In re Cellco / Verizon (USA v. ASCAP): Behind the District Court Ruling that Customer Use of Ringtones Does Not Constitute a Public Performance
Digital media law update: 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).
According to Judge Cote, to determine whether a transmission of a performance qualifies as a transmission to the public, we need to look at the audience that is "capable of receiving" the individual transmission. Here, because only one subscriber is capable of receiving an individual transmission of a ringtone, this cannot be considered a transmission to the public. Judge Cote stated that this result was mandated by the 2nd Circuit's ruling in Cartoon Network v. CSC Holdings, Inc., 536 F.3d 121 (2nd Cir. 2008). In Cartoon Network, the 2nd Circuit held that because each transmission made by a remote DVR playback service was made to a single subscriber, "such transmissions are not performances "to the public" and therefore do not infringe any exclusive right of public performance." Id. at 139.
A Customer Playing of a Ringtone Is Not a Public Performance
ASCAP argued that Verizon was liable for indirect copyright infringement each time its customers played downloaded ringtones. To find Verizon liable for secondary infringement, Judge Cote noted that she would first have to find Verizon's customers liable for direct infringement when they played the ringtones.
However, Judge Cote found several obstacles to holding cell phone customers directly liable for infringement. First, as noted above, performances are not deemed to have been made "publicly" perform, if they are made within a "normal circle of a family and its social acquaintance" -- the normal venue for a ringtone playback on a cell phone. Second, the Copyright Act also exempts performances which occur without expectation of profit. 17 U.S.C. § 110(4). Cell phone customers do not play ringtones to receive a profit from the ringtone -- they play them to provide notice that they have received a call.
ASCAP further argued that Verizon was liable for direct infringement each time its customers played ringtones, because Verizon "controls the entire series of steps that allow and trigger" the cellular phones to perform the musical work in public. According to ASCAP, "Verizon supplies the ringtones; it encourages customers to purchase the ringtones for public playback; it transmits the ringtones to the subscribers' telephones, it places a code on the ringtones that prevents customers from forwarding them; it provides and supports a cellular telephone network; it commands, enables and controls the playing of ringtones by triggering the tones when calls are received; and it is able to terminate a customer's cellular telephone service at any time."
However, Judge Cote found that a key link in this causal chain were missing -- namely that Verizon's only role in the playing of a ringtone was to send a signal to a customer's phone indicating that an incoming call was arriving. However, Verizon did not control the particular ringtone that would play when that signal was sent. The customer, not Verizon, decided whether to play a particular ringtone. As such, Verizon was not responsible for the public playing of ringtones.
Comment
The decision in this case is in line with recent cases, such as Cartoon Network, that have found that downloading of recorded music to individual Internet subscribers may not constitute a public performance. See also U.S. v. ASCAP, 485 F.Supp.2d 438 (S.D. N.Y. 2007).
David D. Johnson is a business lawyer whose practice focuses on litigation and other issues relating to digital media and consumer electronics companies. David can be contacted at (310) 785-5371 or DJohnson@jmbm.com.
