District court dismisses SoundExchange's suit against Sirius XM Radio seeking $150 million in alleged unpaid royalties, finding that "licensing and enforcement of rights" under Section 114 of Copyright Act is not synonymous with litigation enforcement and does not grant SoundExchange an express right of action.
Plaintiff SoundExchange Inc., the nonprofit designated for music
royalty collection under Section 114 of the Copyright Act, brought
suit against defendant Sirius XM Radio Inc., a broadcaster that
provides satellite and online radio services, alleging $150 million
in unpaid royalties owed to rights holders. The case was initially
filed in the Eastern District of Virginia, but venue was
transferred to the Southern District of New York at Sirius XM's
request. Sirius XM moved to dismiss, arguing that Section 114 does
not authorize SoundExchange to litigate royalty disputes. The
district court agreed, granting the motion to dismiss without
addressing the underlying merits of the case. In so holding, the
court enumerated three reasons: (1) Section 114 did not provide
SoundExchange with an express right of action; (2) implying a right
of action for SoundExchange was neither warranted nor appropriate;
and (3) SoundExchange's extra-statutory, policy-based arguments
were devoid of the necessary legal reinforcement to support a right
of action in Section 114.
The parties agreed that Section 114 does not explicitly grant
SoundExchange a right of action to litigate a royalty dispute. In
holding that Section 114 did not provide SoundExchange with an
express right of action, the court declined to read additional
terms into the statute. The court presumed that the omission of
such a right by Congress was intentional, particularly given that
other statutory provisions, such as Section 115, grant express
"legal enforcement" authority to The Mechanical Licensing
Collective—a right that includes filing lawsuits in federal
court for damages and injunctive relief. In contrast, Section 114
"clearly lacks an express conferral of a right of action upon
SoundExchange."
The court also concluded that implying a right of action under
Section 114 was neither warranted nor appropriate. At the outset,
the court noted the "heavy burden on the plaintiffs" to
demonstrate an implied right of action. The parties agreed to apply
the Oxford Bank three-factor test to determine whether a
right of action should be implied: (1) whether the allegedly
violated provision contains "rights-creating language"
focused on the "individuals protected"; (2) whether
Congress "provided an alternate means of enforcing the
relevant provisions"; and (3) whether "Congress expressly
provided a cause of action" elsewhere in the statute.
As to factor one, the court found that Section 114 lacks any
rights-creating language with respect to SoundExchange. Rather, it
merely grants "the licensing and enforcement of rights,"
including "participating in negotiations or arbitration
proceedings." Although SoundExchange argued that the word
"enforcement" encompassed litigation rights, the court
found that the sole reference to "enforcement" did not
constitute "a full-throated grant of litigation authority to
the collective to commence an action in a U.S. District
Court." In short, "enforcement is not synonymous with
litigation."
As to factors two and three, the court held that the single mention
of "enforcement" was clarified by reference to
"negotiations or arbitration proceedings" and not
litigation. The court deployed the maxim expressio
unius—that the clear expression of a term excludes other
similar yet unmentioned terms—and also that the express
mention of "arbitration" is "often interpreted as
precluding litigation." The court also noted that the singular
reference to "enforcement" was, in essence, "made in
an accounting context" and Congress "does not hide
elephants in mouseholes." The court concluded that Congress
intentionally opted not to grant SoundExchange litigation authority
"as an arrow in its quiver."
Finally, the district court rejected SoundExchange's
extra-statutory, policy-based arguments, finding that they were
devoid of the necessary legal reinforcement to support a right of
action in Section 114. First, SoundExchange asserted that, as a
matter of policy, efficient functioning of the statutory licensing
regime requires the collective to possess some legal enforcement
rights. Without a right of action, it would be an "unwieldy
"and "unworkable" regulatory regime. The court held
that it was "powerless to rely on any such arguments to
rewrite the statute." Second, SoundExchange pointed to its
involvement in past lawsuits as evidence that it has standing to
sue in this case. Specifically, in the 2017 case SoundExchange,
Inc. v. Muzak LLC in the D.C. Circuit, Muzak did not challenge
SoundExchange's authority or standing to bring the action. The
court disagreed, finding "various factual and procedural
factors" eliminated the precedential value of those cases.
Third, SoundExchange invoked the legislative history of Section 114
to suggest that a right of action was contemplated by Congress.
Again, the court declined to find the right of action, reasoning
that "reliance on legislative history is inappropriate when
the statutory text is clear." Last, SoundExchange conceded
that while it might not possess a private right of action under
Section 114, it nevertheless should be able to sue under an
associational standing theory. The court rejected this policy
argument as well, finding that "SoundExchange exists to
facilitate efficient royalty collection and distribution, not to
champion the views and interests of copyright owners beyond royalty
collection."
Summary prepared by David Grossman and Jeff Prystowsky
Download our Intellectual Property/Entertainment Cases of Interest mobile app using the links below.
Click here to download a PDF of the full decision.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
