Ringtone Prices May Drop Under Compulsory Copyright License

In a little-known decision of the U.S. Copyright Office that pitted the Recording Industry Association of America (RIAA) against the National Music Publishers Association, Inc., the Songwriters Guild of America, and the Nashville Songwriters Association International, In the Matter of Mechanical and Digital Phonorecord Delivery Rate Adjustment Proceeding, Docket No. RF 2006-1 (October 16, 2006), the U.S. Copyright Registrar concluded that ringtones qualify as digital phonorecord deliveries (“DPDs”) under 17 U.S.C. § 115 and are therefore subject to compulsory licensing.

The decision of the Copyright Registrar states:

Ringtones that are merely excerpts of a preexisting sound
recording fall squarely within the scope of the statutory license, whereas those that contain additional material may actually be considered original derivative works and therefore outside
the scope of the Section 115 license. Moreover, we decide that a ringtone is made and distributed for private use even though some consumers may purchase them for the purpose of
identifying themselves in public. We also conclude that if a newly created ringtone is considered a derivative work, and the work has been first distributed with the authorization of the copyright owner, then any person may use the statutory license to make and distribute the musical work in the ringtone. For those ringtones that are covered by Section 115 of the Copyright Act, all of the rights, conditions, and requirements in the Act would apply. For those ringtones that fall outside the scope of Section 115, the rights at issue must be acquired through voluntary licenses.

The U.S. Copyright Act contains compulsory licensing provisions governing the making and distribution of phonorecords of nondramatic musical works. Section 115 of the law provides that, once phonorecords of a musical work have been publicly distributed in the United States with the copyright owner’s consent, anyone else may, under certain circumstances and subject to limited conditions, obtain a “compulsory license” to make and distribute phonorecords of the work without express permission from the copyright owner.

The person wishing to make and distribute phonorecords of a nondramatic musical work may negotiate directly with the copyright owner or his or her agent. But, if the copyright owner is unwilling to negotiate or if the copyright owner cannot be contacted, the person intending to record the work may use the compulsory licensing provisions of the copyright law.

According to Profesesor Patry, "Since the [compulsory royalty rate] amount paid for ringtones may be substantially less than the free market rate, the cost to consumers may go down as to payments to music publishers decrease."