I would have never guessed that people actually bought Ringtones (how hard is it to just put an mp3 on your phone?), but Juniper Research claimed that the market at one point was a $1 billion industry. Yes, $1 billion dollars worth of loud, low fidelity noise that alerts a user for an incoming phone call and is supposed to be silenced as soon as possible.

Anyways, with a new and profitable market emerging it was only a matter of time before the hemorrhaging recording industry tried to grab a share of their business. Their argument? Transmitting these Ringtones to a mobile phone constituted a public performance, just like transmitting a song through radio waves to multiple receivers does.

It's really not a bad argument, but it immediately falls apart if you've ever used a mobile phone and a radio. The court in In re Application of Cellco Partnership, d/b/a/ Verizon Wireless agrees.

The issue does not involve the conventional meaning of “public performance” contained the statute’s first definition, but rather second definition of the term:

to transmit or otherwise communicate a performance … by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

The court then reasoned that when a user downloaded a Ringtone, the coded transmission is transmitted to a single phone, not all of them. A more interesting question might be what happens when a Ringtone is played in public, say during that movie I payed way too much money to see in the theatre. Wouldn't this constitute a public performance? Who should be liable for the royalties there? The owner of the phone, the seller of the Ringtone, the caller for causing the ringtone to be played? 

At this point, I would argue for a fair use exception, that the copyrighted material has been truncated (both in quality and length) and liability should not be attached. Until then, lets be satisfied with a more...sophisticated use of these Ringtones.