Can SoundExchange Bring Lawsuits? SiriusXM Appeal Will Shape Royalties Enforcement

A major court ruling last month found that SoundExchange doesn’t have the power to collect royalties through litigation. Now, the organization has launched an appeal in hopes of preserving this enforcement strategy.

SoundExchange’s notice of appeal on Friday (Sept. 5) challenges an August federal court ruling that dismissed its $400 million lawsuit against SiriusXM. Judge Naomi Reice Buchwald held in her decision that SoundExchange, a nonprofit designated by the Copyright Royalty Board to collect performance royalties for artists, does not actually have the right to sue anybody under federal law.

This ruling was the first to weigh in on SoundExchange’s standing to collect recorded royalties via lawsuits, and the implications are big. For more than a decade, the organization has regularly used litigation to secure hundreds of millions of dollars in royalties from radio broadcasters like SiriusXM and music streamers such as Slacker and Napster.

Already, music companies are trying to use Judge Buchwald’s ruling in their favor. Just weeks after the decision came down, Sonos told a court that it will file a motion to dismiss its own pending SoundExchange royalties lawsuit based on the rationale in the SiriusXM case.  

Faced with the possibility of losing a key enforcement strategy, SoundExchange is standing firm and using an appeal to go on the offensive. The group wants the Second Circuit Court of Appeals to reverse Judge Buchwald, calling the decision an “erroneous ruling and flawed interpretation” of the Copyright Act in a statement on Friday.

“As Congress surely realized in creating the statutory license, some licensees will seek any available means to avoid paying artists for the full value of their work to maximize profitability,” said SoundExchange in the statement. “For the statutory license to function properly, SoundExchange fully believes Congress intended that the ‘enforcement’ power clearly granted in the statute must necessarily include the ability of its administrator to bring litigation claims when digital music services fail to meet their obligations under the law.”

“In the meantime,” continues the statement, “SoundExchange will continue in its mission of securing fair compensation for artists and rights owners and looks forward to arguing its case in court.”

A rep for SiriusXM did not immediately return a request for comment on the appeal.

The SoundExchange lawsuit against SiriusXM, brought in 2023, accused the satellite radio giant of “gaming the system” with manipulative bundling to withhold more than $150 million in performance royalties up to that point.

SoundExchange says SiriusXM has continued to apply this “faulty methodology” in the years since and now owes more than $400 million to artists and labels. SiriusXM denies all of SoundExchange’s claims.