On September 28th, Los Angeles Superior Court Judge Joanne B. O’Donnell ruled that Ricky Nelson’s estate can pursue a lawsuit against Capitol Records regarding royalties due to the late singer’s estate from digital downloads.  The case, which has been pending for some time, alleges that Nelson’s 1958 contract was breached due to Capitol Records underpaying royalties for music recorded by the singer.  The decision made by the judge is one of much interest to the music industry, an industry which has been greatly affected in recent years due to digital downloads on the internet.

A royalty of 50% is being sought by Nelson’s estate on sales of Nelson recordings by Capitol licensees.  The contract between the estate and Capitol Records allows for a 10% royalty rate; however, Nelson’s estate argues that the 1958 contract refers only to “physical copies” of Nelson’s music and therefore does not apply to digital distribution.  Neville Johnson, the estate’s attorney, argued that Nelson’s master recordings are only covered for use in a “tangible physical form” in the 1958 contract in a hearing on Capitol’s motion to dismiss the case.

Capitol Record’s attorney Melinda LeMoine stated that regardless of whether the 1958 contract only governs the physical uses of a master recording, “We can still make reproductions of it in whatever format we like.  That’s what digital distribution is.”  Estate attorney Johnson said following the hearing that the interpretation of the contract by Judge O’Donnell could affect any musician with a contract which does not cover digital downloads specifically.  Johnson said that this is a very important case that could set a precedent.

Capitol stands its ground saying that the language used in the 1958 contract is broad enough to include digital downloads.  The contract was originally between Nelson and Imperial Records, which as acquired by Capitol at a later date.  The contract defines a master recording as “any original recording, whether on magnetic recording tape or wire, a lacquer or wax disc, or on any other substance or material, whether now known or unknown.”  Further, the contract granted Imperial permission to reproduce a master “by any method now or hereafter known.”

The question now is whether parties to the contract could have possibly foreseen the dramatically changed landscape of music production and distribution that the industry faces today.

The Law Offices of Spotora & Associates has successfully represented clients in hundreds of cases involving royalty and music industry agreements, film, movie and television production and development contracts, matters involving entertainment litigation and more.  Count on our capable and aggressive team of Los Angeles entertainment lawyers for your legal needs.