F.B.T. Productions, LLC v. Aftermath Records

621 F.3d 958 (9th Cir. 2010)

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Nature of the Case

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Facts

P signed Eminem in 1995. In 1998, P signed an agreement transferring Eminem's exclusive recording services to D. The 'Records Sold' provision provides that P is to receive between 12% and 20% of the adjusted retail price of all 'full price records sold in the United States . . . through normal retail channels.' P is to receive 50% of D's net receipts '[o]n masters licensed by us . . . to others for their manufacture and sale of records or for any other uses.' This latter provision is called the 'Masters Licensed' provision. The contract defines 'master' as a 'recording of sound, without or with visual images, which is used or useful in the recording, production or manufacture of records.' The agreement does not contain a definition of the terms 'licensed' or 'normal retail channels.' In 2002, D concluded an agreement with Apple Computer, Inc., that enabled D's sound recordings, including the Eminem masters, to be sold through Apple's iTunes store as permanent downloads. In 2003, P and D entered into a new agreement that terminated the 1998 agreement. The new agreement increased some royalty rates but incorporated the wording of the Records Sold and Masters Licensed provisions from the 1998 agreement. In 2004, the parties amended the agreement to provide that 'Sales of Albums by way of permanent download shall be treated as [U.S. Normal Retail Channel] Net Sales for the purposes of escalations.' Escalations are increases in the royalty rate when total album sales surpass certain targets. The amendment further provides, 'Except as specifically modified herein, the Agreement shall be unaffected and remain in full force and effect.' P sued D in 2006 because D had been applying the Records Sold provision to calculate the royalties for sales of Eminem's recordings in the form of permanent downloads and mastertones. The jury returned a verdict in favor of D. The district court awarded D its attorneys' fees of over $2.4 million. P appealed.