In re Cellco / Verizon (USA v. ASCAP): Behind the District Court Ruling that Customer Use of Ringtones Does Not Constitute a Public Performance
On October 14, Judge Denise Cote of the Southern District of New York ruled that a cell phone service provider does not need a public performance license when it provides ringtones to its customers. The Copyright Act provides the owners of musical compositions are entitled to license fees when their works are “publicly” performed. However, Judge Cote held that because each download of a ringtone is only received by a single customer, the transmission of the download cannot be considered a public performance. Cell phone customer playbacks of ringtones are also not public performances because they are typically only heard by the small circle of people near the phone user and are not performed for money. No one sells tickets so people can hear her phone ring!
How this case began
Cell phone customers can download ringtones from the Internet or their cell phone service provider, such as Verizon. When Verizon sells ringtones, it sends a digital file containing the ringtone which is downloaded onto the customer’s phone. A customer can listen to the ringtone by clicking on the digital file, or the customer can set up her phone to play the ringtone when she receives an incoming call. After downloading, Verizon’s only role in playing the ringtone is to send a signal to the customer’s phone to indicate an incoming call. That signal is the same regardless of the ringtone that is played. While Verizon receives a fee from the original download of the ringtone, it does not receive fees when the ringtone is played.
The Copyright Act treats sound recordings separately from the compositions on which they are based. Under the Act, copyright holders of musical compositions have six exclusive rights, including: (1) the right to reproduce the composition, (2) the right to prepare derivative works, based on the composition — e.g., sound recordings, (3) the right to distribute copies of the composition to the public, (4) the right to perform that composition publicly and two other rights not at issue here. 17 U.S.C. § 106. Copyright holders often license these individual rights separately.
Under a prior ruling, Verizon already pays a royalty of 24 cents per ringtone download to copyright holders of musical compositions for the reproduction and distribution rights to their works (rights (1) and (3) in the list above).
ASCAP negotiates the public performance rights for musical compositions — right (4) in the list above. In January 2009, Verizon filed this action to determine the reasonable license fee it should pay ASCAP for the performance rights for the ringtones. ASCAP contended that Verizon was liable for performance rights royalties for each download of a ringtone to a customer phone, and for each time a customer played a ringtone on his/her phone. District Court Judge Cote disagreed.
Ringtone Downloads Are Not Public Performances
Under Section 106(4) of the Copyright Act, a composition is only entitled to performance license fees when its is performed “publicly.” A composition is considered to have been performed publicly either if it is performed in a public place “where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered” (e.g., a concert), or if it is “transmitted” to the public via some device for its enjoyment (e.g., on the radio or Internet). 17 U.S.C. § 101. Public performances are exempt, if they are given “without any purpose of . . . commercial advantage and without payment of any fee . . . for the performance” — as long as there is no admission charge. 17 U.S.C. § 110(4) (e.g., a free concert).