U.S. District Judge Jon McCalla of the Western District of Tennessee recently issued an order denying motions made by interactive streaming music provider Spotify to dismiss a case including copyright infringement claims brought by independent music publisher and copyright administration company Bluewater Music Corporation. Judge McCalla’s order determined Bluewater has standing for all 2,142 music compositions it has asserted based on ownership or an exclusive license of the works. Given Bluewater is seeking the maximum statutory damages of $150,000 per infringed work, Judge McCalla’s order allows Bluewater to continue pursuing a maximum damages award of $321.3 million.
This case stems back to a complaint filed by Bluewater last July in which the music publisher alleged that Spotify didn’t have a license to reproduce or distribute the 2,142 music compositions in question; Bluewater claimed that Spotify had either never licensed the tracks or continued to use them after the licenses had expired. As early as 2011, Bluewater sent notifications about the compositions it represented to the Harry Fox Agency, which Spotify contracts for licensing compositions.
Spotify filed its motion to dismiss this case last December on Federal Rule of Civil Procedure 12(b)(1) grounds for lack of standing and Rule 12(b)(6) grounds for failure to state a claim. In arguing lack of standing, Spotify alleged that 1,372 musical compositions out of the total asserted by Bluewater are “merely administered” by Bluewater and that the music publisher has no ownership interest in those works. Further, to the extent that Bluewater didn’t allege the transfer of ownership of any exclusive rights which are provided for in Section 106 of the Copyright Act, Spotify alleged that Bluewater Music Services, a Bluewater company which was listed as a second plaintiff in the case, had no ownership interest in any of the asserted works.
Judge McCalla order found that, while both Bluewater and Spotify agreed that standing exists when rights under Section 106 are transferred, the parties disagreed as to the type of rights which were transferred to Bluewater pursuant to administration agreements between Bluewater and music creators. In examining those administration agreements, the court found that Bluewater was granted “the sole and exclusive right… …to print, publish, sell, dramatize, use and license the use of the Compositions… including but not limited to licenses for mechanical reproduction.” This language matched the “sole and exclusive right” language found in Section 106 and by itself, that right should give Bluewater standing.
Spotify had argued that language in the agreements regarding Bluewater not being able to execute any mechanical licenses with the exception of full statutory rate without prior written consent indicates that Bluewater didn’t have exclusive right to the compositions. Judge McCalla, however, found that Bluewater was still the only company that could provide licenses at or above the statutory value. Further, although Spotify alleged that Bluewater Music Services owns and administers nothing, the entity operates collectively with Bluewater Music Corporation and is a party to the administration agreements. Thus Spotify’s motions for lack of standing under Rule 12(b)(1) were denied.
Spotify’s Rule 12(b)(6) motion for failure to state a claim focuses on 23 music compositions asserted by Bluewater which listed “Pending” for the copyright registration number in an amended complaint. Citing to the 2010 decision issued in Middle Tennessee in Sony/ATV Music Publishing v. D.J. Miller Music Distributors, Spotify argued that the court had previously required plaintiffs to obtain copyright registrations before filing suit. Bluewater countered that dismissing 23 of the 2,142 musical compositions would be judicially inefficient, that the circuit court was split regarding this issue and that the U.S. Supreme Court recently granted writ in Fourth Estate Public Benefit Corp. v. Wall-Street.com which will ask the court to address whether a copyright infringement action can be taken after a work is filed with the Copyright Office but before the office approves the registration. Judge McCalla decided that, since the Supreme Court will decide the issue disputed by Spotify in its Rule 12(b)(6) motion, Spotify’s motion is denied without prejudice with permission to refile after the Supreme Court’s decision.
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