(CN) - Producers affiliated with Eminem are entitled to significantly higher royalties on songs and albums downloaded from Apple's iTunes store, the 9th Circuit ruled.
Em2M LLC and FBT Productions sued the rapper's label, Universal Music Group's Aftermath Records, for allegedly underpaying royalties on Eminem's downloaded music.
FBT had signed Marshall Mathers III, professionally known as Eminem, in 1995 and transferred its exclusive rights to his recordings to Aftermath three years later.
Under the transfer agreement, FBT would receive royalties of 12 to 20 percent on the adjusted retail price of all full records sold and 50 percent on licensed master recordings.
The production company sued when it learned that Aftermath had been calculating royalties for downloaded music by treating it as "records sold" instead of licensed music.
A jury sided with Aftermath, and the district court awarded the record label more than $2.4 million in attorney's fees.
But the federal appeals panel in Pasadena reversed, concluding that FBT is entitled to the higher royalty rate.
"Because Aftermath permitted third parties to use the Eminem masters to produce and sell records, in the form of permanent downloads and mastertones, FBT is entitled to a 50 percent royalty under the plain terms of the agreements," Judge Barry Silverman wrote.
If the ruling stands, it could benefit older artists who have been getting a fraction of download income based on contracts they entered long before current technology.
The court also vacated Aftermath's $2.4 million attorney fee award and remanded.
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