Murky Licensing Evident As Spotify Settles After Failure To Obtain Mechanical Licenses


3_FW-141_AMThe recent conclusion of Melisa Ferrick and David Lowery’s class action lawsuit against Spotify served to highlight the swampy mess that is the world of music licensing today, as well as show that copyright law has done a poor job of adapting to technological advancements in the music industry, writes Mike Masnick of Techdirt.

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Guest post by Mike Masnick of Techdirt

A year and a half ago we wrote about a lawsuit, filed by musician/songwriter/Techdirt-hater (with a few perhaps surprising exceptions) David Lowery against Spotify, for failing to pay mechanical licenses. As we noted at the time, the more interesting thing to us beyond the lawsuit itself was how it demonstrated what an amazing clusterfuck music licensing is. That’s because copyright law has not done a very good job keeping up with the times as technology changes (understatement alert).

Basically, each time a new technology undermines the way licensing worked in the past, Congress ends up duct-taping on some new kind of licensing regime. There are a bunch currently, nearly all of which can be traced back to different technological innovations from the past century and a half. And, then, the internet came along. And it wasn’t entirely clear how the licensing regimes of things like radio, television, player pianos, and satellite radio fit into the internet. And, some seem to think the answer is: they ALL apply. At the very least, I don’t envy the “licensing” team at the various music tech companies.

In our initial post, we noted that the issue seemed so complex that after talking to half-a-dozen copyright lawyers, no two could agree on what was actually happening with the lawsuit, or even if it was a legitimate case. The underlying issue had to do with mechanical licensing (a type of licensing which, as it’s name 2suggests, goes all the way back to the early days of “mechanical” reproduction of compositions), and we were wondering how it could possibly be that a company as big as Spotify, whose entire story rested on the idea that it had properly negotiated licenses, had somehow failed to properly secure mechanical licenses. And, yet, a few months later, we noted that the Harry Fox Agency, an organization that many companies, including Spotify, Apple and others, use to handle these kinds of licenses, appeared to be scrambling to send out notices of intent (NOIs), which was something that should have happened way earlier.

After Lowery’s lawsuit got combined with another similar lawsuit, it’s now been announced that Spotify has settled the combined lawsuit and created a $43.4 million fund to pay for the mechanical licenses it failed to obtain properly in the first place. Now, there are still some who argue that mechanical licenses shouldn’t even be necessary for a streaming service, but it doesn’t appear that anyone has the desire to fight that one out in court, and it’s understandable why. Doing so would almost certainly lead to any service making that argument getting slammed by musicians for trying to avoid paying songwriters.

Either way, Spotify has paid its way out of this and I remain baffled by the fact that it hadn’t just done the right thing in the first place — though I’m still curious if the real culprit here is the Harry Fox Agency, and if Spotify and HFA have had a long conversation or two about how this all came down. The real lesson in all of this, though, is that music licensing continues to be a complete murky, swampy mess, almost designed to make it that much harder for licensed music services to exist. While Congress dithers with silly ideas about “moving” the Copyright Office, if it wasn’t to actually reform copyright laws, it should start by fixing and modernizing the crazy and overly complex licensing regimes.