CAN PELOTON BE HELD RESPONSIBLE FOR HUNDREDS OF MILLIONS IN DAMAGES TO MUSIC PUBLISHERS BASED ON ITS UNLICENSED INCLUSIO

1. CAN PELOTON BE HELD RESPONSIBLE FOR HUNDREDS OF MILLIONS IN DAMAGES TO MUSIC PUBLISHERS BASED ON ITS UNLICENSED INCLUSION OF CERTAIN MUSICAL WORKS IN ITS EXERCISE VIDEOS? Ten publishing companies that represent songwriters behind hits by the likes of Lady Gaga, Drake, and Rihanna filed a lawsuit against Peloton, the fitness technology company, alleging copyright infringement. Specifically, the publishers complain that the fitness company has used over 1,000 of its copyrighted musical works without permission since 2017. In response, Peloton began removing classes from its repertoire that feature songs the publishers claim were being used without proper licenses. Peloton is one of the world’s most successful fitness and technology companies. Since its inception in 2012, Peloton has more than 600,000 subscriber members and is reported to be valued in excess of $4 billion. In 2018, Peloton eclipsed cycling giant, SoulCycle, in sales. As a result, Peloton is preparing for its initial public offering (IPO) later this year. The company offers both hardware in the form of a bike or treadmill, as well as, a subscription service that allows consumers to replicate the experience of a high-end exercise studio in the convenience of one’s home. Users are enabled to participate in instructor-led video workouts, while competing against other class participants and viewing performance metrics. In addition to its initial cycling classes, the company has expanded its offering to include yoga, strength, and other exercise classes, all of which are available via live and streaming video. Each of Peloton’s over 13,000 workout videos features music from start to finish, thereby providing a tempo, as well as, an atmosphere for a treadmill run or stationary bike ride. The lawsuit, filed in the United States District Court for the Southern District of New York, seeks up to $150 million in damages for Peloton’s alleged copyright infringement. Copyright Infringement involves the reproduction, distribution, performance, public display, or making of a derivative work of copyrighted work without the permission of the copyright owner. The United States Copyright Act grants copyright owners exclusive rights in their copyrighted works,

2. including the right to reproduce, perform publicly and distribute and authorized others to do the same those copyrighted works. Pursuant to this, the publishing company plaintiffs had previously licensed the public performance, reproduction, synchronization and distribution of many musical works in their catalogs. The publishers claim Peloton used more than 1,000 musical works, including songs by Drake, Rihanna, Kanye West, Lady Gaga, Tiesto, Benny Benassi, Avicii in addition to many others, over a period of years in the videos that it makes available to its hundreds of thousands of customers. Each of these works has been registered with the United States Copyright Office. Moreover, many of these musical works are featured in multiple workout videos. For example, the complaint states that Rihanna’s famous “Umbrella” is played in at least 55 separate workout videos since late 2017. Each of these uses would have required a separate synchronization license and Peloton obtained none. The crux of this lawsuit is that the New York-based start-up failed to secure a synchronization license for a single one of the more than 1,000 songs. The right to license the synchronization of a musical work is derived from the copyright owner’s exclusive right of reproduction. Synchronization licenses, or sync licenses, permit the licensee to lawfully reproduce a protected work in connection with or in timed relation with a visual image, such as the videos that Peloton records, archives and makes available to its customers. In this way, use of the same musical composition in a different context or in a different audiovisual work would require a separate license, carrying an additional fee. Based on the fact that Peloton has previously obtained licenses for other songs it features in its videos, the plaintiffs claim Peloton is a “textbookwillful infringer.” Peloton is allegedly well aware of and fully understands copyright law requirements due to the existence of these other licenses. In this manner, the publishers claim “there is no doubt that Peloton’s infringement was and continues to be knowing and reckless.” Willful infringement involves instances when the named defendants knew or should have known of their wrongful conduct. Copyright law allows a maximum statutory damages in the amount of $150,000 for each willful infringement. The publishing companies seek this maximum amount for each of the 1,000 works infringed. Alternatively, plaintiffs may be entitled to actual damages, including Peloton’s profits from its infringement of the copyrighted works. It remains to be seen if Peloton’s removal of the infringing videos will allay the publishing companies’ concerns. However, in a letter that went out to Peloton subscribers, Peloton claimed that prior to the filing of the lawsuit, “fruitful discussions” had been ongoing with these publishing companies. Nonetheless, Peloton goes on, the classes were removed “out of an abundance of caution.”