AFM Refutes UMG & WMG Dismissal Arguments in Gen AI Lawsuit

Amid an intensifying AI licensing legal battle with Universal Music and Warner Music, the AFM is firing back against the majors’ dismissal arguments – including by maintaining that the relevant provision of their labor contract “is reasonably susceptible to more than one interpretation.”

This provision, Article 21(a) of the litigants’ current Sound Recording Labor Agreement (SRLA), has been front and center since the high-stakes lawsuit kicked off in June. And despite the presence of increasingly detailed arguments from each side, the case’s main points are simple enough.

In one corner, the American Federation of Musicians (AFM) is adamant that the defendants’ Suno and Udio licensing deals – both have partnered with Udio, only Warner Music’s licensed Suno, and Sony Music, having struck deals with neither, isn’t a party to the action – constitute a “new use” under Article 21(a).

Consequently, the AFM musicians who contributed to the now-licensed recordings are entitled to some of the resulting compensation, according to the action.

But the litigating majors don’t feel the same way, claiming, in brief, that the new-use provision doesn’t extend to mediums (like gen AI) that aren’t already covered by standalone agreements. Put differently, the AFM is allegedly entitled to “nothing” for the AI pacts in question.

Back to the newly filed dismissal opposition, the union opened by doubling down on its stance that the “ambiguous” provision “is reasonably susceptible to more than one interpretation, and the AFM’s reading is plausible, which is all that is required to survive a motion to dismiss.”

“At this stage, the AFM need not show that its interpretation is the most persuasive; it need only show that the contract is ambiguous and its reading is plausible,” the plaintiff continued.

It’d be easy to leave it at that, but doing so wouldn’t tell the full story; as mentioned, there’s a layer of complexity lurking beneath the suit’s straightforward surface.

Beginning with Article 21(a) itself, the text indicates that when a recording’s used “for a purpose not covered by this Agreement, the Company shall pay to those musicians who rendered services in the recording.”

And the compensation would arrive in “an amount equal to all payments…that would be required under the AFM agreement that would then be effective if the recording were originally made for the purpose set forth under that agreement.”

The AFM therefore acknowledged as “possible” the majors’ position that the contract depends on adjacent agreements (or the main SRLA) to supply rates for new uses – with no rates meaning no compensation is due.

However, “Article 21(a) can plausibly be read to impose a payment obligation triggered by the new use and to use existing AFM rates, or, at minimum, to leave the amount for later determination,” according to the union.

“[T]he second ‘purpose’ can refer to the agreement that sets the rate for the work, not the agreement covering the distribution platform. … A recording made for an AI platform’s use would still be a ‘phonograph record’ under the SRLA, and the musician who made it would still be covered.

“The SRLA therefore qualifies as ‘the AFM agreement that would then be effective’ for the musician’s work, even if no separate agreement governs the AI platform,” the AFM drove home.

Next, independent of this argument, adjacent usage agreement or not, the AFM specified that the provision “can plausibly be read to impose a mandatory obligation whenever a signatory company uses a covered recording for a purpose outside the SRLA.”

“Whether the referenced provision supplies the final measure presents at most a question of interpretation and damages, not a basis to erase liability at the pleading stage,” the plaintiff stated. “Defendants’ suggestion that a nonexistent agreement necessarily reduces the amount to zero simply assumes its construction of Article 21(a) and cannot justify dismissal.”

What about determining the allegedly due payments? Notwithstanding the “absence of a precise formula” for gen AI, “the SRLA contains objective measures—including session, streaming, and sampling rates—that can inform the calculation.”

Moreover, citing prior video game compensation rates, the AFM closed by underscoring the belief that Article 21(a) can address “emerging uses as a disputed interpretive question…as the general new-use provision” before precise terms are negotiated.

This is, of course, the condensed version of the AFM’s in-depth dismissal-motion retort, which further covers “downstream uses” like AI outputs’ on-demand streams. Now, all eyes are on the court’s decision – and the ongoing AI-focused negotiations concerning a fresh Sound Recording Labor Agreement.