Pandora Sued by Major Labels Over Pre-1972 Copyrights

Pandora Media Inc., the biggest Internet radio service, was sued by major record labels for failing to pay for using music recorded before 1972.

The companies, including Capitol Records LLC and Sony Music Entertainment, filed the copyright infringement lawsuit in New York State Supreme Court in Manhattan yesterday because federal law doesn’t protect recordings made before Feb. 15, 1972. New York courts have enforced ownership rights stemming from before that date, according to the suit.

The labels accused the Oakland, California-based music streaming service of “massive and continuing unauthorized commercial exploitation” of thousands of recordings including iconic songs such as the Beatles’ “Hey Jude,” Bob Dylan’s “Like a Rolling Stone” and Marvin Gaye’s “I Heard It Through the Grapevine.”

“This case presents a classic attempt by Pandora to reap where it has not sown,” the companies said.

Pandora has been fighting in court over how much it has to pay to stream music. In a ruling that sets a precedent for future rate battles, a federal judge in Manhattan last month said the company must give 1.85 percent of revenue to a group representing songwriters and music publishers, rejecting Pandora’s request for a lower rate.

Profit Threat

“Pandora is confident in its legal position and looks forward to a quick resolution of this matter,” Will Valentine, a spokesman for the company, said by e-mail about yesterday’s ruling.

Pandora had sued the 470,000-member American Society of Composers, Authors and Publishers in 2012, saying that the fees charged at the time made sustained profitability impossible.

Pandora said in a filing with the U.S. Securities and Exchange Commission earlier this year that pre-1972 recordings are “governed by a patchwork” of state laws and that it could be subject to a “significant” liability if it was found to have violated the copyrights of their owners. If it has to pay to license the pre-1972 music, it might have to remove the recordings from its service, the company said.

The company’s shares yesterday fell 1.2 percent to $27.02 in New York. The stock has more than doubled in the past year.

The complaint follows a similar suit filed last year against New York-based Sirius XM Holdings Inc. (SIRI) in state court in California.

Unfair Advantage

The plaintiffs, which also include Vivendi SA (VIV)’s UMG Recordings Inc., Warner Music Group Corp. and ABKCO Music & Records, said the infringement of their copyrights is also unfair to other businesses that compete with Pandora and pay for the right to stream the songs. Many of the artists with pre-1972 recordings are deceased or no longer actively recording, so they and their families rely on income from their music, according to the suit.

Steve Cropper, a songwriter and guitarist and member of Booker T. and the MG’s, said in a statement distributed by the Recording Industry Association of America that Pandora’s lack of compensation to artists for songs made before 1972 is “an injustice that boggles the mind.”

“I don’t understand any business that refuses to pay for the product it sells,” Cropper said. “Early rockers like me and my peers had some great hits before 1972 -- songs that help these digital music outlets succeed with their popular oldies channels. Why would they not want to compensate me for my work?”

The case is Capitol Records LLC v. Pandora Media Inc., 651195/2014, New York State Supreme Court, New York County (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at

cdolmetsch@bloomberg.net

To contact the editors responsible for this story: Joe Schneider at jschneider5@bloomberg.net Fred Strasser, Peter Blumberg

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.