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Spotify fails to have Eminem’s big mechanicals lawsuit dismissed on jurisdiction grounds
By Chris Cooke | Published on Friday 3 April 2020
A court in Nashville has declined to dismiss Eminem’s big mechanical royalties lawsuit against Spotify on jurisdiction grounds. The judge overseeing the case said that, while it would clearly be more convenient for Spotify to fight the litigation in New York, that’s no reason to move the case to a court in that state. In the digital domain music is everywhere and, when disputes arise over music rights, they have to be based somewhere, the court noted, giving the green light for the lawsuit to proceed in Tennessee.
Eminem’s publishing company Eight Mile Style sued Spotify last August over unpaid mechanical royalties. The arguments in the lawsuit are very familiar, having been presented by numerous songwriters and music publishers before. Streams exploit the mechanical rights in songs. And while a compulsory licence covers mechanical rights under US copyright law, that only applies if a licensee sends certain paperwork and payment to a copyright owner. Spotify didn’t in relation to an assortment of Eminem songs, therefore by allowing those songs to stream in the US the company is liable for copyright infringement.
Many streaming services have been sued on this point in the US, although the Spotify cases always get the most press. The digital companies argue that the problem is they don’t know what song is contained in any one recording let alone who controls the rights in that song. In other countries this isn’t a problem because the mechanical right collecting societies take responsibility for distributing any royalties not claimed by publishers that have direct deals with the streaming services. But in the US there is no such collecting society.
Or there wasn’t. The 2018 Music Modernization Act kickstarted the process of setting up an American mechanical rights society, that being the Music Licensing Collective, or the MLC.
In the negotiations that led to the MMA, the streaming services agreed to pay for the setting up and running of that society – which will be controlled by the music publishing sector – on the condition the MLC will provide the kind of ‘mop-up’ licence for mechanical rights issued by other societies in other countries. The deal that led to the MMA also said that the streaming services couldn’t be sued over unpaid mechanical royalties after 1 Jan 2019.
But that didn’t stop Eight Mile Style going legal last summer. Noting the limitation the MMA put on such litigation, Eminem’s lawsuit claimed that Spotify wasn’t complying with the obligations set out in the MMA to avoid new liability over unpaid mechanicals. Plus, it argued that the limitation on new legal action over past unpaid mechanical royalties that was a crucial part of the MMA was, in fact, unconstitutional.
Spotify has called Eight Mile Style’s lawsuit “meritless”. However, its initial response to the new litigation was to try to have the case dismissed on jurisdiction grounds, arguing that Nashville wasn’t an appropriate place to fight this legal battle given Eight Mile Style is based in Detroit and Spotify’s main US base is in New York. If the court wouldn’t dismiss the case outright, it should at least transfer it to New York State.
In subsequent submissions backing up that argument, Spotify conceded that it had an office in Nashville, but said that only twelve people worked there, and none of them were in any way involved in things like mechanical rights licensing. Most of the people who would have knowledge and information relevant to this dispute were in New York.
Eight Mile Style countered that Spotify has lots of users in Nashville and the state of Tennessee, and that’s what matters. Allegedly unlicensed Eminem songs were streamed in the state to citizens of Tennessee who paid for a subscription.
Plus, Nashville was more convenient for Detroit-based Eight Mile Style than New York. And the publisher had picked the Tennessee courts because previous similar cases involving Spotify had been filed there, and the streaming service had never previously raised jurisdiction concerns.
Having heard all those arguments, the court sided with Team Eminem. “The court has no doubt that litigating this case in Spotify’s home district would be easier for Spotify”, the judge wrote in her judgement on this issue.
However, she said, past precedent stated that “transfer of venue is inappropriate where it would serve only to transfer the inconvenience from one party to the other”. And “the plaintiffs elected not to proceed in New York for reasons including their reasonable belief that doing so would be more expensive than litigating in Nashville, and that decision is entitled to deference”.
“Moreover”, she continued, “the plaintiffs have demonstrated that no district would be totally free of inconvenience, including inconvenience related to obtaining testimony from out-of-district witnesses”.
Musing more generally about any one court’s jurisdiction in disputes involving musical streams, she went on: “Copyrighted works such as musical compositions are capable of electronically traversing the Earth in seconds; it is, therefore, unavoidable that copyright litigation often involves a wide geographic scope of parties, witnesses, and discovery”.
“Every instance of litigation, however, has to be based somewhere”, she concluded, “and the plaintiffs’ selection of the Middle District Of Tennessee is sufficiently appropriate to avoid a transfer”.
This all means that Spotify will have to take a day trip to Nashville to explain why it believes Eminem’s mechanicals lawsuit to be “meritless”. Once day trips beyond your local shop are a thing again, of course.
