Bolton, Mariah Carey, Lou Reed, Vince Gill, Carole King, Aretha

Franklin and Chet Atkins.

Public Performances under the Copyright Law

Pursuant to the U.S. Copyright Law, if a person desires to publicly perform a copyrighted musical composition, the person must obtain permission from the creator of the musical composition. BMI enters into affiliation agreements with the writers, composers and publishers of musical compositions. These agreements grant to BMI a non-exclusive right of public performance. BMI, in turn, licenses to users of music the right of public performance to the musical compositions contained in its repertoire. As stated above, BMI is operated on a not for profit basis, and all fees received, less administrative expenses and certain reserves, are distributed to its songwriters, composers and publishers.

BMI opposes H.R 3288 as an amendment to the Copyright Act because it would deprive copyright owners of that which Congress long ago determined it was their right to receive. By greatly expanding the situations under which music can be used without compensation to its owners, this bill would make music a commodity that its creators would be compelled by law to donate free of charge to owners of restaurants and like establishments to use for their benefit. To say that such music is "incidental" to the establishment's main purpose is to fail to recognize what Supreme Court Justice Oliver Wendell Holmes stated over 75 years ago: "If music did not pay, it would be given up." Herbert v. The Shanley Company, 242 U.S. 591, 595 (1917).

When a business offers something to its patrons, it is obviously thought to be "good for business". When a radio or television is turned on in a restaurant, it has economic value to the proprietor. The people who own the music emanating from those devices, having created part of that value, should not be forced by statute to contribute their property (musical compositions) when no one else providing value to the business is asked to do the same.

Music is pervasive in the American lifestyle. People use it in a million ways in the home, business, restaurant, TV, Cable television and movies. It is so readily available that people tend to think it's

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free, and they believe they have the right to use music as they please. It's not scrambled like Cable TV network signals (like HBO or MTV). It isn't something like Coca-Cola where the formula is secret. You can buy music in one form and then use it for other purposes. For example, you can buy tapes for use in your home and then play them over and over again in your restaurant SO your customers can better enjoy the restaurant's ambience and thus enjoy their dinner. Buying that record or tape meant that you paid for the right to listen to the musical works in your home, but not the right to perform them in public for your commercial benefit or advantage. That's protected by another right, and it's what we're here to discuss today.

Property rights in an intangible such as music are often difficult to comprehend. Many listeners assume that, because music comes from a radio or television or a record or tape they have purchased, it is theirs to do with as they wish. Although the Copyright Act's grant of exclusive rights dates back decades, BMI and similar organizations spend countless hours educating music users both as to this concept and the statute that affirms it. Even then, unfortunately, too many people do not believe that they must pay for publicly using music, even though they may begrudgingly admit that it probably is someone else's property.

Congress long ago recognized that performing rights to musical compositions were the property of their creators, and it left the enforcement of those rights up to the creators themselves. But unlike an author who may write one book a year, or a playwright who may create two or three plays annually, a prolific composer or songwriter could conceivably create dozens of works that may have numerous performances at any given time.

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When a single music creator's output is viewed in relation to the ease of nationwide public access to those works by simply turning on a radio, buying a record or playing an instrument it is evident why a collective organization such as BMI is necessary to assure that the rights Congress conferred upon the creator are protected to the fullest extent possible. Without an organization such as BMI, a music user would be compelled to seek out every copyright owner whose music the

user is publicly performing to obtain permission for such performances. The availability of a BMI blanket license saves the user time and money in obtaining the necessary rights. Without BMI's efforts, the creations that we can hear with the push of a button would otherwise go uncompensated. If that were to happen, the incentive for a composer to continue at his or her livelihood would disappear, leaving society all the poorer.

Since its inception more than 50 years ago, BMI and its business of music licensing has been periodically examined in various contexts by both Congress and the courts, with a result that has been reaffirmed time and time again, namely, that a performing rights organization is the most effective and practical means to protect the rights to copyrighted music.

The Use of Broadcast Transmissions

Congress examined the entire matter of broadcast transmissions used in public places in its writing of the 1976 Copyright Act. In fact, the Supreme Court had decided a case in 1975 on the subject, and Congress took the opportunity to address the issue specifically in light of the Supreme Court's ruling that, under the 1909 Copyright Act, when the owner of a restaurant played music from a radio it did not constitute a public performance. Twentieth Century Music Corp. V. Aiken, 422 U.S. 151 (1975).

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The restaurant was a small fast-service chicken restaurant known "George Aiken's Chicken," located in downtown Pittsburgh, Pennsylvania. The restaurant consisted of 1,055 square feet of total leased space, with 620 square feet open to the public. The Supreme Court described George Aiken's use of music as follows: "Aiken usually turns on the radio each morning at the start of business. Music, news, entertainment, and commercial advertising broadcast by radio stations are thus heard by Aiken, his employees, and his customers during the hours that the establishment is open for business." Id. at 152.

When Congress enacted the 1976 Copyright Act, it specifically rejected the holding of Aiken that playing music from a radio was not a public performance. The Section 101 definition of "public performance" makes it clear that the playing of

music

in an

establishment which is open to the general public constitutes a public performance, regardless of the source of that music. The House Report accompanying the Act states that the Aiken case "is completely overturned by the present bill and its broad definition of 'perform' in Section 101." H.R. Rep. No. 1476, 94th Cong., 2d Sess., pg. 7, reprinted in 1976 U.S. Code Cong. & Admin. News 5659.

Congress did, however, provide in Section 110 (5) an Aiken-style exemption for small businesses, which exempted them from the obligation to pay licensing fees for the use of music derived from a single inexpensive home-style receiving apparatus. According the Report of the Senate/House Conference Committee, Congress intended the Aiken "fact situation to represent the outer limit of the exemption the line should be drawn at that point." Id. Thus, it was clear that the exemption was intended to be an extremely limited one.

The Congressional intent to limit the exemption to small businesses, such as the one run by George Aiken, is clear. The conference Report states that: "It is the intent of the conferees that a small establishment" be exempt from the obligation to pay royalties, and specifically notes that a business which is of "sufficient size to justify, as a practical matter, a subscription to a commercial background music service" would not be exempt. The House Report refers to "a small commercial establishment" and states that the exemption "would exempt small commercial establishments whose proprietors merely bring onto their premises standard radio or television equipment and turn it on for their customers' enjoyment... Id.

For over 15 years, numerous courts interpreting Section 110(5) relied upon either the House/Senate Conference Report or the House Report, or both, to fashion a body of case law that clearly informed public users of music from radios or televisions of the instances when they were responsible for obtaining permission, and allowed copyright Owners to receive compensation in all but the most limited circumstances, namely when a "mom and pop" business turned on a small radio or television set. Taking their cues from Congress, the courts resisted any attempt to expand this limited exception to the copyright

owner's exclusive rights, since these property rights were not to be donated to others unless Congress clearly intended they be.

Specifically, both the Second Circuit in Sailor Music v. The Gap Stores, Inc., 516 F. Supp. 923 (S.D.N.Y.), aff'd, 668 F.2d 84 (2d Cir., 1981) cert. denied, 456 U.S. 945 (1982), and the Ninth Circuit in Broadcast Music, Inc. v. United States Shoe Corporation, 678 F.2d 816 (9th Cir. 1982), refused to expand the exemption to large chain operations which could clearly afford music license fees. Lower courts addressing the issue followed these decisions and made it clear that a business which is financially able to pay copyright licensing fees should not be exempt from the obligation to pay those fees.

For example, the District Court for the Western District of Texas has held that "it is clearly 'practical' for a chain of restaurants...grossing well over $500,000 annually to subscribe to a commercial background music service," and that [d] efendants' prior subscription to a commercial background music service further establishes the inapplicability of the exemption of defendants' performances of copyrighted musical compositions." Merrill v. Bill Miller's Bar-B-O Enterprises, Inc., 688 F. Supp. 1172, 1176 (W.D. Tex. 1988). The District Court for New Hampshire has held that the Section 110 (5) exemption was not applicable because "defendants' $2.5 million in annual retail sales justifies subscription to a commercial background music system." Merrill v. Country Stores, Inc., 669 F. Supp. 1164, 1170 (D.N.H. 1987).

The District Court for the Middle District of North Carolina has held that any establishment large enough to be a potential customer of a background music service is not covered by the Section 110 (5) small business exemption. Springsteen v. Plaza Roller Dome, Inc., 602 F. Supp. 1113, 1119 (M.D.N.C. 1985).

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The District Court for the Northern District of California denied attempt to invoke the Section 110 (5) exemption because the defendant's stores were "of sufficient size to warrant use of a commercial background music system -- a fact confirmed by defendant's testimony that they employ such a service at two of the [stores]." Lamminations Music v. P&X Markets, Inc., 1985 Copyright L. Dec. (CCH)