Category Archives: Recording Contracts

Getting Tuf

Also from TufAmerica’s lawsuit against the Beastie Boys over the alleged sampling of TufAmerica’s recording artist Trouble Funk’s 1982 release “Say What” on the Beastie Boy’s “Shadrach” from their 1989 release Paul’s Boutique, I give you Trouble Funk’s recording contract and co-publishing agreement.

Recording Agreement

Trouble Funk Recording Contract (1984)

Co-Publishing Agreement
 

Co Publishing Agreement

No (un)Original Thoughts

As I’ve often said, reviewing litigation dockets is a great place to learn new things. Instead of focusing on a judge’s final decision, one can often learn more by reading the party’s pleadings, which provide the strongest advocacy for a particular legal position. [caveat–it is critical to read BOTH side’s pleadings]. It is also often the case that a recording artist or songwriter’s contract will be appended to the complaint, providing useful insight not only into the issues in a particular litigation, but towards how the music industry evolves over time. I was reading Rita Ora’s recording contract with Roc Nation–a copy of which can be found here–and I remembered some research I’d done a while ago but never bothered to post here. Specifically, a review of 3 recording contracts executed between 1983 and 1992 demonstrate how public performance for sound recording royalties made their way into major label recording contracts. [caveat–this is not intended to be scientific; it is merely an interesting fact based on the 3 contracts in question]

So, check this out.  In 1983, CBS did *not* have any language about public performance rights in sound recordings—check out the Toto contract below.  By 1989, the language does exist—see 10.04 of the Allman Bros. agreement with CBS reproduced below.  Identical language appears in the Interscope license with Dr. Dre is 1992—see 10.05 of the Dre agreement reproduced below—even though I’m not aware of any relationship between CBS (which was bought by Sony) and Interscope (which was bought by UMG)!

Pre 72 Comparison

The Toto recording contract is below.

Toto 1983 Recording Contract w CBS (Sony)


The Allman Bros. recording contract is below.

Allman Bros Record Contract w CBS 1989

Dr. Dre’s recording agreement is below:

Dre Death Row Records Agreement (1992)

Sony Sued for Self-Dealing with Spotify

Last year, 19 Records, the label that represents the recording artists from the TV series American Idol, sued Sony, 19 Records’ distributor, for underpayment of royalties. Specifically, 19 Records claimed that Sony paid royalties at the lower rate corresponding to the sale of physical records instead of the higher rate corresponding to a license for use. As background, attorney Richard Busch successfully represented Eminem’s former management team in a similar lawsuit against Universal and has filed numerous similar lawsuits against each of the major labels.

Yesterday, 19 Records amended its complain to include allegations that Sony’s agreements with Spotify amount to self-dealing; alleging “Sony … structured its agreement with the streaming service, Spotify, in a manner designed to rob 19, its artists, and other artists of royalties.” The amended complaint contains the specific allegation that Sony’s insisted on receiving free advertising to generate revenue that it would not have to share with artists: “For instance, Sony’s agreement with Spotify gives Sony up to [REDACTED] in advertising which Sony is free to resell or have resold for it. Thus, Sony is able to collect up to [REDACTED] under the terms of its agreement with Spotify and then claim that none of the income is attributable to the exploitation of a master recording, and thus not subject to the payment of royalties to Sony’s recording artists and 19.”

If history is a guide, Busch will file similar suits against the other majors on behalf of his other clients.

19 Records v Sony (Amended Complaint Re Spotify)

Toto v. Emenim

The SDNY recently found that Toto’s recording contract with Sony did not obligate Sony to pay Toto 50% of royalties from digital sales through Internet retailers such as iTunes.  This outcome is different from the FBT case out of the 9th Circuit, where similar language was interpreted differently.  So, what is the difference?

 

Toto v Sony (9!29!14 Order)

Bamboozled! UMG’s Inter-Company Accounting At Issue

The legal battle between brothers Mark and Jeff Bass, the Detroit producers credited with grooming rapper Eminem in his early days, and Aftermath Entertainment, the American record label founded by Dr. Dre and distributed through Universal Music Group’s Interscope Records, has grown to include the inter-company accounting practices of large, multinational record labels.

History

A brief history is in order.  The Bass brothers, working under their nom de rap Funky Bass Team a.k.a. F.B.T. Productions, signed fellow Detroiter Marshall Mathers (a.k.a. Eminem), to a recording contract in 1995.  In 1998 and 2000, F.B.T. signed agreements with Aftermath to (first) distribute and (later) own all of Eminem’s sound recordings in exchange for between 12% – 20% of the retail price of copies of Eminem’s records sold (“Records Sold” provision) or 50% of the net revenue Aftermath obtained by licensing Eminem’s master recordings (“Masters Licensed” provision).

[Side Note: It is quite common in recording contracts for royalties paid on records sold to be lower than royalties paid of masters licensed; see, e.g., here.]

When an audit of Aftermath revealed that F.B.T. was receiving royalties for permanent downloads and ringtone sales under the Records Sold provision (and not the more lucrative Masters Licensed provision), F.B.T. filed suit in 2007.  After a jury found that Aftermath had been correctly accounting to F.B.T. (i.e., digital downloads were Records Sold), F.B.T. appealed.  The 9th Circuit reversed and held, as a matter of law, that digital downloads and ringtones were licensed to various third parties such as iTunes who, in turn, distributed over the Internet.

The agreements also provide that “notwithstanding” the Records Sold provision, F.B.T. is to receive a 50% royalty on “masters licensed by [Aftermath] . . . to others for their manufacture and sale of records or for any other uses.” 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. A contractual term is not ambiguous just because it is broad. Here, the Masters Licensed provision explicitly applies to (1) masters (2) that are licensed to third parties for the manufacture of records “or for any other uses,” (3) “notwithstanding” the Record Sold provision. This provision is admittedly broad, but it is not unclear or ambiguous.

The 9th Circuit remanded the case back the Central District of California for a trial on damages, which was supposed to begin in April, 2012.

[Another Side Note: If you wonder how Richard S. Busch, a commercial litigator from Tennessee, ends up representing the Bass brothers, I have a theory.  Busch represented Bridgeport Music, a publishing company that owns or controls much of the catalog of George Clinton, and Westbound Records, a record company that released several albums of Clinton’s famous funk band Funkadelic, in a series of cases in the Middle District of Tennessee over alleged unlicensed sampling.  In a controversial landmark decision, Bridgeport Music, Inc. v. Dimension Films, 410 F.3d 792 (6th Cir. 2005), the 6th Circuit held that the unlicensed use of a two-second guitar chord from Funkadelic’s song “Get Off Your Ass and Jam” in gangster rap group N.W.A.’s song “100 Miles and Runnin’” constituted copyright infringement.  In its decision, the 6th Circuit wrote: “Get a license or do not sample. We do not see this as stifling creativity in any significant way.”   It turns out that prior to working with Eminem, Mark and Jeff Bass worked as a production team for George Clinton and his label Westbound Records.]

Present Dispute

The present dispute involves whether F.B.T. can supplement the complaint they filed in 2007 on the eve of a second trial, which was to commence on April 24, 2012.  F.B.T. claims that Aftermath’s expert report, served on February 7, 2012, revealed for the first time that Aftermath was receiving only 29% of the revenue generated from foreign sales of downloads and ringtones under an inter-company agreement with its foreign affiliates.  Because under the 9th Circuit’s decision Aftermath is to pay F.B.T. 50% of revenue (under the Masters Licensed provision), it makes an enormous difference whether that calculation includes 100% of revenue generated by the foreign sales or just the 29% of revenue Aftermath recognizes on its books.

In opposing F.B.T.’s motion for leave to file a supplemental complaint under FRCP 15(d), Aftermath argued, in part, that a prior partial summary judgment ruling had already decided the issue of foreign revenue.  In rejecting Aftermath’s argument, Judge Gutierrez noted that

Defendants largely rely on a single sentence from their summary judgment brief for the proposition that the issue they wanted determined was clear: “In audits conducted post-dating the trial, F.B.T. has contended it is entitled to 50% of what is received by any company affiliated with Universal Music Group, anywhere – including 50% of the ‘receipts’ of foreign distribution companies.” Mem. ISO Defs. Mot. for Summ. J., 20:21-25. In light of Defendants’ current position on revenue sharing with foreign affiliates, the import of this sentence now seems clear. However, at the time, FBT did not seem to understand the reference. In opposition, FBT stated in a footnote that the “significance of this sentence is not clear.” Opp. to Defs. Mot. for Summ. J., Dkt. # 710, at 17:24-28 n.11.

Judge Gutierrez went on to complain

[The] Court is deeply troubled by Defendants’ argument. While it is hard to see what FBT could gain by feigning ignorance, it is now quite apparent what Defendants could hope to gain by bamboozling the Court and Plaintiffs on this issue. Defendants’ current stance makes it appear as though Defendants carefully inserted the issue into the motion for summary judgment before they had notified FBT or the Court of what percentage of the revenues from foreign sales of permanent downloads and mastertones would be paid to FBT. An attempt to dupe the Court into a premature ruling will not serve as the basis to deny FBT an opportunity to challenge Defendants’ accounting practices.

So, F.B.T. now has until July 6 to filed its amended complaint.  The parties will then get to conduct further discovery on the issue of inter-company accounting.  Looks like a trial won’t be happening until the end of this year or early next.

Judge Gutierrez’ opinion is below:
[scribd id=99206217 key=key-1lbo4w2u3s37vujrhdna mode=list]

What is Hip? Suing Your Record Label for 50% of Digital Download Revenue!

Oakland, California-based Tower of Power has filed a class action lawsuit against Warner Music Group claiming to represent a class of plaintiffs whose recording agreements entitled them to 50% of revenue for digital downloads.  According to the complaint, which is provided below,

The WMG Agreement provided a significantly higher percentage of royalties under the licensed equation than under the sold equation. In general, the sold equation provides for royalties often percent (10%) (depending on the popularity of the artist, album and price the record was sold at; i.e., the more popular the artist, or the more expensive the album, the higher the royalty rate) while the licensed equation provides for royalties of fifty percent (50%) of net receipts. As a result, a recording artist or producer is paid a significantly lower percentage of the total money received by Defendant for their commercial exploitation of the artist or producer’s master recordings under the sold equation than under the licensed equation.

While I understand the strategic play, class certification is always hard in these circumstances, as even small differences in contractual language may have important implications for the applicable royalty rate.

What is clear is that these suits are going to become more and more common.

Complaint:
[scribd id=87692961 key=key-1b5xh00oq6v6kc88eugu mode=list]

No, Seriously.

Alfred Matthew “Weird Al” Yankovic is suing Sony for $5mm.  In addition to several  audit-related claims regarding alledgedly unauthorized recoupments and/or deductions, Weird Al has joined the ranks of Eminem, the Allman Brothers, Rick James, and others in claiming that Sony should have paid 50% of revenue for digital download sales.  According to the complaint, which is provided below, Weird Al’s 2002 agreement with Sony specifies that “notwithstanding any other royalty provision …, Sony will credit [Weird Al’s] royalty account with an amount equal to fifty percent (50%) of the Net Receipts from any royalty, fee, or other payment received by [Sony] directly attributed to a Master licensed by us for use (A) in the manufacture and/or distribution of Phonograph Records.” (internal citations omitted).  According to the complaint, “Phonograph Records” is defined in his agreement with Sony as including permanent music downloads, mastertones and ringtones.

Like several other suits, this case is being brought by Richard Busch of Nashville’s King and Ballow, who has cut quite a lucrative niche for himself after winning the landmark Eminem case before the 9th Cir.

Stay tuned…

Complaint:
[scribd id=87688742 key=key-2e0vos93a8ti6meleirw mode=list]

ZFT Zapped: District Court Rules Against Frank Zappa’s Widow

The Zappa Family Trust (“ZFT”) was, indeed, zapped on August 17, 2011 when the District Court for the Southern District of New York squashed their attempts to collect, among other awards, $150,000 per alleged copyright infringement from Ryko, a subsidiary of Warner Music Group.  In a Memorandum and Order, dated August 17, 2011, Judge William H. Pauley, III granted Ryko’s motion for summary judgment, in part and denied in part.  Zappa’s motion for summary judgment was denied.

Frank Zappa released more than sixty albums before his death in 1993, including Burnt Weeny Sandwich, Weasels Ripped My Flesh, and Joe’s Garage Acts I, II and III.  After his death, all rights, title and interests in his sound recordings passed to ZFT.  In 1994, ZFT entered into an agreement with Ryko (the “1994 Agreement”), pursuant to which Ryko paid $20 million for “certain rights in and to the actual versions and mixes of the sound recordings commercially released or exploited with the authority of Zappa prior to October 6, 1994.”  The 1994 Agreement did contain certain restrictions on Ryko’s ability to exploit the masters; i.e., paragraph 12.11 of the 1994 Agreement provides that “[n]o remixes, edits, changes in technical standards or other changes will be made by Ryko to the Subject Masters which would impact the integrity of the work as embodied in 1610 or 16301 final version of each of the Subject Masters delivered.”[1] (italics mine)

Zappa’s widow, Adelaide Gail Zappa, brought suit against Ryko as the sole trustee of ZFT, which owns the rights to Zappa’s music.  Specifically, ZFT alleged that Ryko marketed specific Zappa recordings in ways not allowable under their 1994 agreement.  ZFT further alleged Ryko failed to properly account for mechanical royalties.  Ryko counterclaimed with copyright infringement and breach of contract claims of its own.

Significant to the Court was the lack of specificity defining the term, “technical standard.”  In fact, there was no definition.  The 1994 agreement specified, in part, that Ryko could not exercise its right to exploit the Zappa music in a way that changed the technical standard of Zappa’s work.

The Court specifically addressed digital downloads and vinyl records; and, found that digital downloads might be a violation of the agreement; but the extrinsic evidence used to interpret the violation of Zappa’s “technical standard,” was inconclusive.  In addition, the Court found that vinyl records, commonly used throughout Zappa’s career, were not a degradation of Zappa’s music

The Court dismissed other ZFT claims based on the ambiguity of terms in the 1994 agreement and as being barred by a 1999 settlement between ZFT and Ryko.   Other ZFT claims were barred because ZFT failed to show copyright violation, they were improperly raised, or ZFT provided insubstantial evidence.

The Court’s order is below:
[scribd id=70783812 key=key-1hgs90z0n0xaevbd0020 mode=list]

The 1994 Agreement is below:
[scribd id=70783836 key=key-donbq75x5dcyzcofosm mode=list]


[1] 1610 and 1630 “refer to a format of music delivery equal to CD-quality audio.”

Clinton Sings Sad Tune in Court but Loses

Singer, composer, performer, George Clinton’s request for $33 million, in allegedly unpaid royalties, hit a wrong note with the Central District of California Court. In fact, Judge Philip S. Gutierrez, on remand from the 9th Circuit and having allowed Clinton to amend his earlier complaint to add “for the first time in this protracted litigation … a new claim for alleged underpayment of ‘internet royalties, i.e., exploitation by ‘download providers . . . and mastertone providers . . . for permanent downloads’” against Universal Music Group Inc. (UMG), has granted UMG’s motion for summary judgment.

In this case Clinton claimed that UMG failed to pay him appropriate royalties. UMG’s defense to these claims was simple: they argued that Clinton’s claims were barred by their 1980 performance contract, a copy of which is below. The contract provided that Clinton must specifically object to any royalty statement within 3 years of receiving the statement.  One problem was that UMG apparently had trouble finding Clinton:

“For a period of time, UMG was unable to locate Clinton and the royalty statements it sent were returned as undeliverable. In the spring or summer of 2001, UMG did locate Clinton and provided him with his first royalty statements and payments from Defendants for the exploitation of Parliament sound recordings under the 1980 Agreement. The royalty statement covered the period from 1996 through 2000, and the payment amounted to over $800,000.”

The contract further provided that Clinton was deemed to have received the statement, unless he informed UMG otherwise, within 90 days of the end of the statement period. There was controversy over a subsequent agreement which, as written, tolls any relevant statute of limitations regarding contract rights of the 1980 agreement. Clinton argued that the specified tolling also tolled contractual obligations such as the requirement that he provide specific objection to royalty statements. The issue at hand was whether Clinton ever timely and properly objected to payment of “internet royalties.” This Court found that he did not, stating, “[T]he 1980 Agreement bars Clinton’s internet royalty claims here.” Clinton was contractually barred from challenging royalty statements for the period of 1991-1999 because, in part, “in each of the two audit reports, Clinton not only categorizes the different types of royalties allegedly owed (omitting any reference to internet or internet-related royalties), but also itemizes each category and identifies the infringing records, artists, television shows, and movies, without ever referencing the type of claim he now raises as owed internet royalties.” As to later royalty statements and other related claims, Clinton’s argument became irrelevant because even if the contractual obligations were tolled, as applied to royalty statements provided after the tolling agreement, the Court found that either Clinton did not have any evidence to support his claims or there is no genuine dispute of the claim stated.

However, the Court did deny UMG’s request to deny Clinton an accounting based on their finding that there could be a material disagreement as to the relevant facts.

The court’s order is below:
[scribd id=70707357 key=key-1j5g944rihoj3fvycddh mode=list]

Clinton’s Production Agreement is below:
[scribd id=70707415 key=key-8jtqt70ct2zgh6860dc mode=slideshow]