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Date: 1998/10/08
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[[Page H9953]]

     Communities to investigate the consistency of the ``home 
     style exception'' with the Berne Convention. We believe that 
     this request is groundless. We believe that the courts' 
     ability to apply the ``home style exception'' on a case-by-
     case basis is appropriate and that legislating a specific 
     size exemption would be problematic. If there are to be 
     further limitations on the public performance right, such 
     limitations should be the subject of private agreements and 
     not set in legislation.
       We share your concern that, if it is determined that there 
     must be specific guidance in the copyright law, an exception 
     tailored to the kind of equipment used might be more 
     appropriate, but even in this case, we are concerned that it 
     could lead to substantial erosion of the public performance 
     right, and could lead to the erosion of other rights. As we 
     continue to urge other countries to improve their 
     intellectual property protection, we should not be weakening 
     our own laws by the imposition of additional limitations on 
     the rights of copyright owners. As we noted in our earlier 
     testimony, we believe that private negotiations to exempt 
     certain performances or size of establishments are the 
     appropriate solution, consistent with our treaty obligations.
                                                 Bruce A. Lehmann,
      Assistant Secretary of Commerce and Commissioner of Patents 
     and Trademarks.

                                   The Register of Copyrights,

                                   Washington, DC, Sept. 28, 1994.
     Hon. William J. Hughes,
     Chairman, House Subcommittee on Intellectual Property and 
         Judicial Administration, Washington, DC.
       Dear Chairman Hughes: I would like to comment on H.R. 4936, 
     the ``Fairness in Musical Licensing Act of 1994,'' which was 
     introduced on August 10, 1994. I have a number of concerns 
     that I would like to share with you.

                      amendment to section 110(5)

       My first concern is with the proposed amendments to 17 USC 
     Sec. 110(5); that section represents a narrowly crafted 
     exemption to the copyright owner's exclusive right of public 
     performance under section 106(4). I believe that H.R. 4936 
     would make major changes and would violate our treaty 
       At the time section 110(5) was enacted into law the United 
     States was not a member of the Berne Convention. The United 
     States became a signatory to the Berne Convention on March 1, 
     1989. In joining the Berne Convention the United States 
     reviewed its copyright law to make sure that it was 
     consistent with the requirements of Berne. For the most part 
     deficiencies in our law were corrected in the Berne 
     Convention Implementation Act of 1988; P.L. 100-568, 102 
     Stat. 2853 (1988). One of the sections reviewed was section 
     110(5). An Ad Hoc Working Group on U.S. Adherence to the 
     Berne Convention noted that section 110(5) was an extremely 
     narrow exemption to the public performance right and that the 
     case law interpreting that section had not broadened the 
     exemption beyond Congress' intent. The Working Group noted 
     that the exemption did not extend to the use of loudspeakers 
     or any sort of speaker arrangement which was the 
     characteristics of a commercial sound system and therefore 
     found section 110(5) compatible with the provisions of the 
       Let me quickly review part of the legislative history of 
     section 110(5). The 1965 Supplementary Report of the Register 
     on the General Revision of the Copyright Law stated:
       ``The intention behind this exception is to make clear that 
     it is not an infringement of copyright merely to turn on, in 
     a public place, an ordinary radio or television receiving 
     apparatus of a type commonly sold to members of the public 
     for private use. This exception would apply for the most part 
     to the incidental entertainment of small public audiences 
     (patrons in a bar, customers getting a shoeshine, patients 
     waiting in a doctor's office, etc.). It is not intended to 
     exempt larger establishments, such as supermarkets, bus 
     stations, factories, etc., in which broadcasts are not merely 
     received in the usual manner of a private reception, but are 
     transmitted to substantial audiences by means of a receiving 
     system connected with a number of loudspeakers spread over a 
     wide area. The exemption would also not apply in any case 
     where the public is charged directly to see or hear the 
     broadcast.'' Id. at 44.
       The legislative history shows that the rationale for the 
     subsection was that the secondary use of the transmission by 
     turning on an ordinary receiver in public is so remote and 
     minimal that no further liability should be imposed.
       During the revision process the Supreme Court decided 
     Twentieth Century Music Corp. v. Aiken, 422 U.S. 151 (1975) 
     which, though addressing the issue of what constituted a 
     performance under the 1909 law, raised questions about the 
     proper interpretation of section 110(5). The Senate, House 
     and Conference Committee Reports all written after Aiken 
     indicate how that case would be decided under the 1976 
     Copyright Act. The House Report states that Aiken represented 
     the outer limit of the exemption; (Aiken operated a small 
     fast-food restaurant which had a radio with four ordinary 
     speakers in the ceiling.) That report states that the line 
     should be drawn here. It goes on to say ``the clause 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.'' H. 
     Rep. No. 1476, 94th Cong., 2d Sess. 87 (1976).
       The House Report also suggests some of the factors to 
     consider in particular cases--the size, physical arrangement, 
     and noise level of areas within the establishment where the 
     transmissions are made audible or visible. The Conference 
     Committee Report states that the establishment involved is 
     ``of sufficient size to justify, as a practical matter, a 
     subscription to a commercial background music service.'' H.R. 
     Conf. Rept. No. 1733, 94th Cong., 2d Sess. 75 (1976).''
       It is true that there has been litigation on the scope of 
     section 110(5) exemption; some courts have relied on the 
     legislative history while others have refused to go beyond 
     the plain language of the statute.
       At the time that the United States joined the Berne 
     Convention courts had consistently held that the Sec. 110(5) 
     exemption was not available to businesses financially capable 
     of paying reasonable licensing fees for the use of music. 
     However, since that time two decisions have significantly 
     expanded scope of the exemption. Broadcast Music, Inc. v. 
     Claire's Boutiques, 949 F.2d 1482 (7th Cir. 1991) and Edison 
     Brothers Stores, Inc. v. Broadcast Music, Inc., 954 F.2d 1419 
     (8th Cir. 1992). It can be argued that the holding in these 
     cases violate the spirit, if not the letter, of the Berne 
       My concern is that the proposed amendment to section 110(5) 
     would do further violence to our Berne Convention 
       Berne allows only narrow exemptions to the author's 
     exclusive right to authorize public performance. Thus, only 
     in rare instances may third parties use a broadcast without a 
     license and without remuneration to the author. Article 11 
     bis (1) (iii) establishes the exclusive right of the author 
     to authorize the ``public communication by loudspeaker or any 
     other analogous instrument transmitting by signs, sounds, or 
     images, the broadcast of the work.'' The World Intellectual 
     Property Organization Guide to the Berne Convention (Paris 
     Act 1971) (1978) states:
       ``Finally, the third case dealt with in this paragraph is 
     that in which the work which has been broadcast is publicly 
     communicated e.g., by loudspeaker, or otherwise, to the 
     public. The case is becoming more common. In places where 
     people gather (cafes, restaurants, tea-rooms, hotels, large 
     shops, trains, aircraft, etc.) the practice is growing of 
     providing broadcast programs . . . The question is whether 
     the license given by the author to the broadcasting station 
     covers, in addition, all the use made of the broadcast which 
     may or may not be for commercial ends.'' Id. notes 11 and 12 
     at 68. The Convention's answer is no. Id. note 12.
       In 1988 Congress decided to adhere to the Berne Convention 
     to increase protection for United States' interests in the 
     international copyright arena. The House Report on the 
     implementing legislation states:
       ``. . . the relationship of Berne adherence to promotion of 
     U.S. trade is clear. American popular culture and information 
     products have become precious export commodities of immense 
     economic value. That value is badly eroded by low 
     international copyright standards. Berne standards are both 
     high, reasonable and widely accepted internationally. Lending 
     our prestige and power to the international credibility of 
     those standards will promote development of acceptable 
     copyright regimes in bilateral and multilateral contexts.'' 
     H.R. Rep. No. 609, 100th Cong., 2d Sess. 19-20 (1988).
       To expand the section 110(5) exemption would send the wrong 
     signal. Moreover, I am not aware of any new or unusual 
     difficulties with respect to the licensing of music in 
     commercial establishments. I urge you to reconsider this 
       With respect to the particular language in the proposed 
     amendment to section 110(5), let me raise some additional 
     questions. The proposed language contains no limitation on 
     the type of equipment, and it could permit businesses to use 
     sophisticated equipment with no limitation on the number of 
     speakers or the size of a television screen.
       The Copyright Office also wonders about the interpretation 
     of ``indirect charge.'' There is no indication on how this is 
     to be interpreted. Entertainment and background music is 
     frequently part of the overhead cost of running an 
     establishment. Would overhead costs built into the price of 
     food, for example, make this exception unavailable?

                         choral group exemption

       This proposal exemption would eliminate liability for 
     public performance of a ``nondramatic musical work by a 
     choral group of a nonprofit educational institution choral 
     group, unless a direct or indirect charge is made to hear the 
     performance.'' I understand that this change was suggested in 
     response to complaints that performing rights organizations 
     were attempting to require school groups to pay license fees 
     for performing seasonal musical compositions.
       The Copyright Act of 1976 already covers most situations in 
     which a choral group connected with a non-profit institution 
     may be permitted to perform works freely. Section 110(4) 
     contains a nonprofit exemption for performance of nondramatic 
     literary and musical works if the performance is ``without 
     any purpose of direct or indirect commercial advantage and 
     without payment of any fee or other compensation for the 
     performance to any of its performers, promoters, organizers . 
     . .'' 17 U.S.C. Sec. 110(4). If there is a charge, the 
     exemption is still available if the net

[[Page H9954]]

     proceeds are used exclusively for educational, charitable or 
     religious purposes. Although a copyright owner may prohibit 
     such a performance by serving the performing organization 
     with a signed written notice, this is rarely done. Thus, it 
     would seem that virtually all performances by such choral 
     groups are already covered either by existing licenses or 
     existing exemptions. I urge you to reconsider the 
     necessity for a further exemption.

                      ARBITRATION OF RATE DISPUTES

       The proposed legislation allows a defendant in a copyright 
     infringement suit involving a licensed nondramatic musical 
     work to admit liability but contest the amount being charged 
     for the license. Either the defendant or the plaintiff in the 
     suit would be able to request arbitration of the licensing 
     fee under 28 U.S.C. 652(e).
       This section would reconfigure the dispute resolution 
     process between the performing rights societies and their 
     licensees. Currently, ASCAP rates may be altered by the 
     federal district court of the Southern District of New York, 
     although this is far from a daily practice. Neither BMI nor 
     SESAC has such a mechanism; disputes about their rates must 
     be solved by means of negotiation. However, BMI has asked the 
     United States Department of Justice for permission to amend 
     its consent decree to provide for a rate court similar to 
     that now in place for ASCAP. The Justice Department has 
     agreed, and opened a public comment period on this matter. 
     BMI would like to designate the Southern District of New York 
     as its rate court. When the comment period closes, that court 
     may agree to BMI's requested changes, or may disagree and 
     suggest an alternative. We feel a trend may be developing 
     that would provide more efficient administration of rate 
     disputes and that amendment at this time is premature.
       Furthermore, H.R. 4936 would allow any party who disagrees 
     with the licensing organization to demand arbitration 
     proceedings. This proposal may be a more cost effective 
     system for an individual defendant who admits liability, but 
     it could create a tremendous burden on the licensing 
     organizations to address each complaint individually. Even 
     arbitration proceedings are time-consuming and expensive, and 
     at the end of the day, may not result in an arrangement that 
     is any fairer to copyright owners or users than a negotiated 
     licensing agreement would have been. Such a result would make 
     it difficult for representatives of performers to set prices 
     for use consistently, as they are required to do now.
       I am also troubled by the proposed conforming amendment to 
     Title 28 of the United States Code concerning civil actions 
     for copyright infringement. The proposed amendment says that 
     upon a request by either party for arbitration, as set out in 
     section 4 of H.R. 4936, a district court may refer the 
     dispute with respect to that defendant to arbitration. It 
     also says that ``[e]ach district court shall establish 
     procedures by local rule authorizing the use of arbitration 
     under this subsection.''
       Should each district court be charged with creating a set 
     of rules and procedures regarding arbitration for public 
     performance of nondramatic musical works? Since courts have 
     extremely busy schedules, it does not appear to be judicially 
     efficient to impose new duties on all district courts. 
     Moreover, permitting each court to set its own rules would 
     likely result in an uneven, patchwork effect that is 
     undesirable as well as unpredictable. In addition, the 
     Southern District Court of New York and the legal 
     representatives of the private parties have developed a 
     certain expertise in music licensing matters that other 
     courts would take time to gain.

                          ACCESS TO REPERTOIRE

       This proposed section mandates free access to critical 
     information about copyrighted works by those who wish to 
     license use of the works from performing rights 
     organizations. We think it is unwise to mandate provision of 
     this information at this time. Moreover, address and 
     telephone information about authors who no longer are 
     copyright owners seems unwarranted.
       ASCAP is now providing information about its activities and 
     its membership via CompuServe's Entertainment Drive. In 
     addition, BMI recently launched its accessible database 
     containing information that more than satisfies the needs 
     evidenced by H.R. 4936's Sec. 5. The Library of Congress and 
     the Copyright Office are working with the Corporation for 
     National Research Initiative to develop an electronic 
     copyright management system; a key feature of this system 
     will make certain basic information about copyright owners 
     available to the public for licensing purposes.
       In conclusion, I urge you to reconsider this legislation. 
     Many of the problems H.R. 4936 is attempting to resolve are 
     currently being addressed elsewhere; thus, the proposed 
     legislation seems premature. In at least one case, the new 
     exemption for choral groups, it is difficult to see where the 
     problem is, and finally, the proposed modification to 
     Sec. 110(5) seems unwise.
                                                  Marybeth Peters,
                                           Register of Copyrights.
  Mr. SENSENBRENNER. Madam Speaker, I have no further requests for 
time, and I yield back the balance of my time.
  The SPEAKER pro tempore (Mrs. Wilson). The question is on the motion 
offered by the gentleman from Wisconsin (Mr. Sensenbrenner) that the 
House suspend the rules and pass the Senate bill, S. 505.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the Senate bill was passed.
  A motion to reconsider was laid on the table.


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