The label and its publishing arm claim she has used about 50 of their songs without permission in her YouTube videos and on her own website.
She disputes this, claiming that they gave permission - and interestingly, one of the artists involved has come out in support of her:
What's more interesting to me is that Phan is one of a breed of new media entrepreneurs that have flown under many media commentators' radar. In fact, I first became aware of her while sat in a cab from Manhattan to JFK, with a screen on auto-play in front of me. Periodically adverts for YouTube would come up, featuring some of their biggest celebrities. I passed through disinterest to annoyance, and out into curiosity, as the traffic crawled its way towards the airport. Who were these people? Why was YouTube paying to advertise them and itself?
This is the one starring Phan:
When I got back to the UK, I started poking at this, and whole world opened up to me. These are not just social media celebrities, but powerful media businesses, producing content with a tight focus on their enthusiast audience. They're doing all the things that media businesses claim to be doing - and doing them better.
These video entrepreneurs have built huge followings on YouTube - in Phan's case, through make-up tutorials - and that leveraged that to build real businesses from that following. In a sense, Phan has become a one woman beauty magazine, and is another example of why so many consumer magazines have struggled to get traction online. What they do - offer information to enthusiasts - is being replaced by utterly different forms of media.
The WSJ did an interview with Phan recently, that almost explored how she's built her online business, but gets a little distracted by talking about make-up:
In fact, she's now big enough business that a record label wants $150,000 for every copyright infringement they can prove.
You know it's big business when there are big lawsuits involved.
Photo by Gage Skidmore and used under a Creative Commons licence