Songwriters prevail in cell phone ringtone royalty rate fight

Jenna Greene

June 23, 2010

Does your cell phone play "Sweet Child O' Mine" when it rings? Or maybe "Barbie Girl" or "Bigg Poppa"?

Cell phone ring tones have become a big business, but one unsettled legal question was just how much money copyright owners should get paid for ringtones using their work.

The answer: 24 cents, according to the U.S. Court of Appeals for the D.C. Circuit.

Yesterday, the court upheld a decision by the Copyright Royalty Board setting the ringtone royalty rate, rebuking a challenge by the Recording Industry Association of America. The court also upheld the board's new late fee for overdue royalty payments.

The dispute began in 2006, when parties including RIAA, the Songwriter's Guild of America, and the National Music Publishers' Association failed to reach an agreement on certain licensing terms and rates. The Copyright Royalty Board convened a proceeding involving 28 days of live testimony, more than 140 exhibits, and more than 340 pleadings, motions, and orders.

In 2009, the board published its final determination. RIAA, represented by Paul Smith of Jenner & Block, challenged the ring tone rate and late fees as arbitrary and capricious.

Kelsi Brown Corkran of the Department of Justice represented the Librarian of Congress. (The Copyright Office is part of the Library of Congress.)

Jay Cohen of Paul, Weiss, Rifkind, Wharton & Garrison argued the cause for the intervenors -- the National Music Publishers' Association, Inc., the Songwriters Guild of America and the Nashville Songwriters Association International.

In a unanimous decision, Judge Brett Kavanaugh wrote that the copyright board's decision "was reasonable and reasonably explained." The panel also included Judge Merrick Garland and Senior Judge A. Raymond Randolph.

RIAA argued the cell phone royalty should be a 15 % of the wholesale revenue derived from the sale of a ringtone. Alternately, the group wanted the rate set at 18 cents per ringtone sold.

The court found that the penny rate is "more directly tied to the nature of the right being licensed than a percentage-of-revenue rate," and that agreed with the copyright board that "the simplicity of using a penny-rate royalty structure supported its adoption."

"On behalf of our songwriter and music publisher clients, we are pleased that the well-reasoned decision of the Copyright Royalty Judges was affirmed," said Cohen of Paul Weiss. Partners Lynn Bayard and David Brown also worked on the case.

Jenna Greene can be contacted at jgreene@alm.com.