Merlin, the global rights body for independent music, has alerted its 12,000-plus members to's newly launched artist royalty program, warning some of its license terms and conditions appear "ambiguous" and "open to legal interpretation."

The London-based trade association made clear its concerns in a bulletin to its membership, in which it highlights a number of reservations in relation to's initiative.

"The Program announced today does not appear to offer any compensation for any past illegal use of repertoire," reads the Merlin memo. "It is unclear to us whether or not the terms and conditions of the Program are intended to prevent master owners pursuing such compensation."'s artist royalty program claims to pay unsigned and independent artists for each time their music is played on the free streaming music service. Since it was unveiled in January, more than 450,000 tracks have been uploaded by participating bands.

Merlin, which itself launched for business during the Midem trade fair in January, has revealed it had been negotiating with over the last few months on a non-exclusive blanket license and a settlement agreement on behalf of its members. "Unfortunately, these negotiations have stalled," Merlin explains, "in particular due to's unwillingness to properly address its illegal infringing activity."

A spokesperson for tells, "While we are disappointed that Merlin is talking publicly about our discussions, we respect them and their members, and will continue to work hard to close a deal with them."

Merlin concludes in its bulletin: "Several provisions of the licence terms and conditions of the Program appear ambiguous and open to legal interpretation. We note that this would tend to lead to uncertainty as to the "true" meaning of the licence. The licence points out that if you are unsure about any of it - 'You are advised to obtain independent legal advice'. We would endorse that view."

Merlin president Charles Caldas tells Billboard the organization is close to striking content deals with a host of key online music services, and is negotiating with the likes of MySpace Music, XM Satellite Radio and YouTube.