Brooks, Leslie Gene, Ph.D., national executive director, American Choral Deion, John, owner, Last Call Saloon, Providence, RI, on behalf of the Gomez, Eduardo, president, KABQ Radio Station, on behalf of the American Gould, Morton, president emeritus, the American Society of Composers, Authors and Publishers (ASCAP): Prepared statement Gregg, Guy, owner, the Publick House Restaurant, Chester, NJ, on behalf Johnson, Joe, owner, Rod & Reel Tavern, Brigantine, NJ, and president, Atlantic County Chapter, New Jersey Licensed Beverage Association, on behalf of the National Licensed Beverage Association: Prepared statement .. Leonard, Mike, owner, Greenbaum and Gilhooley's Restaurant, Wappinger Falls, NY, and executive vice president, United Restaurant, Hotel, Tavern Association of New York State, on behalf of the National Licensed Beverage Association: Prepared statement Mayer, Bob C., general manager, Tulsa Convention Center, Tulsa, OK: Pre- Meloy, Catherine A., general manager, WGMS Radio Station, on behalf of the National Religious Broadcasters Music License Committee: Prepared Pastor, Hon. Ed, a Representative in Congress from the State of Arizona: Swinburn, John S., executive director, International Association of Audito- rium Managers (IAAM): Prepared statement Thomas, Hon. Craig, a Representative in Congress from the State of Appendix 1.-H.R. 3288, a bill to amend title 17, U.S. Code, to create an exception from copyright infringement for certain performances in places Appendix 2.-Rebuttal statement of American Society of Composers, Authors and Publishers (with attachments), in response to testimony on February 23-24, 1994 Appendix 3.-Letter from Marvin L. Berenson, senior vice president and general counsel, Broadcast Music, Inc. (with attachments), to Hon. William J. Hughes, chairman, Subcommittee on Intellectual Property and Judicial Appendix 4.-Supporting document index of dispute between the American Choral Directors Association (ACDA) and the American Society of Compos- ers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) Appendix 5.-Letter from Diana Waterman, Washington representative, Tele- vision Music License Committee, transmitting a statement of the Television Music License Committee, to Hon. William J. Hughes, chairman, March 11, 1994 Appendix 6.-Letter from Benjamin L. Palumbo, Palumbo & Cerrell, Inc., transmitting a response from ASCAP to the statement of the Television Music License Committee, to Hon. William J. Hughes, chairman, April 20, 1994 Appendix 7.-Statement of the American Horse Council Appendix 8.-Letter from John B. Burcham, Jr., executive director, National Association of Beverage Retailers (NABR), transmitting a position paper by the NABR, to Hon. William J. Hughes, chairman, March 16, 1994 Appendix 9.-Series of statements for the record (22) from numerous organi- zations and individuals regarding the activities of the performing rights Page 154 94 127 252 139 196 265 423 428 MUSIC LICENSING PRACTICES OF PERFORMING RIGHTS SOCIETIES WEDNESDAY, FEBRUARY 23, 1994 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTELLECTUAL PROPERTY, AND JUDICIAL ADMINISTRATION, Washington, DC. The subcommittee met, pursuant to notice, at 10 a.m., in room 2237, Rayburn House Office Building, Hon. William J. Hughes (chairman of the subcommittee) presiding. Present: Representatives William J. Hughes, Don Edwards, Howard L. Berman, Jack Reed, Carlos J. Moorhead, Howard Coble, F. James Sensenbrenner, Jr., and Steven Schiff. Also present: Hayden Gregory, counsel, William Patry, assistant counsel; Veronica Eligan, secretary; and Joseph Wolfe, minority counsel. OPENING STATEMENT OF CHAIRMAN HUGHES Mr. HUGHES. This oversight hearing before the House Committee on the Judiciary, Subcommittee on Intellectual Property and Judicial Administration will come to order. Good morning, and welcome to this morning's hearing. The Chair has received a request to cover this hearing either in whole or in part by television broadcast, radio broadcast, still photography or by other similar methods. In accordance with committee rule 5(a) permission will be granted unless there is an objection. Is there an objection? [No response.] Mr. HUGHES. Hearing none, permission is granted. This morning the subcommittee will begin 2 days of oversight hearings on music licensing practices of the performing rights societies, ASCAP, BMI, and SESAC. Tomorrow's hearing, also will begin at 10 a.m., and will be held in room 2226. It has been 16 years since the last general revision of the Copyright Act became effective. There have been quite a number of changes in that period, both in the music industry and in the way music is used. The advent of digital delivery systems such as digital audio cable promises even more dramatic changes in the very near future. These very developments alone justify oversight hearings into the licensing of music and whether the copyright law has kept pace. There are other reasons, however. Section 110(5) of the Copyright Act, sometimes called the small business exemption, has been (1) the subject of more litigation than any other limitation on a copyright owner's rights. I imagine the performing rights societies, who are involved in every one of those cases, would agree that no consistent interpretation of section 110(5) has evolved. After 16 years, that is not very encouraging. Part, perhaps most, of the fault for this lack of clarity lies at Congress' feet. There are a number of problems in section 110(5) which we will explore during the hearings. It may be that as a result of the testimony we will consider amendments to section 110(5) or relief similar to that proposed in H.R. 3288 introduced by our colleagues, Mr. Thomas and Mr. Pastor, or it may be that a more modest assertion of rights may be called for. I do want to make it clear, though, that I believe there would appear to be problems with some of the practices that are the subject of these hearings. The lack of clarity in section 110(5) and the nature of enforcement of copyright rights-pay up or we'll sue you-has led to claims that some licenses are inconsistent or questionable. We will hear a lot of testimony about the size of television sets, and licenses being required for high school choirs singing Christmas carols at malls, or music on hold, and even at funeral homes. The continued utility of the section 110(5) exemption will be questioned. Does it adequately balance the rights of copyright owners to compensation for harm to their market against the reasonable practices of food and drink establishments of merely turning on a radio or television set for the incidental pleasure of their guests? Issues will also be raised considering compliance with consent decrees, such as whether a meaningful per-program license is being offered, and whether users are timely provided a list of the society's repertoire in order to make an intelligent decision about whether or how to use particular music. We will hear testimony from one of the societies, SESAC, about an innovative pilot program to track the actual use of music. It promises to be a very interesting hearing, and hopefully a very useful and productive one. I look forward to the testimony of the various witnesses. I know that the acting ranking Republican will be along, and we will reserve the right for him to make or submit an opening statement. The gentleman from Rhode Island. Mr. REED. Thank you, Mr. Chairman. I want to thank you for holding this important hearing on music licensing, and I want to particularly welcome one of the witnesses we will be hearing from today, and that is John Deion who is not only my constituent, but my neighbor from Cranston, RI. Welcome, John, and we will have a chance later to hear your testimony. H.R. 3288, which we touch on today, is an attempt to eliminate some of the ambiguity in the current exemption for public performances of copyrighted works. To the extent that this legislation will clarify and eliminate the arbitrary effects of the exemption, I believe that this will be a good way to ease the strain on small businesses while continuing to protect the rights of composers. Once again, I am glad to be here, and I look forward to hearing and learning from the testimony of the witnesses. Thank you, Mr. Chairman, for your efforts today in this hearing. Mr. HUGHES. Does the gentleman, the acting ranking Republican, have a statement to submit for the record? Mr. COBLE. No statement, Mr. Chairman. Mr. HUGHES. The gentleman from Wisconsin. Mr. SENSENBRENNER. No statement, Mr. Chairman. Thank you. Mr. HUGHES. We begin these hearings with testimony by our colleagues, Craig Thomas, Representative at Large for the State of Wyoming and Ed Pastor who represents the Second District of Arizona. They are the sponsors of H.R. 3288, the Public Accommodations Exception Act of 1993. I want to welcome you to the subcommittee's hearing today, Craig and Ed. We have your statements, which, without objection, will be made part of the record in full. You may proceed as you see fit. Have you decided who would like to go first? Mr. THOMAS. Ed has a markup, so I think he is going to go first. STATEMENT OF HON. ED PASTOR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA Mr. PASTOR. Thank you very much. Good morning. Mr. Chairman and members of the subcommittee, in the last session of Congress, I joined my colleague, Representative Craig Thomas, to be the original cosponsor of H.R. 3288, the Public Accommodations Acceptance Act. I urge the subcommittee to favorably report H.R. 3288 in this session of Congress. I believe it is a much needed change to our copyright laws especially as they relate to a provision passed by Congress in 1976. Representatives of the retail hospitality in my State of Arizona and others around the country have discussed this issue with me. I believe it is time for Congress to amend the Copyright Act of 1976 to provide for a total exemption from licensing fees paid to performing rights societies for the radio and television equipment used in bars, restaurants, and other commercial establishments where food and drink are served provided-and this is the most important item in the bill, Mr. Chairman-the performance of this music is incidental to the main purpose of the establishment, and no direct charge is made to see or hear its transmission. I have just read to you, Mr. Chairman, the language of H.R. 3288, which is very narrowly focused and defines the parameters that the licensing organization must follow in their interpretations of the copyright law regarding the size of television screens and the types of equipment that is commonly used in private homes. There also appears to be, Mr. Chairman, a need to address this homestyle exemption in the copyright law in light of recent Federal cases in which the court has urged Congress to clarify the language in the statute. I refer specifically to the case of Edison Brothers Stores v. Broadcast Music, Inc. In this case, Mr. Chairman, BMI sued two national retail chains. over alleged copyright infringements related to the playing of radio music in their stores, and the Federal court held that these stores do not violate the Federal copyright law by not paying royalties. A copy of this decision is attached to my statement. Mr. Chairman, I urge the subcommittee to pass H.R. 3288 and seek its inclusion in the copyright law so that further confusion within the hospitality industry will be avoided. Thank you, Mr. Chairman. Mr. HUGHES. Thank you, Ed. [The prepared statement of Mr. Pastor follows:] PREPARED STATEMENT OF HON. ED PASTOR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA Mr. Chairman and members of the subcommittee, in the last session of Congress, I joined with my colleague, Rep. Craig Thomas (R-WY), to be the original co-sponsor of H.R. 3288, the Public Accommodations Exceptions Act. I urge the subcommittee to favorably report H.R. 3288 in this session of Congress. I believe it is a much needed change to our copyright laws, especially as they relate to a provision passed by Congress in 1976. Representatives of the retail hospitality establishments in my state of Arizona, and others ar:und the country, have discussed this issue with me. I believe it is time for Congress to amend the Copyright Act of 1976 to provide for a total exemption from licensing fees paid to the performing rights societies for the radio and television equipment used in bars, restaurants and other commercial establishments where food and drink are served, provided and, this is most important, Mr. Chairman, the performance of this music is incidental to the main purpose of the establishment and no direct charge is made to see or hear its transmission. I have just read to you, Mr. Chairman, the language of H.R. 3288, which is very narrowly focused and defines the parameters that the licensing organizations must |