Verizon victory: Royalties not due every time the phone rings

The part of the movie It's a Wonderful Life that always brought a tear to my grandmother's eye was at the end, where little Zuzu hears a bell ring on the Christmas tree, and pronounces that an angel has just gotten his wings. If a district court had found in favor of ASCAP, the nation's leading performers' rights organization (PRO), it's quite possible that if that bell had sounded like a particular song, someone somewhere might have been owed change.

The question at hand was whether performers' royalties -- the same share of proceeds that rights holders get whenever you play a song on Last.fm or Pandora -- were owed to the performers of the music you hear in wireless ringtones. If so, wireless services everywhere could owe a ton of money. And ASCAP may never have thought so in the first place had Cellco Partnership (a company doing business on behalf of Verizon Wireless) hadn't made an application last January for a blanket license -- in other words, if Cellco hadn't been willing to pay a little something for those rights in the first place.

But in a decision yesterday, New York Southern District Judge Denise Cote ruled that performers' royalties were not due, for a number of reasons based on recent legal precedent. Last June, for instance, the Supreme Court let stand an Appeals Court ruling in favor of DVR maker Cablevision, finding that when a person makes a recording of a show on her DVR, it's not an unauthorized reproduction, and thus not a copyright violation.

Taking the next logical step, Judge Cote reasoned that if a cell phone user downloads a ringtone, and the phone then plays it whenever someone calls, that's not a "public performance."

"Boiled down to its essence," the judge wrote yesterday, "the question becomes whether in downloading a ringtone to a customer's cellular telephone Verizon transmits a performance of the work to the public." The keyword here is transmits, especially because the law interprets "transmission" and "performance" with even greater distinction than their common definitions would suggest.

Specifically, transmissions tend to have one receiver, which tends to go against the whole "public performance" idea. When Verizon (Cellco) sends its customers a ringtone, that's a transmission. And obviously, the ringtone is designed so that it may be heard by a plurality. ASCAP argued that this meant the transmission occurred for the purpose of reproducing the ringtone as a performance.

If the user of the phone wants to play his ringtone in front of a room full of friends or strangers, that's his deal. But as Judge Cote found, it's not Cellco's transmission that instigates or triggers the playback to any untold number of people. "Because only one subscriber is capable of receiving this transmission or performance, the transmission is not made to the public and is not covered by the Transmission Clause, at least when considered by itself," the judge wrote. Citing the Cablevision case, she added, "This transmission of a 'unique copy . . . limit[s] the potential audience of a transmission and is therefore relevant to whether that transmission is made to the public.'"

Well, then, if the owner of the phone is the one playing the ringtone in front of an unspecified plurality, aren't Verizon and Cellco liable for having given them the device to do it with? No, reasoned Judge Cote, because it's doubtful the guy would be charging folks money to hear it.

The judge wrote, "The only commercial advantage that ASCAP identifies as being associated with the playing of a ringtone is a commercial benefit to Verizon, specifically, the possibility that others may be encouraged to purchase ringtones when they hear ringtones. A potential commercial advantage to Verizon, however, does not suggest that its customers may not qualify for the § 110(4) [federal copyright law] exemption...The fact that cellular telephone users are not infringers of ASCAP's rights in the public performance of musical works defeats ASCAP's claim that Verizon is secondarily liable for their infringement."

In finding summary judgment in favor of Cellco, Judge Cote continues a trend of legal findings in favor of individuals' rights to make digital copies of media they've obtained lawfully. Opponents of this trend have attempted to leverage the findings against such notables as Napster and Grokster in their favor, the big difference there being that users were obtaining media unlawfully. Neither Verizon nor Cellco could be held to the same scrutiny as a proprietor of a P2P service actively soliciting customers to infringe copyright; the fact that Cellco acted lawfully in establishing its service in the first place, and also acted honorably in petitioning for a license, placed it in a very different league.