Judge Says SoundExchange Can’t Sue

A major new court decision disposes of SoundExchange’s $150 million case against SiriusXM based on a judge’s finding that the royalties-collecting organization does not have the right to bring federal lawsuits, point blank.

The Thursday (Aug. 7) ruling from Judge Naomi Reice Buchwald is the first to weigh in on SoundExchange’s standing to file lawsuits as a means of enforcing royalty schemes. The organization, a nonprofit designated by the Copyright Royalty Board to collect royalties for artists, has been bringing these types of federal court actions for more than a decade against radio broadcasters like SiriusXM and music streamers such as Slacker and Napster.

All of these prior cases have either been settled or referred to the Copyright Royalty Board for resolution. But SiriusXM, having been accused by SoundExchange of “gaming the system” with manipulative bundling in order to withhold more than $150 million in royalties, filed a motion arguing that the organization actually has no right to sue in the first place.

Now, Judge Buchwald says SiriusXM is right. According to the judge, the federal statute that created SoundExchange, Section 114 of the Copyright Act, authorizes the organization to collect and distribute royalties but says nothing about bringing litigation.

“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,” writes the judge. “Absent such evidence, it would be wholly improper for a court to add terms or provisions where Congress has omitted them. Thus, the text of the Copyright Act clearly lacks an express conferral of a right of action upon SoundExchange.”

SoundExchange has argued that, regardless of the text of the Copyright Act, other factors like so-called “implied rights,” public policy goals and legislative history support its ability to bring lawsuits.

But Judge Buchwald is not convinced by any of these arguments — or by SoundExchange’s claim that it should be able to litigate royalty disputes as a representative on behalf of artists.

“SoundExchange exists to facilitate efficient royalty collection and distribution, not to champion the views and interests of copyright owners beyond royalty collection,” says the judge. “SoundExchange exists as a central clearing house for royalty payments, not a legal advocacy group.”

Reacting to Judge Buchwald’s ruling on Thursday evening, SoundExchange says it’s “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.”

“Respectfully, SoundExchange firmly believes Judge Buchwald’s interpretation is entirely wrong on the law,” says the organization in a statement. “Despite this unfortunate and incorrect ruling, 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.”

SiriusXM, meanwhile, says in its own statement that they “agree with the court’s decision that SoundExchange’s oversight and enforcement authority is limited.”

“We have a reasonable, consistent and transparent method to how we allocate royalties across our bundled satellite radio and streaming product,” adds a SiriusXM spokesperson. “We look forward to continuing to work collaboratively with SoundExchange and the broader industry to ensure that musicians and artists continue to receive the fair compensation they deserve.”

This story was updated on Aug. 7 at 8:35 p.m. ET to include a statement from SiriusXM.