and essentially made it impossible to sue Spotify. 

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Which brings us to the lawsuit between Eight Mile Style and Spotify. Eight Mile Style was not part of the drafting of the Music Modernization Act, which allows Spotify to avoid being sued for copyright infringement if it takes certain steps relative to songs that it cannot match to a mechanical license holder (e.g., set aside a stipulated licensing fee in the event that the license holder can later be found). Meanwhile, Eight Mile Style is trying to claim that the MMA is unconstitutional and should be tossed out, while also saying that Spotify failed to follow the MMA’s guidelines when it came to Eminem’s songs.   

If Eight Mile Style Wins the Lawsuit: Part 1

Regarding the first part of the allegation and the MMA’s constitutional standing, the question is, was there a due process violation in Congress basically taking away the right of composers and publishers to sue for infringement damages? 

If the MMA is dissolved, then composers will once again be looking at the ability to recover statutory damages of up to $150,000 per infringed song, plus attorney fees. 

If Eight Mile Style Wins the Lawsuit: Part 2

The other side of the lawsuit is the determination of whether or not Spotify jumped through the required hoops to avoid a copyright lawsuit under the MMA. 

The MMA, in general, creates a big database where publishers can put their songs, making it easier for Spotify and other streaming services to notify the owner of a song that they streamed that song and intend to pay royalties. At its core, the MMA aims to solve a very real problem. There are tens of millions of songs out there with different composers, songwriters and versions. Finding the composers of each version can be really difficult. The MMA’s database sought to simplify the issue. 

Spotify farms out the license matching work to a third party, but the biggest player in this third-party matching industry does not have a high success rate for making matches.  Despite being one of the largest-used companies, court records show that it is only matching about 15% of the songs in the Spotify catalogue! 

When the matching company can’t perform the match, then the MMA grants Spotify a “compulsory license” from the unknown composer. Spotify then sets aside the stipulated fee for this license. Unfortunately, this means that the composer only receives the stipulated fee–a constant across all artists and songs, regardless of the song’s popularity.  In other words, when the match finally occurs, the artist has no chance to negotiate for the royalty that a high-value song may be worth. And if Spotify is unable to make a match, it automatically gets to pay this stipulated, likely lower royalty rate, than if it had made the match and had to enter negotiations with the composer. So, there is a clear benefit to streaming services failing to match high-value songs.

Eight Mile Style is alleging that the third-party company did not correctly match Eminem’s songs to Eight Mile Style on behalf of Spotify, instead indicating that many of Eminem’s songs could not be matched, and thereby enabling Spotify to take a compulsory, and relatively inexpensive license, for those songs.  Eight Mile Style argues that this failure to match one of the most well-known songs in decades is intentional. But is that the case? Are they really incompetent? Or is there a technical issue? Does the entire system need a fix?

The Top Take Away For Those in the Music Industry

We’ll have to wait to see what happens with this case, but if the MMA is struck down, be prepared to go back to the old way of doing things. If it’s not, don’t just assume that the MMA is working for your benefit. As Eight Mile Style has shown, even wildly popular songs aren’t getting matched and royalties are going unpaid. You really have to watch your back and make sure that Spotify and other streaming services are following the rules.