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Universal calls for myriad digital royalty lawsuits to be dismissed

By | Published on Wednesday 28 May 2014

Universal Music

While Sony Music and Warner Music have attempted to kill the digital royalties litigation against them in the US by offering albeit nominal increases in the cuts paid to veteran artists, it seems Universal Music is still in fighting mood, submitting two motions calling for artist lawsuits to be dismissed last week, according to The Hollywood Reporter.

As much previously reported, there has been much dispute over how much of the income stemming from downloads labels are obligated to share with their artists where contracts between the two parties pre-date iTunes and therefore make no mention of digital revenues.

The labels, in the main, have treated downloads like CDs, therefore paying a relatively low cut of the money to artists (usually 15% or less). But some artists and artist attorneys argue that download income stems from a licence not a record sale, and most artist contracts offer a much more generous royalty split on licensing deals (anywhere up to 50%).

A plethora of lawsuits have been filed by veteran artists Stateside in the last few years targeting all three majors, and some of them seeking class action status. Some have been settled out of court, but many are still going through the motions. Universal’s latest legal filings on the issue provide a long list of reasons why those lawsuits should be dismissed, some general, some specific to individual claims.

They include the argument that artists were informed of Universal’s proposed payment model for downloads in 2002, before the iTunes Store was launched; that that model was actually slightly more generous than the major was contractually obliged to offer; and that many artists and managers welcomed the proposal at the time. Universal concedes that there were some dissenters, but adds that the dissenting artists took too long to go legal (the earliest cases on this point were against Sony), and their lawsuits should therefore be denied on the basis of statute of limitations.

Other arguments contained in Universal’s latest papers include: that lawsuits alleging that consumers were hurt by royalty arrangements are invalid because consumers aren’t aware of these dealings; that some of the artists suing under Californian law had contracts that were governed by New York law; that 1970s singer Bo Donaldson couldn’t sue because of an agreement with his former bandmates that majority participation was required to litigate; and Ron Tyson of The Temptations wasn’t party to the crucial contracts because he didn’t join the group until 1983.

Though perhaps the most significant argument presented by the mega-major is another point raised in connection with Donaldson, regarding the crucial previous ruling in this domain in FBT Productions v Universal. The early Eminem collaborators ultimately won in their legal bid for a bigger cut of digital income, and it was that ruling that precipitated the flurry of lawsuits on this issue. But Universal has always insisted that FBT’s contract was unusual, and therefore the judgement in that case didn’t set any kind of industry-wide precedent.

Says Universal in its latest filing: “Few, if any, recording contracts have the starkly dichotomous structure of the contract in FBT. None of plaintiffs’ contracts do. Certainly the contract on which plaintiff Bo Donaldson is suing does not. To the contrary, when plaintiffs’ theory that UMG ‘licenses’ downloads to download providers is applied to Donaldson’s contract, this actually dictates a lower royalty for downloads than UMG is paying under that contract. Of course, if, under plaintiffs’ theory, Donaldson has been overpaid royalties, he cannot maintain claims for underpayment of royalties”.



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