Oct. 15 (Bloomberg) -- Verizon Wireless doesn’t need a public-performance license for ringtones it sells, a judge ruled, dealing a setback to the American Society of Composers, Authors and Publishers.

The company, the largest U.S. mobile carrier, doesn’t need such a license because the rings aren’t played in performances, U.S. District Judge Denise Cote in New York ruled yesterday.

The decision will protect sales in the fastest-growing part of Verizon’s mobile-phone service. Second-quarter revenue from sales of data such as ringtones grew 53 percent from a year earlier to $3.9 billion, accounting for about one-fourth of Verizon’s total.

“Ringtone downloads and text messaging are probably 60 percent or so of all wireless data revenue for the big guys in the U.S.,” Christopher King, an analyst at Stifel Nicolaus & Co., said today in an interview. The brokerage and investment banking firm doesn’t own shares and advises investors to buy Verizon stock.

ASCAP and another licensing company, Broadcast Music Inc., charged for ringtones for years before wireless providers formally began challenging the practice two years ago.

Today’s ruling is the first on the issue. A decision on behalf of ASCAP might have generated millions of dollars annually for the groups’ members.

“While ASCAP is disappointed with the ringtones summary judgment issued yesterday by the U.S. District Court, this federal rate court proceeding with mobile providers is about much more than just ringtones,” ASCAP said in a statement.

Fair Payment

ASCAP said it will continue to pursue “fair payment for individual music creators whose creative works are used to build the businesses of others.”

The suit was filed by Verizon Wireless, which asked the court to rule that a public-performance license isn’t required. Cote issued her summary judgment, which a judge can make if there is no factual dispute requiring a trial, after reviewing legal submissions.

The case attracted legal submissions from wireless, consumer and artist groups including the Consumer Electronics Association, the Electronic Frontier Foundation, and the Society of European Stage Authors & Composers Inc.

The CTIA wireless industry association, which also filed a submission on the case, is “pleased” with the ruling, Andrea Williams, assistant general counsel for the group, said in a statement. The group expects the decision to help the industry fight “double-dipping when it comes to licensing fees for ringtones,” she said.

ASCAP Arguments

The judge said her ruling also applies to a related lawsuit brought by AT&T Mobility LLC, a unit of AT&T Inc., the second- largest U.S. wireless carrier. She also directed the parties in that case to enter into settlement discussions.

Cote’s decision has no effect on another license to which wireless providers are subject. The companies pay about 24 cents per ringtone to composers and others for reproduction and distribution rights.

ASCAP argued in today’s case that Verizon engages in public performances of musical works when it downloads ringtones to customers. The organization is a membership group of 360,000 composers, songwriters, lyricists and music publishers.

“Verizon does not recite, render, play, dance or act the ringtone either directly or by means of any device, and thus does not perform the music,” Cote said in a 34-page ruling.

Verizon Wireless, based in Basking Ridge, New Jersey, is co-owned by Verizon Communications Inc. and Vodafone Group Plc. Spokesman Jeffrey Nelson declined to comment.

The case is In Re Application of Cellco Partnership, which does business as Verizon Wireless, 09-cv-7074, U.S. District Court, Southern District of New York.

To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net.

Last Updated: October 15, 2009 17:54 EDT