Published by LawTechie - June 10, 2013 - LawTechie

Intellectual PropertyThis is that time of year when Performing Rights Organizations (PROs) go after small restaurants and bars for unpaid music licensing fees. BMI, a PRO, recently filed suit against 13 small businesses located across the country.

Background.

When you buy a song from the Apple Store, all you really get is the right to play it privately. To play such song in a bar, restaurant or business open to the public, you need what the Copyright Act calls a Public Performance License. That is, you need to pay extra, i.e. the licensing fee, to play the song in your place of business. The same is true when you play music in such places, be it on Spotify, Pandora, a jukebox or when a live band is invited to play on premises. In short, if music is played in your establishment, you must also pay for the related public performance licenses.

Lack of Awareness.

According to Peter Kilgore, general counsel for the National Restaurant Association, “there still are many people in the industry who just don’t understand what is required if they have a live band coming in. It’s a continuing problem in the industry.”

The 13 establishments recently targeted by BMI constitute just one instance of the PROs’ ongoing efforts to litigate as a mean to encourage reluctant businesses to pay these licensing fees. Taken together, BMI and ASCAP, the two largest PROs, file between 200 and 425 copyright infringement lawsuits against eating and drinking establishments every year, according to spokesmen from these PROS.

Although it is unclear how much the PROs recover on average from those lawsuits, such suits constitute a serious threat to small businesses, for which a $20,000 license tab can prove deadly. For instance, BMI has recovered upward of $30,000 in the past on similar count and is currently asking $17,000 to settle a suit against a small pub located in West Jordan, Utah. Note also that the penalties per song illegally played range from $750 to $30,000.

The Exception

All restaurants, bars and businesses open to the public must pay these licensing fees. Fortunately, a narrow exception exists for “Mom & Pop” establishments and the like. Businesses of a certain size (stores under 2,000 square feet, restaurants or bars under 3,750 square feet) are exempt from licensing fees under the following 3 conditions:

  1. The exception only covers music played from a radio or TV – not music played from your Ipod or CDs.
  2. There must be less than 4 loudspeakers or TVs in any one room and less than 6 loudspeakers or TVs total.
  3. Customers are not charged a direct fee to watch TV or hear the music.

The above simplification is only meant to give you an idea of what the exception covers. And, importantly, other exceptions may apply.

Alternatives.

Not all is lost for those not fitting within the exception or those unwilling to pay approximately $800 per year per PRO in music licensing fees. Some alternatives exist today allowing you to play music legally at a fraction of the cost charged by the traditional PROs.

For instance, Jamendo licenses the songs of little-known emerging musicians at affordable prices. Of course, if you subscribe for a Jamendo license, your customers will not listen to famous artists such as Michael Jackson, whose estate is represented by ASCAP, or the latest “Get Lucky” song, which is also represented by ASCAP.

Getting the adequate music license is a prerequisite under Copyright Law. Such licenses can get expensive, although the Mom & Pop exception may apply. Fortunately, new players, such as Jamendo, are good alternatives to cost-conscious small businesses.

Guest author Steven Buchwald is a law clerk on Tim’s internet law team at Handal & Morofsky. Steven is currently a law student at the Benjamin N. Cardozo School of Law and will graduate in June 2014 with concentrations in intellectual property law and litigation.

LawTechie is a blog focusing on trends in tech and digital media. Areas covered include intellectual property, cyberlaw, venture capital, transactions and litigation as they relate to the emerging sectors. The blog is edited by the firm's partner Tim Bukher with contributions from the firm's experts in their respective areas of law.

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