In Music Lawsuit, “Interim” Licenses Could Spell Trouble For YouTube

In December, Global Music Rights (GMR)–a startup founded by powerful music manager Irving Azoff–threatened a billion-dollar lawsuit against Google, which it claims does not have the proper licenses to distribute songs from GMR clients. The severity of the threat was a bit unclear at the time, but according to a new report, Google should be taking GMR’s bluster very seriously. Over at Digital Music News, music industry attorney Steve Gordon has explained how the concept of “interim” licenses could spell trouble in Mountain View.

Here’s a quick recap of GMR’s argument: In 2014, the startup signed notable artists like Pharrell Williams and Ryan Tedder among its first clients. Shortly after Google launched its YouTube Music Key service, Azoff lashed out, claiming Google had not secured sufficient licenses for his clients’ songs. Google’s counterargument to that claim seems to hinge on the fact that it previously negotiated licenses with companies like BMI and ASCAP, which worked with Azoff’s clients before they jumped ship to GMR. Those licenses theoretically still apply to GMR’s artists, even after they left the companies with whom Google forged its deals.

As Gordon explains, though, the licenses Google acquired from BMI and ASCAP could be interim licenses. Those licenses are meted out when a rights organization is “holding out for higher rates than YouTube wants to pay.” They let the rights holders profit off YouTube revenue while still negotiating a deal with site. When the deal gets resolved, the rights holders are paid retroactively for the views their videos received in the interim period.

If BMI and ASCAP reach an impasse with YouTube, they can settle their dispute in “Rate Court,” but Gordon believes the rights organizations haven’t reached that step because of the expensive legal fees it would carry. Nonetheless, he believes the lack of final licensing agreements between YouTube and rights holders “could be a fatal chink in YouTube’s armor against Azoff’s GMR.” “If there are no pre-existing final licenses or ‘licenses-in-effect’ between ASCAP and BMI on the one hand and YouTube on the other,” he writes, “ASCAP and BMI may not have the right to continue to license those songs to YouTube.”

As far as we know, Azoff’s team still hasn’t submitted any formal charges against Google. But if it does, these interim licenses could be at the center of an argument that could leave Google owing up to a billion dollars in damages.