Arthur Shay May 21 2003 Unauthorized Sale of Ringtones: A Risky Business Shay & Partners | Tech, Data, Telecoms & Media - Taiwan Arthur Shay Tech, Data, Telecoms & Media Analysis Comment Increasing numbers of Taiwanese consumers are purchasing new ringtones which are downloaded from the Internet or telephonically directly to their mobile phones. Reportedly, last year's revenue from ringtone sales in Asia and Europe alone was at least US$1.3 billion. Ringtones sold in Taiwan typically imitate a catchy segment of a popular local or foreign song. They are usually five to 15 seconds in length, and prepared in monophonic (single-tone), MIDI (Musical Instrument Digital Interface) format. However, the local market for longer, polyphonic ringtones is growing. Some ringtones now on offer are direct copies of the sound recording of a musical performance, although few phones can currently support playback. Pursuant to Taiwan law, local companies that sell ringtones to consumers by download must obtain a Type II telecommunications licence. However, this licence does not grant the recipient any right to use the copyrighted works of others without permission from the right holders. Many sales of ringtones which are similar to existing songs are made without authorization from the owners of the copyright in those songs, or from their licensees. This update explores the risk of liability for copyright infringement arising from such unauthorized sales. Analysis The vast majority of ringtones currently being sold in Taiwan do not directly copy any portion of the original sound recording of a song. The sale of such ringtones thus cannot constitute infringement of the copyright in the sound recording of the song in question. However, the ringtone may infringe the copyright in the musical composition for the song, unless this has expired and the work has become part of the public domain. Under Taiwan law, analysis of whether the unauthorized sale of a ringtone infringes on a copyright therefore focuses on whether the ringtone is 'substantially similar' to a copyrightable element of the musical composition (provided that ringtones which are the same or similar to the artist's performance in the sound recording may also infringe on the copyright in the sound recording). Any claim of criminal copyright infringement requires an additional showing of criminal intent. As the Copyright Law still does not grant the copyright holder an exclusive right of distribution - although a bill prepared by the Copyright Office and awaiting consideration by the legislature would add this right to the law - a claim for infringement resulting from ringtone sales would likely be limited to an alleged violation of the copyright owner's exclusive right of reproduction. This violation would arise, for example, from the unauthorized creation of the master copy of the ringtone on the seller's electronic system and the downloading of copies to purchasers. It is unclear under Taiwan law whether, without authorization from the holder of the copyright in the song, the playback to potential buyers of ringtone samples on a telephonic or internet system prior to sale, the actual sale by download, and/or subsequent playback of the ringtone by the consumer on his or her phone would violate the exclusive rights of public broadcast or public performance of the copyright holder.(1) However, if enacted, the Copyright Office bill would add a right of public transmission to the bundle of exclusive rights granted under the Copyright Law to copyright owners, and the telephonic playback of musical works subject to copyright protection would thus require the prior grant of a licence for the right of public transmission. Despite the widespread sale of ringtones in Taiwan in recent years, no Taiwan court has yet issued a judgment deciding the merits of a case involving a claim of civil or criminal copyright infringement resulting from the sale of ringtones. However, at least two recent claims have been filed with the Taipei City Prosecutor's Office relating to the creation and distribution of ringtones. In the first case the complaint filed with the Prosecutor's Office accused the publisher of a local magazine of criminal copyright infringement, based on certain articles that had been published in the magazine which detailed the exact steps required to create ringtones emulating the melody of certain popular songs. Specifically, the publisher was accused of violating the claimants' right of reproduction. The prosecutor filed criminal suit against the magazine publisher without issuing any written explanation for this decision. The dispute was then promptly settled and the criminal suit withdrawn before the court could consider the matter. The publicly available record of the facts underlying this case is sparse. Assuming there were no facts relevant to the prosecutor's decision other than those mentioned above, it is unclear that a Taiwan court would have found the magazine publisher liable for copyright infringement, since there is no liability for indirect or contributory copyright infringement currently stipulated by local statute or regulation, and no Taiwan court has yet determined a case based on any such implied right of action. In the second case a claim of criminal copyright infringement was filed with the Prosecutor's Office against a seller of ringtones which emulated popular songs. A different prosecutor considered the claim. After more than five months of hearings, the prosecutor still has not announced whether criminal suit will be filed against the ringtone seller, and the parties to the matter are pursuing settlement negotiations. Complications include the fact that the downloads were not made by the ringtone seller; instead, requests for the ringtones were relayed to an overseas company, which then transmitted downloads directly to the purchasers. In addition, the ringtone seller was licensed by a local music intermediary organization to transmit ringtones to its customers, and the organization was a licensee of the claimants. However, the claimants alleged that the organization only had a licence granting the rights of public performance and public broadcast, and that the licence agreement between the intermediary organization and the ringtone company therefore could not be construed as including the right of reproduction. Assuming that a Taiwan court eventually hears a case involving an allegation of copyright infringement resulting from the sale of ringtones that emulate segments of existing songs, and assuming that the ringtones in question are only a few seconds in length, a threshold inquiry may be whether the melody and harmony in the short segment of the musical composition that has been imitated is subject to copyright protection. (It would be impossible for a monophonic ringtone to infringe the rights to the harmony in the musical composition, but local sales of polyphonic ringtones are expected to increase by the end of the year.) In this respect, ringtones sold today in Taiwan often consist of just a few notes, and the number of potential arrangements of those notes is limited. It is unclear what the minimum threshold is before a musical work is sufficiently 'creative' to be copyrightable. A Taiwan court considering the copyrightability of a short melody consisting of only a few notes may regard Taiwan law and judicial practice regarding the copyrightability of literary works to be persuasive. As regards literary works, as a matter of Taiwan law a single word is not subject to copyright protection, and short phrases may not be sufficiently novel and distinctive to be copyrightable, even if the origin of such phrase is immediately apparent to the reader and thus evokes the memory of the original work. In cases dealing with issues where the law is not settled, Taiwan courts sometimes find the decisions of US courts regarding copyright issues to have some persuasive value (for a variety of reasons, the development of Taiwan's Copyright Law has been closely influenced by the United States, and perhaps most directly by demands made by the US trade representative). In this respect, there have been some interesting developments in US case law regarding elements of musical compositions not subject to copyright protection. As an example, a US federal district court in California recently found the elements of a music composition copied in a six-second sample to be uncopyrightable.(2) This decision was applauded by the recording industry (multinational members of which have filed in Taiwan the claims of criminal copyright infringement mentioned above). However, it is unclear whether the Taiwan courts will pay much regard to a lower level US federal court decision that has not been affirmed at least by a US circuit level court, or if they will consider such decision to have dealt with an analogous issue.CommentDespite potential obstacles faced by copyright holders, sellers of ringtones which are similar to existing works run a clear risk of liability for copyright infringement if they do not obtain an unambiguous licence from the relevant copyright holders prior to sale of the ringtones. Although such sales may only require a licence of the right of reproduction, a suit brought by members of the music industry or other copyright holders may be avoided if ringtone sellers also obtain a licence of the rights of public performance and public broadcast (and, if the new draft bill prepared by the Copyright Office is passed into law, the rights of distribution and transmission). This will result in additional expenses for the required royalty payments, and it may be that the seller will have to build these additional costs into the price of the ringtones offered to consumers. Such licensing may be burdensome, and the difficulties are exacerbated by demands from some members of the music industry that the license of rights in relation to the sale of ringtones must be made on a song-by-song basis (resulting in delays and potentially preventing the sale of ringtones emulating new songs in the first few months after release, when the songs are most popular). However, penalties for copyright infringement under Taiwan law are severe, and can include imprisonment of the chairman, chief executive officer and other "responsible persons" of the company. Companies selling ringtones in Taiwan that are similar to popular songs should keep these risks in mind when considering whether to obtain a licence from the rights holders in such songs. For further information on this topic please contact Arthur Shay, William Edwards or Vicky Hsu at Shay & Partners by telephone (+886 2 8773 3600) or by fax (+886 2 8773 3611) or by email ([email protected] or [email protected] or [email protected]). Endnotes(1) These rights differ in statutory definition and interpretation from the same terms used in some other jurisdictions.(2) See the 2002 decision of the US District Court for the Central District of California in Newton v Diamond.