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Universal Music wins Eminem song royalty lawsuit

A Los Angeles jury says the record company doesn't have to pay producers more for songs sold online, upholding the music industry's business model.

March 07, 2009|Dawn C. Chmielewski

A federal jury in Los Angeles ruled Friday that Eminem's music royalties don't change just because a song has been sold online.

The decision prevents, at least for now, an upending of the music industry that could have greatly changed the financial relationship between record labels and artists, in which labels have long commanded most of the proceeds from album sales.

The Detroit music producers who were involved in the rapper's early works, including his 1999 Grammy-winning album, "The Slim Shady LP," sued Universal Music Group's Interscope Records, accusing the music label of shortchanging them on royalty payments for music downloads and cellphone ring tones.

Mark and Jeff Bass, brothers who own F.B.T. Productions, said their contract entitled them to 50% of the proceeds for songs sold through online stores including Apple Inc.'s iTunes or by cellphone operators such as Sprint.

They argued that the songs Universal provided to online and mobile services amounted to music "masters," from which infinite digital copies could be produced. As such, F.B.T. said it was entitled to a higher royalty rate than the 12% they would otherwise receive on the sale of a song or music CD.

The jury sided with the music company's interpretation that a song purchased online is no different from one bought in a store.

"It's saying that the digital download is the modern version of a record sale," said music attorney Fred Davis, founder of law firm Davis, Shapiro, Lewit, Montone & Hayes in New York, who was not involved in the lawsuit. "And the economics to the artist are the same for a digital download as they were for the sale of a single, back in the glory years."

Davis said the ruling would have had enormous implications if it had favored the Bass brothers, because it would have forced an already struggling music industry to share a much higher percentage of proceeds from sales with artists.

Although federal district court rulings do not establish a legal precedent, they can influence judges weighing similar disputes. Eminem was not a party to the suit.

Richard S. Busch, an attorney representing the Basses, said his clients were considering their legal options.

"We are very surprised by the jury's verdict," Busch said. "We don't understand it, and the fight's not over."

A Universal Music spokesman hailed the decision, saying, "We are pleased with the jury's verdict."

The jury did award F.B.T. $159,000 owed from underpaid royalties.

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dawn.chmielewski@latimes.com

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