Sunday, September 5, 2010

Eminem award of digital royalties could set precedent

A federal appeals court has sided with rap artist Eminem and his producers in a dispute with Universal Music Group over digital music royalties, a decision that legal experts say could shake up the entire music industry with potentially tens of millions of dollars at stake.
The U.S. 9th Circuit Court of Appeals in San Francisco ruled Friday that the record label had to pay the producers who helped launch Eminem's career, F.B.T. Productions, a bigger cut for music sold online through downloads and mobile-phone ring tones than for the same music sold in stores.

"As a practical matter, this case means every single music lawyer is going to be taking a close look at their clients' contracts to see if there's comparable language as a basis for a similar type of lawsuit," said Kelly Frey, a partner with Baker Donelson, who practices entertainment law in Nashville.

Entertainment lawyers say the ruling has the potential to set a far-reaching precedent that could lead to a recalculation of online royalty payments for untold numbers of artists, not just for the millions of dollars in retroactive royalties that Eminem and F.B.T. could gain from Universal.

For its part, Universal Music Group said in a brief statement that it plans to fight the appeals court ruling, and it dismisses the notion that the case will have any precedent-setting impact.

"We will be filing a petition for a rehearing," the company's statement said. "In the meantime, it should be noted that this ruling sets no legal precedent as it only concerns the language of one specific recording agreement. Any assertion to the contrary is simply not true."

'License' versus 'sale'

Four years ago, Eminem music producers F.B.T. filed a lawsuit against Universal Music Group, claiming they had a right to a 50/50 split of profits with Universal on sales of digital music and ring tones through online retailers such as iTunes and Sprint.

The case involves a dispute about contract language that predates the rise of digital music sales — but now may govern
how revenue is shared between artist and label as downloads become the arena with the most money.

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