Court Says iTunes Subject To Licensing, Not Sales Rates

Eminem‘s first producers FBT won a lawsuit against his current label Universal Music Group and others on Friday (9/3), which claimed that the rapper’s music on iTunes was being licensed, not sold, and therefore was subject to a higher royalty percentage rate.

Eminem signed with FBT in 1995, and when he eventually moved to Universal, the new contract stated that FBT was entitled to a 12% royalty on “records sold” and 50% rate on licensing agreements, which typically refers to sync licensing.

Last week the Ninth Circuit U.S. Court of Appeals ruled that iTunes downloads can’t be considered sales. The court said that the label is licensing use of the master recordings to iTunes, which then sells the digital downloads without further involvement from the label.

The case was originally rejected by a lower court in California in 2009 and was sent up for appeal. Now it has been sent back to the lower court to determine the amount of damages.

“We will be filing a petition for a rehearing,” Universal said in a statement. “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.”

Most recording contracts today specifically address how to handle royalties for digital downloads, which would make this kind of after-the-fact litigation unlikely.

Nashville-based lawyer Richard Busch, a partner with King & Ballow, was among the attorneys representing FBT, according to the Tennessean.