Legislature(1995 - 1996)
04/22/1996 01:35 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 copyright." 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 nature. 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.