Copyright Law's "Small Business Exception": Public Performance Exemptions for Certain Establishments

The Copyright Act grants specific exclusive rights to the owners of copyrighted works. Among the rights conferred upon the composer of a musical work is the authority to "perform the work publicly." This right is implicated when small businesses, including bars, cafes, and restaurants broadcast background music from either the radio, television or from recordings such as compact discs. While the general provisions of the Copyright Act require that these businesses obtain licenses to play background music, there are exemptions, which were expanded when Title II of the "Sonny Bono Copyright Term Extension Act" was signed into law. These exemptions allow bars, cafes, and restaurants, to play the radio and show television programing, but do not authorize the playing of recorded music. Research does not uncover any other provisions that would definitively immunize public performances of audio tapes and musical CDs in small business establishments from possible liability for copyright infringement. This report will be updated as circumstances warrant.

Order Code RS21107 Updated December 10, 2003 CRS Report for Congress Received through the CRS Web Copyright Law’s “Small Business Exception”: Public Performance Exemptions for Certain Establishments name redacted Legislative Attorney American Law Division Summary The Copyright Act grants specific exclusive rights to the owners of copyrighted works. Among the rights conferred upon the composer of a musical work is the authority to “perform the work publicly.” This right is implicated when small businesses, including bars, cafes, and restaurants broadcast background music from either the radio, television or from recordings such as compact discs. While the general provisions of the Copyright Act require that these businesses obtain licenses to play background music, there are exemptions, which were expanded when Title II of the “Sonny Bono Copyright Term Extension Act” was signed into law. These exemptions allow bars, cafes, and restaurants, to play the radio and show television programing, but do not authorize the playing of recorded music. Research does not uncover any other provisions that would definitively immunize public performances of audio tapes and musical CDs in small business establishments from possible liability for copyright infringement. This report will be updated as circumstances warrant. Overview. The Copyright Act confers upon composers of copyrighted musical works the exclusive right to publically perform their work. However, Title II of the “Sonny Bono Copyright Term Extension Act,”1 which relates to the performance of copyrighted music in small businesses, amended the Copyright Act by exempting certain establishments from copyright infringement for playing radio and television programs. These establishments still need performance licenses if they host live music performances 1 P.L. 105-298, 112 Stat. 2827, 2830-2834 (1998)(codified as amended in various sections of title 17 of the United States Code.) Also see CRS Report 98-904, Copyright Term Extension and Music Licensing: Analysis of Sonny Bono Copyright Term Extension Act and Fairness in Music Licensing Act, P.L. 105-298, by Dorothy Schrader. Congressional Research Service ˜ The Library of Congress CRS-2 of copyrighted material, or if they play tapes or CDs of copyrighted music to their customers. Copyright Holders’ Exclusive Right to Authorize Performances. The Copyright Act grants certain exclusive rights to the owner of a copyrighted work, which are different from those enjoyed by a mere owner of a copy of the work. Those exclusive rights include (1) the right to reproduce the work, (2) the right to prepare derivative works based upon the original copyrighted work, (3) the right to distribute copies of the work to the public, (4) the right to publically display the work, and (5) the right to publically perform the work.2 The exclusive performance right allows the copyright holder to control the public performance of certain copyrighted works. These include musical works, literary works, dramatic works, choreographic works, pantomimes, motion pictures, and audio visual works.3 A performance is considered “public” when the work is “performed in a place open to the public or at a place where a substantial number of persons outside of a normal circle of a family and its social acquaintances are gathered.”4 A performance is also considered “public” if it is transmitted to multiple locations, such as through radio or television.5 On its face, the public performance right is implicated when a restaurant plays copyrighted music over its speaker system to its customers from the radio, television or from audio cassettes or CDs. While listening to music on the radio or on a cassette or CD privately will not ordinarily constitute copyright infringement, it is the public performance aspect of using music in a business environment that is the basis for the need for permission from a songwriter or his agent. The three major “performing rights” societies – BMI, ASCAP, and SESAC – generally act as a songwriter’s agent and help enforce the songwriter’s performance rights. These societies grant permission to utilize the music in their repertories through the issuance of licensing agreements, and they monitor businesses to discover infringing use of their members’ songs and music. Exemptions from the Composer’s Performance Rights. The Copyright Act, as amended by Title II of the Sonny Bono Copyright Term Extension Act (“Fairness 2 17 U.S.C. § 106 (2000) (emphasis added). It is important to note that in this circumstance the owner of the copyrighted work is the composer or musical artist and not the other entities like the recording company, who may possess rights from various contractual arraignments. 3 17 U.S.C. § 106(4) (2000). 4 17 U.S.C. § 101 (2000). 5 Id. (“public performance” means “to transmit or otherwise communicate a performance or display of the work to . . . the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”) CRS-3 in Music Licensing”), limits authors’ and publishers’ exercise of their non-dramatic music performance rights with respect to bars, restaurants, and other small businesses.6 Prior to amendment, §110(5) of the Copyright Act provided a special exception only “for the communication of a transmission embodying a performance or display of a work by the public reception of the transmission on a single receiving apparatus of a kind commonly used in private homes.”7 Essentially, this exemption was limited to small businesses that turned on a home radio or television so that customers could hear or view the broadcast.8 There was no exemption for small businesses which originated the performance, e.g. by playing compact discs on a home-style stereo. The Sonny Bono Act expanded the reach of the § 110(5) exception through a twotiered exception: (1) any establishment with less than 2,000 gross square feet, and any food service or drinking establishment with less than 3,750 square feet may broadcast non-dramatic musical works without any apparent limit on the equipment uses.9 (2) any business establishment with greater than 2,000 square feet, and any food service or drinking establishment with greater than 3,750 square feet provided that the establishment comply with additional requirements with respect to equipment use.10 These exemptions, however, do not authorize an establishment to originate its own broadcasts of copyrighted material. That is, an establishment may play the radio or show a television broadcast without violating copyright law, but the act still does not shield the same business when it plays, for example, CDs protected by the copyright laws. On the other hand, for businesses with greater than 2,000 square feet and food service or drinking establishments with greater than 3,750 gross square feet, the statutory exemption will only apply if (1) the performance of the radio transmission incorporating non-dramatic musical compositions is “communicated by means of a total of not more than 6 loud 6 Pub. L. No. 105-298, 202-205, 112 Stat. 2827, 2830-2834 (1998)(codified as amended in various sections of title 17 of the United States Code.) 7 17 U.S.C. § 110(5)(A) (2000). 8 See H.R. Rep. No. 94-1476 at 87 (1976). See also, Letter of Marybeth Peters, Register of Copyrights, included in floor debate on S. 505, 144 CONG. REC. at H9953-54. 9 17 U.S.C. § 110(5)(B) (i)-(ii) (2000). Both sections of the statute include the instruction that when calculating the square footage of the establishment a small business owner is not to include the “space used for consumer parking and no other purpose.” Id. 10 17 U.S.C. §§ 110(5)(B)(i)(I)-(II) and 110(5)(B)(ii)(I)-(II) (2000). CRS-4 speakers, of which not more than 4 loudspeakers are located in any 1 room or adjoining space . . .,”11 or, (2) the performance of a television transmission incorporating non-dramatic musical compositions is “communicated by means of a total of not more than 4 audiovisual devices, of which not more than one audiovisual device is located in any 1 room, and no such audiovisual device has a diagonal screen size greater than 55 inches, and any audio portion of the performance or display is communicated by means of a total of not more than 6 loudspeakers, of which not more than 4 loudspeakers are located in any 1 room or adjoining space . . .”12 For example, under these conditions, an extremely large restaurant with three seating areas may place two professional quality speakers in each area and play radio programing through them without incurring an obligation to pay performance royalties to the composers. In addition to the hardware restrictions, the statute requires that the small business not directly charge customers to hear the transmission or retransmission.13 Furthermore, the statutes requires that the “transmission or retransmission is not further transmitted beyond the establishment where it is received,”14 and that the transmission or retransmission be “licensed by the copyright owner of the work so publically performed or displayed.”15 Presuming that all of the statutory requirements are satisfied, a small business should be able to qualify under the newly amended exemption. Conclusion. While small businesses are exempt from copyright infringement when they play radio and television programs, they still need to obtain performance licenses to host live music performances of copyrighted material or publically play tapes or CDs to their customers. Research does not uncover any other provisions of the copyright act which would definitively immunize public performances of audio tapes and musical CDs in small business establishments from possible liability for copyright infringement. 11 17 U.S.C. §§ 110(5)(B)(i)(I) and 110(5)(B)(ii)(I) (2000). 12 17 U.S.C. §§ 110(5)(B)(i)(II) and 110(5)(B)(ii)(II) (2000). 13 17 U.S.C. § 110(5)(B)(iii) (2000). 14 17 U.S.C. § 110(5)(B)(iv) (2000). 15 17 U.S.C. § 110(5)(B)(v) (2000). EveryCRSReport.com The Congressional Research Service (CRS) is a federal legislative branch agency, housed inside the Library of Congress, charged with providing the United States Congress non-partisan advice on issues that may come before Congress. EveryCRSReport.com republishes CRS reports that are available to all Congressional staff. The reports are not classified, and Members of Congress routinely make individual reports available to the public. 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