Last fall, former composer Johnny Pate was sitting in his Southern California retirement community, mindlessly flipping channels, when something caught his ear. “I passed this award show with Jay-Z doing this big production with girls and all that, and I heard this tune. I was like, ‘Whoa! I know that sound!’ ” Shortly afterward, Pate received a royalty statement and a five-figure check—Jay-Z’s producer, Just Blaze, had used portions of one of his songs for the hit single “Show Me What You Got.” “I’m still flabbergasted that they would sample something I wrote thirtysomething odd years ago,” says Pate.

Pate had unwittingly entered the burgeoning, byzantine world of sampling. Sampling—taking an artist’s music and using it to build a new tune—goes back at least to the Beatles and Pink Floyd, who used fragments of other songs. But modern-day sampling started in the South Bronx, where party D.J.'s in the 1970s would find a favorite chunk of music and blend two duplicate records to play that section over and over. It has always been the de facto beat-creation process for hip-hop producers, but as the music has exploded in popularity, copyright laws have been enforced more regularly and the stakes—and money—involved in the sampling business have risen accordingly.

For example, as rapper Kanye West celebrates selling nearly 1 million copies of his new album, Graduation, last week, royalty checks aren’t just being readied for him but also for Elton John, ’70s duo Steely Dan, and the abstract German band Can. West borrowed from a motley crew of musicians to create his hit album’s sound collage, which means he’ll be dividing his several million dollars with the original artists. Jay-Z, Nas, and even West’s competitor 50 Cent built their catalogs on sample-based albums, their tens of millions in royalties split among hundreds of artists, some of whom haven’t released a new song in decades.

Whenever music is sampled, the user has to get permission, or “clear” the sample with the original songwriters and, depending on the circumstances, the original performer and record label. Experts say artists can ask for a flat fee or a percentage of the new song’s publishing rights—anywhere from 15 to, believe it or not, 100 percent. (Publishing-rights percentages determine how much in royalties an artist gets from album sales.)

“Every single sample clearance is different,” says Kathleen Merrill, of the Parker Music Group, who has cleared music for sampling, TV, and movie use for 18 years. “And it’s really all over the place how long the process can take—there can be 10 publishers on one song.”

It wasn’t this complicated in the ’70s and ’80s, when hip-hop was a subculture instead of a multibillion-dollar business. Although the law was more loosely interpreted before, now it is the creators’ responsibility to ask permission for every sound borrowed—from a bass line to a high hat—or, increasingly, be vulnerable to legal action.

“[Now] it is the song producer’s responsibility to notify the rap artist or the record company as to what they sample,” says Deborah Mannis-Gardner of DMG Clearances, a 15-year veteran of the business who has worked with P. Diddy, Nas, and Ghostface. It is common to give album credit to the very important person who obtains the rights to samples.

The sampled artists, songwriters, or record labels can come back with how much they will charge. New York University professor Joseph Schloss, author of Making Beats: The Art of Sample-Based Hip-Hop, says this dynamic has created three tiers of samplers: big-budget artists, like West, who can afford to clear every sample; midlevel artists who cannot afford to clear but are on the radar of music labels; and underground artists virtually invisible to litigious music labels.

When it comes to paying for the sample, money can come from both the artist and the producer—or from just one or the other. For example, producer Disco D composed a song on 50 Cent’s 2005 album The Massacre that prominently featured a song by the O’Jays. The people controlling the sample wanted half of the publishing rights, and 50 Cent, the most popular artist in rap at the time, had no intention of giving up his half. Still an up-and-coming producer, Disco D received none of the publishing rights and very little money from The Massacre’s 11 million units sold.

For financial, legal, and sometimes even bragging reasons, producers will distort, or “flip,” a sample without clearance and try to slide it under the radar. If they are caught, the consequences can be severe. Just last year, Notorious B.I.G.’s 1994 landmark debut, Ready to Die, was ordered off shelves because it featured two short, uncleared samples from the funk band Ohio Players.

Merrill says that the laws haven’t gotten any harsher—but publishers have finally started using them. “From my perspective, they were pretty lax until the beginning of illegal downloads,” she says. “Now there are songs that are very old that are in litigation...and we’re talking from the beginning of hip-hop music.”

Both Steely Dan and Elton John rarely approve samples, which makes West’s having the artists’ work on his album an impressive—and expensive—feat. “Elton John commands a high price,” quips Merrill, who wasn’t involved with Graduation. “As he well should.”

But performers and sample-clearance agencies stress that the emphasis usually isn’t on the money but on the sampled artist having control over how he or she is being interpreted. It can often be a win-win situation.

Says Merrill, “What a great thing sampling says about the glory of music through time: that someone like Kanye would be moved by Elton John, and Elton was moved enough to allow Kanye to use it.”