Settlement Approval Motion Filed in Rhapsody Class-Action Case

     

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Almost three years after the law firm Michelman & Robinson filed a putative class-action lawsuit against Rhapsody International on behalf of David Lowery and fellow songwriters Victor Krummenacher and David Faragher for infringing their mechanical rights, a deal to end the case is moving forward.

Late Friday night (Feb. 15), the firm filed in the U.S. District Court of Northern California a motion for preliminary approval of a settlement that will get self-published songwriters $35 for every composition Rhapsody played that’s registered with the U.S. Copyright Office and $1 for every unregistered composition the service played at least 24 times. Like the case against Spotify settled in 2017, this involves the service’s failure to properly license and pay for songwriters’ mechanical rights -- and bringing it to a close will allow Rhapsody to move forward with less uncertainty.

The total damages Rhapsody will pay are capped at $10 million -- with songwriter payouts reduced if too many claims come in -- although the cap could increase to $20 million if the company’s financial situation changes. (Rhapsody has already reached a settlement with the National Music Publishers’ Association that covers the majority of the compositions it infringed.) Additionally, Rhapsody will set up an artist advisory board with an annual budget of at least $30,000 to promote the service as a creator-friendly platform, and institute an “artist referral program” that will give creators a $10 fee for each subscriber they refer. Although the class action settlement with Spotify calls for the creation of a mechanical licensing committee, this goes further in establishing the involvement of creators.

“We weren’t just looking at money,” Michelman & Robinson chairman Sanford Michelman tells Billboard. “Artists also have noneconomic rights, as well as this board and a voice on business practices.”

Rhapsody will give less money to self-published songwriters than Spotify, which is expected to pay out $43 million in its settlement. Copyright infringement lawsuits that involve registered works usually ask for statutory damages, which are assessed -- at up to $150,000 per work in cases of willfull infringement -- by the number of works, not how much they were used. Although the fact that Spotify is far bigger than Rhapsody might not matter so much legally, the company might not be able to afford the kind of damages that Spotify can. (That amount does not include attorneys fees.) If the financial information Rhapsody gave Michelman & Robinson proves inaccurate, the settlement cap will increase to $20 million.

Self-published songwriters whose mechanical rights were infringed can claim a payment, exclude themselves from the settlement, or object to it. A hearing on the settlement is currently scheduled for March 13.

The proposed settlement is strikingly different from the one reached with Spotify, and it’s better for less popular songwriters and arguably not as good for popular ones. Unlike the Spotify settlement, this one would pay songwriters -- most of them presumably amateurs -- who have not registered their compositions with the copyright office. (Although they will only get $1 for every work that’s been played at least 24 times, that’s not bad considering that unregistered works aren’t eligible for statutory damages.)

The Spotify settlement called for a fund of $43.45 million to be divided among songwriters according to the number of times their infringed compositions were streamed, so major songwriters would earn more, according to the popularity of their infringed compositions. Under this settlement, each writer of a composition registered with the copyright office would receive $35, which means some would receive far less than they would under a deal set up like Spotify’s, while others will get more. This model is far simpler, although Spotify is responsible for paying the cost of administering its settlement.

Although many streaming services have infringed mechanical rights, this could mark the last major class-action lawsuit on the subject, since the Music Modernization Act offers streaming services a safe harbor from lawsuits for statutory damages for mechanical rights infringements filed after Dec. 31, 2017 under most circumstances.

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