Legislature(1995 - 1996)

04/22/1996 01:35 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 SB 263 - COPYRIGHT ROYALTIES AND LICENSING                                  
 SHERMAN ERNOUF, Legislative Aide, Senate Labor & Commerce Committee           
 testified on SB 263.  Mr. Ernouf paraphrased the sponsor statement.           
 This legislation was introduced in response to a growing outrage              
 amongst Alaskan restaurateurs at the heavy handed enforcement and             
 arbitrary pricing of the national music licensing giants.  The main           
 purpose of this legislation is to level the contractual playing               
 field between small businesses and the large multi-billion dollar             
 licensing giants such the American Society of Composers, Authors              
 and Publishers (ASCAP), Broadcast Music, Inc. (BMI) and SESAC (?).            
 As required under Federal Copyright Law, a restaurant, retailer or            
 any establishment which plays background music or has a television            
 on it's mandatory for them to pay for the music they listen.                  
 Currently restaurants are held liable even for the music played               
 during television commercials and sports programs.  ASCAP, BMI,               
 SESAC and other companies are authorized to collect licensing fees            
 and are often overzealous in their enforcement of their copyrights.           
 Local Alaskan restaurateurs have become increasingly alarmed by the           
 abusive collection practices, discriminatory enforcement, and                 
 random pricing by these organizations.  SB 263 seeks to remedy                
 these concerns by leveling the playing field between these                    
 licensing giants and the local restaurateur.                                  
 The State of Alaska cannot regulate federal copyright laws, but               
 they can regulate the dealings between these two parties, more                
 specifically the contracts.  SB 263 requires a copyright owner to             
 provide notice before entering into a contract with a business                
 proprietor.  This notice must be received at the time of the offer            
 or within 72 hours of entering into the contract.  The notice must            
 contain the rates and terms of the contract, a toll-free number               
 which the business owner can use to contact the licensing agents              
 with questions, and notice that the most recent list of works from            
 the performing rights society's repertoire will be available                  
 through the CHARR Association.                                                
 Further, SB 263 sets a mandatory minimum level of contents for                
 royalties contracts.  A royalties contract must be in writing and             
 signed by the parties.  It must be completed in one year.  The                
 contract should also include: (1) the business proprietors name,              
 address, and location to which the contract applies, (2) the                  
 duration of the contract, and (3) the terms for royalty collection            
 and a rate schedule for royalties.  Collection of royalties will              
 not be permissible if the contract does not meet the enumerated               
 minimum standards.                                                            
 SB 263 also requires a copyright owner or society to disclose to a            
 business proprietor or the business proprietor's employees the name           
 of the copyright owner or society before discussing a contract or             
 the use of copyrighted works.  There have been instances where                
 these copyright representatives enter an establishment unannounced,           
 they "snoop" around, they send a bill and threaten legal action to            
 coerce the proprietor.  Under SB 263, a business proprietor can               
 bring a civil action against a copyright owner or society for the             
 violation of any of the above requirements.  This is a result of              
 the coercion factor which has been going on.  Some of these small             
 businesses cannot afford the threat of a lawsuit.                             
 MR. ERNOUF stated that this legislation has had no opposition.  The           
 Senate Judiciary Committee made some significant amendments to it             
 with the licensing giants.  It passed the Senate unanimously.  20             
 other states already have this legislation and there are at least             
 13 or 14 working on similar legislation presently.                            
 Number 1111                                                                   
 REPRESENTATIVE BUNDE stated he was very concerned about business              
 owners in the state who are signing contracts without knowing what            
 they involved and questioned why the state should push through                
 legislation to keep them from doing dumb things.                              
 MR. ERNOUF responded that these individuals sign these contracts,             
 but they are provided the tapes or the music itself.  These                   
 societies represent certain musicians, but they don't always make             
 it clear what types of works they cover.  Live bands are also a               
 problem, which has not been specifically addressed with this bill,            
 if these bands are playing cover music which is licensed through              
 one of these agents.  "It's a pretty tricky scenario."  This is               
 more of a national movement to do this since there have been some             
 arbitrary cases.  For example, one restaurant is charged one                  
 licensing fee and another restaurant is charged double or triple.             
 REPRESENTATIVE BUNDE noted that in response to these licensing                
 representatives entering these establishments unannounced.  "They             
 are doing that because Alaska is notorious for being out of                   
 compliance and basically stealing this entertainment without paying           
 Number 1161                                                                   
 MR. ERNOUF responded that he didn't have any personal knowledge of            
 this fact and what he does know is from witness testimony.  He knew           
 on one occasion that a licensing representative was rifling through           
 tapes in the back room to see if their's were licensed without                
 announcing their presence.  This is a problem and he didn't feel              
 this legislation was overreaching in any way.  There is national              
 effort to clear this problem up and Congress is dealing with it on            
 a national level as well.                                                     
 REPRESENTATIVE GREEN asked if this legislation conflicted with                
 copyright law.                                                                
 MR. ERNOUF responded that no, this wouldn't be the case.                      
 "Basically copyright law provides that you pay for this, I don't              
 think bill has anything to, it's not saying that people should get            
 away with not paying for copyrighted materials that they use.  What           
 it is saying is, it's saying we can regulate the contracts that               
 exist between these parties, enforce a certain level of contractual           
 dealings between the parties to prevent overreaching.  A strong               
 multi-billion dollar corporation against a local bagel shop owner             
 is not really a level playing field."                                         
 Number 1235                                                                   
 CHAIRMAN PORTER asked if they found themselves in this position               
 because of a federal law, regulation on copyright, or was there a             
 court case decision.                                                          
 MR. ERNOUF said he didn't think there was a case.  He again                   
 mentioned the national movement concerning this issue, but didn't             
 think it resulted from a particular case or anything of that                  
 Number 1325                                                                   
 CHAIRMAN PORTER asked if there was a Ruth Hamilton from ASCAP to              
 testify.  She was not present, but the committee members read                 
 written testimony submitted by Ms. Hamilton instead.  This can be             
 found in the committee packet.  Chairman Porter noted that ASCAP              
 was suggesting two technical changes to the legislation and Mr.               
 Ernouf was familiar with these.  These two technical changes are              
 reflected as follows:                                                         
 "First, subparagraph (3) of Section 45.45.500 provides that the               
 most recent listings of copyright members, their affiliates and               
 copyrighted works are available to business proprietors on                    
 'electronic media' through CHARR.  It is not entirely clear what              
 'electronic media' means.  ASCAP maintains, and we believe CHARR              
 concurs, that 'electronic media' in this context means the Internet           
 and other contact with ASCAP currently has with CHARR's parent                
 association providing the list of members and their works.                    
 Second, Section 45.45.510(b) of the bill provides that contracts              
 made pursuant to 'national agreement' are not subject to a one-year           
 contract term.  However, there is no such copyright licensing                 
 contract called a 'national agreement.'  Rather, the standard                 
 contract is called a 'uniform agreement,' which is used on a                  
 routine basis between performing rights societies and business                
 proprietors.  Thus, the term 'national agreement' does not                    
 appropriately identify the type of contract entered into for the              
 performance of copyrighted works in a place of business."                     
 CHAIRMAN PORTER stated that in other words there is a current                 
 electronic media system using the internet and he thought that for            
 the record he had no problem with accepting that it is the statute            
 or bill proposes.  Mr. Ernouf agreed.  Secondly, he wouldn't have             
 a problem noting for the record that their interpretation of the              
 term "national agreement" would probably coincide with theirs that            
 means "uniform agreement."  Mr. Ernouf said he had no problem with            
 this either.                                                                  
 Number 1460                                                                   
 REPRESENTATIVE GREEN made a motion to move SB 263(JUD) from the               
 House Judiciary Committee with individual recommendations and                 
 attached fiscal note.  Representative Bunde objected.                         
 REPRESENTATIVE BUNDE spoke to his objection.  "It sounds like some            
 people negotiate good deals and some not so good.  This is a                  
 federal concern, there are revisions coming federally.  It sounds             
 to me like this is protectionist legislation and I'm generally not            
 in favor of protectionist legislation."                                       
 CHAIRMAN PORTER stated for the record that he has heard reports to            
 the contrary.  Some of these licensing operations are really                  
 nefarious in their methods.  It's like regulating other industries            
 when they show that they need it.  He didn't see anything in the              
 legislation which gets someone out of having to pay.                          
 Number 1560                                                                   
 REPRESENTATIVE BUNDE withdrew his objection.                                  
 CHAIRMAN PORTER moved SB 263(JUD) as so described.                            

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