Tuesday, September 7, 2010

Interesting Case Regarding Royalties for Digital Downloads

The case is FBT Productions v. Aftermath Records, 09-55817 (9th Cir. 2010). The appeals court reversed a lower court decision (FBT Productions v. Aftermath Records, 07-3314 (C.D. Cal. 2009). The original suit sought damages for royalties on the sale of ringtones and digital song downloads of Eminem's music. The record company argued a standard royalty applied for the downloads, the same as for CDs. FBT argued that the digital downloads were more like third party licenses, and a much higher royalty rate under a "masters licensed" clause in the recording contract applied - in this specific case, a 50% royalty. The lower court agreed with the record company, but the 9th Circuit panel - based on its review of the "broad but unambiguous" language of the contract - reversed and sent the case back to the jury to calculate damages. The court stated that the transaction was a license under US copyright law.

The bottom line is that not only will Eminem possibly receive millions of dollars in revenue from the court's decision, but all music artists are probably reviewing their contracts to see how this decision might apply to them, and making sure to put similar provisions in their future contracts.

Your comments always welcome. Have a great week!

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