Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.
FIDDLING WITH IRISH MUSIC ROYALTIES IN THE WTO
The wee organization that took on the U.S. copyright system
Black Velvet Band, Molly Malone, ,The Fields of Athenry, Wild Mountain Thyme and Danny Boy are among Ireland’s most famous exports. Irish bouzoukis, Uilleann pipes and Celtic harps render traditional Irish music as unmistakable as it is beloved – a cultural connection for millions of Americans to their roots.
Over ten percent of the population, or 32.6 million Americans, claimed Irish ancestry in a 2017 U.S. Census Bureau survey. That affinity (along with Irish beers and whiskeys) explains the popularity of Irish pubs throughout the United States.
The Irish music playlist broadcast in thousands of pubs and restaurants is why a small outfit called the Irish Music Rights Organization (IMRO) twenty years ago convinced the European Commission to sue the United States in the World Trade Organization (WTO). At issue is an exception in U.S. copyright law that enables U.S. businesses to play music without paying royalties to the creators. The United States lost the WTO case known as “Irish Music,” but has yet to restore rights to Irish performers.
Pay to Play
Generally speaking, when copyrighted music is played in a small boutique, while getting a filling at the dentist, or to motivate your workout at the gym, the creators of the music are owed a royalty. It would be cumbersome for many such businesses to pay that directly, so performance rights organizations (PROs) collect licensing fees that they pass on to registered singers, songwriters and music publishers. In the United States, the two largest PROs are The American Society of Composers, Authors and Publishers and Broadcast Music, Inc.
Section 110(5) of the 1976 U.S. Copyright Act included a “homestyle exemption” to this rule that allowed small commercial establishments to avoid the royalty payment. A business could qualify for the exemption if it broadcasts through a single radio or audiovisual device that is of the type commonly used in one’s home. The Senate report accompanying the Act characterized such use as “for the incidental entertainment of patrons in small businesses and other establishments, such as taverns, lunch counters, hairdressers, dry cleaners, doctors’ offices, etc.” The provision became known as the Aiken exemption after the Supreme Court victory of George Aiken who played his radio for customers in his fast-food chicken restaurant.
Over the years, application of the law was repeatedly litigated due to its ambiguity. Rather than clarifying a narrow interpretation, Congress expanded the exemption through the 1998 Fairness in Music Licensing Act to allow all establishments under a certain square footage to play licensed music for their customers regardless of the type of sound system employed. Going a step further, Congress created the “business exemption” which allows businesses of any size to play licensed music if the number and location of loudspeakers is limited, if the establishment does not charge to see or hear the music transmitted, and if the broadcast is not transmitted beyond that establishment.
Broadcasting from both sides of our mouths
Article 9 of the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) requires WTO members to comply with Articles 1 through 21 of the Berne Convention for the Protection of Literary and Artistic Works that guarantee the rights of copyright owners. Any limitations or exceptions should be confined to certain special cases and should not “unreasonably prejudice the legitimate interests of the right holder.”
In 2000, a WTO dispute settlement panel agreed with the European Communities’ contention that section 110(5) of the U.S. Copyright Act violates the United States’ TRIPS obligations. The “homestyle exemption” as provided in section 110(5)(A) was deemed sufficiently narrow as to not prejudice the rights of copyright owners. Some 13 to 18 percent of U.S. business establishments would be covered. The “business exemption” in section 110(5)(B) however, expanded covered establishments to more than 70 percent of bars and restaurants (and 45 percent of retail), causing unreasonable prejudice to the legitimate interests of copyrights holders.
In other words, if the majority of food and drink establishments could avoid paying royalties to copyright holders of Irish music, the exception had become the rule.
An Irish goodbye
The United States accepted the panel findings and agreed to binding arbitration to determine a deadline for compliance and to determine the damages (known in WTO parlance as the level of “nullified or impaired benefits”) to the European Communities, which was set at 1,219,900 euros or about $1.1 million annually. Europe extended a December 31, 2001 deadline to provide time for the U.S. administration to work with Congress on an amendment to the copyright law.
The White House could not secure Congress’ approval so Europe agreed to negotiate a settlement. In June 2003, the United States and European Communities notified the WTO Dispute Settlement Body that the parties had reached a “mutually satisfactory temporary arrangement.”
The United States would make a one-time, lump-sum payment of $3.3 million covering a three-year period paid into a fund set up by European performing rights societies “for the provision of general assistance to their members and the promotion of authors’ rights.” The parties further agreed that, if the dispute has not been resolved three years on, they would enter into consultations to reach a durable resolution, foreshadowing what would become a never-ending exchange of letters.
In a November 2004 document labeled WT/DS160/24, the United States pledged to “work closely with the U.S. Congress and will continue to confer with the European Union in order to reach a mutually satisfactory resolution of this matter.” Every time Europe raises the outstanding item in WTO meetings, it is met with the exact same addendum to WT/DS160/24, restating the U.S. administration’s commitment (whether it be President George W. Bush, Barack Obama or Donald Trump) to work with Congress. As of February 2020, the United States had issued 179 such addendums.
The WTO’s dispute settlement mechanism was designed to encourage members to resolve disputes through consultation. Consultations can sometimes avert use of formal dispute settlement procedures or avoid the imposition of retaliatory measures once a dispute settlement panel renders a decision.
The intent of consultations is to bring WTO-inconsistent measures into conformance with a member’s obligations. In the “Irish Music” case, the United States provided compensation rather than fix the offending measure (and Europe agreed as a temporary solution). But the WTO’s Dispute Settlement Understanding itself states that compensation should be resorted to “only if the immediate withdrawal of the measure is impracticable and as a temporary measure pending the withdrawal of the measure which is inconsistent with a covered agreement.”
In this case, the United States stretched “temporary” into twenty years of non-compliance, to the detriment of the rights of European music creators and the rights of other WTO members. The outcome also undercuts the very intellectual property rights the United States fought to include in TRIPS on behalf of American copyright holders.
Modern musical arrangements
In the meanwhile, sound systems and methods of “transmission” have evolved rapidly. Streaming delivers 75 percent of the music industry’s global revenues today. At this point, it seems pretty unlikely that your local Irish pub is using a radio on a shelf to play music.
The Recording Industry Association of American (RIAA) says charges for licensing account for 16 percent of total U.S. services exports. RIAA is working to ensure global copyright protections for sound recordings as digital products. Copyright enforcement in the digital realm requires measures to control access to content such as encryption and password protections, clarification of responsibilities by Internet service providers that may play host to copyright-infringing websites, and enforcement actions against so-called “stream-ripping” sites that allow free downloads of copyright-protected recordings. This may require new provisions in trade agreements, even as the United States remains out of compliance with some of its old commitments regarding “Irish Music” copyright protections.
We’re all Irish on St. Paddy’s Day
In its 1995 appeal to the EC to bring the Irish Music case, the Irish Music Rights Organization argued that the Chieftains, The Pogues, and other European creators lose as much as 28 million euros each year, not to mention hundreds of millions for American creators whose royalties also go unpaid.
Instead, it’s American bar crawlers who unknowingly benefit. Now that you know, this St. Paddy’s Day, you may as well hoist a Guinness to toast the U.S. copyright law exception that enables you to belt out a rendition of Molly Malone as it plays on the sound system – for free – at your local Irish pub.