In a landmark October 2006 decision from the United States
Copyright Office, selling ten to thirty seconds of a sampled song in a ringtone
became much simpler, much to the detriment of the copyright holder and the
music industry. By finding that
ringtones are an area where a compulsory license is granted, the United States
Copyright Office has made it much easier for anyone to participate in this one
to three billion dollar growth industry. That means if you pay the fee(s), and submit the required paperwork, you
may sell the ringtone in a commercial setting.
The financial impact of this decision is huge. Licenses to sell ringtones are becoming big
business. Previous white papers claim
that by the end of 2005 the mobile phone "will be the most rapidly-growing
and widely-adopted technology of all time." Deloitte, Touche, and Tohmatsu
in "TMT Trends: Predictions, 2005: A focus on the mobile and wireless
sector.” Two billion cellular phone
subscriptions were in place by the end of 2005. Id.
Two billion dollars ($2 Billion) are spent annually in the
US buying ringtones.
It is a growing business that will reach over half of the world’s total population
in the next 5 years.
In the decision, the
United State Copyright Office indicated that ringtones are subject to
compulsory licenses. This allows a
market participant to take another’s intellectual work for paperwork and fees
and use the work as their own. However,
this is an era of creation and innovation achieved through hard work;
hard work that should be protected and fails to recognize the property rights
of the artists.
A quick background may be useful. Under section 102 of the
Copyright Act, copyright protection extends to:
Original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.
The Act defines "works of authorship" as, among
other things, “sound recordings, including musical works.” For example, a Rolling Stones recorded song
is a work of authorship under the Copyright Act. In producing a ringtone, the work is
reproduced, albeit in a smaller fashion. Clearly, a ringtone - which is a snippet of that song - is a work of
authorship. Furthermore, playing it on a
phone, a tangible medium of expression, would indicate it is copyrighted work. Therefore, it would seem Mick Jagger should
get “satisfaction” knowing that his songs are protected from reproduction,
right? Surprisingly, the answer is: Not
always.
How is the copyright violated? Congress has defined
copyright infringement when two elements are proven: (1) ownership of a valid
copyright, and (2) copying of constituent elements of the work that are
original. Feist Publ'ns, Inc. v. Rural
Tel. Serv. Co., 499
U.S.
340 (1991). Many articles, books, and scholarly research are dedicated to the
interpretation of those words. In a general sense, copyrights do not include
spoken conversations or facts. Rather, a
copyright extends to the expression of ideas, not the ideas themselves. Copyright protection does not extend to
procedures, processes, or systems.
According to the ruling, when an artist distributes his work
publicly across the
United
States, Section 115 of the Copyright Code
allows a person to have a compulsory
license by following procedural rules and paying an established royalty. In the Matter of Mechanical and Digital
Phonorecord Delivery Rate Adjustment Proceeding, Docket No. RD 2006-1. For example, this allows cellular phone
providers along with website creators to license ringtones for sale to be sent
to your phone. This was done to keep
copyright owners from taking a monolithic stance with their music. The ruling indicates that almost all ringtones
fall under Section 115 of the Copyright Code.
Unfortunately, not all of the places that sell ring tones
are licensed. A CNET article quoted
industry insiders who believe 65 percent of the retailers are unlicensed. CNN reports that one web site claimed to sell
15,000 copies of a ringtone without paying any fees. Based on the growing standard of ringtones
being sold at $1.99 per ringtone, that potentially means nearly a $30,000 profit
to the ringtone provider with no payment made to the author of the original
music (who no doubt spent considerable effort and expense making the tune
marketable in the first place). The
exponential risk of loss on a whole album or catalog would be
astronomical.
Intellectual property rights need to be protected and those
within the industry must help effect reform that protects copyrighted work. This is where the decision is surprising. Now the Copyright Office is effectively saying
that the copyright owner is no longer in control of how, or whether, the
product is sold. That eviscerates the
reason to own a copyright: To control the use of one’s idea. As a result, it would appear to be approved
copyright infringement.
Decisions like the above made regarding cellular phones will
be considered as precedent in other hearings, trials, and copyright decisions.
“This is an epoch-making decision that bears repeated readings as one can
expect statements made about the derivative right and derivative originality to
be cited in diverse contexts.” Patry,
William.
10/17/2006.http://williampatry.blogspot.com/2006/10/ringtone-ruling.html.
For example, this ruling might be expected to be used in a patent dispute over
TiVo© or Digital Video recordings. The application of the compulsory ringtone
license could be enormous to another’s protected idea in any digital context.
As companies adapt to the ever-changing digital society of
the twenty-first century, copyright protection, and in that regard Digital
Rights Management, will be at the forefront of the landscape. Decisions being made today will ripple through
the internet for years to come. It is a
time to be proactive in the protection of trademarks, patents, and all other
intellectual property as that landscape is created. Unfortunately, the United States Copyright
Office’s decision is a step backwards on this landscape.
* * *
Patrick Wall, an Associate in our Chicago office, concentrates his practice in automobile and premises liability litigation. However, he also handles large-scale commercial litigation document reviews and research in the construction, commercial, real estate, employment, intellectual property, and environmental practice areas.
During his law school education, Mr. Wall received awards for excellence in constitutional law and trial advocacy. During the summer of 1997, Mr. Wall was selected to participate as an extern at the White House Press Office under Press Secretary Mike McCurry. In this position, he assisted in training and supervising new interns and handled general office administrative tasks, including keeping reporters and press crew apprised of event timing. Mr. Wall also brings 5 years of experience with two Fortune 500 companies to the firm and is active in the community through coaching youth soccer and volunteering for breast cancer organizations.
If you have any questions regarding this article,
please contact Pat via
pwall@querrey.com. If you have questions regarding
Querrey & Harrow’s intellectual property practice, please contact Beverly
Berneman, Chair of our Intellectual Property Practice group, via bberneman@querrey.com.
