Updated: Eminem Wins Royalties from Universal, UMG Will Fight It

Court rules that the rapper is owed money for music downloaded over iTunes; update: UMG vows to file for new hearing

The U.S. Court of Appeals has overturned a lower court ruling and decided that Eminem’s music-publishing company is owed royalties by Universal Music Group (UMG) for music downloaded over iTunes or sold as cellphone ringtones.

The decision was filed in court on Friday. (Read the full decision here)

The appeals court ruled that the contracts were “unambiguous” as regards to Eminem's company, F.B.T. Productions:

“On appeal, F.B.T. reasserts that the Masters Licensed provision unambiguously applies to permanent downloads and master-tones. We agree that the contracts are unambiguous and that the district court should have granted summary judgment to F.B.T. We therefore reverse the judgment and vacate the district court’s order awarding Aftermath its attorneys’ fees."

The case has vastly important implications for artists seeking royalties from music companies as commerce from places like iTunes has supplanted traditional music sales.

(Update: UMG spokesperson Peter Lofrumento said that UMB would file for a new hearing and denied that the case had implications for other musical artists.

("We will be filing a petition for a rehearing," he wrote TheWrap. "In the meantime, it should be noted that this ruling sets no legal precedent as it only concerns the language of one specific recording agreement. Any assertion to the contrary is simply not true.")

After a trial that lasted a little over a week in March 2009, a jury ruled in favor of UMG.

Eminem’s F.B.T. did win $159,000 in a separate claim that said UMG had made accounting errors in payments of royalties between it and Eminem.

But F.B.T. appealed to the federal court of appeals for the ninth district.

Owned by brothers Jeff and Mark Bass, F.B.T. discovered Eminem and signed him to an exclusive recording deal in 1995. As such, they sued UMG, the world’s largest music company, on the rapper's behalf two years ago, saying UMG did not deserve the more than 80 percent of the profits it was making on his music.

F.B.T. was seeking to decrease UMG's take to 50 percent; it also wanted $1.47 million in damages for unpaid royalties.

The earlier judgment was a blow to musical artists seeking greater share of the profits in a world dominated by digital downloads, and the reversal may have implications for other artists demanding what they consider to be their fair share of revenues.

F.B.T. sought to prove that a digital download is not a record sold but rather a license on a master recording and should therefore fall under the “master license” provision. That would entitle the artist to the 50 percent royalty rate.

In a three-judge decision, Judge Barry Silverman wrote that the simple word "Nonetheless" in the F.B.T. contract rendered the definition of the master license unambiguous. 

"The parties’ use of the word “notwithstanding” plainly indicates that even if a transaction arguably falls within the scope of the Records Sold provision, F.B.T. is to receive a 50% royalty if Aftermath licenses an Eminem master to a third party for 'any' use."

He added: "A contractual term is not ambiguous just because it is broad."

The decision later continued:

"The jury returned a verdict in favor of Aftermath, and the district court awarded Aftermath its attorneys’ fees of over $2.4 million. F.B.T. timely appealed the district court’s final judgment and award of attorneys’ fees. We have jurisdiction pursuant to 28 U.S.C. § 1291 and we reverse."