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US Royalties Suit: SoundExchange v. Music Choice Moves to Discovery

SoundExchange and Music Choice have proposed phased discovery and possible settlement talks in a US dispute over alleged unpaid statutory royalties.

SoundExchange and Music Choice

SoundExchange, a US non-profit, and Music Choice have proposed phased discovery in their dispute over alleged unpaid statutory royalties, with settlement talks or mediation to follow. The original complaint was filed in April 2019, and its eighth anniversary is only months away.

How the dispute began#

SoundExchange alleges that a Prager Metis audit, which spanned several years because Music Choice allegedly refused to provide “access to any information pertaining to its activities in 2013,” found that the company had “systematically underpaid statutory royalties” on its business subscription.

At the centre of the case is the meaning of “gross proceeds” in the relevant statutory text. SoundExchange says Music Choice, a digital service provider (DSP), wrongly left out business-offering revenue tied to channels and recordings also provided under its non-business subscription. A percentage of that revenue is owed for the license.

SoundExchange further alleges that Music Choice “hid from SoundExchange the vast majority of the fees and payments it actually received from the provision of its” business tier.

Key dates#

  • April 2019: SoundExchange files the original suit, covering alleged underpayments from the start of 2013 to the end of 2016.
  • December 2021: The presiding judge refers the case to the Copyright Royalty Board (CRB) for clarification.
  • December 2024: The CRB largely agrees with SoundExchange in a lengthy ruling.
  • August: The appropriate court sends the case back to the district court on jurisdictional grounds.

SoundExchange had argued that Music Choice’s reading would allow a large number of non-royalty-bearing uses when recordings were added to both the business and general subscriptions. Music Choice appealed the CRB ruling shortly afterward.

Proposed discovery schedule#

Music Choice and SoundExchange wrote that “at this point, the parties believe it would be beneficial to conduct discovery in phases to facilitate potential settlement discussions.” They proposed “an approximately 75-day period of damages discovery culminating in settlement discussions or mediation.”

Under that schedule, the parties would have until early March to complete settlement talks or mediation.

About 15 months ago, in SoundExchange’s dispute with SiriusXM, a federal judge granted the satellite radio company’s motion to dismiss. The judge found that the non-profit “has no private right of action under” the relevant Copyright Act statute.

Other royalties actions are currently on hold, and an appeal is underway.

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