Wednesday, March 23, 2011

More Breaking News

Once again, my examination of marketing has been interrupted by significant news in the digital world.

I don't know how many of you have followed the lawsuit by Eminem's production company against Universal Music Group ("UMG") over digital rights and revenue.  Eminem (aka Marshal Mathers) signed his contract in 1998, right before digital downloads revolutionized the music industry.  Even though the 1998 contract was rescinded and replaced by a second contract in 2003 (after UMG made a deal with Apple to sell Eminem's music through the iTunes store), the key issue of payment for the downloads was not specifically addressed.

The legal issue centers on the contract's wording of whether digital downloads should be considered a sale or a license.  In other words, under the contract terms, Eminem gets a certain percentage if a CD is sold versus a much higher percentage if that same music is licensed for use by a film or TV show.  The suit revolves around how digital music should be considered when no specific clause exists in the contract, but both parties are acting under the assumption such digital rights were sold.

In 2010, the Ninth Circuit Court of Appeals (and I'll be the first to admit they are a very liberal court) ruled that a digital download is a license to use the music, not a physical sale.  If you're curious, here's the apellate decision.

The amazing thing is on Monday the U.S. Supreme Court refused to hear the case.  This generally means the Supremes agree that the Ninth got the law right, or at least didn't eff it up bad enough to fix.

Now, the case will go back to the Federal District Court of Central California (i.e. the original trial court) to determine the damages that UMG must pay Eminem and F.T.B. Productions.  The estimates being thrown about are $40-50 million.  I have no doubt UMG will appeal the trial court's final figure as well.

This is a precedent setting case, and it'll be interesting to see who tries to use it first in the digital book arena.


Then to top things off (as if the Eminem case wasn't enough), Judge Denny Chin rejected the Google Book Settlement yesterday.  His big concern was Goodle's blatant grab for author's rights without regard to copyright law (which is why Author's Guild, etc., threw a fit when the Digital Library Project was first proposed).  The rejection was made without prejudice, which means the parties can hammer out a new settlement agreement and submit it to the court.  In his decision, Judge Chin said if the parties change to an opt-in settlement, instead of an opt-out, it would ameliorate many of the objections to the settlement.

It's nice to see the justice system standing up for artists' rights.

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