Is Spotify justified in saying it is prepared to pay but claimants will have to come to them and present a rightful claim?

Spotify, the music streaming company, faces a $150 million class action lawsuit led by David Lowery, the frontman for Cracker, the alternative rock band, and Camper Van Beethoven, an American rock band. The musicians maintain that Spotify has not been securing the proper licenses for all of the music it offers and has not been paying royalties to all of the appropriate parties. The implication emerging from the lawsuit is that the company that claims to be providing an alternative to online piracy is not living up to its own legal obligations. In short, it’s a case of copyright infringement and some might say it involves stealing another person’s intellectual property

A license for a piece of music involves two separate copyrights. First is the recording, which is typically owned by the performer’s label and second is the underlying composition, which is often owned by the songwriter or his or her publisher. So, to use a recording, a streaming company such as Spotify would have to get two licenses. This is done by negotiating with the publisher or by sending the rights holder a notice and paying a royalty.

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Lowery claims that Spotify frequently skips the second part. He claims that there may be hundreds or thousands of artists who have not been paid for their work including him. Spotify does not argue against this but does say that tracking down the proper rights holders is a complex process and hard to do. The company says it has royalties set aside for cases where royalty rights are not clear, and it stands ready to pay the royalties if the affected artists make a rightful claim. But, one of

Lowery’s lawyers argues that artists should not have to track down royalties owed them but that it is Spotify’s responsibility to secure the license and pay the royalty

Spotify, in its defense, says that the laws and copyright infrastructure that currently exist do not fully factor in the scope and speed with which digital music services operate. The company maintains that securing advance permissions for each track is inefficient and possibly crippling for a company trying to stay competitive. In January 2016, Spotify was hit with a second lawsuit over the alleged and systemic and willful copyright infringement.

1. How do you evaluate the company’s claim that the system is too complex and that the laws and copyright infrastructure are the problem in the digital music industry?

2. Is the issue in this case that the law is not keeping up with the high-tech music streaming industry or that Spotify is using this as an excuse to take short cuts and engage in a questionable practice?

 

1. Who are the stakeholders affected and what are the ethical issues in this case?

2. Is Spotify justified in saying it is prepared to pay but claimants will have to come to them and present a rightful claim? Or, does Spotify have the responsibility to find the artists and secure permission and pay the appropriate royalty before they stream the music?

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