Legal Research

Eninem says ?thank you? to 9th circuit

By scott

Continuing my catch up of interesting things (legally, at least) that happened whilst I was on holiday, the 9th circuit (yes, them again) decision in F.B.T. Productions et al v Aftermath Records et al is a very interesting one ? if one that is unlikely to have as much effect as might first be thought.

The case concerned royalties ? and more importantly what level of royalties were owed to Eminem for digital downloads of his music. Importantly it looked at the distinction of what is a ’sale’ and what is a ‘license’ [Some of you may see a similar theme from my last post]

Why this is important ? if you are Eminem is that whilst the percentage an artist receives from the ’sale’ of a CD/Record is quite low ? usually less than 20% , the percentage derived from licencing - the rights to duplicate or make another use of the record ? often provides a 50% royalty.

In this case Eninem argued that his record company’s contracts enabling Apple’s iTunes and Amazon etc to make the digital tracks available for download amounted to licensing of his recordings not sales, and therefore he should be receiving the licencing royalty rate not the sale rate on downloads. The Court agreed.

“When the facts of this case are viewed through the lens of federal copyright law, it is all the more clear that Aftermath?s agreements with the third-party download vendors are ‘licenses’ to use the Eminem master recordings for specific purposes authorized thereby?i.e., to create and distribute permanent downloads and mastertones?in exchange for periodic payments based on the volume of downloads, without any transfer in title of Aftermath?s copyrights to the recordings. Thus, federal copyright law supports and reinforces our conclusion that Aftermath?s agreements permitting third parties to use its sound recordings to produce and sell permanent downloads and mastertones are licenses.”

Aftermath are set to appeal, although unless they can dig out an agreement with Eninem stating that downloads will be classed as sales, then I do see they have any hope of reversing this decision. As for other artists, most standard contracts do now state clearly that digital downloads are regarded as sales, so thus removing this decision leading to an opening of floodgates in the industry (although I suspect that behind the scenes for some still under older contracts some deals may now be done to head off any similar action by others).

Interesting read all the same.

Full post as published by Information Overload on September 16, 2010 (boomark / email).