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Rick James estate to test extent of FBT ruling

By | Published on Tuesday 5 April 2011

Rick James

Universal Music maintains that the previously reported FBT Productions v Interscope case does not set a more general precedent regarding the digital royalties paid on pre-internet contracts, but that viewpoint is going to be tested by the estate of the late Rick James.

As previously reported, FBT Productions successfully sued Universal’s Interscope for a bigger cut of digital royalties relating to the early Eminem catalogue – in which it has a stake – based on the notion that the music major’s relationship with services like iTunes should be treated as a licensing arrangement rather than a record sales relationship akin to that record companies have with traditional retailers. It’s an important distinction because many record contracts give artists a bigger cut of royalties when they are generated by licensing deals rather than record sales.

This debate only affects record contracts written before the internet because post-iTunes contracts will clearly state that download revenues are subject to the lower royalty. But record companies are sitting on a lot of pre-internet artist agreements, a handful of which generate a lot of cash.

FBT Productions were not the first royalty beneficiaries to go legal over this, but previous attempts by artists to win a bigger cut of digital royalties via the courts were unsuccessful. But FBT won though, as we say, Universal insist the ruling in this case relates specifically to the wording of the hip hop producers’ contract and doesn’t set a more wide-reaching precedent.

But that’s not stopping the Rick James estate having a go at forcing such a precedent. They have filed a class action lawsuit against Universal calling on the major to apply the ruling in the FBT Productions case to all artists under other similar record contracts.

The lawsuit says: “By this lawsuit, the plaintiff seeks to compel UMG to account to and pay its other recording artists and music producers (ie, those not directly involved in the FBT litigation) their rightful share of the licensing income paid to UMG for downloads and mastertones of the recorded music licensed by UMG to these entities”.

Commenting on the action, Jeff Jampol, manager of the James estate, told Billboard: “In assessing and watching the Eminem case, the original judge found for the production company and declared these were indeed licenses, and said it’s a matter of law unless there’s specific language in the contract to address this. Many entertainment industry attorneys have been lobbying about this issue for years”.

The courts must decide whether to accept the James estate’s case as a class action, ie one that would allow any artists in a similar position to claim the larger royalty on digital revenues if the lawsuit were to be successful. Legal reps for the estate reckon thousands of artists could benefit.

Needless to say, Universal were dismissive of the lawsuit, telling reporters: “The complaint filed by the estate of Rick James suffers from many infirmities, not the least of which is that the claims asserted are not appropriate for class treatment. We intend to vigorously defend against it”.