Nora Sleeth is a JD candidate at Osgoode Hall Law School.
On May 30, the Ontario Superior Court of Justice approved a settlement agreement in a class action between four record companies and thousands of artists who failed to receive royalties for the unlicensed use of their work.
In 2008, a claim was filed for a class action against several major players in the recording industry for withholding royalty payments owed to artists for the use of their work. Four record companies, Sony Music Entertainment Canada Inc., EMI Music Canada Inc., Universal Music Canada Inc., and Warner Music Canada Inc. as well as the Canadian Musical Reproduction Rights Agency (CMRRA) and Société du Droit de Reproduction des Auteurs, Compositeurs et Éditeurs au Canada (SODRAC) were named as defendants. Class members were represented by the estate of Jazz artist Chet Baker who has since been replaced by Craig Northey, founding member of popular 1990s band the Odds.
It was alleged that over 300 000 works were used without a licence and without the payment of royalties. With statutory damages ranging between $500 and $20 000 and the plaintiffs demanding the full $20 000 for each unlicensed work, the lawsuit was worth nearly $6 billion. The lawsuit involves only physical audio materials and not digital music files.
After multiple court-assisted mediations and case management appearances, Ontario Superior Court judge George Strathy approved a financial settlement and a new process designed to address the use of unlicensed works. Counsel for the plaintiffs, Harrison Pensa’s Jonathan Foreman, calls the $50.2 million settlement a “strong financial resolution” for the artists. The settlement agreements with the four record companies and CMRRA and SODRAC may be found on Harrison Pensa’s website.
The defendants agreed to the settlement in exchange for freedom from the claims regarding the use of works listed on what have been termed “pending lists”. These lists contain unlicensed works for which the artists were not compensated. Artists’ works were placed on the lists under the assumption that “approval and payment is pending”; however, some 300 000 works later, royalties were still outstanding.
The settlement agreement aims to end the practices that led to thousands of unpaid royalties and the pending lists. CMRRA and SODAC are now responsible for administering a procedure that aims to fairly address unpaid royalties. All necessary measures will be taken to find artists, and if an artist cannot be found, the record companies must apply for an unlocatable licence and any payments must be made and held in trust by CMRRA or SODAC.
It is not surprising that critics of the record industry have been quick to point out the irony of this case. Record companies consistently maintain that they have artists’ best interests in mind and oppose file sharing on the grounds that it deprives artists of well-deserved compensation. The pending lists suggest that record companies are more motivated by profit than by artists’ rights and entitlement to royalties.
One Response
Another interesting aspect of this case is its use of mediation. It seems that mediation of IP disputes has taken off lately, e.g. in light of recent Ontario legislation, discussed by the IP Neutrals of Canada: http://www.ipneutralscanada.com/articles/article1.asp.
In any dispute, parties’ agreement to mediation presupposes each party’s agreement that the other side has a (somewhat) valid claim. IP disputes, on the other hand, seem to frequently involve litigants who steadfastly argue that the other side has no rightful claim at all. (This might be especially true in matters of trade-mark or patent infringement, as opposed to royalty disputes.) If parties can choose not to engage in mediation, I’m curious to see how often mediation actually comes to be used in the IP field.
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