April 23, 2013

Jenner & Block, led by Partner Andrew H. Bart, recently secured two significant victories for client UMG Recordings, Inc., both regarding applicable royalty rates on income derived from digital downloads.  This has become a hot button topic in the music industry since the Ninth Circuit awarded Eminem 50% of such income rather than the royalty rate payable on sales of records- usually a third or less of a 50% rate.

In one breach of contract complaint, guitarist Yngwie Malmsteen claimed that he was entitled to 50% of UMG’s net receipts from digital download sales pursuant to a contractual provision that applied that rate in certain limited circumstances. UMG argued that contractual provisions that set a lower royalty rate for all sales of “records” through “normal retail channels” was unambiguous and applied to digital downloads. Judge Paul A. Engelmayer of the Southern District of New York agreed that UMG used the proper royalty rates and granted summary judgment in its favor, dismissing the lawsuit.  Associate Joseph P. Fishman worked closely with Andy throughout this matter

In the other matter, singer Connie Francis claimed that she was entitled to a royalty rate of 50% of UMG’s net receipts from sales of digital downloads through online retailers.  UMG moved to dismiss the complaint, arguing that the recording agreements at issue contain unambiguous provisions setting forth a different calculation of royalties on all “record” sales, which includes digital downloads.  U.S. District Judge Jesus Bernal of the Central District of California rejected Francis’ attempts to limit the definition of “record” and “phonograph record,” because the agreements contemplated that the term "record" encompassed any future medium that transmitted sound recordings.  Judge Bernal also agreed that the plain, unambiguous language of the royalty provision was determinative and dismissed Francis’ contract and quasi-contract claims.  Partner Carletta F. Higginson and Associate Lisa J. Kohn provided invaluable support.