Ringtones and Digital Music Players: New Media drive changes in Copyright Law

March, 2007

In this era of new media and quick technological developments, the Copyright Act (the “Act”) is constantly required to ask itself over what does it govern.  That means that when the courts or certain boards or commissions are asked to interpret the Act with respect to new technologies, the legal community approaches the decisions with a sort of fearful excitement.  The excitement comes from any light shone on the provisions of the Act, while the fear comes from the verbal contortionism in which the ruling body may engage in order to place the new technology firmly within the four corners of the Act.

Persons interested in copyrights in musical works have recently put forward two positions based on their interpretation of the Act with respect to new media technology, that is ringtones and digital audio recorders.  In both cases, clarification is required to determine how the Act applies to the new technological devices and developments, which did not exist a decade ago. The first concerns whether the transmission of a ringtone from a provider to an individual cellular phone constitutes a telecommunication under the Act.  The second concerns whether the blank audio recording media levy should apply to digital audio recorders, such as MP3 players, in the same way it applies to compact discs, cassettes, etc.  In both cases, the reader may wish to ask himself whether the Copyright Board of Canada is being asked to opine on issues, which are more appropriately the subject of an amendment of the Act.

Does the Copyright Act apply to the communication of ringtones by telecommunication to cellular phone users?

SOCAN requests tariffs on downloaded ringtones

The Society of Composers, Authors and Music Publishers of Canada (“SOCAN”), which represents the persons and organizations owning the right to communicate music, requested that the Copyright Board of Canada (the “Board”) set a tariff for the communication of ringtones.  In Canada, any person who delivers a ringtone, which includes a musical work, requires a license to reproduce it; SOCAN argues that any person also requires a license to communicate such musical work by telecommunication pursuant to section 3(1)(f) of the Act.

The wireless carriers and the recording industry (the “Objectors”) argued that as the transmission of a ringtone does not involve a communication to the public by telecommunication pursuant to section 3(1)(f) of the Act, no tariff should be levied.  The Objectors conceded that downloading a ringtone is a communication by telecommunication, however they contended that the communication is not a public communication, but rather a private transaction between a vendor and purchaser, thus not protected under the Act.  The Objectors suggested that the ringtone transaction primarily concerns the reproduction right, while the communication is purely incidental or accessory.

In order to decide whether to permit the levying of the tariff, the Board had to determine whether the transmission of a ringtone constituted the communication of a copyrighted work to the public by telecommunication under section 3(1)(f) of the Act.  In arriving at its decision[1], which was delivered in the latter part of last year, the Board focused on two questions: (1) Does a ringtone constitute a “substantial part” of a musical work?; and (2) Is the communication of a ringtone a communication by telecommunication to the public?

Does a ringtone constitute a “substantial part” of a musical work?

When a person owns a copyright in a work, it includes the sole right to communicate the work “or any substantial part thereof”.  The Board held that a ringtone does constitute a substantial part of a musical work.  Although a ringtone is rarely comprised of the entire musical work, ringtones are created by focusing on the strongest part of the melody or identifiable hook.  The objective of a ringtone is to make the excerpt or sample of the song as obvious as possible in order to trigger a recognition of the song in anyone.  Furthermore, a ringtone is usually 30 seconds in length.  In consideration of the quality and length of ringtones, the Board ruled that a musical ringtone constitutes a substantial part of a musical work. 

Is the communication of a ringtone a communication to the public?

The Board ruled that ringtones are uploaded onto a website for the specific purpose of marketing and communicating them to any subscriber who wishes to download the ringtone to a cellular phone.  The ringtone is marketed to the phone-owning public and placed on a website in a catalogue for communication to members of that segment of the public who buy that product.  Furthermore, messages with identical content (musical ringtones) sent to different individuals can be a communication to the public even though they are sent individually.  Simultaneity is not a prerequisite for a communication to be “to the public”.  The Board relies on a previous decision of the Federal Court of Appeal, which found “in public” in the Act to mean “openly, without concealment and to the knowledge of all” and ruled that the phrase “to the public” in section 3(1)(f) of the Act is broader than “in public”.

Therefore, the Board concluded that purchasing a musical ringtone over the internet constitutes a communication to the public by telecommunication under section 3(1)(f) of the Act.

Trying again: The Canadian Private Copying Collective petitions for the reintroduction of the levy on digital recording mediums.

In response to the widespread copying of recorded or broadcasted music onto blank audio recording media in contravention of the Act, the Act was amended in 1997 to include two provisions which are relevant to the issue at hand: (i) an exemption to copyright infringement for the private reproduction of music onto an audio recording medium by an individual user for the private use of such individual; and (ii) a levy on blank audio recording media, as compensation for any reproduction of music onto any blank audio recording media.

The Act defines “blank audio recording medium” as (a) an audio recording medium onto which no sounds have ever been fixed, and (b) any other prescribed audio recording medium.  In the Act, “audio recording medium” means a recording medium, regardless of its material form, onto which a sound recording may be reproduced and that is of a kind ordinarily used by individual consumers for that purpose, excluding any prescribed kind of recording medium

That means that any person who imports or manufactures blank audio recording media sold in Canada must pay a levy to the Canadian Private Copying Collective (the “CPCC”).  The Copyright Board of Canada (the “Board”) has designated the CPCC as the body responsible for the collection and distribution of levies to eligible authors, performers and makers of recorded music in the proportion in which the Board has determined.  The CPCC is obligated to distribute the levy to the collective societies that represent the rights-holders mentioned above.

The Former Tariff

In a proposed tariff for 2003-2004, the CPCC requested that levies be imposed for the first time on recording media onto which music could be copied such as removable electronic memory cards, recordable or rewritable “digital versatile disks” (DVDs), and non-removable memory permanently embedded in “digital audio recorders”.

In its decision, the Board used the term “digital audio recorders” to refer to products with non-removable memory capable of, and ordinarily used for, recording digitally any format of music.[2]  The Board stated that MP3 players and similar devices would come within the definition of “digital audio recorders”.  In response to the proposed tariff, the Board decided that private copying levies would apply to the memory components in digital audio recorders but would not apply to recordable or rewritable DVDs and removable electronic memory cards.  As the levy is meant to compensate relevant persons for their right to reproduce the sound recording (which right individual users were infringing under a former version of the Act, when said users reproduced a sound recording onto a blank audio recording media) by imposing a charge on the sale of blank audio recording media, the Board ruled that a digital audio recorder, onto whose components music could be recorded, was properly subject to the levy.

The Federal Court of Appeal overturned the decision of the Board on the ground that the Board was not authorized to establish a levy on the memory embedded in a digital audio recorder.[3]  The Board only had the authority under the Act to establish a levy on an audio recording medium, such as a cassette or compact disc.  Any expansion of the authority of the Board must come from Parliament.  The definition of “audio recording medium” in the Act gave the Board no authority to look through the device being sold, a digital audio recorder, and define it as an audio recording medium because it had memory permanently embedded therein.

Therefore, the effect of the court’s decision was to disallow all levies on digital audio recorders, which required manufacturers to reimburse to consumers the $15 and $25 retail surcharges on MP3 players.  The CPCC had to reimburse nearly $4 million in total.

The Newly Proposed Tariff

On January 31, 2007, the CPCC asked the Board to reintroduce the disallowed levy on blank audio recording media for the years 2008-2009.  Instead of classifying MP3 players and similar devices as digital audio recorders separate and the apart from blank audio recording media, the newly proposed tariff categorizes digital audio recorders as one of the possible incarnations of a blank audio recording medium.  If CPCC is able to successfully argue that MP3 players and similar devices fall under the definition of “blank audio recording medium”, the current levy on blank audio recording media should apply to MP3 players and the like.

However, it does seem doubtful that the Board has the authority to decide upon whether any levy should apply to digital audio recorders.  Nothing has changed since the Federal Court ruling.  It appears that the CPCC will attempt to argue that digital audio recorders as a whole come within the definition of audio recording media.  As the definition of audio recording medium has traditionally been restricted to media, whose only characteristic is the ability to have a sound recording recorded upon it, it appears dubious that a digital audio recorder, which, in some cases, is capable of radio reception and interacting with digital files, could qualify as an audio recording medium.  That being said, as it is common knowledge that persons are reproducing copyrighted recorded music onto digital audio recorders without the consent of the copyright owner, it makes sense for the levy in some form and at some rate to apply to digital audio recorders.  In my opinion, as the current Act is written, I do not believe that the Board has any authority to expand the levy to apply to this new technological device.  However, I have been wrong before.

The proposed levy leaves silent the question of whether the levy is a sound measure to address the reproduction of recorded music onto blank audio recording media.  At present, the levy is only distributed to persons, who hold copyrights in recorded music.  Thus, when a person buys a cassette to record their own performance of a musical work, rights-holders in recorded music are compensated.  It would be sensible for the Board to determine whether it is appropriate to authorize a levy, assuming the Board has the authority, on an MP3 player or similar device, for the reason that it may be used, or may be used predominantly, as a medium onto which recorded music is downloaded.

Conclusion

As new media and technology test the limits of the current Act and as the courts and the Board attempt to render equitable decisions, it becomes increasing clear that the Act requires meaningful amendments to address digital media and technologies.  This is especially true as individuals continue to contravene the Act and rights-holders fail to be compensated for their works.  At present, it appears that any amendments to the Act are more than a year away.

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Ryan K. Smith is a lawyer and trade-mark agent at Feltmate Delibato Heagle LLP. He specializes in corporate and commercial law with expertise in intellectual property matters including trade-marks, copyrights, privacy, information technology, and confidential information.  You can reach Ryan at rsmith@fdhlawyers.com and (905) 287-2215.

 


[1] 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).

[2] Tariff of levies to be collected by CPCC in 2003 and 2004 on the sale of blank audio recording media, in Canada, in respect of the reproduction for private use of musical works embodied in sound recordings, of performer’s performances of such works and of sound recordings in which such works and performances are embodied.

[3] Canada (Canadian Private Copying Collective) v. Canadian Storage Media Alliance, [2004] F.C.J. No. 2115 2004 FCA 424 Federal Court of Appeal.