[Federal Register Volume 71, Number 211 (Wednesday, November 1, 2006)]
[Notices]
[Pages 64303-64317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-18426]


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LIBRARY OF CONGRESS

Copyright Office

[Docket No. RF 2006-1]


Mechanical and Digital Phonorecord Delivery Rate Adjustment 
Proceeding

AGENCY: Copyright Office, Library of Congress.

ACTION: Final Order.

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SUMMARY: The Copyright Royalty Board, acting pursuant to statute, 
referred two novel questions of law to the Register of Copyrights. 
Specifically, the Copyright Royalty Board requested a decision by the 
Register of Copyrights regarding whether ringtones are subject to the 
statutory license for making and distributing phonorecords under the 
Copyright Act, and if so, what legal conditions and/or limitations 
would apply. The Register of Copyrights, in a timely fashion, 
transmitted a Memorandum Opinion to the Copyright Royalty Board 
stating, with certain caveats, that the statutory license applies to 
ringtones.

DATES: Effective Date: October 16, 2006.

FOR FURTHER INFORMATION CONTACT: Ben Golant, Senior Attorney, and Tanya 
M. Sandros, Associate General Counsel, Copyright GC/I&R, P.O. Box 
70400, Southwest Station, Washington, DC 20024. Telephone: (202) 707-
8380. Telefax: (202) 707-8366.

SUPPLEMENTARY INFORMATION: In the Copyright Royalty and Distribution 
Reform Act of 2004, Congress amended Title 17 to replace the copyright 
arbitration royalty panel with the Copyright Royalty Board (``Board''). 
One of the functions of the new Board is to make determinations and 
adjustments of reasonable terms and rates of royalty payments as 
provided in sections 112(e), 114, 115, 116, 118, 119 and 1004 of the 
Copyright Act. In any case in which a novel question of law concerning 
an interpretation of a provision of the Copyright Act is presented in a 
ratesetting proceeding, the Board has the authority to request a 
decision of the Register of Copyrights (``Register''), in writing, to 
resolve such questions. See 17 U.S.C. 802(f)(1)(B)(i). For this 
purpose, a ``novel question of law'' is a question of law that has not 
been determined in prior decisions, determinations, and rulings 
described in Section 803(a) of the Copyright Act.
    On August 1, 2006, the Recording Industry Association of America 
(``RIAA'') requested that the Board refer a question to the Register of 
Copyrights regarding the eligibility of ringtones (i.e., short digital 
sound recording file distributed for use in a cellular telephone or 
similar device) for statutory licensing under Section115 of the 
Copyright Act. An opposition to the RIAA`s referral motion was 
submitted, collectively, by the National Music Publishers Association, 
Inc., the Songwriters Guild of America, and the Nashville Songwriters 
Association International (``Copyright Owners''). After considering the 
arguments of the parties, the Board agreed that the matters raised by 
the RIAA motion did present novel questions of law and agreed to submit 
the questions to the Register. Accordingly, on September 14, 2006, the 
Board transmitted to the Register: (1) an Order, dated August 18, 2006, 
referring two novel questions of law; and (2) the Initial and Reply 
Briefs filed with the Board by RIAA and the Copyright Owners. The 
Board`s transmittal triggered the 30-day decision period prescribed in 
Section 802 of the Copyright Act. This statutory provision states that 
the Register ``shall transmit his or her decision to the Copyright 
Royalty Judges within 30 days after the Register of Copyrights receives 
all of the briefs or comments of the participants.'' See17 U.S.C. 
802(f)(1)(B)(i). On October 16, 2006, the Register transmitted a 
Memorandum Opinion to the Board that answered the novel questions of 
law. To provide the public with notice of the decision rendered by the 
Register, the Memorandum Opinion is reproduced in its entirety, below.

    Dated: October 26, 2006
Marybeth Peters,
Register of Copyrights.

Before the
U.S. Copyright Office
Library of Congress
Washington, D.C. 20559

Docket No. RF 2006-1
In the Matter of
Mechanical and Digital Phonorecord
Delivery Rate Adjustment Proceeding


MEMORANDUM OPINION

I. Introduction

    On September 14, 2006, the Copyright Royalty Board (``Board''), 
acting on a request by the Recording Industry Association of America, 
Inc. (``RIAA''), and pursuant to 17 U.S.C. Sec.  802(f)(1)(B), referred 
two novel questions of law\1\ to the Register of Copyrights 
(``Register''). Specifically, the Board requested a decision by the 
Register as to the following:
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    \1\ A ``novel question of law'' is a question of law that has 
not been determined in prior decisions, determinations, and rulings 
described in Section 803(a) of the Copyright Act. See 17 U.S.C. 
Sec.  802(f)(1)(B)(ii).
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     1. Does a ringtone, made available for use on a cellular 
telephone or similar device, constitute delivery of a digital 
phonorecord that is subject to statutory licensing under 17 U.S.C. 
Sec.  115, irrespective of whether the ringtone is monophonic 
(having only a single melodic line), polyphonic (having both melody 
and harmony), or a mastertone (a digital sound recording or excerpt 
thereof)?

     2. If so, what are the legal conditions and/or limitations on 
such statutory licensing?\2\

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    \2\ See Mechanical and Digital Phonorecord Delivery Rate 
Adjustment Proceeding, Order Granting in Part the Request for 
Referral of a Novel Question of Law, Docket No. 2006-3 CRB DPRA 
(Aug. 18, 2006) (``Order'').
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    In sum, and as stated more fully below, we believe that ringtones 
(including monophonic and polyphonic ringtones, as well as mastertones) 
qualify as digital phonorecord deliveries (``DPDs'') as defined in 17 
U.S.C. Sec.  15. Apart from meeting the formal requirements of Section 
115 (e.g., service of a notice of intention to obtain a compulsory 
license under Section 115(b)(1), submission of statements of account 
and royalty payments, etc.), whether a particular ringtone falls within 
the scope of the statutory license will depend primarily upon whether 
what is performed is simply the original musical work (or a portion 
thereof), or a derivative work (i.e., a musical work based on the 
original musical work but which is recast, transformed, or adapted in 
such a way that it becomes an original work of authorship and would be 
entitled to copyright protection as a derivative work).
    Procedural Background. On August 1, 2006, the RIAA requested that 
the Copyright Royalty Board refer a question to the Register of 
Copyrights regarding the eligibility of a mastertone, a short digital 
sound recording file distributed for use in a cellular telephone or 
similar device, for statutory licensing under 17 U.S.C. Sec.  115.\3\ 
An opposition to the RIAA`s

[[Page 64304]]

referral motion was submitted, collectively, by the National Music 
Publishers Association, Inc., the Songwriters Guild of America, and the 
Nashville Songwriters Association International (``Copyright Owners''). 
After considering the arguments of the parties, the Board agreed that 
the matters raised by the RIAA motion did present novel questions of 
law and agreed to submit the questions to the Register.
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    \3\ The Copyright Royalty Board is currently conducting a 
proceeding to determine the reasonable rates and terms for the 
making and distribution of phonorecords under the Section 115 
license. See Adjustments or Determination of Compulsory License 
Rates for Making and Distributing Phonorecords, 71 Fed Reg 1454 
(Jan. 9, 2006). The answers to the two questions referred to the 
Register will help determine the scope of the ratesetting proceeding 
before the Board.
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    Accordingly, on September 14, 2006, the Board transmitted to the 
Register of Copyrights the following: (1) the Order, dated August 18, 
2006, referring two novel questions of law; and (2) the Initial and 
Reply Briefs filed with the Board by RIAA and the Copyright Owners. The 
Board`s transmittal triggered the 30-day decision period prescribed in 
Section 802(f)(1)(B) of the Copyright Act. This statutory provision 
states that the Register of Copyrights ``shall transmit his or her 
decision to the Copyright Royalty Judges within 30 days after the 
Register of Copyrights receives all of the briefs or comments of the 
participants.''\4\
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    \4\ 17 U.S.C. Sec.  802(f)(1)(B).
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    In addition to reviewing the Initial Briefs and Reply Briefs filed 
in this proceeding, the Office concluded that it would be helpful to 
conduct oral argument relating to the novel questions of law.\5\ On 
October 4, 2006, the Copyright Office convened a hearing and questioned 
counsel on matters raised in the briefs filed by RIAA and Copyright 
Owners.\6\
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    \5\ See In the Matter of Mechanical and Digital Phonorecord 
Delivery Rate Adjustment Proceeding, Notice of Oral Argument, Docket 
No. RF 2006-1 (Sept. 28, 2006).
    \6\ We note that for demonstration purposes at the oral 
argument, RIAA and Copyright Owners have created CDs containing many 
examples of ringtones as well as full length versions of some of the 
musical works from which the ringtones were based. Copyright Owners` 
CD also contains ringtones downloaded from specific mobile phone 
operators. These CDs are now part of the record in this proceeding 
as is the oral testimony of the parties.
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    Summary of Arguments. RIAA argues that ringtones are digital 
phonorecord deliveries as that term is defined in the Copyright Act and 
are subject to statutory licensing under the plain language of Section 
115, without limitation. It argues that ringtones in general and 
mastertones,\7\ in particular, contain no new original material, are 
not protectable as derivative works, and therefore cannot infringe on 
the derivative work rights of the Copyright Owners. Moreover, even if 
they were derivative works, RIAA argues that Section 115(a)(2), the 
arrangement privilege, expressly authorizes their creation. In any 
event, RIAA argues that once the copyright owner of a musical work 
distributes a new ringtone to the public, anyone can obtain a statutory 
license to use the musical work in that ringtone. RIAA concludes that 
the Register should find that ringtones are subject to statutory 
licensing under Section 115 of the Copyright Act, and all of the 
conditions under the provision should apply.
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    \7\ These types of ringtones are described in more detail below.
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    Copyright Owners assert that all ringtones are excluded from the 
Section 115 statutory license. They argue that the statutory license 
for making and distributing phonorecords of musical works is narrow in 
scope and does not encompass ringtones. They argue that ringtones are 
not covered by Section 115 because they involve only a portion of the 
underlying composition, not the entire musical work. Copyright Owners 
argue that ringtones are derivative works and thus fall outside the 
express language of the statute. As for Section 115(a)(2), they argue 
that ringtones cannot be considered ``arrangements'' as that term is 
understood in the music industry, and in any event, ringtones change 
the basic melody and fundamental character of the musical work. 
Copyright Owners also argue that ringtones fail to satisfy Section 
115's requirement that the phonorecords be distributed for private use. 
Copyright Owners conclude that although variations exist among 
ringtones, none of them fit within the Section 115 licensing scheme.
    Summary of Decision. We find that ringtones (including monophonic 
and polyphonic ringtones, as well as mastertones) are phonorecords and 
the delivery of such by wire or wireless technology meets the 
definition of DPD set forth in the Copyright Act. However, there are a 
variety of different types of ringtones ranging from those that are 
simple excerpts taken from a larger musical work to ones that include 
additional material and may be considered original musical works in and 
of themselves. Ringtones that are merely excerpts of a preexisting 
sound recording fall squarely within the scope of the statutory 
license, whereas those that contain additional material may actually be 
considered original derivative works and therefore outside the scope of 
the Section 115 license.\8\ Moreover, we decide that a ringtone is made 
and distributed for private use even though some consumers may purchase 
them for the purpose of identifying themselves in public. We also 
conclude that if a newly created ringtone is considered a derivative 
work, and the work has been first distributed with the authorization of 
the copyright owner, then any person may use the statutory license to 
make and distribute the musical work in the ringtone. For those 
ringtones that are covered by Section 115 of the Copyright Act, all of 
the rights, conditions, and requirements in the Act would apply. For 
those ringtones that fall outside the scope of Section 115, the rights 
at issue must be acquired through voluntary licenses. While the 
Copyright Royalty Judges need not know which specific ringtones fall 
within/outside the scope of the license for the purpose of setting 
rates, and the parties have not asked the Register to undertake such a 
granular analysis here, we nevertheless offer some guidance on the 
legal matters raised in this proceeding.
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    \8\ We note that Section 115 permits the creation of derivative 
works, but this privilege under the statutory license is limited to 
making musical arrangements necessary to conform it to the style or 
manner of interpretation of the performance involved. 17 U.S.C. 
Sec.  115(a)(2). For purposes of our discussion in this proceeding, 
when we refer to derivative works not covered by Section 115, we 
mean those types of works that exhibit a degree of ``originality'' 
as that term is defined in court precedent. The addition of original 
material would not only take a ringtone outside the scope of the 
privilege of making arrangements, it would also take the ringtone 
outside the Section 115 license altogether.
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II. Section 115 of the Copyright Act

    Almost a century ago, Congress added to the Copyright Act the right 
for copyright owners to make and distribute, or authorize others to 
make and distribute, mechanical reproductions (known today as 
phonorecords) of their musical compositions. Due to its concern about 
potential monopolistic behavior, Congress also created a statutory 
license, Section 115 of the Act, to allow anyone to make and distribute 
a mechanical reproduction of a musical composition without the consent 
of the copyright owner provided that the person adhered to the 
provisions of the license, most notably paying a statutorily 
established royalty to the copyright owner. Although originally enacted 
to address the reproduction of musical compositions on perforated 
player piano rolls, the statutory license has for most of the past 
century been used primarily for the making and distribution of 
phonorecords and, more recently, for the digital delivery of music 
online.\9\
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    \9\ Statement of Marybeth Peters, Register of Copyrights, Before 
the Subcommittee on Intellectual Property: Music Licensing Reform, 
U.S. House of Representatives, 109th Cong., 1st Sess. at 20 (June 
21, 2005).

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[[Page 64305]]

    In 1995, Congress recognized that ``digital transmission of sound 
recordings [was] likely to become a very important outlet for the 
performance of recorded music.''\10\ Moreover, it realized that 
``[t]hese new technologies also may lead to new systems for the 
electronic distribution of phonorecords with the authorization of the 
affected copyright owners.''\11\ For these reasons, Congress made 
changes to Section 115 to meet the challenges of providing music in a 
digital format when it enacted the Digital Performance Right in Sound 
Recordings Act of 1995 (``DPRA'')\12\ which also granted copyright 
owners of sound recordings an exclusive right to perform their works 
publicly by means of a digital audio transmission subject to certain 
limitations.\13\ Specifically, Congress wanted to reaffirm the 
mechanical rights of songwriters and music publishers in the new world 
of digital technology. The changes to Section 115 were also designed to 
minimize the burden on transmission services by placing record 
companies in the position to license not only their own rights, but 
also, if they chose to do so, the rights of writers and music 
publishers to authorize digital phonorecord delivery.\14\ It is the 
DPRA amendments to Section 115 that are of particular interest here.
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    \10\ S. Rep. No. 104-128, 104th Cong., 1st Sess. at 14 (1995).
    \11\ Id.
    \12\ Pub. L. No. 104-39, 109 Stat. 336 (1995).
    \13\ See 17 U.S.C. Sec.  114.
    \14\ S. Rep. No. 104-128, at 37 (1995).
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III. Ringtone Types

    Before addressing the questions raised by the Copyright Royalty 
Judges, we must first determine the scope of the subject matter in this 
proceeding. According to RIAA, a ringtone is a digital file, generally 
no more that 30 seconds in length, played by a cellular phone or other 
mobile device to alert the user of an incoming call or message.\15\ 
RIAA states that, initially, mobile carriers and other ringtone vendors 
distributed synthesized ringtones that embodied versions of musical 
works, but not recorded performances by featured recording artists. It 
states that these earlier forms of ringtones are commonly known as 
``monophonic'' ringtones (having only a single melodic line) and 
``polyphonic'' ringtones (having both melody and harmony). RIAA 
explains that typical commercial monophonic and polyphonic ringtones 
consist of a segment of the musical work representing its ``hook,'' or 
most memorable portion of the melody, with little or no revision.\16\
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    \15\ Cellular phones typically have the ability to accept 
downloads of ringtones, usually directly over the cellular telephone 
network. Over the last decade, a new consumer market has developed 
for musical ringtones. According to RIAA, the vast majority of 
ringtones (99 percent) now in the marketplace consist of excerpts 
from sound recordings. Oral Argument Transcript at 7, 10.
    \16\ RIAA Initial Brief at 3-4; see also Neil J. Rosini and 
Michael I. Rudell, Ring Tone Revenues Foster Copyright Detente, 234 
N.Y.L.J. 3, col. 1 (2005) (``Originally, musical ring tones were 
only available in `monophonic' form: a simple series of tones-each a 
single note-that might remind one of several bars from a favorite CD 
as performed by a very simple computer. Technology then advanced to 
the `polyphonic' level, which are like monophonic ring tones with 
multiple notes played at the same time, creating harmonies. They 
sound closer to that favorite CD, but without original 
instrumentation or vocals.'')(Hereinafter ``Rosini and Rudell'').
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    RIAA states that advances in technology now allow mobile devices to 
play digital copies of commercial sound recordings. As a result, mobile 
phone manufacturers are incorporating the functionality of stand-alone 
portable digital music players, thus permitting consumers to download 
sound recordings via the Internet or a computer connected to the 
Internet. RIAA states that, in addition to full song downloads of 
commercial recordings to such phones, there is consumer demand for 
downloads of shorter (partial-copy) excerpts of sound recordings for 
use as ringtones. These ringtones are commonly referred to as 
``mastertones.''\17\ RIAA asserts that mastertones are displacing 
monophonic and polyphonic ringtones as the ringtone of choice amongst 
consumers.\18\ RIAA acknowledges that record companies and ringtone 
vendors must obtain licenses to reproduce and distribute the relevant 
musical works in ringtones and that Section 115 exists to enable use of 
musical works when licenses are not otherwise available.\19\
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    \17\ RIAA explains that record companies hire contractors to 
select hooks from popular sound recordings and then create ringtones 
including these hooks. Oral Argument Transcript at 10.
    \18\ See Rosini and Rudell (Mastertones ``not only sound like a 
favorite CD but are that favorite CD.'').
    \19\ RIAA Initial Brief at 4-5.
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    Copyright Owners describe ringtones as ten-to-thirty-second 
``snippets'' of full-length musical works that are created to serve as 
ringers on cell phones and other mobile devices.\20\ Copyright Owners 
alternatively describe a ringtone as a ten-to-thirty-second derivation 
of a musical work, sometimes repeated in a ``looping'' sequence and 
sometimes not.\21\ Copyright Owners assert that the creation of 
ringtones, including mastertones, involves ``substantial'' creativity 
and ``significant'' changes to the underlying work. They state, for 
example, that making a ringtone requires creative determinations as to 
which portions of the work should be selected to best capture the 
``hook'' of the full length recording and also to be most appealing as 
ringtones. They further state that many mastertones are designed to be 
looped, repeating the selected portions of the song multiple times 
until the phone or mobile device is answered.\22\ Some songs have 
multiple hooks, each of which can be made into a separate ringtone. 
Other ringtones, they assert, include new content not present in the 
underlying work.\23\
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    \20\ Copyright Owners Initial Brief at 1-2.
    \21\ Id. at 9. We note that looping involves a portion of a 
musical performance that is then sequenced in a repetitive manner.
    \22\ RIAA states that ringtone producers do not intentionally 
create looping sequences; instead, looping is the product of 
cellphones that do not have adequate storage capacity (memory). Oral 
Argument Transcript at 13-14.
    \23\ Copyright Owners Reply Brief at 5, 7.
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    Analysis. While RIAA and the Copyright Owners may disagree as to 
the amount of creativity it takes to create a ringtone, they do agree 
that, in general, ringtones are a unique category of sound recordings 
that are used to announce an incoming call. The most rudimentary 
ringtone, in musical terms, is the monophonic ringtone that only 
contains a musical work`s melody (or a portion of the melody). One 
level up the musical hierarchy is the polyphonic ringtone that contains 
a work`s melody and harmony (or a portion thereof). The most musically 
complex ringtones are mastertones. A mastertone is a portion of a pre-
existing full length musical work that may play sequentially or is 
looped in a sequence. A mastertone could also contain a portion of a 
musical work combined with a message from the recording artist designed 
specifically for the ringtone user. It is important to note that there 
are also non-musical ringtones that are becoming increasingly popular 
with consumers.\24\ As discussed below, different types of ringtones 
may be treated differently for Section 115 purposes.
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    \24\ See Rosini and Rudell (``[C]onsumers aren`t settling merely 
for musical ringtones and ringbacks. Audio clips from films and 
television programs; comic routines from Comedy Central; pithy 
observations by Donald Trump; and announcement of baseball plays are 
also available as ring tones.''); see also http://cyberextazy.wordpress.com/2006/09/01/ringtones-in-mtvs-video-music-awards/, Ringtones in MTV`s Video Music Awards(Sept. 1, 2006) 
(stating that ringtones are evolving into watchtones, which are 
ringtones combined with video clips).

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[[Page 64306]]

IV. The Applicability of Section 115 to Ringtones

    Statutory Language. Section 115 of the Copyright Act provides a 
``compulsory license to make and distribute phonorecords'' of any 
musical work previously recorded once a phonorecord of a nondramatic 
musical work has been ``distributed to the public in the United States 
under authority of the copyright owner.''\25\ Such a license ``includes 
the right of the compulsory licensee to distribute or authorize the 
distribution of a phonorecord of a nondramatic musical work by means of 
a digital transmission which constitutes a digital phonorecord 
delivery.''\26\ The term ``digital phonorecord delivery'' or ``DPD'' is 
defined, in part, as ``each individual delivery of a phonorecord by 
digital transmission of a sound recording which results in a 
specifically identifiable reproduction by or for any transmission 
recipient of a phonorecord of that sound recording.''\27\
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    \25\ 17 U.S.C. Sec.  115(a)(1).
    \26\ 17 U.S.C. Sec.  115(c)(3)(A).
    \27\ 17 U.S.C. Sec.  115(d). The legislative history 
accompanying this provision states, inter alia, that: (1) the phrase 
``specifically identifiable reproduction'' should be understood to 
mean a reproduction specifically identifiable to the transmission 
service; and (2) a transmission by a noninteractive subscription 
transmission service that transmits in real time a continuous 
program of music selections chosen by the transmitting entity, for 
which the consumer pays a monthly fee would generally not be 
considered a DPD.
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    Congress created the statutory mechanical license, as part of the 
Copyright Act of 1909, to prevent monopolistic control over musical 
works while ensuring that music publishers and songwriters receive an 
appropriate royalty.\28\ Congress revisited the issue of statutory 
licensing in 1976 and 1995 and has reaffirmed these same purposes.\29\ 
Congress added the DPD provisions to Section 115, as part of the DPRA 
of 1995, with support of the music publishers, noting: ``The intention 
in extending the mechanical compulsory license to digital phonorecord 
deliveries is to maintain and reaffirm the mechanical rights of 
songwriters and music publishers as new technologies permit 
phonorecords to be delivered by wire or over the airwaves rather than 
by the traditional making and distribution of records, cassettes, and 
CDs.''\30\ The question presented here is whether ringtones qualify as 
digital phonorecord deliveries within the scope of Section 115.\31\
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    \28\ SeeH. R. Rep. No. 60-2222, at 7 (1909) (``The main object 
to be desired in expanding copyright protection accorded to music 
has been to give to the composer an adequate return for the value of 
his composition, and it has been a serious and difficult task to 
combine the protection of the composer with the protection of the 
public, and to so frame an act that it would accomplish the double 
purpose of securing to the composer an adequate return for all use 
made of his composition and at the same time prevent the formation 
of oppressive monopolies, which might be founded upon the very 
rights granted to the composer for the purpose of protecting his 
interests.)''
    \29\ See H. R. Rep. No. 94-1476, at 107 (1976) (``[A] compulsory 
licensing system is still warranted as a condition for the rights of 
reproducing and distributing phonorecords of copyrighted music.'').
    \30\ See S. Rep. No. 104-128, at 37 (1995).
    \31\ We note that the Harry Fox Agency, Inc., a subsidiary of 
the National Music Publishers Association and the leading musical 
work licensing agency, released a notice in 2004 informing all 
licensees of its stated position that Section 115 does not cover 
ringtones or mastertones. See Mario F. Gonzales, Are Musical 
Compositions Subject to Compulsory Licensing for Ringtones?, 12 UCLA 
Ent. L. Rev. 11, 11-12 (2004). RIAA asserts that its dispute with 
the Harry Fox Agency over the interpretation of Section 115 remains 
unresolved and ``has cast a pall of legal uncertainty over the 
ringtone market.'' RIAA Initial Brief at 6.
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    RIAA argues that, under the plain language of the Copyright Act, a 
distribution of a ringtone is a DPD subject to statutory licensing 
under the Copyright Act. RIAA asserts that a ringtone results from the 
fixation of a series of musical, spoken, or other sounds and therefore 
meets the definition of a ``sound recording'' in Section 101 of the 
Copyright Act; its fixation in a material object is a ``phonorecord.'' 
According to RIAA, it is a phonorecord of the relevant musical work as 
well. In the case of a mastertone, the sound recording is a clip of the 
commercially distributed recording. In the case of monophonic and 
polyphonic ringtones, the fixed sounds are rendered by a synthesizer in 
the telephone and so do not represent ambient sound in a recording 
studio.\32\
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    \32\ Id. at 6-7.
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    RIAA asserts that downloads of ringtones are DPDs because, when a 
ringtone is downloaded, there is a digital transmission of the sound 
recording that results in a specifically identifiable reproduction for 
the transmission recipient. RIAA argues that the statutory license 
under Section 115 includes the right of the licensee to distribute 
ringtones just as it includes the right of the licensee to make and 
authorize other kinds of downloads.\33\ RIAA asserts that statutory 
licensing of ringtones is consistent with Congressional intent, as they 
are just the type of new technology contemplated by Congress to be 
included within the scope of the DPRA.\34\
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    \33\ Id. at 8.
    \34\ Id. at 21, 23.
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    Copyright Owners do not argue that ringtones are not DPDs, stating 
instead that since ringtones are not covered by Section 115, there is 
no need to address the question.\35\ Rather, Copyright Owners argue 
that the statutory license for making and distributing phonorecords or 
musical works is narrow in scope and does not encompass uses such as 
ringtones. They assert that the inclusion of ringtones within the 
statutory license would contravene Congress` intent that Section 115 be 
a narrowly construed exception to certain exclusive rights of the 
musical work copyright owner. Copyright Owners state that, as a 
``limited exception'' to certain exclusive rights granted to copyright 
owners, courts consistently have held that the statutory license ``be 
construed narrowly, lest the exception destroy, rather than prove, the 
rule.''\36\
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    \35\ Oral Argument Transcript at 55.
    \36\ Copyright Owners Initial Brief at 5, citing Fame Publishing 
Co. v. Alabama Custom Tape, Inc., 507 F. 2d 667, 670 (5th Cir. 
1975)(noting that the compulsory license provision of the 1909 
Copyright Act is a limited exception to the copyright holder`s 
exclusive right to decide who shall make use of his composition).
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    With regard to the DPRA of 1995, Copyright Owners assert that 
Congress` clarification that Section 115 covered not only ``brick and 
mortar'' sales did not extend the license to cover any and all digital 
uses. They state that the existing limitations on the scope of the 
license did not change and that use of a work prior to publication, the 
creation of derivative works, and the synchronization of a musical 
work, are uses that remain outside of the license, whether in digital 
or physical form.\37\
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    \37\ Copyright Owners Initial Brief at 7-8.
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    Copyright Owners assert that RIAA`s interpretation of Section 115 
would ``potentially open the door'' to licensing of snippets of musical 
works used to enhance all sorts of other consumer products and devices, 
such as musical car alarms or doorbells. They state that the licensing 
of musical works for functional uses in consumer products is not what 
Congress intended when it enacted Section 115.\38\
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    \38\ Copyright Owners Reply Brief at 14-15.
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    RIAA, in its Reply, asserts that the statutory mechanical license 
has been a fixture of U.S. copyright law for nearly a century and 
argues that it should be construed in accordance with its terms. RIAA 
contests Copyright Owners` view that Section 115 should be construed 
narrowly, noting that the legislative history accompanying the 1976 
Copyright Act states: ``The fundamental question of whether to retain 
the compulsory license or do away with it altogether was a major issue 
during earlier stages of the program for general revision of the 
copyright law. At the hearings it was apparent that the argument on 
this point had shifted, and the real issue was not whether to retain

[[Page 64307]]

the compulsory license but how much the royalty rate under it should be 
. .[gteqt].[gteqt]. The Committee`s conclusion on this point remains 
the same as in 1967: `that a compulsory license system is still 
warranted as a condition for the rights of reproducing and distributing 
phonorecords of copyrighted music.`''\39\ RIAA adds that Congress did 
not narrow the license through adoption of the DPRA in 1995, but rather 
stated that it was ``extending the mechanical compulsory license to 
digital phonorecord deliveries'' and that its purpose was to ``maintain 
and reaffirm'' that the Section 115 license would apply to ``new 
technologies.''\40\ RIAA concludes that although some details of the 
Section 115 license have changed over the years, nothing in these 
enactments or the legislative history thereof suggests that Congress 
intended a narrow reading of the statute.
---------------------------------------------------------------------------

    \39\ RIAA Reply Brief at 3, citing H.R. Rep. No. 94-1476, at 107 
(1976).
    \40\ Id. at 4, citing S.Rep. No. 104-128, at 37 (1995).
---------------------------------------------------------------------------

    Analysis. We find that ringtones meet the definition of DPDs. The 
issue presented is one of pure statutory construction and there is no 
actual dispute on this point.\41\ Based on the language of the statute, 
ringtones easily meet the requisite definitions under the Copyright Act 
to be included in the Section 115 licensing scheme. First, we hold that 
a ringtone meets the definition of ``sound recording'' under Section 
101 of the Act as a work that results from ``the fixation of a series 
of musical, spoken, or other sounds,''\42\ and that the sound recording 
is fixed in the form of a ``phonorecord,'' defined in the statute as a 
``material object in which sounds are fixed by any method now known or 
later developed.''\43\ The phonorecord here is the actual sound 
recording file stored as a ``download'' on either the cell phone`s hard 
drive or on a cell phone`s removable memory storage disk.\44\ When 
downloaded through the Internet or by wireless transmission, a ringtone 
is part of a ``digital phonorecord delivery'' and a digital 
transmission of a sound recording which results in a ``specifically 
identifiable reproduction'' by or for any transmission recipient of a 
phonorecord of that sound recording.\45\ We also believe that our 
statutory analysis comports with Congressional intent. Ringtones are 
delivered by means of the type of ``new technologies'' Congress 
intended to be included when it enacted the DPRA in 1995.\46\
---------------------------------------------------------------------------

    \41\ Id. at 2, citing Doyle v. Huntress, Inc., 419 F.3d 3, 7-8 
(1st Cir. 2005) (``A question of statutory construction presents a 
purely legal question.''); Blackman v. District of Columbia, 2006 WL 
2034355, *6 (DC Cir. 2006) (statutory construction begins with ``the 
language itself, the specific context in which that language is 
used, and the broader context of the statute as a whole[.]'').
    \42\ 17 U.S.C. Sec.  101 (```Sound recordings' are works that 
result from the fixation of a series of musical, spoken, or other 
sounds, but not including the sounds accompanying a motion picture 
or other audiovisual work, regardless of the nature of the material 
objects, such as disks, tapes, or other phonorecords, in which they 
are embodied.'').
    \43\ 17 U.S.C. Sec.  101 (```Phonorecords` are material objects 
in which sounds, other than those accompanying a motion picture or 
other audiovisual work, are fixed by any method now known or later 
developed, and from which the sounds can be perceived, reproduced, 
or otherwise communicated, either directly or with the aid of a 
machine or device. The term `phonorecords` includes the material 
object in which the sounds are first fixed.'').
    \44\ See S. Rep. No. 104-128, at 39 (1995) (stating that storage 
of data in a ``computer memory'' is ``technically the making of a 
phonorecord.'').
    \45\ 17 U.S.C. Sec.  115(d).
    \46\ See S. Rep. No. 104-128, at 37 (1995)
---------------------------------------------------------------------------

    We disagree with Copyright Owners that Congress did not intend for 
ringtones to be the kind of use of musical works contemplated for 
inclusion under the Section 115 license.\47\ While we adhere to the 
general proposition that statutory licenses are to be construed 
narrowly,\48\ we find that Section 115, as amended by the DPRA, 
purposefully broadened the scope of the statutory license to cover 
DPDs, and ringtones appear to fit comfortably within the definition of 
DPDs. On this note, we recognize that Copyright Owners have cited Fame 
Publishing Co. v. Alabama Custom Tape, Inc., 507 F. 2d at 670, to 
support their narrow construction argument. However, we find this 
citation is inapt because the case arose out of a dispute concerning 
statutory language found in the 1909 Act that is not present in the 
current version of Section 115. In any event, the legislative history 
of the Copyright Act of 1909 states that from its inception, this 
compulsory license was intended to include all ``mechanical 
reproductions'' and that one of its purposes was ``to secure to the 
composer an adequate return for all use made of his 
composition[.]''\49\ (emphasis added). While the concept of the 
cellular phone ringtone undoubtedly would have astonished the members 
of the 1909 Congress, the license they devised was broad enough to 
include ringtones. Whether our interpretation ``opens the door'' to 
licensing of snippets of musical works to be used in car alarms or 
doorbells is a question that is outside the scope of this proceeding.
---------------------------------------------------------------------------

    \47\ We are not saying that Congress specifically contemplated 
ringtones and their inclusion in the Section 115 license. Rather, 
ringtones generally fall into the class of ``new technologies'' that 
Congress concluded should be included within the expanded statutory 
license.
    \48\ See Public Performance of Sound Recordings: Definition of a 
Service, Docket No. RM 2000-B, 65 FR 77,292, 77,297 (Dec. 11, 2000) 
(noting that the Copyright Office has historically construed 
limitations on copyright narrowly, especially those constrained by a 
compulsory license.).
    \49\ See H. R. Rep. No. 60-2222, at 7 (1909).
---------------------------------------------------------------------------

    Works or Portions of Works. According to Copyright Owners, Section 
115 is expressly limited to the making and distributing of phonorecords 
of ``works,'' not portions of works such as ringtones. Copyright Owners 
argue that because a ringtone is not a reproduction of the entire 
musical work, it is not subject to the statutory license. They argue 
that Section 115 throughout its provisions makes clear that a ``work,'' 
and not a ``portion'' of a work, is its subject. Copyright Owners state 
that this result was not an accident of drafting nor is it an 
unintended source of statutory ambiguity. They state that Congress had 
no difficulty using the term ``portions'' where in fact that concept 
was intended, such as in Sections 108(h)(1) and 110(2) of the Copyright 
Act.\50\ Copyright Owners assert that this interpretation is confirmed 
by Section 115's legislative history which mentions ``cover records'' 
as well as cassettes and CDs.\51\
---------------------------------------------------------------------------

    \50\ Section 108(h)(1) states in part ``a library or archives. . 
.may reproduce, distribute, display, or perform in facsimile or 
digital form a copy or phonorecord of such work, or portions 
thereof, for purposes of preservation, scholarship, or research.'' 
Section 110(2) refers to ``the performance of a nondramatic literary 
or musical work or reasonable and limited portions of any other 
work, or display of a work in an amount comparable to that which is 
typically displayed in the course of a live classroom session, by or 
in the course of a transmission.''
    \51\ Copyright Owners Initial Brief at 9-11, citing 
Supplementary Register`s Report on the General Revision of the U.S. 
Copyright Law: 1965 Revision Bill, House Comm. on the Judiciary, 
89th Cong., Copyright Law Revision Part 6, at 54 (Comm. Print 1965) 
(discussing ``cover'' records); H.R. Rep. No. 90-83, at 67 (1967) 
(referring to ``disks and audio tapes''); S. Rep. No. 104-128, at 37 
(1995) (``extending the mechanical compulsory licenses. . .as new 
technologies permit phonorecord to be delivered by wire or over 
airwaves rather than by traditional making and distributing of 
record, cassettes and CDs'').
---------------------------------------------------------------------------

    Copyright Owners remark that it is obvious that the Section 115 
license applies only to physical or digital phonorecords of complete 
works since industry practices have developed on the basis of this 
interpretation of Section 115. They state, for example, that partial 
uses of compositions, such as medleys and samples, are licensed in 
market transactions. They further state that legal commentators have 
recognized that the Section 115 license does not apply to digital 
sampling and that it would have to be modified in order to include 
sampling within its scope.\52\
---------------------------------------------------------------------------

    \52\ Id. at 11, citing Jennifer R.R. Mueller, Note: All Mixed 
Up: Bridgeport Music v. Dimension Films and De Minimis Digital 
Sampling, 81 IND. L.J. 435, 461 (Winter 2006).

---------------------------------------------------------------------------

[[Page 64308]]

    RIAA asserts that Section 115 applies to whole musical works as 
well as portions of musical works, and that any other reading would be 
inconsistent with other provisions of the Copyright Act.\53\ RIAA 
states that if the Copyright Owners are correct that the Copyright Act 
distinguishes between ``works'' and ``portions of works,'' then 
reproduction and distribution of ringtones would be permissible without 
a license as the provisions under Section 106 granting the exclusive 
rights to reproduction and distribution only refer to ``works,'' not 
``portions of works.'' RIAA remarks that the Copyright Owners do not 
intend that interpretation nor is it a correct one. RIAA adds that 
Copyright Owners` approach to what constitutes a ``work'' would make 
other phrases in the statute superfluous. It notes, for example, that 
one of the factors used in determining whether a use of a work is a 
fair use under Section 107(3) is the ``amount and substantiality of the 
portion used in relation to the copyrighted work as a whole.'' The 
phrase ``as a whole'' would be superfluous if a ``work'' in the Act 
must always be the whole work and not a portion thereof.\54\ RIAA 
asserts that although unstated, Copyright Owners apparently are relying 
on the canon of statutory construction expressio unius est exclusio 
alterius, which provides a general inference that omissions in 
statutory text are intentional.\55\ RIAA notes, however, that this 
maxim ``requires great caution in its application'' and should be 
disregarded where ``its application would thwart the legislative intent 
made apparent by the entire act.''\56\ It states that such caution 
should be exercised here because, unlike most of the relevant language 
in Section 115, the references to ``portions'' of works that Copyright 
Owners cite did not appear in the 1976 Act and were only added years 
later. RIAA asserts that there is no indication that either amendment 
was intended to affect the interpretation of the provisions of the 
Copyright Act enacted more that twenty years before. RIAA concludes 
that two isolated references in the Copyright Act to ``portions of 
works'' cannot imply that the hundreds of unadorned references to 
``works'' apply only to works in their entirety.\57\
---------------------------------------------------------------------------

    \53\ RIAA Reply Brief at 7.
    \54\ Id. at 9, citing 17 U.S.C. Sec.  107(3)
    \55\ Id. at 8, citing 2A Sutherland, Statutes and Statutory 
Construction, Sec.  47:25 (Norman Singer ed., 6th ed. 2005).
    \56\ Id.
    \57\ Id. at 7, 9.
---------------------------------------------------------------------------

    RIAA notes that Copyright Owners` argument that ringtones are 
analogous to sampling is equally misplaced. It states that ringtones 
are excerpts that are taken from musical works and distributed as such; 
samples, however, are short excerpts that are blended into what are 
clearly new creative works. RIAA asserts that the fact that the latter 
are licensed apart from Section 115 does not imply that the former 
should be.\58\
    Analysis. The Section 115 license is not limited to the 
reproduction and distribution of phonorecords of the entire musical 
work, and an excerpt may qualify for the statutory license if all other 
requirements are met. We believe that the Copyright Act`s language and 
purpose are broad and that ``portions of works'' should be treated the 
same as any other type of work under Section 115. This provision of the 
Act does not expressly exclude ``portions of works'' from its scope and 
we cannot assume that such treatment was intended in the absence of 
clear statutory language to that effect.\59\ Contrary to Copyright 
Owners` assertion, we cannot find support for such a limited and narrow 
reading of the Act in the legislative history they cite.\60\
---------------------------------------------------------------------------

    \58\ Id. at n.8.
    \59\ We agree with RIAA that Section 115 makes no distinction 
between downloads of song excerpts and full songs delivered by 
online music services such as Apple`s iTunes Music Store and Verizon 
Wireless` V Cast Music Store. See RIAA Initial Brief at 1.
    \60\ See n. 51, supra
---------------------------------------------------------------------------

    Moreover, we believe that Copyright Owners` citations to Sections 
108 and 110 are inapt as these provisions were not enacted 
contemporaneously with Section 115 and cannot be read to provide any 
guidance as to Congressional intent or the purpose of the statutory 
license. We note, in particular, that their interpretation of Section 
110(2) defies legislative intent as well as common sense.\61\ Under 
Copyright Owners` interpretation, educators using the distance 
education exemption could transmit limited portions of works other than 
nondramatic literary or musical works, but if they transmit a 
performance of a nondramatic literary or musical work, they would have 
to transmit the entire work as a transmission of a portion of the work 
would not be permitted. Congress certainly did not intend this result.
---------------------------------------------------------------------------

    \61\ See 17 U.S.C. Sec.  110(2) (discussing works ``produced or 
marketed primarily for performance or display as part of mediated 
instructional activities transmitted via digital networks . . .'').
---------------------------------------------------------------------------

    We also find that Copyright Owners` reading of the Copyright Act, 
if adopted, would render certain provisions of the statute superfluous. 
For example, well-settled interpretation of and practice under Section 
118 of the Act would be undermined if Copyright Owners` interpretation 
were correct. Under this provision, licensing agreements and related 
fees negotiated between noncommercial broadcasting entities and 
copyright owners of published nondramatic musical works are subject to 
ratesetting by the Copyright Royalty Board.\62\ While Section 118 
expressly refers to ``works,'' it has been understood to include 
portions of works as well. For example, under 37 CFR Sec.  253.7(b)(3), 
which implements the rates set for the Section 118 statutory license, 
``a `Concert Feature` shall be deemed to be the nondramatic 
presentation in a program of all or part of a symphony, concerto, or 
other serious work originally written for concert performance or the 
nondramatic presentation in a program of portions of a serious work 
written for opera performances.''\63\(emphasis added). If we were to 
accept Copyright Owners` argument that the Act covers only full musical 
works, and not portions of musical works, then the Board could never 
set such rates pursuant to Section 253.7. This result, we believe, was 
not intended by Congress.
---------------------------------------------------------------------------

    \62\ See 17 U.S.C. Sec.  118. Section 118(d) gives public 
broadcasters permission to engage in certain ``activities with 
respect to published nondramatic musical works and published 
pictorial, graphic, and sculptural works . . .'' Under Section 
118(d)(1), one of the activities is ``the performance or display of 
a work.'' 17 U.S.C. Sec.  118(d)(1).
    \63\ See37 CFR Sec.  253.7(b)(3).
---------------------------------------------------------------------------

    We also believe that Copyright Owners analogy to sampling is inapt. 
Sampling generally refers to the appropriation of sounds from an 
existing sound recording for transformative use along with other sounds 
in a new work. A mastertone, in contrast, is taken from a single work, 
in the form of an excerpt.
    Marketplace Developments. According to Copyright Owners, the 
statutory license was instituted to ensure a market where none existed, 
but there is an active market for freely negotiated licenses already in 
place. They assert that the Register of Copyrights has stated that 
ringtones are a subject more appropriately left to market forces than 
government regulation and that ``there is no need for Government to 
legislate what the parties can negotiate themselves.''\64\ They state 
that Copyright Owners and record labels, recognizing that ringtones are 
not DPDs subject to the statutory license,

[[Page 64309]]

have entered into voluntary license agreements granting the labels the 
right to create ringtones at specified mutually-negotiated royalty 
rates.\65\ Copyright Owners assert that these voluntary licenses 
provide further support that ringtones are outside the narrow scope of 
Section 115. They conclude that there exists a vibrant and growing 
market for ringtones, which makes it unnecessary and inappropriate to 
include ringtones within Section 115.\66\
---------------------------------------------------------------------------

    \64\ Copyright Owners Initial Brief at 8, citing Copyright 
Office Views on Music Licensing Reform. Hearings Before the Subcomm. 
on Courts, the Internet, and Intellectual Property. House Comm. on 
the Judiciary, 109th Cong., at 20 (2005) (Statement of Marybeth 
Peters, Register of Copyrights)
    \65\ For example, Copyright Owners cite the November 1, 2004 
Sony BMG/EMI Music Publishing Agreement that granted the former the 
right to create ringtones embodying EMI compositions
    \66\ Copyright Owners Initial Brief at 4.
---------------------------------------------------------------------------

    According to RIAA, Copyright Owners mischaracterize current 
marketplace conditions and the Register`s prior testimony, which, in 
any instance, are both irrelevant. RIAA asserts that the Register`s 
testimony was in the context of an express legislative invitation to 
explore revision of the statute. The reform proposal presented by the 
Register, if adopted by Congress, would have repealed the statutory 
license and omitted from a successor licensing system the statutory 
treatment of ``ringtunes'' and certain other types of works. RIAA notes 
that the Register`s reform proposal is not law, but Section 115 is.\67\
---------------------------------------------------------------------------

    \67\ RIAA Reply Brief at 4, citing Music Licensing Reform. 
Subcomm. on Intellectual Property, Senate Comm. on the Judiciary, 
109th Cong. (July 12, 2005) (Statement of Marybeth Peters, Register 
of Copyrights).
---------------------------------------------------------------------------

    RIAA disputes Copyright Owners` claims that the purpose of the 
statutory license was to ensure a market where none existed and that 
the ringtone market is thriving. As to the former point, RIAA asserts 
that Section 115 was enacted to protect the market from a ``great music 
monopoly,'' not to create a market.\68\ With regard to the latter 
point, RIAA asserts that although the U.S. has the world`s largest 
music market, the U.S. ringtone market represents only a fraction of 
worldwide sales, with the bulk of the market in Europe and Asia. 
Moreover, aside from the EMI agreement cited by Copyright Owners, there 
are no other major ringtone licensing agreements of importance. RIAA 
states that with tens of thousands of music publishers, the need to 
clear all these rights through negotiation is a burden on the market 
and it is not surprising that the U.S. offerings lag behind other parts 
of the world. RIAA concludes that some mastertone agreements are no 
substitute for the Section 115 license.\69\
---------------------------------------------------------------------------

    \68\ RIAA Reply Brief at 5, citing Melville B. Nimmer & David 
Nimmer, Nimmer on Copyright Sec.  8.04[A] (2004).
    \69\ Id. at 6-7.
---------------------------------------------------------------------------

    In Reply, Copyright Owners reiterate that the market for ringtones 
is thriving and no compulsory license is needed to ensure its continued 
growth. The suggestion by RIAA that, absent compulsory licensing, music 
publishers will ``prevent the commercialization'' of ringtones is 
belied by the years of voluntary licensing of compositions by music 
publishers for such uses.\70\
---------------------------------------------------------------------------

    \70\ Copyright Owners Reply Brief at 15-16, citing Rudell and 
Rosini, (noting that U.S. ringtone sales in 2005 was approximately 
$500 million).
---------------------------------------------------------------------------

    Analysis. The general success, or lack thereof, of the marketplace 
for ringtones is not dispositive, or even necessarily relevant, in this 
analysis. Commercial negotiations involving the use of copyrighted 
works cannot annul the force and effect of existing law, unless 
Congress explicitly so states. We in fact note that, despite the 
existence of the Section 115 license, the vast majority of sound 
recordings are made pursuant to direct licenses from music publishers 
or the Harry Fox Agency rather than under the provisions of the 
statute. These commercial agreements, however, do not negate the 
existence of the statutory license. Moreover, reliance on the 
statements made by the Register of Copyrights is both inappropriate and 
inapt. These statements were proposals for revising the law, not 
interpretations of the existing regulatory regime.

V. Derivative Works

    Section 115 and Derivative Works. Section 101 of the Copyright Act 
defines a derivative work as a ``work based upon one or more 
preexisting works, such as a translation, musical arrangement, 
dramatization, fictionalization, motion picture version, sound 
recording, art reproduction, abridgement, condensation, or any other 
form in which a work may be recast, transformed, or adapted. A work 
consisting of editorial revisions, annotations, elaborations, or other 
modifications, which as a whole, represent an original work of 
authorship, is a derivative work.''\71\ Congress used one defined term, 
``derivative work,'' to specify both that derivative works are 
protectable under Section 103 of the Copyright Act and that the 
copyright owner has the exclusive right to prepare derivative works 
under Section 106(2) of the Copyright Act.\72\ According to the Act`s 
legislative history, Section 115 exists to permit artists and record 
companies to create sound recordings, which are a type of derivative 
work.\73\
---------------------------------------------------------------------------

    \71\ 17 U.S.C. Sec.  101.
    \72\ Section 103 states that ``the copyright in a compilation or 
derivative work extends only to the material contributed by the 
author of such work, as distinguished from the preexisting material 
employed in the work, and does not imply any exclusive right in the 
preexisting material.'' 17 U.S.C. Sec.  103(b). Section 106 states 
that ``[s]ubject to sections 107 through 122, the owner of copyright 
under this title has the exclusive rights to do and to authorize any 
of the following. . . (2) prepare derivative works based upon the 
copyrighted work. . .'' 17 U.S.C. Sec.  106(2).
    \73\ See H. R. Rep. No. 94-1476, at 108-09 (1976) (noting that a 
Section 115 license permits either the creation of a new sound 
recording or a duplication of an existing one with the consent of 
the sound recording copyright owner).
---------------------------------------------------------------------------

    Copyright Owners generally assert that ringtones fall outside the 
ambit of the statutory license because they are derivative works. They 
argue that ringtones exceed the scope of the Section 115 license by 
infringing the copyright owners` exclusive right to prepare derivative 
works. They assert that Section 115 subjects only the rights to 
reproduce and distribute phonorecords of works to the statutory 
license, leaving derivative works outside its scope. Copyright Owners 
argue that ringtones fit squarely within the derivative work definition 
because they are based on pre-existing works, and typically reduce a 
three-to-five minute work to an abridged ten-to-thirty second work.\74\
---------------------------------------------------------------------------

    \74\ Copyright Owners Initial Brief at 12-13. Copyright Owners 
note that the Copyright Board of Canada recently observed in a 
proceeding to set the rates for ringtones that ``mastertones are 
created by taking an actual segment of a sound recording after 
determining which number of seconds out of a work will be most 
appropriate for the market.'' Id., citing Copyright Board of Canada, 
Collective Administration of Performing Rights and of Communications 
Rights, Statement of Royalties to be Collected by SOCAN for the 
Communication to the Public by Telecommunication, In Canada, of 
Musical or Dramatico-Musical Works, Tariff No. 24-Ringtones (2003-
2005) (Aug. 18, 2006) at 13. In response, RIAA notes that this 
statement by the Copyright Board confirms its supposition that the 
selection of a mastertone from the underlying musical work is a 
``trivial omission.'' RIAA Reply Brief at n. 10.
---------------------------------------------------------------------------

    RIAA asserts that the legal tests for protection of derivative 
works and infringement of the derivative work right are identical and, 
in any event, require originality.\75\ It states that ``[F]or the 
derivative work right to be infringed, the defendant must have created 
a derivative work, and for the derivative work to have been created, 
the Act requires the contribution of expressive content capable of 
standing on its own as a copyrightable work.''\76\ RIAA cites a string 
of precedent to support its position that derivative works must be 
original to be afforded copyright

[[Page 64310]]

protection.\77\ RIAA states that for mastertones, the trivial action of 
copying a clip from an existing sound recording does not stand on its 
own as meriting copyright protection.\78\ RIAA also asserts that there 
is no precedent in copyright law for the proposition that every partial 
reproduction of a work constitutes a separate derivative work. RIAA 
concludes that ringtones are nothing more than partial copies that lack 
sufficient originality to be protected as derivative works or to 
infringe the derivative works right.\79\ RIAA concludes that because 
ringtones do not fit under the definition of derivative works in 
Section 101 of the Act, the making of a ringtone cannot be excluded 
under Section 115 on this basis.
---------------------------------------------------------------------------

    \75\ RIAA Initial Brief at 11, citing Feist Publ'ns, Inc. v. 
Rural Tel. Serv. Co., 499 U.S. 340, 346 (1991) (``Originality is a 
constitutional requirement.'').
    \76\ Id. at 11-12, citing 2 Paul Goldstein, Copyright Sec.  7.3 
(3d ed. 2005).
    \77\ See id. at 12-14, 20, citing Woods v. Bourne Co., 60 F.3d 
978, 989 (2d Cir. 1995)(holding that a musical work must have 
``substance added making the piece to some extent a new work'' and 
that only the ``addition of such new material would entitle the 
creator to a copyright on the new material.''); Lee v. Deck the 
Walls, Inc., 925 F. Supp. 576 (N.D. Ill 1996), aff'd on other 
grounds sub nom., Lee v. A.R.T. Co., 125 F.3d 580 (7th Cir. 
1997)(holding that notecard art image deposited on tile and covered 
with epoxy is not copyrightable because the work does not contain 
any original artistic expression); Peker v. Masters Collection, 96 
F. Supp. 2d 216 (E.D.N.Y. 2000) (holding that an oil painting 
reproduction, made by transfer of a copy of a copyrighted painting 
from a poster to a canvas with the addition of resin to create a 
brushed-on look of the original was not a derivative work because 
there was no originality that would be considered copyrightable); 
Precious Moments, Inc. v. La Infantil, Inc., 971 F. Supp. 66, 67 (D. 
Puerto Rico, 1997) (stating that originality is required for a 
derivative work to be copyrightable).
    \78\ Id. at 2.
    \79\ Id. at 10, citing Nimmer on Copyright Sec.  8.09[A] (noting 
that no reported case finds the holder of a reproduction license 
barred from making trivial changes to a work even without a separate 
license to make derivative works).
---------------------------------------------------------------------------

    Analysis. As an initial matter, we agree with Copyright Owners` 
assertion that Section 115, by its terms, concerns only the rights to 
reproduce and distribute phonorecords of works, leaving derivative 
works outside its confines. Thus, consideration of the derivative work 
right is important only to the extent that a ringtone which is adjudged 
to be a derivative work cannot be licensed under Section 115. To be 
considered a derivative work, a ringtone must exhibit a degree of 
originality sufficient enough to be copyrightable.\80\ With regard to 
the appropriate legal test regarding copyrightability, we believe that 
Feistis controlling precedent here.\81\ In Feist, the Supreme Court 
observed that ``as a constitutional matter, copyright protects only 
those constituent elements of a work that possess more than a de 
minimis quantum of creativity,'' and that there can be no copyright in 
work in which ``the creative spark is utterly lacking or so trivial as 
to be virtually nonexistent.''\82\ As illustrated below, there are 
ringtones that may be considered derivative works because they exhibit 
a degree of originality and creativity. However, there are many other 
ringtones that would not be considered derivative works because they 
exhibit only trivial changes from the underlying work. Those ringtones 
would not be considered derivative works and would be within the scope 
of the statutory license.
---------------------------------------------------------------------------

    \80\ We recognize that in one sense, every ringtone will be a 
derivative work, in that every sound recording of music is a 
derivative work; the underlying work is the musical composition 
itself. See H. R. Rep. No. 94-1476, at 108-109 (1976) The issue 
before us is not whether a ringtone is a derivative work; by 
definition it is. Rather, the question is whether a musical 
composition as recorded in a ringtone infringes the derivative work 
right in the original musical composition. When we refer to 
ringtones as ``derivative works'' in this Memorandum Opinion, we are 
referring not to the sound recording, but to the musical composition 
recorded in the ringtone. See also, n. 8, supra.
    \81\ Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 
(1991). Original, as the term is used in copyright, means that: (1) 
the work was independently created by the author (as opposed to 
copied from other works); and (2) it possesses at least some minimal 
degree of creativity. Id. at 345. When we refer to ``originality'' 
in this Memorandum Opinion, we are referring not to independent 
creation, but to creativity.
    \82\ Id. at 359, 363; see also Woods v. Bourne Co., 841 F. Supp. 
118, 122 (S.D.N.Y. 1994) (quoting Fred Fisher, Inc. v. Dillingham, 
298 F. 145, 148 (S.D.N.Y. 1924) (holding that a derivative work must 
be ``substantially a new and original work, not a copy of a piece 
already produced, with additions and variations, which a writer of 
music with experience and skill might readily make'').
---------------------------------------------------------------------------

    Court Precedent. Copyright Owners argue that caselaw compels a 
conclusion that ringtones are derivative works. They argue that 
ringtones satisfy any creativity requirement for the copyrightability 
of a derivative work.\83\ They additionally argue that the selection 
process involved in the creation of ringtones meets the creativity 
standard for copyrightability under settled law.\84\ Copyright Owners 
also assert that the courts have routinely held that shortened versions 
of a variety of different copyrighted works constitute derivative works 
under the Copyright Act. They note, for example, that courts have found 
that clips from full-length copyrighted works, such as movie trailers, 
constitute derivative works.\85\
---------------------------------------------------------------------------

    \83\ Copyright Owners Reply Brief at 8, citing Video Pipeline, 
Inc. v Buena Vista Home Entm't, Inc. 192 F. Supp. 2d 321 (D.N.J. 
2002), aff'd on other grounds, 342 F.3d 191 (3d Cir. 2003); Yurman 
Design, Inc. v. PAJ, Inc., 262 F.3d 101, 109 (2d Cir. 2001) (stating 
that ``Under the Constitution and by statute, copyright validity 
depends upon originality''), citing Feist Publ'ns, Inc. v. Rural 
Tel. Serv. Co., 499 U.S. 340, 345 (1991).
    \84\ Id., citing U.S. Payphone, Inc. v. Executives Unlimited of 
Durham, Inc., 18 U.S.P.Q. 2d 2049, at *8 (4th Cir. 1991) (finding 
that a section of a reference guidebook was a protectable 
compilation because the author collapsed voluminous tariff 
information into an easily usable guidebook); Caffey v. Cook, 409 F. 
Supp. 2d 484, 497 (S.D.N.Y. 2006) (finding a protectable compilation 
in the selection and ordering, for a musical show, of thirty two 
songs from a universe of possible musical compositions based on the 
compiler's sense of musicality).
    \85\ Copyright Owners Initial Brief at 13, citing Video 
Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 192 F. Supp. 2d 
321, 330 (D.N.J. 2002),aff'don other grounds, 342 F.3d 191, 197 (3rd 
Cir. 2003); John Lamb d/b/a Alpha Production v. Michael Starks 3D TV 
Corp., 949 F. Supp. 753, 755-56 (N.D. Cal. 1996)(finding that use of 
a portion of a full length movie to create a trailer, without 
permission, was infringing and not fair use).
---------------------------------------------------------------------------

    RIAA cites cases contrary to Copyright Owners` position. For 
example, it cites precedent holding that the use of copyrighted music 
excerpts in the background of a television show did not infringe the 
derivative work right because the inclusion of the music did not create 
a new derivative work that warrants copyright protection.\86\ It also 
refers to another case where the district court denied a claim that 
adding local commercials to rental videos was an infringement of the 
derivative work right because there was no evidence that ``the mere 
addition of a commercial to the front of a videocassette recasts, 
transforms, or adapts the motion picture in what could represent an 
original work of authorship.''\87\ Relying on the district court`s 
determination in Agee that copying an excerpt of a musical work does 
not infringe the derivative work right, RIAA argues that the creation 
of a ringtone does not infringe the exclusive right to prepare 
derivative works of the underlying musical work.\88\
---------------------------------------------------------------------------

    \86\ See RIAA Initial Brief at 15, citing Agee v. Paramount 
Commc'ns, Inc, 853 F. Supp. 778 (S.D.N.Y. 1994), aff'd in part rev'd 
in part on other grounds, 59 F.3d 317 (2d Cir. 1995) (holding that 
``copying a sound recording for use in a broadcast television 
program does not create a derivative work which warrants protection 
under the Copyright Act of 1976''). The Second Circuit found it 
unnecessary to reach the derivative works question. See id. at 324 
(stating that ``Although the interspersing and abridgement of a 
sound recording may not, strictly speaking, involve sampling or 
amount to the traditional creation of a derivative work, such use of 
a recording appears to fall within the language of section 114(b), 
perhaps constituting a rearrangement or alteration in sequence. We 
need not determine the extent to which the recording was altered, 
however, because the finding that Paramount created a derivative 
work is unnecessary to a finding of infringement in light of 
Paramount's reproduction of Agee's recording.'').
    \87\ See id. at 14, citing Paramount Pictures Corp. v. Video 
Broad. Sys., Inc., 724 F. Supp. 808, 821 (D. Kan. 1989).
    \88\ Id. at 8, 15.
---------------------------------------------------------------------------

    RIAA argues that the cases involving the creation of unauthorized 
trailers through editing and condensing of motion pictures are inapt. 
According to RIAA, such cases involve claims of unauthorized 
reproduction, and that is a sufficient basis on which to decide

[[Page 64311]]

them. Moreover, in the few instances where those cases address the 
derivative work right, they point in conflicting directions depending 
on whether or not the court follows Ninth Circuit precedent.\89\ RIAA 
argues that the Register should decline to follow the Ninth Circuit`s 
holding that the derivative work right may be infringed without a 
finding of originality. RIAA explains that in the Ninth Circuit, all 
one must show to prove infringement of the derivative work right is 
substantial similarity between the derivative work and the underlying 
work and that, under this reasoning, there is no legal distinction 
between infringing the reproduction right and infringing the derivative 
work right.\90\ RIAA submits that such an interpretation is wrong 
because it is contrary to the plain language of the statute and 
contrary to the weight of authority.\91\ RIAA states that, in any 
event, the trailer cases are of marginal relevance here because they 
involve a greater degree of editorial judgment than copying a single 
clip for distribution as a mastertone or other typical commercial 
ringtone.
---------------------------------------------------------------------------

    \89\ Id. at 15, comparing Clean Flicks of Colo. v. Soderbergh, 
433 F. Supp. 2d 1236, 1242 (D. Colo. 2006) (holding that ``family 
friendly'' edited versions of movies ``are not derivative works and 
do not violate Sec.  106(2)'') with Video Pipeline, Inc. v. Buena 
Vista Home Entm't, Inc., 192 F. Supp. 2d 321, 330 (D.N.J. 
2002),aff'd on other grounds, 342 F.3d 191 (3d Cir. 2003).
    \90\ RIAA cites Mirage Editions, Inc. v. Albuquerque A.R.T. Co., 
856 F. 2d 1341 (9th Cir. 1988) where the Ninth Circuit affirmed a 
district court finding that mounting legally purchased copies of 
copyrighted artworks on ceramic tiles infringed the right to prepare 
derivative works. The court found that appellant ``made another 
version'' of the artwork that amounted to the preparation of a 
derivative work because it `` recast or transformed the individual 
images by incorporating them into its tile-preparing process.'' This 
decision has been followed in subsequent cases within the Ninth 
Circuit. See, e.g., Micro Star v. Formgen, Inc., 154 F.3d 1107, 1112 
(9th Cir. 1998); Sobhani v. Radical Media, Inc., 257 F. Supp. 2d 
1234 (C.D. Cal. 2003). See id. at 16-17.
    \91\ Id.at 16. In its Reply Brief, RIAA again argues that 
mastertones and other typical commercial ringtones are not 
derivative works. It states that the cases cited by Copyright Owners 
all rely on Ninth Circuit precedent, and given that it is the lone 
Federal circuit in holding that there is a more lenient test for 
infringement of derivative works, that approach should be rejected. 
RIAA Reply Brief at 11.
---------------------------------------------------------------------------

    Copyright Owners assert that to the extent there is a dispute among 
the circuits as to whether creativity sufficient for copyright 
protection is required for a work to be a derivative work for purposes 
of infringement, that dispute is not appropriate for resolution by the 
Register and is, in any event, irrelevant to the Register`s analysis 
here since ringtones satisfy the test for creativity in any 
circuit.\92\
---------------------------------------------------------------------------

    \92\ Copyright Owners Reply Brief at n. 13.
---------------------------------------------------------------------------

    Analysis. Given the wide range of ringtones available in the 
marketplace, and understanding that a derivative work analysis is 
factually intensive, our task here is not to provide a comprehensive 
analysis of the caselaw. However, we do need to address whether a 
musical excerpt, in the form of a ringtone, is a derivative work 
because it is a central issue in this proceeding. First, consideration 
of the derivative work right issue is important to the extent that a 
ringtone which is adjudged to be a derivative work cannot be licensed 
under Section 115. Second, we agree with RIAA that the Ninth Circuit`s 
more lenient test for infringement of derivative works, which seemingly 
ignores the originality requirement, appears to be in error as it runs 
contrary to all other Circuit Court precedent.\93\ Third, we agree with 
RIAA that reliance on derivative works precedent involving movie 
trailers, such as Video Pipeline, Inc., is inapt because the creating 
and editing process involved in making those trailers required much 
more originality than simply shortening an existing musical work to 
create a ringtone.\94\ Fourth, Woods v. Bourne is guiding precedent for 
determining the derivative work right in musical compositions.\95\ 
Under Woods, an excerpt of a musical work made into a ringtone without 
original embellishments likely would not be considered a derivative 
work because nothing of substance has been added and the ringtone is 
merely a copy of a work (albeit a portion) already produced, without 
additions or variations. Fifth, as for those mastertones that contain 
new words in the lyrics not found in the underlying musical works, we 
draw no conclusions based on precedent because they involve factual 
issues and potentially close questions that need not be resolved here. 
A court of competent jurisdiction would be the appropriate forum to 
make the necessary determinations.
---------------------------------------------------------------------------

    \93\ We note that there is widespread disapproval of the Ninth 
Circuit's approach to derivative works. See, e.g., Lee v. A.R.T, 125 
F.3d 580, 582 (7th Cir. 1997) (noting that if the Ninth Circuit is 
``right about what counts as a derivative work, then the United 
States has established through the back door an extraordinarily 
broad version of the authors' moral rights.''); Precious Moments, 
Inc. v. La Infantil, Inc., 971 F. Supp. 66, 69 (D. Puerto Rico 1997) 
(agreeing with the Seventh Circuit that Mirage and its progeny read 
the originality requirement out of the definition of derivative 
works and ``open[s] the door for the most trivial modifications to 
generate an infringing derivative work.''); Goldstein Sec.  5.3 at 
5:81-82; Nimmer on Copyright Sec.  3.03. Although Copyright Owners 
assert that ``to the extent that there is a dispute among the 
circuits as to whether creativity sufficient for copyright 
protection is required for a work to be a derivative work for 
purposes of infringement, that dispute is not appropriate for 
resolution by the Register,'' the positions taken by the parties on 
this issue require the resolution of that issue. Having concluded 
that many ringtones do not exhibit sufficient creativity to qualify 
for copyright protection as derivative works, it is necessary to 
determine whether the derivative work right nevertheless could be 
infringed by making and distributing such ringtones.
    \94\ There are marked differences between the making of 
ringtones and the making of movie trailers in the cited cases. For 
example, the trailers at issue in Video Pipeline were 120 seconds in 
length and included the display of the movie studio's trademark, 
title of the motion picture, and two or more scenes from the film. 
See 342 F.3d at 195. In any event, the Third Circuit found that the 
trailers at issue were essentially copies of the original work that 
lacked ``any significant transformative quality'' and any ``creative 
ingenuity.'' Id. at 199-200. The trailer at issue in John Lamb, 
another case cited by Copyright Owners, was 2 minutes and 40 seconds 
in length and included individual images and scenes, among other 
things. Further, the original trailer was transformed into a 3-D 
format for use with specially engineered eyeglasses. See 949 F. 
Supp. at 755.
    \95\ See n. 77, 82, supra.
---------------------------------------------------------------------------

    Copyright Office Precedent. The Copyright Office has made certain 
pronouncements as to the registrability of derivative works in sound 
recordings and other works in various publications. For example, 
Section 408.07 of Compendium II of Copyright Office Practices states 
that ``An abridgement of a musical work may be registrable provided 
that there is a substantial amount of selectivity, for example, more 
than merely omitting a section from the beginning or end.'' Copyright 
Office Circular No. 14 (2006), Copyright Registration for Derivative 
Works, states that ``When the collecting of preexisting material that 
makes up the compilation is a purely mechanical task with no element of 
editorial selection or when only a few minor deletions constitute an 
abridgment, copyright protection for the compilation or abridgment as a 
new version is not available.'' Copyright Office Circular No. 56 
(2006), Copyright Registrations for Sound Recordings, states, in part 
that ``[I]f only a few slight variations or purely mechanical changes 
(such as declicking or remastering) [of a work] have been made, 
registration is not possible.''
    RIAA argues that mastertones and other typical commercial ringtones 
do not stand on their own as separately copyrightable works under the 
Copyright Office`s interpretations. RIAA cites Section 408.07 of the 
Compendium II of Copyright Office Practices as support for its 
argument.\96\ RIAA argues that a partial copy of a commercial sound 
recording distributed as a mastertone or a partial copy of a musical 
work distributed as a monophonic or polyphonic ringtone is not 
separately

[[Page 64312]]

protectable as a derivative work under Copyright Office standards.\97\ 
To the extent that it may be desirable to make technical adjustments to 
the commercial sound recording to improve playability on phones, RIAA 
asserts that process is in the nature of remastering and would not 
affect the underlying musical work.\98\ As for RIAA`s reliance on 
Copyright Office precedent, Copyright Owners refer to Copyright Office 
Circular No. 14 which states that ``a few minor deletions'' to a work 
will not suffice for a work to be protectable as a derivative work. 
Copyright Owners respond that ringtones do not involve the mere 
omission of portions of a work, but involve the creative selection of 
portions of a work and often more. They assert that the process used to 
construct a thirty second ringtone from a three-to-five minute work 
involves the ``substantial amount of selectivity'' acknowledged by the 
Copyright Office to suffice for the creation of a protectable work.
---------------------------------------------------------------------------

    \96\ Compendium II of Copyright Office Practices, Sec.  408.07 
(1984).
    \97\ RIAA Reply Brief at 13.
    \98\ RIAA Initial Brief at 21.
---------------------------------------------------------------------------

    Analysis. The Copyright Office documents, noted above, are 
instructive. We note that the Circulars are designed to inform members 
of the public about how to register works with the Copyright Office 
offering guidelines for instructional purposes. The Compendium, 
generally used by the Copyright Office staff, serves as an internal 
manual detailing what works are copyrightable, and therefore 
registrable. Here, the cited materials are based on, and to a large 
extent, mirror judicial precedent on the subject of derivative works. 
Essentially, making ``minor deletions'' or ``slight variations'' to an 
original work will not result in the creation of a derivative work 
because there is no originality involved in the new work. Using the 
cited materials as references, then, the Copyright Office would refuse 
registration of a mastertone that is merely an excerpt of a full 
musical work because the new work lacks the requisite originality.
    Examples in the Record. Copyright Owners state that creating 
ringtones involves making alterations to the underlying work that 
require skill, judgment, and creativity. According to Copyright Owners, 
all ringtones require the exercise of creative judgment in determining 
the points in the composition where the ringtone should begin and end 
so as to maximize appeal to consumers. They state that the decision as 
to what portion of a work to use in the ringtone is not trivial; 
shorter ringtones are sometimes designed to ``loop'' to achieve the 
appropriate length to function as a ringer, with the result that a 
musical phrase is repeated in a sequence unintended by the author of 
the work. They add that other mastertones involve the addition of new 
lyrics, spoken-word interludes, and other material designed to enhance 
sales. Copyright Owners conclude that, for a derivative work to be 
copyrightable under the copyright laws, the ``requisite level of 
creativity is extremely low'' and the alterations of ringtones in the 
manner described meet this test.\99\
---------------------------------------------------------------------------

    \99\ Copyright Owners Initial Brief at 14-15, citing Yurman 
Design, Inc. v. PAJ, Inc., 262 F.3d 101, 109 (2d Cir. 2001) (quoting 
Feist, 499 U.S. at 345).
---------------------------------------------------------------------------

    RIAA disagrees and asserts that ringtones are nothing more than 
partial copies that lack sufficient originality to be protected as 
derivative works or to infringe the derivative works right. It states 
that copying a clip to distribute as a ringtone does not involve the 
addition of any new material. RIAA argues that because the definition 
of the term ``derivative work'' applies to both protection and 
infringement, and because the definition requires originality in both 
contexts, copying a single short clip from a sound recording and/or 
musical work to distribute as a mastertone or other ringtone does not 
meet the requirements for copyright protection as a derivative work or 
infringement as a derivative work.\100\ RIAA has submitted, into the 
record, a CD with relevant examples of mastertones, that are simply 
partial copies of the underlying musical work.
---------------------------------------------------------------------------

    \100\ RIAA Initial Brief at 19-20.
---------------------------------------------------------------------------

    In their Reply Brief, Copyright Owners reiterate that the creation 
of ringtones involves substantial creativity and that ringtones do not 
only feature the hook of a particular musical work. Moreover, they 
assert, there is no such thing as a ``typical commercial ringtone,'' as 
RIAA seems to suggest. Rather, they vary in kind and length. They note 
the following examples: (1) the ringtone for Leonard Cohen`s 
``Everybody Knows'' recording comprises nine seconds of the 
approximately five and a half minute full length work and the ringtone 
commences seven seconds into the song; (2) Britney Spears `` . . . Baby 
One More Time'' ringtone consists of a fifteen-second snippet of the 
recording that begins two and half minutes into the three and a half 
minute song; and (3) the mastertone for Jay Z`s ``Change Clothes,'' 
consists of excerpts of two separate hooks repeated twice (even though 
these hooks are separated in the full-length song by other musical 
content), and then these two snippets are further repeated if the 
caller fails to answer the phone. Copyright Owners also note that some 
songs result in multiple ringtones, each focusing on different elements 
of the same underlying composition. They state, for example, that the 
Bubba Sparxx/Ying Yang Twins hit, ``Ms. New Booty,'' has spawned two 
ringtones-one featuring the lyric ``I found you''and the other 
emphasizing the lyric ``get it right.''\101\
---------------------------------------------------------------------------

    \101\ Copyright Owners Reply Brief at 5-6.
---------------------------------------------------------------------------

    They also assert that other ringtones include new content not 
present in the underlying work. Copyright Owners note, for example, 
that the Pussycat Dolls` mastertone derived from the best-selling song 
``Don`t Cha'' features the lyrics, ``Don`t cha wish your girlfriend was 
hot like me. Don`t cha wish your girlfriend was a freak like me,'' 
which are part of, but not all of the lyrics of the song. This 
ringtone, which is eleven seconds, as compared to the four and a half 
minute full length work, also includes new material different from 
those of the underlying work: ``Come on boy, don`t cha wanna pick up? 
We`re ready for ya.'' These additional words are spoken, not sung, and 
are not accompanied by music. Likewise, Copyright Owners note that in 
Beyonce`s mastertone ``Let Me Cater 2 You,'' the ringtone contains a 
portion of the song, with an extra line added at the end: ``What`s up, 
this is Beyonce from Destiny`s Child and this call is for you.'' Again, 
the additional words are spoken, unaccompanied by music. Copyright 
Owners have submitted a CD, included in the record, that contains many 
more examples of ringtones that they assert support their case.
    Analysis. The ringtone samples provided by the parties are 
instructive. The record evidence demonstrates that not all ringtones 
are the same. While we need not decide whether all of the ringtones 
presented to us are within the scope of Section 115, we observe that 
some undoubtedly are not. For example, the 16 second mastertone, Grind 
With Me, by performing artist, Pretty Rickey, was created solely for 
ringtone use and the lyrics used therein are not found in the 4:02 
minute full length version of the work. This ringtone is likely 
copyrightable as a derivative work because it is original and 
demonstrates a ``creative spark.'' In any event, there are likely to be 
many ringtones, such as the mastertone that uses a portion of Otis 
Redding`s classic ``Sittin` On the Dock of the Bay,'' that simply copy 
a portion of the underlying musical work and cannot be considered 
derivative works because such excerpts do not contain any originality 
and are created with rote editing. There are also

[[Page 64313]]

ringtones that contain a portion of the full length musical work and 
additional spoken material such as the Pussycat Dolls example, above. 
The determination of whether such a ringtone, or one that includes the 
addition of some new lyrics, results in a copyrightable derivative work 
is a mixed question of fact and law that is beyond the scope of this 
proceeding.
    In sum, there is a broad spectrum of ringtones, and whether one 
would be considered a derivative work depends upon the nature of the 
ringtone. At one end of the spectrum are those ringtones that are 
simple excerpts of larger musical works. This type of ringtone is not a 
derivative work. At the other end of the spectrum are ringtones that 
contain additional original authorship. These would be considered 
derivative works if there was a sufficient amount of creative 
authorship in the new material. In between are ringtones that may 
include some new material (spoken words or music) in addition to the 
excerpt. Those ringtones cannot be properly analyzed in a factual 
vacuum and their status as derivative works need not be determined in 
this proceeding, but are more appropriately determined on a case-by-
case basis by the courts.

VI. The ``Arrangement Privilege''

    Section 115(a)(2) of the Copyright Act states that the ``compulsory 
license includes the privilege of making a musical arrangement of the 
work to the extent necessary to conform it to the style or manner of 
interpretation of the performance involved, but the arrangement shall 
not change the basic melody or fundamental character of the work, and 
shall not be subject to protection as a derivative work under this 
title, except with express consent of the copyright owner.''\102\ 
(Emphasis added) According to the Act`s legislative history, the 
purpose of the limitations in Section 115(a)(2) was to prevent the 
musical composition from being ``perverted, distorted, or 
travestied.''\103\
---------------------------------------------------------------------------

    \102\ 17 U.S.C. Sec.  115(a)(2).
    \103\ H. R. Rep. 94-1476 at 62 (1976) (``The second clause of 
subsection (a) is intended to recognize the practical need for a 
limited privilege to make arrangements of music being used under a 
compulsory license, but without allowing the music to be perverted, 
distorted, or travestied. Clause (2) permits arrangements of a work 
``to the extent necessary to conform it to the style or manner of 
interpretation of the performance involved,'' so long as it does not 
``change the basic melody or fundamental character of the work.'' 
The provision also prohibits the compulsory licensee from claiming 
an independent copyright in his arrangement as a ``derivative work'' 
without the express consent of the copyright owner.''); see also, 
Nimmer on Copyright 17 U.S.C. Sec.  115(a)(2). 8.04[F] (noting in 
reference to Section 115(a)(2) that ``Such respect for the integrity 
of a musical composition evinces Congressional regard for the moral 
rights of composers [.]'').
---------------------------------------------------------------------------

    Arrangements. RIAA argues that ringtones are authorized by the 
arrangement privilege set forth in Section 115. RIAA argues that even 
if the Register were to determine that the creation of mastertones or 
other ringtones necessarily involves preparation of a derivative work, 
Congress specifically authorized the creation of certain derivative 
works under the express terms of the Copyright Act. RIAA asserts that 
creating arrangements by changing the length of musical works has been 
an accepted part of industry practice since before creation of the 
mechanical license. It states that shortening a musical work is 
necessary to conform the song to the style or manner of the performance 
involved because ringtones necessitate brevity.\104\
---------------------------------------------------------------------------

    \104\ RIAA Initial Brief at 23-25.
---------------------------------------------------------------------------

    Copyright Owners take issue with RIAA`s stance. They state that 
RIAA`s argument rests on a false premise-that changing the length of a 
musical work necessarily results in an arrangement. They assert that 
arrangements are adaptations of whole works and involve changes to the 
style and interpretation of the underlying work. They conclude that a 
portion of a musical work for inclusion in a ringtone is not an 
arrangement of the underlying work.\105\
---------------------------------------------------------------------------

    \105\ Copyright Owners Reply Brief at 12.
---------------------------------------------------------------------------

    Copyright Owners strongly assert that a ringtone is not a musical 
arrangement as that term is understood in the music business. They 
state that it is well settled in the music industry that arrangements, 
intended to permit alterations solely in interpretation and style, are 
adaptions of entire works.\106\ They note that an arrangement, as 
defined by the American Federation of Musicians, is ``the art of 
preparing and adapting an already written composition for presentation 
in other than its original form. An arrangement may include 
reharmonization, paraphrasing, and/or development of a composition, so 
that it fully represents the melodic, harmonic, and rhythmic 
structure.''\107\ They assert that, by definition, there cannot be a 
ten-second arrangement of a three minute composition and a ringtone is 
no more of an arrangement of a song than the selection of four notes 
out of all the others is an arrangement of a song.\108\
---------------------------------------------------------------------------

    \106\ Id. at 3.
    \107\ Copyright Owners Initial Brief at 16, citing http://www.answers.com/topic/arrangement. They also cite the Oxford English 
Dictionary (an arrangement is ``[t]he adaptation of a composition 
for voices or instrument for which it was not originally written.'') 
and the Cambridge Advanced Learner's Dictionary (an arrangement is 
``[a] piece of music that has been changed so that it can be played 
in a different way, especially by a different instrument'').
    \108\ Id. at 15-16.
---------------------------------------------------------------------------

    RIAA asserts that the definitions of ``arrangement'' that Copyright 
Owners provide are unconvincing. It states that the only definition 
that even remotely suggests that an arrangement must always embody the 
full work and never a partial copy of that work is the definition from 
answers.com, but even that definition is not particularly 
instructive.\109\ RIAA also argues that there is nothing in the 
Copyright Act, its legislative history, or the common usage of these 
terms to suggest that, by employing the phrase ``musical arrangements'' 
in either Section 101 or Section 115(a)(2), Congress was distinguishing 
between ``musical arrangements'' as a class and musical arrangements 
that happen to shorten versions of the underlying work. RIAA asserts 
that there are innumerable arrangements of a particular work and a 
shorter version of such a work is still referred to as an 
arrangement.\110\
---------------------------------------------------------------------------

    \109\ RIAA Reply Brief at 15, and n. 11, citing www.answers.com/topic/arrangement (stating that an arrangement ``fully represents 
the melodic, harmonic, and rhythmic structure'' of the work,'' but 
also stating that an arrangement ``may specify or vary some or all 
of . . . [the] sequence, including the order and number of repeats 
of sections such as verses and choruses. . .introduction, coda, 
modulations, and other variations.''
    \110\ Id. at 16.
---------------------------------------------------------------------------

    Analysis. For purposes of our discussion here, ``arrangement'' 
pertains to the musical aspect of the work, and not to changes in 
lyrics. Even so, defining the parameters of Section 115(a)(2) is 
difficult because there is no precedent and there is no common ground 
among the parties regarding the appropriate definition of 
``arrangement''for Section 115 purposes. Here, the parties have used 
various dictionaries and web sites to support their definitional 
argument, but there is no consensus on what sources are valid and 
reliable. While Copyright Owners` definition is appropriate to use in 
this context, we believe that the definition found in the New 
Encyclopedia of Music and Musicians (``NEMM'') is as reliable, if not 
more comprehensive.\111\ NEMM

[[Page 64314]]

defines an arrangement as ``The process or result of readjusting a work 
for performance by different artistic means from that originally 
intended. Also, a relatively close or literal rendering of the 
substance and form of a work with only those modifications demanded by 
the limitations or peculiarities of the medium in view.''\112\ We can 
make three general observations based on the definitions and the law. 
First, the user`s right to make a melodic arrangement should be limited 
so that the basic character of the musical work is preserved.\113\ 
Second, a mastertone that merely shortens the full length work to 
conform it to the physical limitations of the cellphone does not affect 
the musical work`s arrangement. Finally, a ringtone that makes minor 
changes to lyrics of the underlying musical work generally does not 
affect its arrangement.\114\ There may be other ringtones that are 
substantially different from the underlying musical work, but whether 
such changes impinge upon the arrangement of the work is a factual 
question, which goes beyond the scope of this proceeding.
---------------------------------------------------------------------------

    \111\ We note that when examining musical works for the purpose 
of copyright registration, the Performing Arts Section of the 
Copyright Office defines ``arrangement'' as ``harmony added to an 
existing melody, or a transcription, such as a band arrangement of a 
piano piece.'' Copyright Office examiners also rely on the 
definition of ``arrangement'' in Section 408.01 of Compendium II of 
Copyright Office Practices which states that: ``A musical 
arrangement is a work that results from the addition of new harmony 
to a preexisting work. The standard of originality for arrangements 
takes into consideration the fact that a melody carries with it a 
certain amount of implied harmony.'' Compendium II of Copyright 
Office Practices, Sec.  408.07 (1984).
    \112\ See Waldo Selden Pratt, The New Encyclopedia of Music and 
Musicians, Macmillan (1929).
    \113\ See Preliminary Draft for Revised U.S. Copyright Law and 
Discussion and Comments on the Draft. House Comm. on the Judiciary, 
88th Cong., Copyright Revision Part 3, at 444 (1964).
    \114\ See Shapiro, Bernstein& Co., Inc. v. Jerry Vogel Music 
Co., Inc. (S.D.N.Y. 1947) (holding that a new version of copyrighted 
song ``Melancholy'' under the title ``My Melancholy Baby'' with an 
additional chorus in march time, but using identical lyrics except 
for a slight variation in the base of the accompaniment, did not 
constitute a copyrightable new work).
---------------------------------------------------------------------------

    Copyright Owners assert that ringtones are actually abridgements, 
not arrangements, of a musical work, and therefore they fall outside 
the Section 115 license.\115\ While Copyright Owners do not fully state 
what constitutes an abridgement for the purposes of Section 115(a)(2), 
RIAA takes issue with this conclusion and cites a litany of 
definitions, references, and examples to support its case.\116\ In this 
context, and without adequate explanation from the Copyright Owners, we 
surmise that the gist of their argument is that a ringtone abridges a 
full length musical work, and as such, should be considered a 
derivative work. If that is the case, we need not re-examine the matter 
as it is analyzed and discussed in detail in the derivative work 
section above. Our conclusion here is bolstered by the fact that the 
term abridgement does not appear in Section 115(a)(2), but it does 
appear in the definition of derivative works in Section 101 of the 
Copyright Act.
---------------------------------------------------------------------------

    \115\ Copyright Owners Initial Brief at n. 6.
    \116\ RIAA Reply Brief at 15. For example, referring to 
Cambridge Advanced Learner's Dictionary, RIAA states that an 
abridgment is ``to make a book, play or piece of writing shorter by 
removing details and unimportant information.''
---------------------------------------------------------------------------

    Fundamental Character of the Work. Copyright Owners state that even 
assuming, for argument`s sake, that ringtones qualify as musical 
arrangements, Section 115 is inapplicable because the basic melody and 
fundamental character of the underlying work has been changed. They 
assert that ringtones delete large portions of the underlying works 
including much of the melody, verses, bridges, codas, and instrumental 
interludes. They conclude that the reduction of a work to a short 
refrain excludes all of the other elements that make up the overall 
character of the work.\117\
---------------------------------------------------------------------------

    \117\ Copyright Owners Initial Brief at 16-17.
---------------------------------------------------------------------------

    Copyright Owners assert that ringtones change the character of the 
underlying work in other ways as well. They assert that ringtones 
transform artistic works into utilitarian substitutes for the ring of 
the telephone; the character of a musical work fundamentally changes 
when the ``original artistic vision expressed by the work in the form 
of a full-length song is superseded by a new purpose of serving as a 
thirty second mobile phone ringer.'' Copyright Owners argue that the 
use of a musical work as a ringtone departs from the integrity of the 
original composition, ``a result that Congress properly avoided'' by 
excluding such uses from the Section 115 scheme.\118\
---------------------------------------------------------------------------

    \118\ Id. at 17.
---------------------------------------------------------------------------

    RIAA asserts that typical commercial ringtones do not change the 
basic melody of a musical work; to the contrary, ringtones by their 
very nature seek to accurately reproduce the basic melody with little 
or no alteration. RIAA asserts that the limitations in Section 
115(a)(2) to prevent changes to the ``basic melody and fundamental 
character of the work'' were added specifically to address the 
objections of the copyright owners that the arrangement privilege would 
otherwise allow ``radical alterations'' to the ``material detriment of 
the work.''\119\ RIAA states that in the case of mastertones, the 
melody is exactly the same as in the commercial sound recording release 
and distributing a clip does not radically alter, pervert, distort, or 
travesty the musical work in contravention of Congressional intent. 
RIAA asserts that since Copyright Owners frequently license large parts 
of their catalogs for use as ringtones, that use cannot be said to be 
to the material detriment of the work.\120\ RIAA concludes that 
creating a partial copy of the work does not constitute a radical 
alteration, and if it did, mastertones would not be commercially 
successful.
---------------------------------------------------------------------------

    \119\ RIAA Reply Brief at 14, citing Goldstein, Sec.  7.4.2, n. 
7.
    \120\ RIAA Initial Brief at 26.
---------------------------------------------------------------------------

    Analysis. Before discussing the ``fundamental character'' issue, we 
must note that the arrangement privilege does not represent the outer 
limit of what other kinds of changes (apart from what is conventionally 
understood as an arrangement) may be made to a musical work within the 
scope of the Section 115 statutory license. In this sense, an analysis 
of the arrangement privilege as it applies to mastertones is irrelevant 
except to the extent that some of these types of ringtones may actually 
tinker with the style and interpretation of the underlying work. 
Mastertones are taken from commercially released sound recordings which 
may involve arrangements, but for purposes of this proceeding, we 
assume that the commercially released sound recording was licensed 
(either by means of a voluntary license or the statutory license), and 
that the arrangement in the sound recording was within the scope of the 
license. In such cases, which we will assume to be the norm, the use of 
the same arrangement in the mastertone would not be in contravention of 
the limitations of Section 115(a)(2). Given this conclusion, we need 
not specifically address whether mastertones change the fundamental 
character of the work, but a statutory analysis is still necessary to 
determine the legal status of monophonic and polyphonic ringtones under 
Section 115.
    As stated above, Section 115(a)(2) of the Copyright Act permits 
statutory licensees to make a musical arrangement of the work ``to the 
extent necessary to conform it to the style or manner of interpretation 
of the performance involved,'' but the arrangement shall not ``change 
the basic melody or fundamental character of the work.''\121\ The Act`s 
legislative history states that the provision was enacted to prevent 
the music from being ``perverted, distorted, or travestied.''\122\

[[Page 64315]]

The language of the statute was meant to avoid the desecration of the 
underlying musical work.\123\ Under the statute, it is reasonable to 
conclude that a portion of a pre-existing musical work truncated to 
ringtone length does not change the basic melody and fundamental 
character of the work. Certainly, this conclusion applies to 
mastertones, and it would almost always apply to monophonic or 
polyphonic ringtones that preserve the basic melody of the underlying 
musical work. As such, we cannot conclude that the musical work 
customized for ringtone purposes has been perverted, distorted, or 
travestied, as those terms are commonly defined, as no changes have 
been made to the melody of the original work.\124\ In sum, we do not 
believe, as Copyright Owners argue, that the reduction of a work to a 
short excerpt fundamentally changes the overall character of the work 
or impugns the integrity of the work.
---------------------------------------------------------------------------

    \121\ 17 U.S.C. Sec.  115(a)(2).
    \122\ See H. R. Rep. No. 94-1476, at 109 (1976). Congress did 
not define the terms ``perverted,'' ``distorted,'' or 
``travestied.'' However, the America Heritage Dictionary defines 
``perverted'' as ``Deviating from what is considered right and 
correct.'' It defines ``distorted'' as ``to give a false or 
misleading account of.'' And, it defines ``travestied'' as ``An 
exaggerated or grotesque imitation, such as a parody of a literary 
work.'' See http://dictionary.reference.com for these definitions.
    \123\ See Preliminary Draft for Revised U.S. Copyright Law and 
Discussion and Comments on the Draft. House Comm. on the Judiciary, 
88th Cong., Copyright Law Revision Part 3, at 444 (1964) (noting the 
concern of composers: ``We have had numerous instances where a 
record manufacturer has taken a sacred or serious composition and 
without authority changed it into a Rock and Roll or jazz 
arrangement in such a manner as to constitute a desecration. We have 
also had instances of unauthorized adaptations which are beyond the 
limits of reason and good taste; the writing and recording of lyrics 
to instrumental compositions; the making and recording of burlesque 
versions and the recording of salacious versions.'')
    \124\ The legislative history notes that the statutory licensee 
should have some latitude, but not complete freedom, to alter the 
character of the work. See Further Discussions and Comments on the 
Preliminary Draft for Revised U.S. Copyright Law. House Comm. on the 
Judiciary, 88th Cong., Copyright Law Revision Part 4, at 430 (Comm. 
Print 1964).
---------------------------------------------------------------------------

    In the absence of a case directly addressing the scope of Section 
115(a)(2), it is useful to examine precedent involving the derivative 
work rights in a musical composition. For example, in Woods v. Bourne, 
the Second Circuit discussed the factors upon which a derivative 
musical work may be considered an original work for copyrightability 
purposes:

     ``something of substance added making the piece to some extent 
a new work with the old song embedded in it but from which the new 
has developed. It is not merely a stylized version of the original 
song where the major artist may take liberties with the lyrics or 
the tempo, the listener hearing basically the original tune. It is, 
in short, the addition of such new material as would entitle the 
creator to a copyright on the new material.''\125\

---------------------------------------------------------------------------

    \125\ Woods, 60 F.3d at 991 (quoting Woods v. Bourne Co., 841 F. 
Supp. 118, 121 (S.D.N.Y. 1994)). In Woods, the District Court 
decided the novel issue of whether any musical additions or 
variations to the preexisting melody and lyrics of a song resulted 
in a derivative work that was entitled to copyright protection. In 
order to qualify as a derivative musical work, the court found that 
``there must be present more than mere cocktail pianist variations 
of the piece that are standard fare in the music trade by any 
competent musician. . . . [There must be] something of substance 
added making the piece to some extent a new work with the old song 
embedded in it but from which the new has developed. . . . It is, in 
short, the addition of such new materials as would entitle the 
creator to a copyright in the new material.'' See Agee v. Paramount 
Commc'ns, Inc, 853 F. Supp. 778, 788 (S.D.N.Y. 1994), aff'd in part, 
rev'd in part on other grounds, 59 F.3d 17 (2d Cir. 1995);see also, 
Shapiro, Bernstein & Co. v. Jerry Vogel Music Co., 73 F. Supp. 165, 
167 (S.D.N.Y. 1947) (finding changes in the rhythm and 
accompaniment, without changes in the tune or lyrics, were not 
protectable as a derivative work).
---------------------------------------------------------------------------

    Under Woods, a typical monophonic or a polyphonic ringtone would be 
considered a mere ``stylized version'' of the original musical work 
with no changes to the melody, but perhaps some changes to the tempo. 
In such cases, an electronic synthesizer may generate a monophonic or 
polyphonic adaptation of the underlying musical work for play on a 
cellphone, and the ringtone may have been conformed to fit within the 
parameters of its intended use. However, where the ringtone has added 
non-trivial ``new material,'' such that it would be considered a 
derivative work, the Section 115 license may not be available because 
the ringtone was not changed simply to conform it for use in a 
cellphone.\126\
---------------------------------------------------------------------------

    \126\ See Gilliam v. American Broadcasting Comp., Inc., 583 F. 
2d 14, 20-21 (2d Cir. 1976) (holding that a licensee infringes a 
copyright where it publishes the protected work after making 
extensive, unauthorized changes which impair the integrity of the 
original work).
---------------------------------------------------------------------------

VII. Private Use

    Section 115 states that ``a person may obtain a compulsory license 
only if his or her primary purpose in making phonorecords is to 
distribute them to the public for private use including by means of a 
digital phonorecord delivery.''\127\ According to the Act`s legislative 
history, the ``private use'' limitation was added to Section 115 to 
clarify that manufacturers of specialty recordings for use in jukeboxes 
and business music services could not rely on the mechanical license in 
their use of musical works.\128\
---------------------------------------------------------------------------

    \127\ 17 U.S.C. Sec.  115(a)(1).
    \128\ See Supplementary Register's Report on the General 
Revision of the U.S. Copyright Law: 1965 Revision Bill, House Comm. 
on the Judiciary, 89th Cong., Copyright Law Revision Part 6, at 55 
(Comm. Print 1965) (``[T]he provision would not apply, for example, 
to reproduction in a motion picture sound track or recording 
primarily for use in broadcasts, wired music transmissions, or 
jukeboxes.''). See also H. R. Rep. No. 94-1476, at 108 (1976) (``The 
second sentence of clause (1), which has been the subject of some 
debate, provides that `a person may obtain a compulsory license only 
if his or her primary purpose in making phonorecords is to 
distribute them to the public for private use.''' This provision was 
criticized as being discriminatory against background music systems, 
since it would prevent a background music producer from making 
recordings without the express consent of the copyright owner; it 
was argued that this could put the producer at a great competitive 
disadvantage with performing rights societies, allow discrimination, 
and destroy or prevent entry of businesses. The committee concluded, 
however, that the purpose of the compulsory license does not extend 
to manufacturers of phonorecords that are intended primarily for 
commercial use, including not only broadcasters and jukebox 
operators but also background music services.'').
---------------------------------------------------------------------------

    Copyright Owners assert that ringtones fail to satisfy Section 
115's requirement that the phonorecords be distributed for private use. 
They argue that the ``private use'' limitation contemplated by Congress 
includes only ordinary listening use for private enjoyment of music. To 
bolster their argument that a ringtone serves only public functions, 
Copyright Owners assert that a ringtone: (1) is no substitute for 
enjoyment of the full length musical work; (2) provides the 
notification functions of a phone ring; and (3) is marketed as a 
lifestyle accessory. They conclude that ringtones provide mobile phone 
users a means to publicly identify and express themselves to their 
friends, colleagues and the public at large.\129\
---------------------------------------------------------------------------

    \129\ Copyright Owners Initial Brief at 17-19, citing H.R. Rep. 
No. 90-83, at 68 (1967).
---------------------------------------------------------------------------

    RIAA asserts that ringtones are distributed to individual consumers 
for private use. It states Copyright Owners` arguments ignore common 
sense, the relevant statutory language, and the legislative history of 
the Copyright Act. RIAA states that although ringtones do provide users 
a means to identify and express themselves, that is true for any 
phonorecord. RIAA asserts that all kinds of phonorecords distributed 
and sold to private customers are sometimes used in public, yet no one 
argues that such uses make the Section 115 license inapplicable. It 
argues that uses of CDs in public places, for example, do not make the 
Section 115 license unavailable to distributors for the simple reason 
that it is the primary purpose of the distributor, not the use by the 
consumer, that is relevant. According to RIAA, the phrase ``private 
use'' is not the opposite of ``public performance,'' but means 
``personal'' or ``noncommercial use.'' RIAA asserts that ringtones 
satisfy the private use requirement because the primary

[[Page 64316]]

purpose of the distributor is to distribute them to individual 
consumers for their own personal use and enjoyment, on those consumers` 
cell phones, in whatever manner the consumer sees fit, not to 
distribute them for commercial use such as public broadcasting, in 
motion pictures, business music services or jukeboxes.\130\
---------------------------------------------------------------------------

    \130\ RIAA Reply Brief at 17.
---------------------------------------------------------------------------

    Analysis. We believe that Copyright Owners` arguments are 
inconsistent with the law and ignore common uses of music by 
individuals. The controlling language here is ``for private use.'' It 
is undisputed that the term is directed at individual consumers who use 
music for personal enjoyment. However, Copyright Owners seem to suggest 
that once an individual takes the music out of the home, the statutory 
provision becomes null and void.\131\ This cannot be what Congress 
intended. Here, we note that traditional phonorecords are used in 
public (e.g., in boom boxes in public parks, in a car stereo while the 
automobile is driving down the street, etc.), but that does not 
disqualify them from the statutory license by violating their primary 
purpose of being for private use. While it may be true that some mobile 
phone users purchase ringtones to identify themselves in public, this 
use most likely would not be considered a public use as Congress 
intended that term to be understood in the Section 115 context, and in 
any event, there is no basis to conclude that the primary purpose of 
the ringtone distributor is to distribute the ringtone for 
``public''use. The legislative history accompanying Section 115(a)(1) 
does not contradict this conclusion. In fact, it clarifies that ``the 
purpose of the compulsory license does not extend to manufacturers of 
phonorecords that are intended primarily for commercial use, including 
not only broadcasters and jukebox operators but also background music 
services.''\132\ Section 115 does not, however, impose any limitations 
on the use of a phonorecord once it is purchased by the consumer. As 
such, Section 115(a)(1) is not a bar to the inclusion of ringtones 
under the statutory license.
---------------------------------------------------------------------------

    \131\ See Copyright Owners Initial Brief at 19 (``In sum, far 
from being used for private musical entertainment in one's home, 
ringtones provide mobile phone users a means to identify themselves 
to their friends, colleagues and the public at large.'').
    \132\ See n.128, supra.
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VIII. First Use

    The Section 115 license is available ``[w]hen phonorecords of a 
nondramatic musical work have been distributed to the public in the 
United States under authority of the copyright owner.'' According to 
the Act`s legislative history, once a musical work has been recorded 
and ``distributed to the public,'' any person may obtain a compulsory 
license by complying with the provisions of Section 115.\133\
---------------------------------------------------------------------------

    \133\ 17 U.S.C.Sec.  115(a)(1). Mirroring the statutory 
language, the provision's legislative history states that the 
Section 115 license is ``available to anyone as soon as 
`phonorecords of a nondramatic musical work have been distributed to 
the public in the United States under the authority of the copyright 
owner.''' See H. R. Rep. No. 94 Sec.  1476 (1976).
---------------------------------------------------------------------------

    RIAA argues that a ringtone would be subject to statutory licensing 
after first use even if it were not otherwise covered by Section 
115(a)(2). RIAA explains that even if certain musical works may be 
outside the scope of the statute in the first instance, Section 115 
nonetheless would apply to the new musical work once that version was 
first distributed under the authority of the copyright owner. RIAA 
states that assuming for the sake of argument that a ringtone-length 
version of a musical work is a derivative work outside the scope of the 
Section 115 license, the music publisher would have the right to 
prevent distribution of that ringtone-length work. However, once the 
publisher allowed one record company or ringtone distributor to 
distribute phonorecords of that ringtone-length work, the ordinary 
operation of Section 115 would then allow any person to obtain a 
statutory license with respect to the ``new''ringtone version in 
question.\134\
---------------------------------------------------------------------------

    \134\ RIAA Initial Brief at 26-27.
---------------------------------------------------------------------------

    Copyright Owners disagree that ringtones are subject to Section 115 
after the public distribution by the copyright owner. They state that 
RIAA`s argument is ``premised on the inaccurate assumption that Section 
115 applies to every digital transmission of a copyrighted 
phonorecord.'' They reiterate that ringtones are not subject to Section 
115 because they are not complete musical works as required by Section 
115, and in any event, the license is narrow and does not apply to 
works that are not distributed for private use.\135\
---------------------------------------------------------------------------

    \135\ Copyright Owners Reply Brief at 17-18.
---------------------------------------------------------------------------

    Analysis. We find that RIAA`s reading of the statute is a 
reasonable one. The issue arises only if a particular ringtone 
qualifies as a derivative work due to the presence of copyrightable 
derivative work authorship in the ringtone. If, as we expect will 
usually be the case, the ringtone is not a derivative work, there will 
be no reason to reach this issue; the ringtone will be within the scope 
of the Section 115 license for the reasons stated above. However, if a 
particular ringtone, released with the permission of the copyright 
owner of the underlying musical work, does constitute a derivative 
work, then once that derivative work has been distributed under the 
authority of the copyright owner, anyone else may, by complying with 
the formal requirements of Section 115, obtain a compulsory license to 
make and distribute copies of that derivative work.

IX. Conditions and Limitations

    As noted above, the Copyright Royalty Board asked the Register to 
address the legal conditions and/or limitations that would apply to 
ringtones if such works were found to DPDs under Section 115 of the 
Act.
    RIAA asserts that the same conditions and limitations that apply to 
other phonorecords apply to ringtones. It posits that first use of the 
song under the authority of the copyright owner, notice, and payment of 
royalties, would be among the statutory conditions that would apply to 
the licensing of ringtones.\136\
---------------------------------------------------------------------------

    \136\ RIAA Reply Brief at 19, citing 17 U.S.C. Sec.  Sec.  
115(a)(1), 115(b), and 115(c)(2).
---------------------------------------------------------------------------

    Copyright Owners assert that there is no need for any limitations 
or conditions on the licensing of ringtones under Section 115, as all 
ringtones are excluded from the reach of the statute as a matter of 
law. They note, however, that if the Register were to conclude that 
some ringtones are subject to statutory licensing, the appropriate 
scope of such licensing would involve factual issues. Copyright Owners 
state that in this case, the Copyright Royalty Boards` August 18, 2006 
Order prohibited the submission of factual material that is required to 
make a reasoned determination of conditions on the licensing of 
ringtones within Section 115. They assert that the Copyright Royalty 
Boards` decision not to permit the submission of factual materials 
makes it ``impossible to delineate'' any informed conditions or 
limitations on the statutory licensing of ringtones.\137\
---------------------------------------------------------------------------

    \137\ Copyright Owners Reply Brief at 20 and n. 7.
---------------------------------------------------------------------------

    Analysis. We believe that Section 115's general requirements are 
applicable to all types of ringtones (monophonic, polyphonic, or 
mastertone). This applies to mastertones that are simple excerpts of 
the underlying musical work, ringtones (monophonic, polyphonic, and 
mastertones) that are not adjudged to be derivative works, and those 
ringtones that do not change the basic melody or fundamental character 
of the work. For newly created ringtones that have not been distributed 
to the public, and that

[[Page 64317]]

fall outside the scope of the statute because they are derivative works 
or for any other reason outlined above, the Section 115 provisions do 
not apply. A commercial license is required to make and distribute 
those types of ringtones. There will, of course, be some instances 
where the status of a ringtone (monophonic, polyphonic, and 
mastertones) for Section 115 purposes is unclear. A judicial 
determination would be required where such mixed question of fact and 
law are present.
    While we cannot delineate a litmus test that will in every case 
determine specifically whether a particular ringtone is or is not 
within the scope of the statutory license, the guidance offered above 
is sufficient for purposes of this proceeding. In general, a ringtone 
will fall within the scope of the compulsory license unless it has so 
altered the musical composition as to constitute a derivative work. 
Simply excerpting a single portion of a licensed sound recording of a 
musical composition will not constitute the making of a derivative 
work. It is clear that many, but not all, ringtones will fall within 
the scope of the Section 115 license. Therefore, it is appropriate for 
the Copyright Royalty Judges to determine royalties to be payable for 
the making and distribution of ringtones under the compulsory license.
    Dated: October 16, 2006
Marybeth Peters,
Register of Copyrights.
[FR Doc. E6-18426 Filed 10-31-06; 8:45 am]
BILLING CODE 1410-30-S