[Congressional Record Volume 142, Number 36 (Friday, March 15, 1996)]
[Senate]
[Pages S2192-S2195]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH:
  S. 1619. A bill to amend the provisions of title 17, United States 
Code, to provide for an exemption of copyright infringement for the 
performance of nondramatic musical works in small commercial 
establishments, and for other purposes; to the Committee on the 
Judiciary.


                 THE MUSIC LICENSING REFORM ACT OF 1996

  Mr. HATCH. Mr. President, today I am introducing the Music Licensing 
Reform Act of 1996: First, to clarify the ``home-style'' exemption 
provided by the Copyright Act for the public performance of nondramatic 
musical works; second, to regularize the commercial relations between 
the performing rights societies, which license such public 
performances, and their licensees, who are the proprietors of eating, 
drinking, and retail establishments, and third, to improve in general 
the oversight of the licensing practices of the two largest performing 
rights societies, the American Society of Composers, Authors, and 
Publishers [ASCAP] and Broadcast Music, Inc. [BMI].
  Music licensing has been a matter of discussion for many years. There 
are strongly held views among all of those involved. I am committed to 
trying to resolve this matter, and this bill is a good-faith effort to 
do so. It is my hope that it can serve as a basis for further 
discussion.
  Commercial establishments, such as restaurants, bars, and retail 
stores, make money off of the public performance of musical works, 
whether it be from live performances, from sound recordings, or from 
radio and television. Commercial establishments play music or turn on 
radio and TV in order to make the eating, drinking, or shopping 
experience more pleasant. The ubiquity of these kinds of entertainment 
itself proves that businesses believe that it increases patronage.
  Recognizing that commercial establishments make money off of the 
creative output of songwriters, the Copyright Act of 1976 provided 
songwriters with the exclusive right of public performance, so that 
creators might share in the added value that their product creates. In 
doing so, the Copyright Act carries out the philosophy of the copyright 
clause of the Constitution, which sees economic reward as an important 
incentive to artistic creation.
  Mr. President, the Constitution was right. In 1993, the core 
copyright industries contributed approximately $238.6 billion to the 
U.S. economy, or 3.74 percent of the total GDP. These same core 
copyright industries contribute more to the U.S. economy and employ 
more people than any single manufacturing sector, and the growth rate 
of these industries continues to outpace the growth of the economy as a 
whole by a 2-to-1 ratio.
  With domestic sales topping $10 billion each year and annual foreign 
sales totaling over $12 billion, the music industry by itself accounts 
for a huge percentage of the American economy, and its popularity 
abroad provides a healthy component of the U.S. balance of trade. It is 
really not an exaggeration to say that American music dominates the 
globe. In fact, it is estimated that U.S. recorded music accounts for 
some 60 percent of the world market. Indeed, the United States is 
second to none in musical creativity. The prosperity of the music 
industry and the creative output of American composers and songwriters 
must be encouraged.
  At the same time, Mr. President, the Copyright Act recognizes that 
obtaining and paying for a license to play music should not be overly 
burdensome. Some of the burden of obtaining such a license is lessened 
by the performing rights societies, such as ASCAP, BMI, and SESAC. It 
would be intolerable for a restaurant, bar or store to monitor all the 
music that it performs and then search out the individual songwriter, 
composer, or publisher who owns the copyright in the music. Instead, a 
proprietor can go to the performing rights societies and purchase a 
blanket license and not worry about what music it plays, since ASCAP, 
BMI, and SESAC account for virtually all of the music that is normally 
played in the United States.


             exemption for small commercial establishments

  The average cost to restaurants and retail establishments of a 
blanket license from ASCAP for all public performances, whether by 
radio and TV or live, is $575 per year. BMI charges on the average less 
than $300 per year for eating and drinking establishments for public 
performance by radio and TV, and its retail establishment license for 
these performances ranges from $60 to $480 per year. These are not 
large sums of money, but they still could be burdensome for some small 
commercial establishments. So the Copyright Act also provides for an 
exemption, freeing some proprietors from any obligation to compensate 
songwriters for the use of their music. This exemption is found in 
section 110(5) of the Copyright Act and it effectively applies to 
establishments that turn on radio and TV for their customers' 
enjoyment. It is known as the ``homestyle'' exemption, because it 
exempts ``the public reception of the transmission on a single 
receiving apparatus of a kind commonly used in private homes.'' 
Congress felt--and rightly so--that small commercial establishments 
that turned on ordinary radio and TV sets would have a de minimis 
impact on the incentive to create that music licensing fees encourage.
  Unfortunately, a certain ambiguity was introduced into the exemption 
by the language of the House and conference reports of the Copyright 
Act of 1976, and this ambiguity has been exacerbated by the courts. 
Although the language of 110(5) only mentions sophistication of 
equipment, the courts

[[Page S2193]]

have also considered such factors as the size of the establishment, and 
ability to pay for a license.
  Mr. President, the time has come to clarify the exemption regarding 
nondramatic musical works so that proprietors and performing rights 
societies can determine more precisely whether an establishment is 
exempt or not without having to engage in costly litigation.
  My bill does this by exempting ``small commercial establishment[s].'' 
This change simply recognizes the existing state of the law. In effect, 
the courts have looked at a host of relevant factors in order to decide 
whether an establishment should have the benefit of the exemption. This 
new bill directs the Register of Copyrights to define ``small 
commercial establishment'' by regulation, and provides guidance by 
listing the factors that the courts have considered, as well as other 
factors that are relevant to the determination.
  The register is not confined to these factors, however. In our 
rapidly changing technological environment, the expertise of the 
Copyright Office should not be hampered. The sound and video equipment 
that are common today may be obsolete in the not too distant future. 
The Copyright Office, unlike Congress, will be able to respond to these 
changes in the years ahead more quickly, with greater expertise, and 
with far less cost by engaging in other rule-making proceedings. If 
Congress legislates specific equipment and area requirements, as some 
have suggested, it will have to revisit this issue time and time again.
  Changing the language of 110(5) from ``homestyle'' equipment to the 
more general ``small commercial establishment'' may result in slightly 
expanding the exemption. The Copyright Office, therefore, must take 
care that it does not unduly upset the balance between the creative 
incentive on the one hand and concern for the burden on small 
businesses on the other.
  Furthermore, the Copyright Office must bear in mind our international 
obligations, especially the Berne Convention. We cannot very well 
insist that our musical works be protected outside the United States if 
we cut too deeply into the protection that musical works enjoy within 
our borders.
  Both the Register of Copyrights and the Commissioner of Patents and 
Trademarks have written to me that another bill dealing with the 
exemption, S. 1137, introduced by Senators Thomas and Brown, would 
violate the U.S. obligations under the Berne Convention. The bill that 
I am introducing today prevents this from happening by specifically 
prohibiting the Copyright Office from expanding the scope of the 
exemption beyond that permitted under the international treaty 
obligations of the United States.


    commercial relations between proprietors and performing rights 
                               societies

  Mr. President, this legislation addresses two areas of concern in the 
commercial relations between the proprietors of eating, drinking, and 
retail establishments who must acquire a license publicly to perform 
musical works and the performing rights societies who grant such 
licenses as agents for composers, songwriters, and publishers.
  First, in response to complaints from proprietors that the performing 
rights societies do not readily disclose information about their 
licensing fees and in response to complaints from the performing rights 
societies that proprietors do not readily disclose factual information 
about their establishments that is essential in charging them the 
appropriate fee, this bill directs the Register of Copyrights to 
promulgate regulations to establish a code of conduct, applicable to 
both sides, to govern their licensing negotiations and practices.
  The Copyright Office is in a much better position than Congress is to 
study the business practices that prevail in order to identify 
improvements that would make these practices fairer and more efficient. 
The Copyright Office is also in a better position to modify these 
regulations as times change.
  Second, my legislation directs the Copyright Office to promulgate 
regulations to ensure that a performing rights society provides 
reasonable access to its repertoire of songs and other musical 
compositions. The principle behind this part of the bill is easy to 
understand: If a person is going to be asked to pay a performing rights 
society in order to perform a work publicly, the payor should be able 
easily to verify whether the work is included in the society's 
repertoire. A buyer, after all, doesn't want to pay for goods that the 
seller has no right to sell.
  Complications arise, however, in determining what is reasonable 
access. Both ASCAP and BMI, for example, have already made their 
repertoires available on line. Is this sufficient to meet the needs of 
their licensees or is some more conventional means also called for? 
Since the copyright owners of musical compositions can cancel their 
agency contracts with the performing rights societies, how up-to-date 
must the repertoire be? What happens when a song has two authors, each 
of which is represented by a different society?

  Finally, what information needs to be supplied? Since almost all 
licenses are blanket licenses, giving the licensee the right to play 
all music in a society's repertoire, how important is detailed 
information on individual compositions? (Indeed, most persons engaged 
in the business of publicly performing copyrighted music routinely buy 
blanket licenses from ASCAP, BMI, and SESAC, thereby assuring that 
virtually all copyrighted music is covered.) It would be unwise to 
burden the performing rights societies with expensive obligations to 
provide information that is really not necessary.
  Clearly, Mr. President, this problem needs the investigative tools 
and fine-tuning that Congress is ill-equipped to provide. That is why 
the Register of Copyrights needs to examine the problem and provide 
clear and up-to-date regulations, after input from the relevant 
parties.


     general oversight of the licensing practices of ascap and bmi

  As I have already pointed out, Mr. President, a blanket license 
purchased from ASCAP and BMI will give the licensee the right publicly 
to perform virtually all the most popular music in the United States. 
For proprietors of eating, drinking, and retail establishments who play 
radio and TV for their customers, this is the easiest and most cost-
effective way to go. This logic also applies to radio and TV 
broadcasters, who publicly perform countless musical works during their 
program days.
  There are, however, other businesses for whom the blanket license is 
not as attractive. Religious broadcasters, for example, may play music 
for a few, select programs, while the rest of their programming is 
devoted to talk. For these and other broadcasters similarly situated, a 
per program license seems more attractive.
  Now, a per program license is available from ASCAP and BMI; in fact, 
the antitrust consent decree under which ASCAP and BMI operate requires 
that they offer a per program license. The religious broadcasters, 
however, are dissatisfied with the price of the license, which, in some 
instances, costs more than a blanket license. ASCAP argues, however, 
that the administrative costs of the per program license are higher 
because it has to monitor the broadcasters to make sure that its music 
is used only for licensed programs.
  The religious broadcasters would have Congress determine a pricing 
formula for the per program license and put it in the Copyright Act, as 
currently provided in S. 1137. But arriving at a formula requires a 
study of the pricing mechanisms and an inquiry into all the factors 
that go into them. Again, this is something that Congress is ill-
equipped to do. Moreover, it would simply spark demands by other music 
licensees to do the same for them.
  Fortunately, a forum for dealing with this issue already exists in 
the Rate Court of the U.S. District Court for the Southern District of 
New York. The Rate Court was set up pursuant to an antitrust consent 
decree that both ASCAP and BMI are party to, stemming from law suits 
against these performing rights societies that were brought many years 
ago.
  Indeed, the religious broadcasters are currently arguing the per 
program license pricing issue before the Rate Court in a suit brought 
against ASCAP. A decision is expected this year. A previous case 
involving ASCAP and the TV broadcasters over the same issue resulted in 
a decision favorable to the broadcasters. The religious broadcasters, 
therefore, have a reasonable

[[Page S2194]]

expectation that their complaint will be decided in their favor and in 
the near future.
  Mr. President, I question the wisdom of having Congress establish a 
pricing formula for per program licenses for radio broadcasters.
  What Congress should be doing is looking at the overall structure and 
efficient functioning of the consent decree to make sure that it is 
working and that it is accessible to those, such as the religious 
broadcasters, who do not have the resources to engage in expensive, 
protracted litigation. This is precisely what the bill that I am 
introducing today proposes to do. It directs the Copyright Office to 
study the administration of the consent decree so that adjudication 
under the consent decree may be less time-consuming and more cost-
effective, especially for parties with fewer resources. It may very 
well be, for example, that a system of local or regional arbitration 
may be more efficient and not too burdensome for the performing rights 
societies. The Judiciary Committee will consider very seriously the 
findings and recommendations of the Copyright Office.
  Although I disagree with S. 1137, I want to thank my distinguished 
colleague from Colorado, Senator Hank Brown, for his indefatigable 
attention to music licensing issues. Senator Brown spent several hours 
trying to work out a compromise that would be acceptable to the 
proprietors and religious broadcasters on the one hand and to the 
performing rights societies and the hundreds of composers and 
songwriters that they represent on the other. I also want to thank my 
distinguished colleague from South Carolina, Senator Strom Thurmond, 
who brought the concerns of the religious broadcasters to my attention.
  I urge them and all others interested in this issue to support the 
compromise legislation that I have introduced today, the Music 
Licensing Reform Act of 1996.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1619

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Music Licensing Reform Act 
     of 1996''.

     SEC. 2. EXEMPTION OF COPYRIGHT INFRINGEMENT FOR PERFORMANCE 
                   OF NONDRAMATIC MUSICAL WORKS IN SMALL 
                   COMMERCIAL ESTABLISHMENTS.

       (a) In General.--Section 110 of title 17, United States 
     Code, is amended--
       (1) in the matter preceding paragraph (1) by inserting 
     ``(a)'' before ``Notwithstanding'';
       (2) by amending paragraph (5) to read as follows:
       ``(5)(A) communication of a transmission embodying a 
     performance or display of a work (except a nondramatic 
     musical work) by the public reception of the transmission on 
     a single receiving apparatus of a kind commonly used in 
     private homes, unless--
       ``(i) a direct charge is made to see or hear the 
     transmission; or
       ``(ii) the transmission thus received is further 
     transmitted to the public; or
       ``(B) communication of a transmission embodying a 
     performance or display of a nondramatic musical work by the 
     public reception of the transmission on the premises of a 
     small commercial establishment, unless--
       ``(i) a direct charge is made to see or hear the 
     transmission; or
       ``(ii) the transmission thus received is further 
     transmitted to the public;''; and
       (3) by adding at the end thereof the following new 
     subsection:
       ``(b)(1) For purposes of subsection (a)(5)(B), the Register 
     of Copyrights shall define the term `small commercial 
     establishment' by regulation, which shall include specific, 
     verifiable criteria. Such criteria may relate to--
       ``(A) the area of the establishment, including whether the 
     establishment is of sufficient size to justify, as a 
     practical matter, a subscription to a commercial background 
     music service;
       ``(B) the kind, number, and location of equipment used;
       ``(C) the gross revenue of the establishment;
       ``(D) the number of employees; and
       ``(E) other relevant factors.
       ``(2) The definition of small commercial establishment 
     shall not result in an exemption to the right of public 
     performance or to the right of public display the scope of 
     which exceeds that permitted under the international treaty 
     obligations of the United States.''.
       (b) Technical and Conforming Amendments.--Chapter 1 of 
     title 17, United States Code, is amended--
       (1) in section 111(a)(2) by striking out ``section 110'' 
     and inserting in lieu thereof ``section 110(a)'';
       (2) in section 112(d) by striking out ``section 110(8)'' 
     each place such term appears and inserting in each such place 
     ``section 110(a)(8)''; and
       (3) in section 118(d)(3) by striking out ``section 110'' 
     and inserting in lieu thereof ``section 110(a)''.

     SEC. 3. NEGOTIATIONS AND LICENSING BETWEEN PROPRIETORS AND 
                   PERFORMING RIGHTS SOCIETIES.

       (a) In General.--The provisions of title 17, United States 
     Code, are amended by adding after chapter 11 the following 
     new chapter:

   ``CHAPTER 12--NEGOTIATIONS AND LICENSING BETWEEN PROPRIETORS AND 
                      PERFORMING RIGHTS SOCIETIES

``Sec.
``1201. Definitions.
``1202. Code of conduct.
``1203. Access to repertoire.

     ``Sec. 1201. Definitions

       ``For purposes of this chapter, the term--
       ``(1) `performing rights society' means an association, 
     corporation, or other entity that licenses the public 
     performance of nondramatic musical works on behalf of 
     copyright owners of such works, such as the American Society 
     of Composers, Authors and Publishers (ASCAP), Broadcast 
     Music, Inc. (BMI), and SESAC, Inc.; and
       ``(2) `proprietor'--
       ``(A) means the owner of a retail establishment, 
     restaurant, inn, bar, tavern, or any other similar place of 
     business in which--
       ``(i) the public may assemble; and
       ``(ii) nondramatic musical works may be publicly performed; 
     and
       ``(B) shall not include any owner or operator of--
       ``(i) a radio or television station licensed by the Federal 
     Communications Commission;
       ``(ii) a cable system or satellite carrier;
       ``(iii) a cable or satellite carrier service or programmer;
       ``(iv) a commercial subscription music service; or
       ``(v) any other transmission service.

     ``Sec. 1202. Code of conduct

       ``(a) In General.--The Register of Copyrights shall 
     promulgate regulations to establish a code of conduct for the 
     licensing negotiations and practices between a proprietor and 
     a performing rights society. Such regulations shall include 
     reasonable disclosure requirements for proprietors and 
     performing rights societies and the content and form of 
     licensing agreements.
       ``(b) General Enforcement.--(1) A proprietor or performing 
     rights society may file a civil action in any United States 
     district court of appropriate jurisdiction to enforce the 
     code of conduct established under this section.
       ``(2) For purposes of an action filed under this 
     subsection--
       ``(A) all parties shall be deemed to have exhausted all 
     administrative remedies; and
       ``(B) the court shall conduct a trial de novo without an 
     agency record.
       ``(c) Enforcement in Actions Involving Licensing 
     Agreements.--(1) This subsection applies to any civil action 
     filed under this section to enforce the code of conduct in 
     which a proprietor and a performing rights society have a 
     licensing agreement.
       ``(2) If a proprietor violates a provision of the code of 
     conduct, the court shall assess a civil fine against the 
     proprietor, payable to the performing rights society, equal 
     to the cost of the applicable annual license fee.
       ``(3) If a performing rights society violates a provision 
     of the code of conduct, the court shall order the society to 
     grant a license to the proprietor for the nondramatic public 
     performance of musical works in the repertoire of the society 
     at no fee for a period of 1 year beginning on the date on 
     which judgment is entered.

     ``Sec. 1203. Access to repertoire

       ``(a) In General.--(1) The Register of Copyrights shall 
     promulgate regulations to ensure that a performing rights 
     society shall provide reasonable access to its repertoire so 
     that a person engaged in the public performance of a 
     nondramatic musical work may determine with reasonable 
     certainty whether the public performance of a particular work 
     may be licensed by a particular licensor.
       ``(2) Reasonable access to repertoire under this section 
     shall not include access to works rarely publicly performed.
       ``(b) Enforcement.--(1) A proprietor or performing rights 
     society may file a civil action in any United States district 
     court of appropriate jurisdiction to enforce the regulations 
     promulgated under this section.
       ``(2) For purposes of an action filed under this section--
       ``(A) all parties shall be deemed to have exhausted all 
     administrative remedies; and
       ``(B) the court shall conduct a trial de novo without an 
     agency record.
       ``(c) Restrictions on Performing Rights Society Not in 
     Compliance With Regulations.--(1) A performing rights society 
     may not--
       ``(A) file, be a party, or pay the costs of any party in 
     any civil action alleging the infringement of the copyright 
     in a work described under paragraph (2); or
       ``(B) charge a fee under any per programming period license 
     for a work described under paragraph (2).
       ``(2) A work referred to under paragraph (1) is any work in 
     such performing rights society's repertoire that is not 
     identified and documented as required by the regulations 
     promulgated under this section.''.

[[Page S2195]]

       (b) Technical and Conforming Amendment.--The table of 
     chapters for title 17, United States Code, is amended by 
     adding after the item relating to chapter 11 the following:

``12. Negotiations and licensing between proprietors and performing 
    rights societies........................................1201''.....

     SEC. 4. REPORT ON CONSENT DECREE.

       (a) In General.--No later than 1 year after the date of the 
     enactment of this Act, the Register of Copyrights shall 
     submit a report to the Senate Committee on the Judiciary and 
     the House of Representatives Committee on the Judiciary on 
     the administration by the United States District Court for 
     the Southern District of New York of the consent decree of 
     March 14, 1950, in United States v. American Society of 
     Composers, Authors, and Publishers, 1950 Trade Cas. 
     para.62,595 (S.D.N.Y. 1950) and the consent decree of 
     December 29, 1966, in United States v. Broadcast Music, Inc., 
     1966 Trade Cas. para.71,941 (S.D.N.Y. 1966).
       (b) Contents.--The report under this section shall 
     include--
       (1) any recommendation for improvements so that 
     adjudication under the consent decree may be less time-
     consuming and more cost-effective, especially for parties 
     with fewer resources; and
       (2) a determination whether a system of local or regional 
     arbitration should be implemented.

     SEC. 5. STATE COPYRIGHT LICENSING LAWS PREEMPTED.

       Section 301 of title 17, United States Code, is amended by 
     adding at the end the following:
       ``(g)(1) Any law, statute, or regulation of any State or 
     local government which requires a performing rights society 
     to license copyrighted musical compositions to a proprietor 
     in a particular manner not required by this title, or to 
     conduct such society's business in any manner not applicable 
     to all businesses as a general manner, shall be deemed to be 
     preempted by subsection (a) and of no force or effect.
       ``(2) For purposes of this subsection, the terms 
     `proprietor' and `performing rights society' have the same 
     meanings as such terms are defined under section 1201.''.

     SEC. 6. RULE OF CONSTRUCTION.

       Nothing in this Act shall be construed to relieve any 
     performing rights society of any obligation under any consent 
     decree or other court order governing the operation of such 
     society, as such decree or order--
       (1) is in effect on the date of the enactment of this Act;
       (2) may be amended after such date; or
       (3) may be issued or agreed to after such date.

     SEC. 7. EFFECTIVE DATE.

       This Act shall take effect 90 days after the date of the 
     enactment of this Act.
                                 ______