Sales of music by digital downloads and by ringtones sold through carriers must be accounted to an artist under a royalty contract with a recording company as licenses rather than sales of the music, the U.S. Court of Appeals for the Ninth Circuit ruled. The court concluded that the record company's agreements with the iTunes Store and the wireless carriers fell into the provision in the royalty agreement that specified that the artist receive a percentage of royalties “[o]n masters licensed by us . . . to others for their manufacture and sale of records or for any other uses.” The court ruled that the term "license" should be given its ordinary meaning, i.e., "permission to act," and that the agreements qualified as licenses in the ordinary meaning of the term because they gave third parties permission to use the sound recordings to produce and sell permanent downloads.
F.B.T. Productions v. Aftermath Records, 621 F.3d 958 (9th Cir. Sept. 3, 2010) Download PDF