DC Circuit Resurrects SoundExchange's Mood Media/Muzak Royalties Lawsuit
The D.C. Circuit Court of Appeals ruled Tuesday that SoundExchange can proceed with a previously dismissed lawsuit against digital music provider Mood Media over underpaid royalties. SoundExchange claimed Mood was “playing a shell game to cheat artists” out of royalties…
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by improperly claiming the lower “preexisting subscription services” (PSS) royalty rate granted to Mood's Muzak subsidiary under the Digital Millennium Copyright Act also applied to Mood's other services. District Court Judge Royce Lamberth dismissed SoundExchange's complaint last year in Washington, D.C., saying there was “clear evidence” the DMCA allowed Mood's other services to claim the lower royalty rate. A three-judge D.C. Circuit panel acknowledged that “although the case is close -- the controlling statute is dreadfully ambiguous -- we conclude that SoundExchange has the better position.” DMCA is “quite unclear” on what constitutes a PSS grandfathered in under DMCA and precedent is even more murky because the Copyright Office issued an opinion in 2006 that determined Muzak was one of only three PSS services that qualified for the grandfathered rate, Senior Circuit Judge Laurence Silberman said in the panel's opinion. Circuit Judges Thomas Griffith and Judith Rogers also voted to reverse the D.C. district court. But the Copyright Office also said in its opinion its ruling should be narrowly interpreted and “we should respect” that interpretation guide, Silberman said for the panel. “The grandfather provisions were intended to protect prior investments the three business entities had made during a more favorable pre-1998 rate-setting regulatory climate,” the panel said. “But when Muzak expands its operations and provides additional transmissions to subscribers to a different 'service,' (i.e., SonicTap), this is an entirely new investment.” The “better interpretation of the statute” is that the term service “contemplates a double limitation” in which “both the business and the program offering must qualify before the transmissions are eligible for the favorable rate,” the court said. SoundExchange and Mood didn't comment.