Copyright Term Extension and Music Licensing: Analysis of Sonny Bono Copyright Term Extension Act and Fairness in Music Licensing Act, P.L. 105-298

Copyright Term Extension and Music Licensing: Analysis of Sonny Bono Copyright Term Extension Act and Fairness in Music Licensing Act, P.L. 105-298

98-904 A
CRS Report for Congress
Received through the CRS Web
Copyright Term Extension and Music
Licensing: Analysis of Sonny Bono
Copyright Term Extension Act and
Fairness in Music Licensing Act,
P.L. 105-298
October 27, 1998
Dorothy Schrader
Senior Specialist
American Law Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
P.L. 105-298, extends the term of copyright protection by an additional 20 years and makes
two major reforms in music licensing practices. Title I of the Public Law is also known as
the Sonny Bono Copyright Term Extension Act. In addition to term extension, Title I
creates a new termination right during the 20-year added period and grants libraries and
nonprofit educational institutions an exemption to reproduce works that are not
commercially exploited and are not available at a reasonable price during the 20-year added
period. Title II of the Public Law is also known as the Fairness in Music Licensing Act.
This Title expands the exemption from the music performing right for businesses playing
music by turning on radios and televisions in public places, and requires local judicial
review of the licensing rates set by the performing rights societies that license the
performance of nondramatic music. This report explains the provisions of PL 105-298,
reviews key aspects of the legislative history and notes changes from prior law.

Copyright Term Extension and Music Licensing:
Analysis of Sonny Bono Copyright Term Extension
Act and the Fairness in Music Licensing Act
P.L. 105-298
Summary
P.L. 105-298, extends the terms of all subsisting and future copyrights by 20
years and makes two major reforms in music licensing practices. This report analyzes
the amendments made by the new law to the Copyright Act.
Title I, the Sonny Bono Copyright Term Extension Act, extends the copyright
terms for all categories of copyrightable works by an additional 20 years. Title II,
the Fairness in Music Licensing Act, expands the exemption of 17 U.S.C. 110 for the
benefit of businesses that perform music publicly by turning on radio or television
sets in their places of business and makes statutory provision for regional judicial
review of the reasonableness of the rates charged by the music performing rights
societies.
The new copyright term for post-1977 personal works is life of the author plus
70 years. For works made for hire, anonymous and pseudonymous works, the term
is a fixed period of 95 years after publication or 120 years after creation, whichever
is shorter. For pre-1978 works, the term is a fixed period of 95 years from the date
copyright was secured.
In addition to adding 20 years to the copyright term, the Sonny Bono Act 1)
grants a new, limited termination right with respect to the 20-year added period for
certain pre-1978 works; 2) expands the classes of persons eligible to terminate
licensing contracts; and 3) grants libraries and nonprofit educational institutions a
narrow exemption to use copyrighted works during the 20-year added period, if the
works are not commercially exploited in that period and copies are not available at
a reasonable price.
The Music Licensing Act in general exempts food and drinking establishments
of less than 3750 square feet, and other business establishments of less than 2000
square feet, from paying licensing fees for performing music by playing a radio or
television in their place of business. Businesses that exceed the respective 3750 and
square foot limits can still qualify for an exemption by restricting the receiving
equipment as follows: if audio only, no more than 6 speakers and no more than 4
speakers in one room; in the case of audiovisual equipment, no more than 4 pieces
of equipment, of which no more than 1 device is in any one room and no device has
a diagonal screen greater than 55 inches, and the audio portion meets the restrictions
for audio only.
Concerning review of Performing Rights Societies’ licensing fees, the Act adds
a new Section 512 to title 17 U.S.C. giving an individual business proprietor who
operates fewer than 7 non-publicly traded establishments, the right to request regional
judicial review of the fees in lieu of filing for review only in New York, as required
by the former law.

Contents
Sonny Bono Copyright Term Extension Act — Title I . . . . . . . . . . . . . . . . . . . . . 2
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Summary of Sonny Bono Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Copyright term provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Termination provisions of Title I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reproduction by libraries and archives . . . . . . . . . . . . . . . . . . . . . . . . . 6
Division of motion picture royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fairness in Music Licensing Act — Title II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Summary of Music Licensing Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Business exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Regional review of music licensing rate disputes . . . . . . . . . . . . . . . . 11
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Copyright Term Extension and Music Licensing:
Analysis of Sonny Bono Copyright Term
Extension and Fairness in Music Licensing Act,
P.L. 105-298
Duration of copyright is one of the major parameters for establishing the amount
of protection accorded to authors and other owners of copyright. It is also the
principal dividing line between the property rights of such owners and the public
domain — that is, the domain of unprotected works which are available to the public
for unrestricted, uncompensated use. Under the United States Constitution, Art. I,
Sec. 8, Cl. 8, Congress is authorized to grant copyright protection only for “limited
Times.”
P.L. 105-298, extends copyrights by 20 years and broadens the business
exemption for performing music by playing a radio or television at the place of
business.
Title I of the new law, the Sonny Bono Copyright Term Extension Act, amends
the Copyright Act1 by extending the copyright terms for all categories of
copyrightable works by an additional 20 years. The added 20-year period applies
retroactively to all works in which copyright subsists.
Title II of the new law, the Fairness in Music Licensing Act, makes two reforms
relating to the licensing of music for public performance. One amendment of 17
U.S.C. 110 expands the exemptions available to businesses that perform music
publicly by turning on radio and television sets in their places of business. The
second amendment makes statutory provision for regional judicial review of the
reasonableness of the rates charged by the music performing rights societies (“PRS”)
that license the public performance of nondramatic music on behalf of music
copyright owners.
This report reviews the background of this legislation and summarizes the main
provisions of the Sonny Bono Copyright Term Extension Act (hereafter: “Sonny
Bono Act”) and the Fairness in Music Licensing Act (hereafter: “Music Licensing
Act”).
1 The Copyright Act of 1976, as amended, is codified at title 17 of the U.S. Code, sections
101 et seq. The basic Act was enacted on October 19, 1976 by Public Law 94-553, with an
effective date of January 1, 1978.

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Sonny Bono Copyright Term Extension Act — Title I
Background
Under the copyright law in effect before enactment of S. 505, copyright
generally endured for a fixed term of 75 years from publication, or for the life of the
author plus 50 years after the author’s death. Specifically, for post-1977 works (i.e.,
works that secured copyright on or after January 1, 1978), the term for personal
works (i.e., works created by known authors who are not employees of another
person or entity) was the life of the author plus 50 years after death. For impersonal
works copyrighted on or after January 1, 1978, the term was the shorter of 75 years
from publication or 100 years from creation. For pre-1978 copyrighted works, the
term was a fixed period of 75 years, computed from the date copyright was secured
either by publication with notice of copyright or by registration as an unpublished
work with the Copyright Office.
If a personal work is created jointly by two or more authors, the post-1977 term
is measured by the life of the last surviving author.
These former terms of copyright had been established by the last general
revision of the copyright law, the Copyright Act of 1976, which was effective
January 1, 1978. Before that date, the copyright term under the Copyright Act of
1909 was a fixed period of years, consisting of a 28 year original term which could
be renewed for an additional 28 years. For various reasons, including fairness and
the wish to avoid possible impairment of contracts, Congress changed the basis for
computing the copyright term under the 1976 Act only for post-1977 works.
Congress adopted the “life-plus-50" basis for works copyrighted on or after January
1, 1978, and retained the fixed period of copyright for pre-1978 works. However, to
balance the two methods of computing copyright terms, Congress added a 19-year
period to the maximum 56-year period that otherwise would have applied to pre-1978
works; the resulting term was a total of 75 years.
Proponents of extending the copyright term an additional 20 years by legislation
in the 105th Congress made two principal arguments: 1) they argued that economic
fairness to the heirs of authors justified the 20 year increase because longevity has
increased since the “life-plus-50" standard was first adopted by the Berne Copyright
Convention2 in 1908; and 2) they argued that the United States must match the
recent 20-year extension of the copyright term adopted by the European Union3 in
order to avoid application of the rule of the shorter term4 for musical works and other
2 The Berne Copyright Convention is the major international treaty relating to protection
of copyright subject matter. The United States became a member on March 1, 1989.
3 The European Union adopted a Directive on Copyright Duration, effective July 1, 1995,
which generally set a copyright term of life-plus-70 for personal works, 70 years for works
copyrighted by legal persons, and 50 years for related rights protection for the rights of
producers of motion pictures and sound recordings.
4 The “rule of the shorter term” is an exception to the general principle of the Berne
(continued...)

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personal works and to enhance the bargaining position of the U.S. Government and
U.S. copyright industries in international trade negotiations affecting intellectual
property rights.
Several bills were introduced in the 105th Congress to extend the copyright terms
by an additional 20 years.5 The House Judiciary Committee favorably reported H.R.
2589 on March 18, 1998.6 The House passed the bill on March 25, 1998 with several
amendments, including the core provisions of the music licensing bill, H.R. 789. The
Senate passed S. 505 on October 7, 1998, Title II of which included a compromise
version of the music licensing provisions. The House also passed S. 505 on October
7, 1998. The President signed S. 505 into law on October 27, 1998.
Summary of Sonny Bono Act
The Sonny Bono Act increased the term of existing and future copyrights by 20
years. Other sections of the Act: 1) grant a new, limited termination right7 with
respect to the 20-year period; 2) expand the classes of persons eligible to terminate
licensing contracts; 3) grant libraries and nonprofit educational institutions a narrow
exemption to use copyrighted works during the 20-year period, if the works are not
commercially exploited in that period and copies are not available at a reasonable
price; and 4) express a “sense of Congress” view encouraging private sector
negotiations to reach voluntary agreements about establishment of an audiovisual
works fund to allocate royalties received during the 20-year period from the
exploitation of motion pictures.
Copyright term provisions. The Sonny Bono Act establishes the following
terms of copyright protection:
! For post-1977 personal works, life of the author plus 70 years;
! For post-1977 impersonal works (works made for hire, anonymous or
pseudonymous works), the shorter of 95 years from publication or 120 years
from creation;
4(...continued)
Convention that works of foreign authors shall be given the same protection as works of
nationals of the country where protection is claimed (i.e., “national treatment”). Article 7
of the Berne Convention permits reciprocity concerning the duration of copyright. The
country where protection is claimed is entitled to compare the copyright term of its law with
that of the country of origin of the work and apply the shorter term.
5 H.R. 695, H.R. 1621, H.R. 2589, and S. 505.
6 H.R. REP. 105-452, 105th Cong. 2d Sess. (1998).
7 A “termination right” is an inalienable right granted by the Copyright Act to authors and
their heirs to revoke an earlier contract assigning or licensing rights to another party, after
a certain period of years and under certain statutory conditions.

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! For pre-1978 works, 95 years from the date copyright was secured either by
publication with notice of copyright or, in the case of unpublished works, by
registration.
All of the extended terms apply retroactively to any work in which copyright
now exists, and to the works that have been retrieved from the public domain by the
1994 law implementing the Uruguay Round of the General Agreement on Tariffs and
Trade (GATT).8
Another special provision extends the term of works created but not copyrighted
before 1978 (i.e., unpublished, unregistered works) by 20 years (by increasing their
expiration date from 2027 to 2047), provided the work is published by December 31,
2002.9 Preemption of common law/state law copyright in pre-February 15, 1972
sound recordings is also delayed another 20 years, from February 15, 2047 to
February 15, 2067.10
Termination provisions of Title I. Termination provisions affect transfer and
ownership of the rights granted to authors under the Copyright Act. They are a
means for regulating who benefits from a statutory increase in the length of the
copyright term. The exercise of termination rights essentially effects a reversion of
the copyright (or other partial rights) back to the original author-owner (or the heirs
of the author) notwithstanding a contractual assignment of the property to another.
The 1976 Copyright Act created two termination provisions. One termination
clause applies to “old law works” (i.e., works copyrighted before 1978), which is
found at section 304(c) of the Act. This provision applies to grants (i.e., licensing
agreements) executed before January 1, 1978 by the author or any statutory renewal
claimant. The holder of the termination right can terminate the pre-1978 grant with
8 The Uruguay Round Agreements Act, Pub. L. 103-465 (December 8, 1994). For eligible
works, copyright restoration occurred automatically one year after the effective date of the
entry into force of the World Trade Organization. Therefore, these copyrights were restored
effective January 1, 1996. While the eligibility rules are complicated, in general copyright
is restored for “foreign-origin,” that is, non-United States-origin, Berne Convention works.
9 The general revision of the copyright law effective January 1, 1978, preempted common
law and state statutory copyrights in unpublished works. Congress granted these works a
minimum federal term of 25 years, which could be increased to 50 years under the 1976 Act
by publication on or before December 31, 2002. That maximum term is now increased to
70 years, if the work is published before 2003. The purpose of this provision has been to
provide minimum federal protection for pre-1978 common law works, in order to assure the
constitutionality of federal preemption, and to encourage early publication of unpublished
works.
10 Sound recordings were granted a 75-year delay in federal preemption under the 1976
Copyright Act because, unlike other categories of copyright subject matter, sound recordings
did not enjoy dual common law and federal protection before February 15, 1972, the date
federal copyright protection was first extended to sound recordings. Also, state common
law and statutory protection for sound recordings was of recent vintage, whereas
unpublished books and music, for example, might have been protected for decades or 200
years by state law, prior to federal preemption under the 1976 Act.

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respect to the 19-year period added to the copyright term for “old law works” by the
1976 Act.
The second termination clause of the 1976 Act applies to “new law works” (i.e.,
works copyrighted on or after January 1, 1978). Under section 203 of the 1976 Act,
grants of rights by the author relating to new law works can be terminated 35 years
after their execution.
The Sonny Bono Act creates a third termination right relating to the 20-year
added period for pre-1978 works and modifies who is eligible to terminate rights in
both “old law” and “new law” works under the original termination provisions of the
1976 Act.
With respect to the new termination right in the 20-year added period, the
Sonny Bono Act amends 17 U.S.C. 304 by adding a new paragraph (d). The new
“304(d)” termination right applies to the author (in theory)11 or other owner of a
termination right in a pre-1978 grant, whose right to terminate under section 304(c)
has already expired without being exercised. The basic structure of the original
“304(c)” termination right is retained, but the time limit for exercising the right is
changed, and the new “304(d)” termination right applies to the 20-year period added
by the Sonny Bono Act to the term of copyright. Termination can be effected at any
time during a 5 year period beginning at the end of the 75 year copyright term.
The new “304(d)” termination right applies only to grants executed before
January 1, 1978. It was not necessary to legislate a comparable right with respect to
grants executed on or after January 1, 1978 since “new law” grants are first eligible
for notices of termination in 2003.12 Holders of “new law” termination rights will
receive the 20-year added period when they exercise their right of termination.
As is true of the original termination rights of the 1976 Act, the “section 304(d)”
termination right does not apply to works made for hire.13
If the section 304(c) termination right of the 1976 Act has already been
exercised, the holder of the exercised termination right owns the copyright in the 20-
year added period, unless the copyright has already been re-assigned post-
termination. Such re-assignments are not terminable. In that case, the assignee owns
11 In order for an author to be able to exercise the new termination right in the 20-year
added period, the author must live more than 75 years after the copyright was secured in the
work. Songwriter Irving Berlin lived more than 75 years after some of his copyrights were
secured, but these instances are exceedingly rare. As a rule, the author’s heirs will exercise
the new “304(d)” right.
12 New law grants cannot be terminated until 35 years after their execution. The notice of
termination (which also specifies the exact termination date) must be served no earlier than
10 years before the termination date.
13 Works made for hire are defined in 17 U.S.C. 101 as works created by employees within
the scope of their duties and, subject to a written agreement, certain specially ordered or
commissioned works.

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the copyright during the 20-year period added to the copyright terms by the Sonny
Bono Act.
The second change made by the Sonny Bono Act in the termination provisions
applies both to old and new law works. Sections 203(a)(2) and 304(c)(2) of title 17
U.S.C. are amended to change the persons eligible to exercise termination rights.
Under the original termination provisions of the 1976 Act, the author’s executor
under a will, administrator, personal representative, or trustee had no termination
right. The next of kin had a termination right in transfers which they may have
granted with respect to “old law” works; the next of kin had no termination rights
in “new law “ works.
The Sonny Bono Act grants a termination right to the author’s executor to
terminate the author’s interest, if the author, spouse, children, and grandchildren are
deceased. Also, in the absence of a will, if there is no surviving author, spouse, child,
or grandchild, the administrator, personal representative, or trustee of the author’s
estate owns the author’s termination interest in the case of both old and new law
transfers by the author.
Reproduction by libraries and archives. Libraries, archives, and educational
groups expressed concerns about diminution of the public domain as a consequence
of adding 20 years to the copyright terms. In partial response to these concerns, the
Sonny Bono Act amends 17 U.S.C. 108 to limit the rights of copyright owners
against libraries, archives, and nonprofit educational institutions during the 20-year
added period. These entities will be allowed to reproduce, distribute, display, or
perform in facsimile or digital form, copies of works during the 20-year period for
preservation, scholarship, or research purposes, if the works are not being
commercially exploited and copies or phonorecords cannot be obtained at a
reasonable price.
This exemption does not apply after notice by the copyright owner (in
accordance with Copyright Office regulations) that the conditions for use are not
satisfied, or to subsequent users other than the exempt entities.
Division of motion picture royalties. Most theatrical motion pictures produced
in the United States are works made for hire. The contributors to motion pictures
such as the screenwriters, directors, and performers ordinarily do not own the
copyright nor do they have any termination rights with respect to the term of
copyright. By industry custom and practice, the rights of motion picture contributors
in the United States are usually acquired through collective bargaining agreements
between the production companies and the guilds or unions representing the
contributing artists.
During the consideration of the copyright term extension bills, motion picture
contributors expressed concerns about their right to receive royalties during the 20-
year added period. The Sonny Bono Act makes no change in any law concerning the

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division of motion picture royalties,14 but SEC. 105 of the Act does contain a “sense
of Congress” statement on this point. The statement is intended to encourage
voluntary agreements between motion picture producers and the various motion
picture contributors leading to the establishment of an audiovisual fund or other
mechanism for the division of royalties accrued during the 20-year added period.
Agreement on the division of motion picture royalties becomes especially
important with respect to the royalties that accrue from exploitation of American
motion pictures in Europe.
Article 2(2) of the European Union Directive on Copyright Duration sets the
term for “cinematographic or audiovisual works” at the life of the author(s) plus 70
years after the death of the last of four contributors to survive — the principal
director, the author of the screenplay, the author of the dialogue, and the composer
of any music specifically created for the motion picture. Another provision, Article
2(1), mandates that at least the principal director shall be considered the author of
the motion picture. Article 3(3) of the EU Directive provides that the “related rights”
of the motion picture producer expire 50 years after fixation or publication (if
published), whichever is earlier.
Since most theatrical motion pictures produced in the U.S. are works made for
hire and the director is not considered an author, it is not entirely clear what
European Union term applies to U.S. motion pictures or who is entitled to collect
licensing fees in Europe during the 20-year added period. United States motion
picture producers and the United States Trade Representative take the position that
contracts assigning rights to the producers (including collective bargaining
agreements) should be recognized in Europe.
The “sense of Congress” provision in the Sonny Bono Act is intended to
facilitate private negotiations concerning division of motion picture royalties between
producers and artistic contributors to motion pictures.
Effective date. The Sonny Bono Copyright Term Extension Act took effect
upon enactment, which was October 27, 1998.
14 An earlier version of the Sonny Bono Act, H.R. 2589 as passed by the House in March
1998, contained an additional motion picture rights clause. SEC. 106 of H.R. 2589 would
have amended title 28 U.S.C. by adding a new chapter 180 dealing with the assumption of
contractual obligations (e.g., “residual” rights) when transferring motion picture rights. This
provision was later added to another bill, H.R. 2281 (the Digital Millennium Copyright
Act), and was enacted as part of that legislation.

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Fairness in Music Licensing Act — Title II
Background
Under the Copyright Act of 1976, the owner of copyright in a musical work is
granted the exclusive right to perform the work publicly [17 U.S.C. 106(4)], subject
to specified limitations or exemptions.
A musical work is “publicly performed” if it is rendered or played directly or by
means of any device or process either i) at a place open to the public or any place
where a substantial number of persons outside of the normal circle of family and
social acquaintances is gathered, or ii) by transmission to a place open to the public
or to the unassembled public which is capable of receiving the performance (for
example, by radio, television, cable, or satellite).
Performances at “semi-public” places are generally considered public
performances. These places include clubs, lodges, factories, summer camps, and
schools; daycare, seniors, and other recreational centers; and possibly the common
areas of hospitals, nursing homes, and other care facilities.
Performances of music at public places such as restaurants, bars, taverns,
nightclubs, conventions, and stores are public performances, whether the music is
performed live, or by recordings or transmissions, and whether the music is used as
background, incidental, or theme music. Of course, performances of music in concert
halls, opera houses, theaters, stadiums, outdoor arenas, and similar places open to the
public, are public performances.
Although the above examples constitute public performances, the need to obtain
a music performing license and pay copyright fees hinges upon the availability or
absence of an exemption, limitation, or exception to the music copyright owner’s
public performance right. If the performance is neither exempt nor subject to
compulsory licensing, the music user must obtain permission or a license to perform
the music by negotiating the terms and conditions with the music copyright owner
or an authorized agent. With few exceptions music performing licenses for
performance of nondramatic music are obtained from the performing rights societies
(“PRS”), who act as agents for the music copyright owners.
By custom and practice, music publishers and composers-lyricists generally
share the royalties obtained under the music performing right equally — that is, 50-
50, after the PRS deducts its administrative costs. Currently, there are two major
PRS who control virtually all licensing of the performing right in nondramatic music.
These are the American Society of Composers, Authors, and Publishers (ASCAP)
and Broadcast Music Inc. (BMI). Both PRS operate under antitrust consent decrees
that establish restrictions and conditions on their music licensing activities.

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The principal exemptions or limitations to the music performing right are set
forth in section 110 of the Copyright Act, or in the compulsory licensing sections.15
The existing music performing right was enacted as part of the 1976 general
revision of the copyright law, the 1976 Copyright Act. Under its predecessor, the
1909 Copyright Act, nonprofit performances of nondramatic music were exempt
from copyright liability. The statute did not define “nonprofit performances,”
however. The term was given meaning by the courts. Although the line drawn
between “for-profit” and “non-for-profit” performances was never clear, in general,
the nonprofit exemption was applied fairly broadly. For example, musical
performances by public broadcasting and by religious broadcasters were arguably
exempt.
In the 1976 Copyright Act, Congress dropped the broad exemption for nonprofit
musical performances and replaced it with a broad performance right, to which
Congress applied specific, more narrowly-drawn exemptions. The 1976 Act also
legislated a broad definition of the term “public,” which resulted in application of the
music licensing rights in “semi-public” contexts that formerly were arguably private
performances.
The general effect of these changes from the 1909 Act was to create a need to
obtain a music performing right license on a broader basis than under the law in
effect before 1978. Expanded enforcement efforts by the PRS have generated
opposition and counter-legislative proposals from groups impacted by the broader
music performing right.
In the 105th Congress, music licensing reform proposals were introduced under
the title of “Fairness in Music Licensing Act.” Essentially identical bills (H.R. 789
and S. 28) were introduced in the House and Senate. The bills proposed several
reforms including: 1) expansion of certain exemptions to the public performance
right for businesses that perform music by turning on radios or televisions within
their business establishments; 2) a new statutory requirement of arbitration of the
fees charged by the PRS; 3) statutory conditions for radio per program licenses; 4)
elimination of the vicarious and contributory infringement liability of landlords of the
premises where music is performed; and 5) mandated access to PRS repertories and
licensing information.
The supporters of music licensing reforms linked their legislative efforts with
proposals to extend the copyright term an additional 20 years. Music licensing reform
supporters argued that the additional 20-year period should be balanced by some
concessions to music users. They pointed out that music copyright owners are
among the principal beneficiaries of copyright term extension. Music and other
15 The Copyright Act had 5 active compulsory licenses as of October 15, 1998: section 111
(cable retransmissions of broadcasts); section 114(f) (subscription digital audio
transmissions of sound recordings); section 115 (mechanical reproduction of music); section
118 (public broadcasting license); and section 119 (satellite television license). All of these
compulsory licenses affect public performance of music except the section 114(f)
subscription transmssion license (which applies to sound recordings) and the section 115
recording license (which affects only the reproduction right).

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copyright owners denied that there should be any link between term extension and
music licensing proposals. Copyright owners opposed the music licensing reform
proposals as unfair, unnecessary, and possibly contrary to the international treaty
obligations of the United States.
Over the objections of copyright owners, H.R. 2589 was amended during floor
debate in the House of Representatives to include three of the core provisions from
the music licensing bill as Title II of H.R. 2589.16 The House passed H.R. 2589 in
this form on March 25, 1998.
Following pre-conference discussions with the Senate, the Senate on October
7,1998 passed a version of S. 505 that included two of the music licensing reform
proposals in modified form. The House agreed and passed the same version of S.
505 on the same day. Title II of the bill is the “Fairness in Music Licensing Act of
1998.” The President signed S. 505 into law on October 27, 1998. As enacted, Title
II broadens the business exemptions for public performance of music and creates a
mechanism for regional judicial review (by means of a “circuit rider” provision) of
the reasonableness of the licensing fees charged by the PRS.17
Summary of Music Licensing Act
Business exemptions. Under section 110(5) of the 1976 Copyright Act,
performances of any work by public reception of broadcasts or other primary
transmissions were exempt if — reception occurred by means of receiving
equipment commonly used in private homes, there was no direct charge to see or hear
the transmission, and the transmission was not further distributed. The key issues
were whether the receiving equipment met the “home-style” standard and the number
of receivers employed.
The Music Licensing Act broadens the business exemption of 17 U.S.C. 110(5)
Distinctions are drawn between “food service/drinking establishments” and other
business establishments such as stores based on the size of the business premises. A
further distinction is made based on the nature and number of the receiving sets used
to perform the music.
If the business qualifies for the exemption based on the size of the premises or
the receiving equipment, the further conditions on availability of the exemption are
that there must be no direct charge to see or hear the transmission, and the
transmission itself must be licensed by the copyright owner of the musical work.
16 The three provisions were: expansion of the business exemptions; binding arbitration of
the rates charged by the PRS; and elimination of the vicarious and contributory infringement
liability of landlords.
17 The final bill dropped the proposed elimination of vicarious and contributory
infringement liability of landlords. Therefore, no change has been made in these judicially-
created doctrines with respect to music licensing. With respect to the liability of Internet
service providers, however, legislation was passed in the form of H.R. 2281, the Digital
Millennium Copyright Act, which impacts the vicarious and contributory infringement
doctrines in general.

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Store exemption. The Music Licensing Act defines an “establishment” as a
store, shop, or similar place of business open to the general public for the primary
purpose of selling goods or services in which the majority of the nonresidential area
is used for that purpose and in which nondramatic musical works are performed. The
exemption is available to business establishments other than “food service/drinking
establishments” if —
i) the area of the business where the music is intended to be received covers
less than 2000 square feet (excluding the customer parking area); or
ii) the area where the music is intended to be received covers 2000 square feet
or more (excluding the customer parking area) and (A) any audio only
performance occurs via not more than 6 loudspeakers, of which no more than
4 are in any one room, or (B) an audiovisual performance occurs via no more
than 4 audiovisual devices, of which no more than 1 device is located in any one
room and no such device has a diagonal screen size greater than 55 inches, and
the audio portion is communicated by no more than 6 loudspeakers, of which
no more than 4 speakers are located in one room.
Food service/drinking establishment exemption. The Music Licensing Act
defines a “food service or drinking establishment” as a restaurant, inn, bar, tavern,
or any other similar place of business in which the public or patrons assemble for the
primary purpose of being served food or drink, the majority of the nonresidential
area is used for that purpose, and nonndramatic musical works are performed. The
exemption is available to food service/drinking establishments if—
i) the area where the music is intended to be received covers less than 3750
square feet (excluding the customer parking area); or
ii) the area where the music is intended to be received covers 3750 square feet
or more (excluding the customer parking area) and the receiving equipment
meets the same conditions described in Clause (ii) above for stores.
Additional damages. If a court finds that a defendant establishment, which
claims the section 110(5) exemption, lacked reasonable grounds to believe its use of
the work was exempt, the plaintiff shall be entitled, in addition to any award of
damages, an additional award of two times the amount of the licensing fee that
should have been paid during the preceding 3 years.
Retail record and audiovisual stores promotions. The Music Licensing Act
also amends the section.110(7) exemption of the Copyright Act which relates to the
public performance of music in stores as part of promotional efforts to vend music,
records, and playback equipment. Under the 1976 Copyright Act, this exemption
applied to phonorecords. The Music Licensing Act extends the section 110(7)
exemption to “audiovisual or other devices utilized in ... performance” of music.
Regional review of music licensing rate disputes. In accordance with the
existing antitrust decrees governing the two major performing rights societies

CRS-12
(“PRS”)18 — ASCAP and BMI, disputes about the rates the PRS charge music users
to pay for performing right music licenses under the 1976 Copyright Act could be
challenged and reviewed only by the designated Rate Court in the federal district
court for the Southern District of New York.19 One of the major objectives of
supporters of music licensing reform proposals was to obtain local review of the
music licensing rates.
The original proposals in H.R. 789 and S. 28 would have required binding local
arbitration of rate disputes at the option of persons or entities defined as “general
music users.”20 A modified version of the arbitration proposal remained in H.R. 2589
as passed by the House of Representatives in March 1998. S. 505 as enacted dropped
the proposal for rate review by binding local arbitration and substituted judicial rate
review under a regional, “circuit-rider” procedure.
The Music Licensing Act provides that, notwithstanding existing and future
consent decrees, “an individual proprietor who owns or operates fewer than 7 non-
publicly traded establishments” in which music is performed and who disputes the
reasonableness of the PRS rates, can obtain rate review on a regional basis. The
individual proprietor files for rate review either with the designated Rate Court or in
the district court at the seat of the regional Court of Appeals (other than the Court of
Appeals for the Federal Circuit) in which the proprietor’s establishment is located.
The rate review proceeding is presided over by the district court judge assigned
to the Rate Court, who either “rides” the circuits to hear the cases or appoints a
special master or magistrate judge to hear the cases in the appropriate region. Any
decision of the special master or magistrate judge shall be reviewed by the Rate Court
judge. The whole rate review proceeding shall be completed within 6 months after
its commencement.
The final determination is binding only as to the individual proprietor who
commenced the rate review. The PRS are relieved of any obligation of
nondiscrimination among similarly situated music users, in complying with the
regional rate decision.
18 ASCAP is governed by a 1950 consent decree. The decree designated the district court
for the Southern District of New York as the “Rate Court” for review of ASCAP rates.
BMI is governed by a 1966 consent decree, which was modified only in 1994 to establish
the district court for the Southern District of New York as the forum to review BMI music
licensing rates.
19 The performing right societies can be sued in any federal district court for alleged
antitrust violations, however.
20 The original proposals distinguished between pre-litigation rate arbitration and court-
annexed arbitration. The rates charged broadcasters and other transmitting organizations
would not have been subject to pre-litigation arbitration, but these entities could have
invoked court-annexed arbitration, if sued for copyright infringement. In H.R. 2589 as
passed by the House in March 1998, broadcasters and other transmitting organizations were
completely excluded from the binding arbitration proposal in that bill.

CRS-13
The industry rate already set by the Rate Court shall be presumed to have been
reasonable at the time it was set, but this presumption “shall in no way affect a
determination of whether the rate is being correctly applied to the individual
proprietor.” 21 “Industry rate” is defined as the PRS fee set by negotiations, or by
the Rate Court, for a significant segment of the music user industry to which the
individual proprietor belongs.
An individual proprietor can bring only one rate review proceeding under the
new section 512 of title 17 U.S.C.
Effective date. The Fairness in Music Licensing Act takes effective 90 days
after enactment, i.e., 90 days after October 27, 1998.
Conclusion
Enactment at the end of the 105th Congress of the Sonny Bono Copyright Term
Extension Act extends the term of existing and future copyrights an additional 20
years. This legislation is expected to result in equivalent duration of protection for
American copyrights in the European Union, or will at a minimum give United States
negotiators arguments for longer terms of protection within the European Union and
other foreign countries.
Within the United States, authors and other owners of the extended copyrights
will profit from the increased term of copyright protection at least in the case of the
relatively few works that have commercial value over a 95-year period. In those
instances where the works are not commercially exploited during the 20-year added
period, libraries and nonprofit educational institutions are granted an exemption to
use the works, provided copies are not available at a reasonable price.
The passage of a modified version of the Fairness in Music Licensing Act
responds to some of the concerns of music users about the fairness of traditional
licensing practices of the performing right societies. The Act broadens the business
exemption of 17 U.S.C. 110(5) for playing radios or televisions, and creates a new
procedure for regional review of the licensing fees in the case of an individual
proprietor of less than 7 non-publicly trade businesses. The proposals dropped from
the Music Licensing Act in the final compromise (e.g., vicarious liability of landlords
for performance of music on their premises and radio per program licensing fees)
may or may not be the subject of new legislative proposals in the next few years
21 17 U.S.C. 512(4).