During my first year of practicing law, I received a phone call from one of my restaurant clients who had received a demand letter from an acronymned company he had never heard of. There was a genuine sense of panic in his voice — the letter contained boldface type and threatening phrases like “CEASE AND DESIST” and “PENALTIES WILL ACCRUE.”
You have to remember, these were the days before practically everything you received in the mail was some sort of scam. The mail, much like Peter Jennings or Tom Brokaw, was to be trusted.
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‘What’s an ASCAP?’
But besides causing great concern, the letter was also just bewildering to my client. “What’s an ASCAP?” my client asked me, referring to the name on the demand letter’s letterhead. I explained to him that ASCAP was a performing rights organization that has agreements with thousands of songwriters to enforce the various rights their member songwriters hold as a part of their copyright.
“What did I do wrong?” he asked. From what he had read me of the letter, it sounded like ASCAP was alleging that he had played the music of several of ASCAP’s member songwriters at his restaurant recently.
“But I’ve never dealt with any of these people,” said my client. That’s exactly their point, I explained. My client didn’t have any sort of agreement with ASCAP or one of its commercial licensees to play ASCAP member music at his restaurant.
Secret Diners
“How did they know I was playing this music?” he asked. Bracing him for what often came as a shock to my clients, I explained that ASCAP was known to send “secret shoppers,” or in my client’s case “secret diners,” to patronize an establishment while surreptitiously writing down what music was being played on the sound system.
“But this isn’t that Napster stuff,” he said. “I own the CDs I’m playing at the restaurant.”
My client was referring to the free file-sharing platform, Napster, whose battles with record companies and artists were all over the news at the time. Indeed, my client had once allowed me to peruse his collection of eclectic, but well-organized, CDs, so I knew he was telling the truth (his CDs filled eight large-size CaseLogic folder cases, a respectable amount even to a music snob like me).
Public Performance
I explained to my client that even though he didn’t make direct copies of music, which was the basis for the record companies’ claims against Napster, he did something just as illegal in the mind of a copyright holder: By playing his CD collection in an open, commercial space (his restaurant), he “publicly performed” copyrighted material without the express permission of the copyright holder.
Like other types of property rights, owning a copyright is like owning a “bundle of sticks,” with each stick representing a different right enforceable by the owner. When it comes to copyright, the most familiar of these is the right to prevent reproduction without the owner’s express permission. A lesser-known but just as powerful, right is the right to prevent a “public performance” without the owner’s permission.
In the case of music, a “public performance” can mean a live performance by someone other than the copyright owner in a public or commercial space (e.g., a cover band playing another artist’s music at a bar), or playing a recording intended for private listening (e.g., a CD, a vinyl record, or, in today’s terms, music streamed from a non-commercial Spotify account) in a public or commercial space.
In my client’s example, when he purchased a CD from, say, Sound Warehouse (RIP), that CD only came with a license from the copyright holder to listen to the music privately (private performance being another “stick” in the “bundle”). It did not come with the license to reproduce or publicly perform the copyrighted music (and, in most cases, expressly forbade these activities somewhere in the liner notes).
It’s Not Just Music
The same “sticks” in the copyright “bundle” exist for other forms of media. I’ve fielded similar calls from clients who receive demand letters because they showed a movie DVD or a pay-per-view sporting event at their bar. When it comes to pay-per-view events, there are different rates for watching the event at home, as opposed to displaying the event in a commercial setting. While several of my clients have chosen the home option accidentally, at least one of my clients opted for the significantly cheaper home rate thinking “who’s gonna know?”
Of course, my client questioned the rationale behind all of this. Even after I explained that the purpose of U.S. copyright law is to incentivize artists to create by allowing them to economically benefit from their creations, he didn’t quite seem convinced.
“If I create a pizza,” he said, sarcastically emphasizing the word create, “someone could figure out my recipe and sell it on the opposite corner for cheaper, which would kill my business. But if I can’t do anything to stop that, why should a rock star be able to?”
Counterfeit Pizza
Ignoring any possible trade-secret claims my client might have in his pizza recipe, I explained to him that the main difference in his example is that any potential pizza counterfeiter is dissuaded from such a ploy by the cost of reproducing the pizza itself, which will in most cases be the same cost of production that my client would pay.
However, once an artist creates a work of art — often at significant expense in recording, packaging, material, and promotional costs — anyone who wishes to exploit that work can do so at minimal or no cost.
“Okay, I guess that makes sense,” my client said, either out of true empathy for the artist or the sudden realization that this esoteric conversation on the public policy behind U.S. copyright law will result in significant costs of his own when he receives my firm’s bill.
“So, what do I do now?” my client asked, quickly changing the tone from philosophical to the practical. I advised him to first verify the amounts demanded with ASCAP to determine whether they’re credible. If he was satisfied, then he should pay the amount of the demand (or negotiate down, if he felt that he could).
Licensing Agreements
Then, he needed to enter into a license agreement with ASCAP to continue playing the music in its catalog. In many cases, the goodwill generated by entering into an agreement with the performing rights organization could result in a reduction of the fine for past violations.
These agreements are usually yearly “blanket” type agreements that cover the establishment no matter how much or how little the catalog music is played. And, although I felt terrible piling on, I had to explain to him that entering into an agreement with ASCAP would only allow him to play music from the ASCAP catalog legally. There were four other major performing rights organizations in the U.S.: BMI, SESAC, Pro Music Rights, and Global Music Rights, each with its own catalog of songwriters, and all of which were represented in his eclectic CD collection.
Alternatively, my client could sign up with a service like MUZAK, which pipes in music licensed from all the performing rights organizations (and not just the “elevator music” that the company became synonymous with). Or he could cultivate some old-school vibes (even for the time) by signing up with a jukebox service, which, like MUZAK, handled all the licensing fees as a part of its service.
But since he had just invested in a new, state-of-the-art 100-disc CD changer, my client didn’t seem too receptive to the MUZAK or jukebox suggestions.
The Song Remains the Same
Many years later, my client has managed to stay in the good graces of all five performing rights organizations by maintaining licenses with each until he finally retired the 100-disc CD changer and opted for a Spotify business account, which operates in much the same way that MUZAK once pioneered.
Even with the advances in technology, secret shoppers and secret diners still exist and are actively enforcing rights of the copyright owners they represent. And like my client, most business owners begrudgingly respect these rights and pay for them, knowing very well that nothing goes better with pizza and beer than some good music.
