Eminem Sues Universal for Royalties on Downloading

F.B.T. is accusing Aftermath of withholding about $1.3 million in royalties under what it claims is a cynical interpretation of contracts with UMG, starting in 1998, that established royalties from the sale of Eminem’s music at 50 percent of net receipts. Lawyers for the rapper argue that making the work available for digital downloading is simply an extension of the original contracts.   

In court papers, Aftermath disputes allegations that the company withheld royalties or that the company is misinterpreting contract language that F.T.B. says equates digital downloads to the sale of music in other forms.
 
“If you give the music to a third party without cost to you, like manufacturing or packaging, that’s the same as a licensing agreement,’’ said a person involved on the plaintiff’s team who asked not to be identified. “They are characterizing it as something else.’’

The plaintiffs claim that UMG has maintained “licensing agreements’’ with third-party distributors for digital downloads since 2001, including as many as 80 for so-called Mastertones, which play when an incoming call reaches a cellphone. They further say that in no contract revisions with UMG was clarifying language inserted to accommodate the changing technological landscape.

In court papers, they cite various instances when executives from UMG and digital distribution partners used the words “licensed” and “licensing” in discussing their financial relationships.

One document says Steve Jobs “discussed his company’s relationship with UMG as that of a ‘license’ in an essay titled, ‘Thoughts on Music,’ dated February 6, 2007.” It went on to say, “He explained Apple’s need to ‘license rights to distribute music from others,’ mentioning Universal and the other large record companies.’’

The defendants argue that the plaintiffs have misconstrued the contracts with UMG, that Eminem is wrong to expect that “any transaction that involves anything that might be considered a ‘license’ under federal copyright law triggers the 50% of net receipts royalty.’’

They further argue that Eminem’s production company has blurred all distinctions within the series of four contracts with UMG, assuming each of them to be a “licensed” agreement.

And they point to language in a 2004 contract amendment with F.B.T. that “expressly recognizes that downloads are sold, not licensed, for royalty purposes (indeed, that selling them is a ‘method of sale.’).”

While Cooper said he is unfamiliar with the details of the Eminem case, he cautioned, “Artists have to live with the contacts they have, even when they may not like them. These contracts have existed for a long time. It’s a question of interpretation.”
 

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