January 31, 2011
Dear City Manager:
You have the following question: Is the city required to obtain an ASCAP/BMI license for
the playing of a radio station’s material, which includes some music, over the city’s phone system?
The phone system has an “on hold” feature that plays music and perhaps other copyrighted
material to callers put on hold.
The answer is not clear under the present state of copyright law; arguments can be made
both ways. I hate to give an answer like that, but this question is a much litigated one with respect
to private businesses of various kinds, particularly restaurants and retail stores, but as far as I can
determine, it has never arisen where the music is being played on a government’s phone system.
However, some of those cases involving private businesses analyze the effect of the “on hold”
phone systems had on allegations of copyright violations brought by ASCAP and BMI. Those
cases indicate that if the copyright law is held to apply to governments, their “on hold” phone
system, assuming copyrighted music or even other material transmitted to outside callers, would
trigger copyright violations if the government did not have a license to use such music or material.
See Broadcast Music, Inc. v. Claire’s Boutiques, Inc., 949 F.2d 1482 (7th Cir. 1991), Merrill v.
County Stores, Inc., 669 F. Supp. 1164 (Dist N..Hampshire 1987). Also see unreported Prophet
Music, Inc. v. Shamla Oil Co., Inc. 1992 WL 3002204 (D. Minn.)
Section 17 U.S.C.A. ' 110(5), which is part of the copyright law, contains an exemption
from that law for certain radio and television transmissions involving copyrighted works. In
addition, there is legislative history of that statute. Both appear to indicate the statute was
intended to apply to private businesses, but the statute’s language appears broad enough to apply to
governments.
The exemption in Section 110(5) exempts radio and television transmissions as follows:
5(A) Except as provided in subparagraph (B), 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 a private home, unlessB
(I) a direct charge is made to see or hear the transmission; or
(ii) the transmission thus received is transmitted to the public;
Note that Subsection (A) does not contain any exemption for the use of radio transmissions
January 31, 2011
Page 2
by governments. The exemption therein is for “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....” That exception itself contains two exceptions: If there is a direct charge made to see
or hear the transmission, or the transmission thus received is further transmitted to the public. The
cases on the question of whether “on hold” transmissions of copyrighted work sent by a phone
system to persons waiting for their calls to be answered is a “further transmission to the public”
make it clear that the answer is yes; such audio systems do not reflect a “transmission on a single
receiving apparatus of a kind commonly used in private homes.” Standing alone, Section 5(A)
could be read to apply to any kind of establishment.
Subsection (B) contains another exemption for certain establishments. I am not going to
lay out most of it here, because, as I will point out below, it also contains an exception to the
exemption that rules out its application to “on hold” audio transmissions. Subsection (B) contains
one subset of eating and drinking establishments, and another subset for establishments other than
eating and drinking establishments. The subsets are based on size and sophistication of the audio
or audiovisual system at issue.
Likewise, Subsection (B) does not expressly exclude audio transmissions in government
buildings, but the legislative history of Section 110(5), and its mention of eating and drinking
establishments and “on hold” establishments might mean private business of other kinds.
However, if it is held that Section 110(5) applies to government phone systems that have a
“call hold” feature, Subsection (B)(iv) provides that “the transmission or retransmission [must not
be ] further transmitted beyond the establishment where it is received.” For that reason, it does
not appear to me that a determination need be made of the size of the establishment and what the
loudspeaker arrangement is under Subsection (B). The reason is that under Subsection (B)(iv),
when the “on hold” system, receives a call, and that system plays music to the callers who are on
hold, it almost always transmits or retransmits the call beyond the establishment where it was
received, because most such calls will be coming from outside the establishment.
But the legislative history of Section 110(5) is important because there are no cases on the
question of whether that statute applies to government telephone systems. Notes on the
Committee on the Judiciary, House Report No. 94-1476 declare that:
With respect to section 110(5) [c] (5) [of this section], the
conference substitute conforms to the language in the Senate bill.
It is the intent of the conferees that a small commercial
establishment of the type involved in Twentieth Century Music
Corp. v. Aiken, 442 U.S. 151 (1975) [parallel citations omitted by
me.], which merely augmented a home-type receiver and which was
not of sufficient size to justify, as a practical matter, a subscription
January 31, 2011
Page 3
to a commercial background music service, would be exempt.
However, where the public communications was by a means of
something other than a home-type receiving apparatus, or where the
establishment actually makes a further transmission to the public,
the exemption would not apply.
The legislative history speaks about the facts in Aiken:
On June 17, 1975, the Supreme Court handed down.... [Aiken], that
raised fundamental questions about the proper interpretation of
section 110(5) of this section. The defendant, owner and operator
of a fast-service food shop in downtown Pittsburgh, had “a radio
with outlets to four speakers in the ceiling,” which he apparently
turned on and left on throughout the business day. Lacking any
performing license, he was sued for copyright infringement by two
ASCAP members..... [which] finally prevailed by a margin of 7-2 in
the Supreme Court....
Under the particular fact situation in the Aiken case, assuming a
small commercial establishment, and the use of a home receiver
with four ordinary loudspeakers grouped within a relatively narrow
circumference from the set, it is intended that the performances
would be exempt under clause (5). However, the Committee
considered this fact situation to represent the outer limit of the
exemption, and believes that the line should be drawn at that point.
Thus, the clause would exempt small commercial establishments
whose proprietors merely bring into their premises standard radio or
television equipment and turn it on for their customers’ enjoyment,
but it would impose liability where the proprietor has a commercial
“sound system” installed or converts a standard home receiving
apparatus (by augmenting it with sophisticated or extensive
amplification equipment) into the equivalent of a commercial sound
system....
That legislative history appears to be concerned with private businesses, not governments.
It is also said in Broadcast Music, Inc. above, which also cited at length the legislative history of
the Section 110(5) exemption, that:
The legislative history reveals several reasons why Congress passed
the § 110(5) exemption. Congress thought it unfair to impose
liability on unsuspecting small business persons. Congress
January 31, 2011
Page 4
believed also that it was impractical to require small organizations
to enter into licensing agreements with performing rights
organizations. The secondary use of radio broadcasts in small
establishments, Congress also recognized, would have only a
minimal effect on authors’ incentives to create new works. [At1489]
Likewise, Merrill v. Country Store, above, 669 F.Supp. 1164 (Dist. Hampshire 1988),
declares that:
Copyright owners alleging infringement must also contend with
section 110(5) of that Act, codified at 17 U.S.C. § 1105(5), which
exempts certain small business establishments from having to
contract with organizations such as ASCAP before publicly playing
or rebroadcasting copyrighted musical works.... [At 1168]
But the fact that Aiken, and the above cases dealt with the applications of Section 110(5) to
business phone systems, is not conclusive on the question of whether that statute applies only to
businesses. As I pointed out, neither Section 110(5)(A) nor Section 110(5)(B) expressly exempt
governments. In addition Section 110(4) of the copyright law expressly contains exceptions for
governments (which are equally unclear, but do expressly apply to governments), in other
contexts. It is difficult to understand why the Congress would not have also expressly declared an
exemption to Section 110(5) for governments had it intended one.
Incidentally, there are exceptions in other contexts for governments’ uses of music and
other copyrighted materials under Section 110(4). Those exceptions can also be troublesome,
there also being no cases having arisen under that section. It seems to me that, given the relatively
inexpensive protection the ASCAP and BMI licensing agreement provides to municipalities,
entering into those agreements are, at the present, worthwhile. They afford some mental security to
municipal governing bodies’ and staff in that area. If and when cases arise that sort out municipal
liabilities under the copyright act under 17 U.S.C.A. § 110, such payments can easily be revisited.
As several copyright authorities have pointed out, ASCAP and BMI have very strong records of
winning cases under the copyright law. It is generally expensive to be a guinea pig.
Let me know if I can help you further in this or any other matter.
Sincerely,
Sidney D. Hemsley
Senior Law Consultant