SiriusXM Beats SoundExchange Unpaid-Royalties Suit

Back in August 2023, SoundExchange sued SiriusXM for allegedly failing to pay millions in due royalties. Now, a federal judge has tossed the complaint, finding that the plaintiff lacks the statutory authority to sue.

Judge Naomi Reice Buchwald dismissed the suit and explained the decision across 33 detail-oriented pages. Regarding the courtroom confrontation’s considerable length: A venue transfer, evidently fruitless settlement talks, ultimately withdrawn counterclaims, and more made for a drawn-out legal process.

Keeping the focus on brass-tacks developments here, SiriusXM in October 2024 formally sought dismissal “because SoundExchange has no private right of action under the federal statute [Section 114 of the Copyright Act] it seeks to enforce.” And as mentioned, the presiding judge agreed with that position.

Importantly, however, the court emphasized that the newly issued decision pertains solely to Section 114 authority – not the underlying unpaid-royalty claims themselves. (Having originally sued for $150 million, SoundExchange claims that the amount due “has since climbed above $400 million.”)

Getting down to it, then, Judge Buchwald indicated it’s “undisputed that Section 114 lacks an explicit provision extending SoundExchange a right of action or the power to otherwise bring an action to litigate a royalty dispute.”

As the court sees things, Congress deliberately omitted the right to spearhead litigation. Section 115 expressly enables the MLC to sue, and Section 501 authorizes complaints on the part of “certain individuals and entities” – but not SoundExchange – “to combat infringement,” the judge maintained.

“In light of these examples,” Judge Buchwald laid out, “there is a dearth of evidence, let alone ‘substantial evidence,’ for us to infer that Congress’s omission of any legal authority for SoundExchange in Section 114 was anything but deliberate.”

(Congress also could have added this legal authority – like it did when establishing the mentioned MLC – under 2018’s Music Modernization Act, the judge claimed in more words.)

What about any implied legal authority? Long story short, the court found that “enforcement” – a non-profit collective may deduct reasonable costs incurred with “the licensing and enforcement of rights,” per the statute – could extend to audits, violation notices, and other steps besides lawsuits.

“So, without further clarification from Congress as to what ‘enforcement’ might mean in this context,” the court wrote, “it would be inappropriate for this Court to attempt to define the boundaries of the collective’s enforcement authority.”

Furthermore, “the singular reference to ‘enforcement’ is essentially made in an accounting context… It is unlikely that Congress, had it wanted to confer litigation authority upon the collective, would have done so by hiding this power in a provision governing accounting protocols,” Judge Buchwald penned.

“[W]hile SoundExchange possesses an enforcement hammer with its affirmative powers,” another important section reads, “it also has the tools to promote voluntary compliance with the statutory licensing regime, namely via the threat of potentially costly and invasive audits, arbitrations, etc., for non-compliant licensees.”

Finally, SoundExchange’s cited prior lawsuits all resolved “without addressing whether SoundExchange was a proper plaintiff to enforce licensing disputes,” the judge found.

Running with the point, the ruling, far from solely impacting claims against SiriusXM, could have a far-reaching effect on SoundExchange’s broader enforcement capabilities. Consequently, the entity didn’t hesitate to criticize Judge Buchwald’s interpretation as “entirely wrong on the law.”

“Respectfully, SoundExchange firmly believes Judge Buchwald’s interpretation is entirely wrong on the law, as Congress created the provisions of the statutory license to promote efficiencies in the music licensing marketplace, including the enforcement of the statutory license by SoundExchange as the designated collective,” SoundExchange vented in an in-depth release.

“This decision undercuts that intent. It is only natural that an entity charged with administering a statutory license be empowered with the ability to sue violators.

“Despite this unfortunate and incorrect ruling,” the entity proceeded, “it is an established and long-accepted fact that SoundExchange has the right to sue negligent providers to compel compliance and payment of mandated royalty fees. In fact, SiriusXM has previously conceded this exact point when SoundExchange has brought claims against SiriusXM.

“SoundExchange is currently reviewing the decision and will consider all options, including appeal and potentially filing actions in state courts to ensure the company’s continuing ability to collect all digital performance royalties owed to its constituents for the use of their recordings under the law,” concluded SoundExchange.