This article was first published in World Copyright Law Report on December 7, 2006.
The US Copyright Office has issued a decision ruling that ringtones that are excerpts of longer musical works or that are taken from existing sound recordings are subject to the compulsory licence provisions of US copyright law under 17 USC §115. However, ringtones that recast, transform or adapt existing musical works or that add new material so as to create a new derivative work cannot be used under the compulsory licence regime.
This issue was referred to the Copyright Office by the US Copyright Royalty Board, which administers the compulsory licence system. The outcome is that compositions covered by the compulsory licence provisions will now be subject to the board's rate-setting proceeding, whereas derivative works that are not covered by Section 115 must be licensed at a royalty rate negotiated with the copyright owner.
This is a good result for record labels wanting to sell ringtone providers the master rights and publishing rights together. In a statement following the Copyright Office's announcement, a representative of the Recording Industry Association of America emphasized the benefits to consumers in the flourishing market for ringtones:
"This decision injects clarity into the marketplace - clarity that will help satisfy fans' hunger for the latest hits from today's best artists by affording record companies and ringtone providers the ability to move new offerings quickly and easily to consumers."
In contrast to the record industry's response, music publishers have expressed disappointment at the decision to broaden the reach of compulsory licence provisions. A spokeswoman for the National Music Publishers' Association stated that the result of the decision could harm songwriters:
"Of particular concern is that copyright owners who have negotiated ringtone licences in the free market for years will now be subject to government regulation. We see no justification for this, and are currently reviewing our legal options."
The next phase of the proceedings relating to use of compositions as ringtones is the setting of the compulsory licence royalty rates. Submissions from interested parties were made in November, and it will be interesting to see what the industry reaction is once the impact of compulsory licences on the ringtone market can be measured in dollars and cents.
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