Music copyright lawsuit targets Microsoft, Yahoo, Real

I'm not a lawyer, but I'm well-acquainted with legal filings from analyzing Microsoft's legal travails for the last nine years. I've seen a lot of aggressive lawsuits, but a copyright infringement suit filed Monday in the U.S. District Court for Middle Tennessee is one of the boldest--and, I'd argue, short-sighted--filings I've ever seen.

The suit appears to have been initiated by Music Copyright Solutions (MCS), which claims to administer copyrights for more than 45,000 compositions. MCS is named as the lead plaintiff, along with a number of songwriters including Mark Farner of Grand Funk Railroad fame. These folks allege that Microsoft, Yahoo, and RealNetworks improperly licensed the rights to more than 200 compositions that they offered as on-demand streams or limited downloads via the Zune Marketplace, Yahoo Music, and Rhapsody.

Surely these companies paid somebody for the rights to offer these songs. But there's a catch, which TechDirt pointed out earlier Tuesday: these companies may have licensed the rights to the recordings, but that doesn't mean they licensed the rights to the compositions (also known as publishing rights). As section 23 of the legal filing puts it:

In order to transmit, perform, reproduce and deliver any sound recording of any musical work via 'On-Demand Streams' or 'Limited Downloads,' Defendants must first obtain not only the rights for the sound recording itself, but also the rights for the underlying musical composition that is embodied on said musical recording.

Maybe, maybe not--that's up to the court to decide. But that's not the insane part. The insane part is that the plaintiffs are alleging that each time one of the defendants made any recording of a covered song available, that's a copyright violation, and they're seeking damages of $150,000 per violation (or the amount the defendants earned from streaming those songs, whichever is more). So, for example, the lawsuit claims that Yahoo Music offered Conway Twitty's recording of "Fifteen Years Ago" on six different greatest hits albums. The plaintiffs allege that constitutes six copyright violations, which would mean damages of $900,000. Overall, the lawsuit names more than 200 songs, and a far greater number of recordings, meaning that the potential liability for each defendant would be tens of billions of dollars--that's far greater than the total amount of revenues these companies ever earned from any of these services.

These types of cases are usually settled for a relative pittance--something much closer to what the defendant would have paid to license the songs properly in the first place. But imagine for a minute that this lawsuit actually goes to trial and the plaintiffs win damages amounting to 1 percent of what they asked for. No company would ever risk building an online music service again--the legal liability would simply be too high.

When it comes to online music, big legal music services like Zune, Yahoo Music, and Rhapsody are the copyright owners' friends--unlike file-trading networks or free on-demand streaming services, these companies actually collect money from users and disburse it to copyright owners. Perhaps the plaintiffs have a legitimate complaint. But by filing such an aggressive lawsuit to recover billions in supposed damages--I mean honestly, how many Grand Funk Railroad streams have been delivered via the Zune Marketplace?--these folks risk killing their allies and driving music back to the darknet where nobody in the value chain sees a dime.