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Monday, March 09, 2009, 07:00 am PT (10:00 am ET)

Eminem firm loses iTunes royalty lawsuit against Universal

Universal Music has prevailed in a case that would have otherwise given millions more to artists for the sale of their songs on digital download services such as Apple's industry-leading iTunes Store.

The Detroit production company involved in Eminem's early albums had previously filed suit against Universal Music, seeking more royalties on songs sold online versus traditional CD sales.

However, a Los Angeles jury late last week sided with Universal's arguments, agreeing that a song sold online is no different from a song bought in a store.

"We are pleased with the jury's verdict," said Universal spokesman Peter Lofrumento.

Bloomberg News reported FBT Productions, which signed Eminem before he came to prominence, was seeking $1.47 million in damages.

An FBT victory could have dramatically changed the pecking order for proceeds from digital downloads, such as Apple's dominant iTunes Store.

The jury's decision means record labels will continue to control most of the revenues from album sales. Artists and production companies have called for more proceeds from the online music marketplace as the record labels' overhead is much lower since companies like Apple are responsible for the marketing, management, delivery, and so on.

The production company had argued their contract entitles them to more proceeds for songs sold online. It reasoned that the tracks the label provides to services like iTunes and Amazon are music "masters", used for reproducing endless digital copies. FBT, owned by brothers Mark and Jeff Bass, said their contract entitles them to higher royalties on music "master" sales, but the jury did not agree.

Eminem was not a party to the suit, although he would have earned much more in unpaid royalties had the jury sided with FBT. Lawyers for FBT said they will appeal the jury's ruling.

The brother-owned company did prevail on a separate claim involving underpaid royalties, netting a minor victory. Universal was ordered to pay $159,000.