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Ninth Circuit refuses to rehear Eminem royalty split case

By | Published on Monday 25 October 2010

America’s Ninth Circuit court has refused to reconsider its ruling in the previously reported legal dispute between the production company which helped launch Eminem and the rapper’s record label, Universal’s Aftermath.

As previously reported, when Aftermath signed Slim Shady, the production company which had previously been working with him prior to the deal – FBT Productions – got a slice of the revenues generated by some of the rapper’s early recordings. As is common in record contracts, the slice was bigger on licensing deals than record sales. Because the deal was pre-iTunes etc, it didn’t mention what slice of money FBT was due on downloads though, as is also common practice, Aftermath has been treating them as record sales and paying the lower royalty.

But FBT argued that the relationship between a record company and download store was based on a licensing deal rather that the supply of recordings for sale, and therefore its royalty share on download sales should be calculated using the higher rate. It’s not first time such an argument has been presented – some other artists with pre-internet contracts have also said download royalties should be calculated at the usually higher licensing deal rate – though when cases have previously gone to court on this issue judges have generally ruled in the label’s favour.

FBT also lost the argument in court first time round, but appealed to the Ninth Circuit court which overturned the original ruling last month finding in the production company’s favour. Universal almost immediately asked for a second hearing on the dispute, but the Ninth Circuit court last week refused.

It is not clear if there are other appeal options still open to Universal, or whether the major will now have to pay FBT higher digital royalties on the Eminem songs in which the company has a stake. Of course, this whole thing would be much bigger news if the principle in this case could be applied to all other pre-net record contracts where there is a distinction between licensing and record sale royalty payments. Though, needless to say, Universal was keep to stress it could not when the Ninth Circuit originally ruled against them last month.

The major’s Peter Lofrumento told Bloomberg: “It should be noted that this ruling sets no legal precedent as it only concerns the language of one specific recording agreement”.