Spotify Triumphs Against Eminem Publisher in Long-Running Mechanicals-Focused Lawsuit

It’s a battle that could have gone either way, though Spotify has now triumphed against Eminem’s Eight Mile Style in a long-running mechanical licensing-focused infringement lawsuit.

After a several-year legal battle, Spotify has triumphed in a court case levied against it by co-publisher of 242 of Eminem’s tracks, Eight Mile Style. The publisher alleged the Stockholm-based company streamed the songs without permission by failing to secure proper mechanical licenses for the works in question.

The oddity here is that Spotify emerged victorious in the case despite the court having found that the streaming giant did not actually have a license to stream those tracks. Technically, Spotify was in the wrong — but as we mentioned, this case was complicated.

The court also found that if Spotify were to be ruled guilty of copyright infringement, it would be Kobalt Music Group that would have to foot the bill. So what happened?

At its core, this is a story about just how complex music administration can be, especially in the era of music rights as a hot commodity.

Eight Mile Style, which is notably not formally affiliated with Eminem, sued Spotify in August 2019 under allegations that the streaming giant had no license to stream its catalog of 242 Eminem tracks. Reportedly, Eminem was not aware of the lawsuit until it had already been filed.

According to Eight Mile, Spotify had instructed mechanical licensing and rights management agency Harry Fox Agency (HFA) to send “purported ‘royalty statements’ out” when Spotify and HFA “knew the compositions were not licensed” through a compulsory license. Eight Mile alleged that despite “billions” of streams, Spotify had not “accounted to Eight Mile or paid Eight Mile for these streams,” but instead issued “random payments of some sort” which only accounted for a fraction of the total streams.

Further, Eight Mile claimed Spotify had issued notices of intent to obtain a compulsory license to the US Copyright Office, arguing that it did not know who owned the rights to the compositions behind the Eminem tracks. Eight Mile alleged that some of those notices were back-dated, in some cases, by years — a violation of the law at the time.

The initial lawsuit also challenged the Music Modernization Act (MMA), which had only been passed the year prior. The MMA established the Mechanical Licensing Collective (MLC) to collect mechanical royalties in the US and also limited the liability that streamers like Spotify would face should they be caught streaming unlicensed music.

Essentially, Spotify and other DSPs received ‘get out of jail free cards’ after the MMA became law for past transgressions, though Eight Mile called that aspect of the MMA “an unconstitutional denial of due process.”

About a year after the initial complaint, Spotify brought a third-party complaint against Kobalt, roping their mechanical licensing branch and administration into the lawsuit as another defendant. Spotify asserted that as they were, in fact, licensed by Eight Mile’s agent, Kobalt, to reproduce and distribute the compositions, they are to blame for Eight Mile’s woes.

Spotify alleged it was Kobalt who misled them into the belief that they controlled the administration of Eight Mile’s catalog, and had agreed to indemnify Spotify in the event that someone sued them over Eight Mile’s rights. Further, Spotify said that, for years, Eight Mile had no issue with the royalty payments it was receiving via the Harry Fox Agency. Kobalt dismissed Spotify’s allegations as “baseless.”

The parties went back and forth over the course of the next four years, with Eight Mile alleging conspiracy, and at one point, a dispute over whether Spotify CEO Daniel Ek would be deposed in the case. The court ruled that yes, he would; ultimately, the parties requested the court to issue a summary judgment so the case would not have to go to a full trial.

In documents stamped August 30th, Judge Aleta A. Trauger officially issued her summary judgement, concluding that it was Eight Mile that engaged in “scheming,” in an effort to extract as much money as possible from Spotify.

Judge Trauger ruled Eight Mile had tried to exploit the law and the complicated ownership and administration structure specific to Eminem’s works “to enrich itself” by obscuring the compositions’ ownership.

The court found that Spotify had been streaming the Eminem tracks in question since the service first launched in the US in 2011. “For the entirety of that period, Spotify has paid royalties associated with that streaming to Eight Mile Style’s collection agent, Kobalt, as if a license had been in place […] and Kobalt provided Eight Mile Style with a quarterly document summarizing the royalties being paid.”

But the issue is that, although Kobalt was Eight Mile’s collection agent, it wasn’t authorized to license use of Eight Mile’s music in the US and Canada, because those rights had been transferred from Kobalt to Bridgeport in 2009. Eight Mile made minimal effort to let anyone know that licensing rights had been transferred, not issuing a letter of direction as is customary.

“Music industry practice […] makes it surprisingly plausible that Spotify might be genuinely confused, at times, regarding what rights it possessed and which it did not. By all accounts, it was in the practice of licensing catalogs without knowing, with any specificity, what was in them,” wrote Judge Trauger.

Ultimately, Kobalt is on the hook, but because Spotify is not required to pay out damages for copyright infringement, Kobalt will only have to pay “reasonable attorney’s fees and expenses.” That may still amount to a hefty sum, given how long the case dragged on.