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Major record labels continue to fight recording artists on the issue of compensation for digital downloads. Most recently, The Temptations filed perhaps the biggest lawsuit on this front yet. Meanwhile, Sony BMG, which just agreed to pay $8 million to settle a similar class action, isn’t finished contending with musicians who don’t want to be part of that deal. In defending a lawsuit brought by the group Toto, which recorded the hit song “Africa,” the music company says the band is “dissatisfied with the bargain that it struck.”
As we’ve previously written, the chief controversy is whether a digital download should be treated as a “license,” with high royalty rates for song artists, or a “sale,” with a much lower rate. Musicians believe it should be a “license” because there’s not much packaging required to simply permit iTunes or another digital vendor the right to offer up music on its service.
But the “license” vs. “sale” dispute misses a third word — “lease” — which could play a role in determining whether musicians get roughly 50 percent of digital income or merely about 15 percent.
Sony Music’s contracts with musicians appear to have “lease” provisions instead of “licensing” provisions. Is there a difference?
Sony says yes.
On Thursday, Sony submitted a motion to dismiss Toto’s lawsuit. In a memorandum to the court, the company gives a few reasons why a judge should toss the complaint, starting with the alleged fact that in 2002, the parties amended their agreement to set forth a new royalty rate specifically applicable to “all records made for digital playback.”
Then, Sony gives the judge and the plaintiffs a lesson on semantics.
“In an attempt to sidestep this [‘lease’] obstacle to its claim, plaintiff alleges that ‘license’ and ‘lease’ simply mean the same thing,” writes Sony. “But plaintiff’s allegations cannot alter the plain meaning of the contract. As a matter of both ordinary English and contractual usage, the terms ‘license’ and ‘lease’ are not synonymous.”
Sony points to an earlier ruling in the Allman Bros. class action — the one that settled for $8 million — where a judge noted that the plaintiffs had not pled any allegations that the master recordings were leased. “There is, therefore, no basis from which it can reasonably be inferred that payment pursuant to the master recording lease provision is applicable,” said the judge in June, 2008 in granting a motion to dismiss.
However, the judge later allowed the Allman Brothers plaintiffs an opportunity to amend their complaint, which they did by alleging that Sony “leases” its catalogue to download providers like Apple’s iTunes.
Now, the Toto case picks up the language switcheroo, and Sony is pointing to the Black’s Law Dictionary, the Webster’s Third New International Dictionary, and the Oxford English Dictionary to support the idea that “lease” and “license” are different.
Black’s Law Dictionary defines “lease” as “a contract by which a rightful possessor of real property conveys the right to use and occupy the property in exchange for consideration.”
The dictionary defines “license” as “a permission, revocable, to commit some act that would otherwise be unlawful, especially an agreement that it is lawful for the licensee to enter the licensor’s land to do some act that would otherwise be illegal, such as hunting game.”
If Sony wins this argument — no sure thing — we bet it’ll mean a whole lot of people out there will be guilty of talking about “licensing” activity in media and entertainment when they really mean leasing activity. The semantic argument might seem trivial, but it’s worth millions.
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