Digital Royalties Timeline Legal

Is Universal employing delaying tactics in FBT case?

By | Published on Tuesday 8 February 2011

Universal Music Group

According to Digital Music News, some artist lawyers in the US are accusing Universal Music of devious delaying tactics in the ongoing and previously reported Interscope v FBT Productions royalties dispute.

As previously reported, FBT Productions worked on the early Eminem recordings, and have a stake in the copyrights in those tracks, getting their royalties via Slim Shady’s label, the Universal-owned Interscope. Their contract with the major, as is often the case, pays out a bigger share of royalties on licensing deals as opposed to record sales.

FBT argues that Universal’s relationship with services like iTunes should be considered a licensing deal, whereas labels always treat a la carte download stores as if they were record shops, and therefore any download revenue as record sales money rather that licensing income. That means, of course, that the labels pay the smaller royalty share to artists (and in this case producers), while FBT argue they are due the bigger cut on download money.

They weren’t the first artists with pre-internet record company contracts to make this argument, but whereas most other similar claims failed in court, with this case FBT won, the Ninth Circuit Court ruling in their favour last year and then refusing to hear the case for a second time.

While Universal insists there is no precedent set in this case and it only applies to the specific wording of the Interscope/FBT contract, lawyers representing various artists with pre-internet record company agreements are watching the case closely, believing their clients could also have a claim to a higher pay out on iTunes royalties based on the Ninth Circuit Court ruling in FBT’s favour.

But Universal, of course, is taking the matter to the US Supreme Court. Officially the company believes it can win this one, though some lawyers have told DMN they believe the latest appeal is as much about delaying tactics as anything else.

No other artists are likely to sue for their bigger royalty cut while the Supreme Court case is pending, not wanting to incur legal costs until there is a firm precedent set. But, DMN’s sources say, they fear Universal will drag this one out for as long as possible until there is a case for arguing any subsequent claims for bigger royalty cuts are invalid under the so called ‘statutes of limitation’, which obligate aggrieved parties to sue within a fixed time after their grievance first arises.

DMN says “opposing lawyers will certainly try to work around that mess, but this could represent a serious roadblock for some”, while quoting an unnamed music lawyer who says “it’ll be different in every case, but it’s certain to make everything more complicated”.

Of course, if FBT were to win in the Supreme Court, and if it was to set a precedent, and assuming the statute of limitations wouldn’t stop other heritage artists taking action, then this case could be devastating to Universal and their competitors whose budgets assume they are paying out the lower royalty on catalogue recordings sold via iTunes.