Pandora Says MLC Lawsuit Over Streaming Royalties Must End: ‘Clearly Unconstitutional’

Pandora wants a judge to end a lawsuit filed by the Mechanical Licensing Collective over streaming royalties, accusing the group of “abusing” its position with an unconstitutional case. But the MLC says the streamer is just trying to ignore the reality of its “unlawful underpayment.”

The MLC sued Pandora (a unit of SiriusXM) two years ago, claiming it had misclassified its services to avoid paying the kind of higher royalties owed by “interactive” platforms like Spotify. The case has now reached the make-or-break moment, where each side asks the judge to rule in their favor.

In a strongly-worded motion on Thursday, Pandora says the case is a “gross overreach” aimed at forcing the company to “pay vast sums” for rights that it “does not need” – all filed by a private entity that’s “exploiting” and “abusing” its limited powers.

“The brazen nature of the MLC’s efforts here cannot be overstated,” Pandora’s lawyers write, asking the judge to end the case without a trial. “Allowing a private, unaccountable, non-rightsholder entity like the MLC to serve as a roving enforcer of the Copyright Act, with no oversight or supervision from any entity of the federal government, is ‘delegation in its most obnoxious form,’ and clearly unconstitutional.”

MLC fired back in its own motion on Thursday, asking the judge to instead hold Pandora liable for its “unlawful underpayment of royalties.” It said Pandora was attacking the MLC’s authority to distract from a “mountain” of evidence and “inescapable” conclusion that must pay up.

“Pandora has poured resources into litigating a refusal to accept the obvious, ignoring its many admissions and instead offering semantic defenses and red herrings to obscure the undisputed truths,” the group’s lawyers write. “The MLC…brings this motion to cut through the obfuscation and hold Pandora to the plain language of the statute and the simple reality of its own service.”

MLC, a group created by the Music Modernization Act in 2018 to collect mechanical royalties from streaming services, filed its case against Pandora in February 2024, essentially claiming the company was using bookkeeping trickery to reduce its payments to songwriters and publishers.

At the heart of the lawsuit was distinction between “interactive” platforms like Spotify or Apple Music, which allow users to pick their songs on demand, and “noninteractive” platforms like Pandora that provide an experience more like radio. It’s a key dividing line, since interactive and noninteractive services pay very different royalties under different systems.

Though Pandora pays such interactive royalties for its premium tier with on-demand functionality, it has long treated Pandora Free — the core radio-like product that fueled the company’s rise in the late 2000s — as a noninteractive service, since it largely serves users a mix of songs based on their preferences.

But in its lawsuit, the MLC argued Pandora Free had crossed the line into “interactive” status by offering so-called “Sponsored Premium Access” sessions, which allow users to briefly play specific songs in return for watching ads. As a result, the MLC argued that Pandora owed the same kind of royalties for Pandora Free as services like YouTube or Spotify pay: “Pandora provides even greater interactive access,” MLC wrote at the time.

After two years of litigation, including a lengthy discovery process, both sides are now filing their motions for “summary judgment,” asking the judge to rule on the case without the need for a jury trial.

In its filing, Pandora argues that even if MLC has the authority to sue, the group’s demand for more royalties was “plainly and unmistakably wrong.” It says the law is clear: That companies offering both radio and on-demand functions should only pay higher royalties for the latter, and that its “Sponsored” sessions do not change the calculus.

“The MLC seeks to use civil litigation to overturn two decades of industry practice and force upon Pandora a novel and incorrect interpretation of the Copyright Act,” the company writes. “These sessions, which comprise a miniscule percentage of listening by free Pandora users, do not come close to transforming Pandora’s internet radio service into the statutory equivalent of an on-demand streaming service like Spotify or Apple Music.”

In its own motion, MLC says Pandora’s free users can search for specific songs and “have access to unlimited skips and replays.” And it says the streamer has bragged about the disputed features, including by telling users they can “search and play your favorite songs on-demand for free.”

“Pandora intentionally developed, marketed and provided each of these features to Pandora Free users, and then boasted of them to its investors,” MLC writes. “Pandora’s defense in this action thus asks the Court to ignore not just the reality of the product’s operation, but also years of Pandora’s own representations about its service.”

If the judge denies the motions, a jury trial is scheduled for June 30. A spokesperson for Pandora did not immediately return a request for comment. In a statement, MLC said it had “repeatedly” tried to resolve the dispute without litigation, but that Pandora had “refused” to address the problem: “We have now moved for summary judgment because the undisputed evidence proves our claims.”