A federal court has dismissed SoundExchange’s $150 million lawsuit against SiriusXM, throwing a major wrench into how royalty compliance is enforced across the audio industry, stripping the royalty collector of its ability to sue over alleged underpayments.
Citing Section 114 of the Copyright Act, the decision effectively eliminates a legal enforcement mechanism that broadcasters have long expected SoundExchange could wield, placing future disputes squarely in the hands of individual copyright holders or Congress.
Without litigation authority, SoundExchange may be limited to audits, arbitration, and regulatory negotiations, creating uncertainty about how violations of royalty obligations will be addressed and who will be responsible for enforcing them.
SoundExchange’s lawsuit against SiriusXM alleged underpayments in 2018 related to the bundling of satellite and streaming audio services. SiriusXM argued that the statute does not permit SoundExchange to bring lawsuits, and Federal District Judge Naomi Reice Buchwald agreed, issuing a 33-page opinion stating that neither the text of Section 114 nor its legislative history grants SoundExchange an express or implied right of action.
Judge Buchwald emphasized that Congress knew how to grant litigation authority, citing Section 115, which allows the Mechanical Licensing Collective to sue, but chose not to extend the same power to SoundExchange.
SoundExchange claimed SiriusXM had manipulated its revenue reporting by bundling its satellite and streaming offerings, thereby reducing the base used to calculate royalty payments. The collective also cited audit findings by Adeptus Partners that allegedly confirmed the underpayment. The court, however, did not evaluate the merits of the claim, ruling solely on the issue of legal standing.
SoundExchange previously sued SiriusXM in 2013, claiming the broadcaster made “impermissible deductions and exemptions in calculating its royalty payments.” This case was settled in 2018, with SiriusXM agreeing to pay $150 million.
The Recording Industry Association of America, SAG-AFTRA, the American Federation of Musicians, and the American Association of Independent Music filed Amicus briefs in support of SoundExchange, saying that eliminating the collective’s ability to litigate would hinder enforcement and reduce payments to artists. The court dismissed those arguments, stating that policy considerations cannot override the clear language of the statute.
SoundExchange also argued it should be allowed to sue under associational standing, but the court rejected that as well, noting that SoundExchange is not a traditional membership organization and is not structured to act as a legal proxy for rightsholders.
This decision could trigger renewed lobbying efforts in Congress to amend the Copyright Act, especially as the Copyright Office has previously recommended granting SoundExchange enforcement authority. Until then, statutory licensees may face less legal pressure to resolve disputes, and enforcement may shift to more informal channels or direct action by artists.
