Sirius Radio Alleges Copyright Conspiracy

MANHATTAN (CN) - Sirius XM Radio claims in a federal antitrust complaint that a nonprofit and a trade group conspired to monopolize the recording industry's copyrights.

Sirius sued SoundExchange Inc., a nonprofit performing rights organization that collects royalties for satellite radio, and the American Association for Independent Music, also known as A2IM, a trade group representing independent artists.

Sirius claims: "These organizations, acting in concert with one another and with their individual recording company members, have erected an industry-wide conspiracy to boycott and tortiously interfere with Sirius XM's efforts to secure through the workings of a competitive market copyright rights critical to the conduct of its business. As a result of this concerted refusal to deal, the defendants and other industry trade organizations, in concert with numerous individual record labels, have eliminated price competition in, among others, the market for digital transmissions of sound recordings licensable under the statutory licensing provisions of Section 114 of the Copyright Act of 1976.

"The purpose and effect of this unlawful conduct has been to allow SoundExchange, acting on behalf of the entire record industry, to monopolize the licensing of these rights in direct contravention of the licensing framework carefully constructed by Congress. That framework expressly prescribes that any such collective licensing of such rights must be non-exclusive in nature so as not to interfere in individual licensing transactions between individual copyright owners and users such as Sirius XM. In furtherance of this conspiracy Defendants and others have coerced record companies to refrain from entering into competitive market licenses, used implicit and explicit threats to enforce compliance, misled record companies as to their economic interests, and even encouraged some record companies to terminate license agreements they had already concluded with Sirius XM."

Sirius claims that the Recording Industry Association of America, the National Academy of Recording Arts and Sciences, and several unions are involved in the conspiracy - but they are not named as defendants.

Sirius points out the obvious: that it "makes significant uses of copyrighted sound recordings in its satellite radio and other businesses."

The complaint states: "For a variety of business reasons, Sirius XM has sought to negotiate terms of sound recording performance rights licenses, among other copyright rights incident to conducting its business, through direct negotiation with individual recorded music companies. Direct licensing of the sort proposed by Sirius XM offers substantial benefits to the record companies in comparison to their reliance on SoundExchange to distribute royalties pursuant to statutory licenses it negotiates or litigates over on the record industry's behalf. These include faster and more transparent royalty reporting and payment, avoidance of SoundExchange administrative costs, and the ability to grant broader rights to Sirius XM than SoundExchange legally is able to, thereby affording the record company's artists and recordings both wider exposure and access to new media and promotions run by Sirius XM.

"Alarmed at the prospect that record companies, acting in their individual economic interests, would pursue direct licensing with Sirius XM, and that such licensing would inject competition into the licensing of copyrights used by Sirius XM, defendants and their co-conspirators determined to suppress that competition. Their orchestrated response has resulted in a concerted refusal to deal by numerous record companies approached by Sirius XM to negotiate direct licenses. The unlawful purpose and effect of this boycott has been to force Sirius XM into a single avenue for procuring the rights it needs: dealing exclusively with SoundExchange, as the record industry's collective licensing agent."

Sirius claims that one record label prepared to sign direct licenses with it pulled away from the deal, saying, "A2IM is opposed to it."

Another label told Sirius that two senior executives from SoundExchange "asked everyone to hold off," according to the complaint.

According to the New York Times, SoundExchange issued a brief statement: "Sirius XM's claims appear to be wholly without merit."

The American Association for Independent Music said on the "News" page of its website this morning: "We've reviewed the complaint and feel that it is completely without merit. We have engaged outside counsel and plan to vigorously defend our organization against this complaint."

Sirius seeks treble damages and an injunction for six violations of the Sherman Act and tortious interference.

It is represented by R. Bruce Rich with Weil, Gotshal & Manges.

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