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Sirius XM sued for digital royalty underpayment

Sirius XM radio
Daniel Acker | Bloomberg | Getty Images

A U.S. nonprofit charged with collecting digital royalties for music artists sued satellite radio service provider Sirius XM Radio for at least $50 million on Monday for underpaying on recordings, including ones from before 1972.

The lawsuit was filed in the U.S. District Court for the District of Columbia by SoundExchange, an entity appointed by the Copyright Royalty Board to collect and distribute performance royalties established under federal law.

The lawsuit said from 2007 through 2012, Sirius XM "systematically" underpaid SoundExchange for the statutory license that allows the service to air recordings to its millions of paying subscribers.

(Read more: As music streaming grows, royalties slow to a trickle)

The lawsuit said Sirius in particular reduced by 10 percent to 15 percent the gross revenues it reports to calculate the royalties because that corresponded with performances of pre-1972 recordings.

The royalty rate that would be charged against those gross revenues ranged from 6 percent in 2007 to 8 percent in 2012, according to SoundExchange, which was established by the Recording Industry Association of America.

"We cannot sit by and watch this multi-billion dollar company reap record profits from the creative contributions of artists and labels without paying them everything they deserve," SoundExchange Chief Executive Michael Huppe said in a statement.

(Read more: McAndrews to succeed Kennedy as Pandora CEO)

Representatives for Sirius XM did not immediately respond to a request for comment.

But in the complaint, SoundExchange said Sirius had taken the position that the statutory license established under federal law does not cover pre-1972 recordings.

Sound recordings were not given federal copyright protection until 1972 and instead relied on state law for protection.

The lawsuit also accuses Sirius of, among other things, excluding from its revenue calculations money it earned from customers subscribing to its Sirius XM Premier package and of failing to make timely royalty payments.

The lawsuit seeks $50 million to $100 million or more, along with appropriate late fees and interest.

The case is SoundExchange Inc. v. Sirius XM Radio Inc., U.S. District Court, District of Columbia, No. 13-01290.

By Reuters

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