Decision is a victory for record labels.

The Copyright Office has decided that compositions used for ringtones may be subject to a compulsory license. The decision is a victory for record labels that want to offer ringtone operators the master rights and publishing rights as one package.

“This decision injects clarity into the marketplace -- clarity that will help satisfy fans’ hunger for the latest hits from today’s best artists by affording record companies and ringtone providers the ability to move new offerings quickly and easily to consumers," says Steven Marks, executive VP/general counsel for the RIAA. "Ultimately, we’re all seeking a vibrant mobile market. This decision helps us further that goal.”

Last month, the Copyright Royalty Board (CRB) referred the question about ringtones and compositions to the Copyright Office for a decision. The CRB wanted to know whether compositions used for ringtones -- monophonic (single melody line) or polyphonic (melody and harmony) -- or for master ringtones (taken from a master recording) fall under the compulsory license provisions of section 115 of the Copyright Act. If so, the CRB would determine rates through its rate-setting proceeding. If not, then publishers would be free to withhold permission to use the compositions unless labels or ringtone providers negotiate a license and a royalty rate for each use.

Under section 115, anyone, like a record label, may obtain a mechanical license or a digital phonorecord delivery (DPD) license to record and distribute "phonorecords" of compositions that were previously recorded and released in the United States. The rate is set by statute, which is periodically adjusted through a copyright tribunal proceeding.

In its 35-page opinion, the Copyright Office concluded that ringtones and master ringtones are "phonorecords" under copyright law. As a result, delivery of ringtones by wire or wireless technology makes them a digital phonorecord delivery.

As long as the ringtones are merely excerpts of a larger musical work or from a preexisting sound recording, then the composition used for the ringtone is subject to the compulsory license, the decision says. For the composition to fall under the compulsory license, the ringtone may not recast, transform or adapt it -- or include additional material -- in such a way that it becomes an original work of authorship (i.e., a derivative work). If it does, then a license must be negotiated with the copyright owner.

"We are disappointed in the Register's decision, which could hurt songwriters significantly and represents an unprecedented broadening of the compulsory license for musical works," says a National Music Publishers' Assn. spokeswoman. "Of particular concern is that copyright owners who have negotiated ringtones licenses in the free market for years will now be subject to government regulation. We see no justification for this, and are currently reviewing our legal options."

The decision also makes the portion of a composition that has been recorded only as a ringtone subject to a compulsory license as well. "If a newly created ringtones is considered a derivate work, and that 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," the opinion states.

Briefs from interested parties arguing what statutory rates should be for ringtones and other formats are due to be filed with the CRB in mid-November.