Pandora and the MLC Escalate Royalties Dispute

Another chapter has been added to the two-year legal battle between Pandora and the Mechanical Licensing Collective (MLC) over the payment of mechanical royalties, with both asking a Tennessee court to rule in their favor via summary judgment. Each argues that the law clearly supports their interpretation.

The dispute:

• The case centers on what royalties Pandora must pay for its core personalized radio service.

• Key is how US copyright law distinguishes between “interactive” and “non-interactive” streaming services.

Interactive vs non-interactive streaming:

• Personalized radio services, in which listeners are unable to pick a specific song or album on demand, are typically classed as non-interactive, meaning they only require licences from performing rights bodies like BMI and ASCAP.

• Fully on-demand services, which give listeners that ability to pick songs, are interactive. Therefore they must pay mechanical royalties, which are administered by the MLC, on top of performance royalties.

• Pandora argues its personalized radio service fits the non-interactive model, except during limited on-demand access, for which it already pays mechanical royalties.

The MLC’s argument:

• The MLC says Pandora’s radio service should be treated as interactive because users can unlock on-demand listening at any time.

• On that basis, it argues mechanical royalties should be paid on every stream, not just those played on demand.

• The organization says Pandora is relying on “semantic defences” to avoid what it calls an obvious legal conclusion.

Pandora’s response:

• Pandora accuses the MLC of abusing its role as a royalty administrator and attempting to rewrite long-standing industry practice.

• It argues the MLC is overstepping its remit by acting as a de facto regulator, a move Pandora claims is unconstitutional.

• Complete Music Update points out that while the MLC does have legal authority to sue over unpaid mechanical royalties, Pandora contends that power does not extend to redefining the scope of copyright law.

• The judge must now decide which interpretation prevails.