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Is Jay Z’s Live Nation Deal Like the Formula for Coca-Cola?

With just two weeks to go before Shawn "Jay Z" Carter stands trial for allegedly infringing an Egyptian film composer's tune on the mega-hit "Big Pimpin," a California federal judge is setting up one…

With just two weeks to go before Shawn “Jay Z” Carter stands trial for allegedly infringing an Egyptian film composer’s tune on the mega-hit “Big Pimpin,” a California federal judge is setting up one hell of a show to come. In a complicated dispute that’s lasted eight years, one should expect nothing less.

Jay Z will testify, as will music producer Tim “TimbalandMosley. There will be an MTV executive on the witness stand and possibly a Universal Music executive phoning in from Dubai. Egyptian law will get some discussion. Sampling too. And just possibly, there may be revelations about all the money Jay Z has been earning these past 15 years since “Big Pimpin” was released. In fact, Jay Z’s lawyer is now arguing that his agreement with concert giant Live Nation is like the formula of Coca-Cola and that many music artists will be impacted upon disclosure.


U.S. District Judge Christina Snyder has decided to split the case into two phases. The first will concern whether the defendants (including EMI, Universal Music, Paramount Pictures and MTV) violated the copyright on the Baligh Hamdi composition “Khosara, Khosara” from the 1960 Egyptian film Fata ahlami through their exploitation in records, documentaries and concerts.

Jay Z and cohorts have a number of defenses to the allegation that the hook in “Big Pimpin” was illegally derived. Among those defenses is that “Khosara” is not original enough to be copyrighted, rights were forfeited by general publication, the use of a sample was de minimus copying or fair use, and there wasn’t any willfulness in the copying. The biggest defense, though, is that the defendants had license to use “Khosara” through an agreement with an Egyptian outfit that had worked out an arrangement with Hamdi’s heirs.

The discussion of liability will involve talk about Egyptian copyright law. Maybe not as much as plaintiff Osama Ahmed Fahmy, the nephew of Hamdi, originally demanded, but more than Jay Z wants. Under Egyptian law, authors and their heirs can refuse to permit use of a composition in manners deemed to be “objectionable.” Judge Snyder has ruled that plaintiff’s “moral rights” can’t be tried in an American courtroom, but she is allowing Fahmy to argue that insofar as Egyptian law presents a way to interpret defendants’ agreements, he can raise the question of whether defendants acted outside of the scope of the relevant licenses.

The liability phase of the trial will be notable for other reasons. First, the judge has decided that it would be prejudicial to let a jury hear about Jay Z’s great wealth, but she is leaving open the possibility for now of letting them hear about his past criminal conduct. And similar to what happened when the family of Marvin Gaye took on Robin Thicke and Pharrell Williams at trial over “Blurred Lines” earlier this year, the jury won’t hear the actual sound recordings of “Big Pimpin” and “Khosara.”

The judge writes that presenting the sound recordings “carries a significant risk of confusing and misleading the jury,” and offers that Fahmy could instead compare the lead music sheets. “However, the Court recognizes that because there may not be a musical composition of Big Pimpin’ such a comparison may not be possible,” she notes. “Nonetheless, regardless of the methodology plaintiff elects to establish infringement, he must prove that the copyrighted lead sheet has been infringed as opposed to the uncopyrighted sound recordings.”

If Fahmy proves liability, the trial will move onto the damages phase. It’s here where the parties are still debating the shape and character of the potential proceedings. For one thing, the two sides are currently quarreling over whether there is a 7th Amendment right to let a jury determine an apportionment of profits arising from copyright infringement. The judge is currently hearing arguments with references that date all the way back to how courts in the 17th century dealt with restitution. And both sides are discussing the subject with a nod towards a more recent decision — the U.S. Supreme Court’s opinion pertaining to alleged copyright infringement of Martin Scorsese‘s classic film Raging Bull. Jay Z is arguing that a judge, not a jury, should decide any awarding of profits attributable to infringement.

Then, there’s that Live Nation deal. In a brief last week, Jay Z’s lawyer explained to a judge why the hip-hop star’s agreement shouldn’t be presented at trial.

“The Live Nation Agreement is a highly confidential agreement reflecting years of negotiations between Carter and Live Nation,” they wrote. “It is over eighty pages long and sets forth in detail the terms of Mr. Carter’s business relationship with Live Nation — most of which have no conceivable relation to this case. Its disclosure would severely undermine Live Nation’s ability to negotiate deals with new artists, as it would significantly change the artists’ bargaining position if they knew the formula Live Nation uses to compensate Mr. Carter. It would similarly compromise Mr. Carter’s bargaining power in the future. Live Nation treats the details of its agreement with Mr. Carter like the formula for Coca-Cola: it is so sensitive that Live Nation shields it from its own employees.”

On Monday, Fahmy’s attorneys responded that the comparison to Coca-Cola’s secret formula is “implausible.” They wrote that it was needed because Jay Z “refused to provide bottom-line numbers for concert revenues” and what was disclosed “underestimate Mr. Carter’s profits.” They also pointed to something that was published in The Hollywood Reporter in 2008 to show the terms have already been “widely reported.”

“Live Nation will contribute $5 million each year in overhead for five years and offer $25 million to finance Jay-Z’s external acquisitions, plus $10 million per album for a minimum of three albums within the deal’s term,” stated the article, which was actually a pick-up from AP. “Jay-Z also will receive an additional $20 million for other rights, including publishing and licensing….[T]he company [Live Nation] last week filed a Form-8K with the U.S. Securities and Exchange that states the artist is getting 775,434 Live Nation Shares, plus an option on an additional 500,000 with the exercise price of $13.73.”

Judge Snyder will soon decide whether the Live Nation deal can become public.

Even if Fahmy wins his case, it doesn’t mean he’d be getting all of these riches. The jury — or judge — would have to weigh what’s led to the success of “Big Pimpin.”

Jay Z’s side wanted to bring forward as an expert Jason King, a professor at New York University, to testify that the song became an anthem to the emergence of certain lifestyle movements, such as “pimp chic” and “corporate rap,” coinciding with the emergence of terms and phrases such as “ghetto fabulousness” and “bling.” King’s conclusion is that the lyrics are the most significant factor contributing to the success of “Big Pimpin” and he even came up with percentages to quantify this. The lyrics, he believes, contributed 40-60 percent of the song’s success whereas “Khosara” contributed only 1-to-5 percent. The professor then examined each of the products and deduced that use of “Khosara” contributed between .004% and .03% to defendants’ total concert revenues and between .0071 percent and .0714 perecnt to the success of the album Jay-Z: The Hits Collection, Volume One.

That went a tad too far in the judge’s eyes.

“Presenting testimony with the degree of precision contained in King’s report carries a substantial risk that the jury will attach undue weight to the numbers provided, even if they are ostensibly characterized to be only an illustration,” she wrote. “Accordingly, defendants may present King’s testimony regarding the factors that contribute to the success of musicians and their music, as well as the relative importance of these factors. However, King may not testify regarding the percentage values by which he quantifies these factors.”

This article was first published by The Hollywood Reporter.