Private Use
on Musical Works, Rights of Public
Performance,
and Collecting Society Systems.
By'
Judge Visit Sripibool
applicability
to the rights of the Berne Convention implemented in TRIPS in the opinion
of the commission, Article 13 of TRIPS should not apply to the Aiken exemption,
if only because Section 110(5) of the Copyright Act does not provide for
royalties and hence does not represent a limitation provision within the
meaning of Article 13. The wording of Article 13 of TRIPS does not directly
indicate such a restrictive construction only to limitations while granting
a right to royalties. On the contrary, the wording of the provision indicates
that Article 13 of TRIPS must be regarded as a limitation rule going beyond
Article 9(2) of the Berne. It is unanimously agreed that Article 9(2)
of the Berne must be construed such that compulsory licenses and certain
exceptional royalty-free uses are permitted within the framework of the
reproduction right. Even Article 13 of TRIPS cannot allow more extensive
limitations, since compulsory licenses and exceptions not covered by Article
9(2) would necessarily infringe the Berne. In the interests of uniform
construction, it can therefore be argued that Article 13 of TRIPS must
be interpreted uniformly in the light of Article 9(2) of the Berne, even
where it concerns rights other than reproduction rights.
The Commission also argued similarly: if Article 13 of TRIPS is applied,
it must be construed in parallel with Article 9(2) of the Berne and hence
within the limits the latter permits. Thus, Article 13 of TRIPS is to
be construed such that the national limitations must be restricted to
certain special cases and may not impair the normal exploitation of the
work. Article 13 of TRIPS is aimed at creating national regulations whose
limits are open to determination by the national courts but which do not
unreasonably infringe the copyright holder's legitimate interests. It
is therefore appropriate to apply a restrictive interpretation. The new
provisions in the USA with wheir broad scope of application are not merely
restricted to certain special cases. Moreover, the normal commercial exploitation
of broadcast works of music in permanently impaired in an area that around
the world is left to the copyright holder for exploitation, at least with
the grant of a right to royalties. This construction, which takes into
account the values adopted in Article 9(2) of the Berne, prevents any
justification pursuant to Article 13 of TRIPS.
At the time of the conclusion of the Commission Examination, the bill
had not yet entered into effect. If the old Aiken exemption of Section
110(5) of the Copyright Act was incompatible with the Berne, this applies
all the more so to the now applicable legal position.
4. Existence of Obstacle to Trade
More difficult than the finding of a substantive law infringement of the
Berne and TRIPS is the qualification of the inner-state provision in Section
110(5) Copyright Act as an obstacle to international trade. In collaboration
with the collecting societies in the USA and Europe, the Commission made
detailed estimates of the commercial effects of the restrictive rule on
European rightholders. The reduction of income for U.S. copyright holders
justifies the conclusion that there will be a reduction of the transfer
of money to Europe.
In the cross-border enforcement of the rights in the repertoire of foreign
collecting societies and the settlement of the remunerations collected
from the international sister organizations regulated by the reciprocity
treaties, there has, in the opinion of the European societies, for years
been a lower flow of income in the relationship between the USA and Europe
than would be appropriate for the actual use of the European music of
20%-25% of the U.S. music market, only roughly 5% of revenue raised in
America is received by European collecting societies. The imbalance is
due to a number of factors, including the exemption in Section 110(5)
of the Copyright Act. Using specific tariffs of the U.S. collecting societies
and an estimate of the businesses affected by the new Aiken exemption,
the Commission applied various calculation methods and came to the conclusion
that approximately a loss can be expected of between 13% and 24% of the
current usual transfer of royalties, amounting to between US$3.8 and 6.8
million. The new regulation of the Copyright Act reduces European hopes
that the cross-border license revenue for music rights could be adjusted
more to actual conditions by means of international collaboration.
5. Reasonableness
of Appeal to WTO
Although the findings make by the Commission already showed an unjustifiable
infringement of the TRIPS obligations, the Commission's considerations
went beyond the direct financial effects of the exemption and discussed
the further consequences that might result from uncontested acceptance
of the amendment by the Europeans. The extent of these consequences indicate
that it is necessary to refuse to tolerate the infringement and to issue
a recommendation for the filing of dispute settlement proceedings.
First of all, there is cause for concern that even businesses where the
size or type of communication appliances means that they do not fall within
the statutory exemption are hardly likely to have themselves licensed
voluntarily by ASCAP, BMI or SESAC for the communication of music in the
light of the apparent trend towards exemption from royalties. Public awareness
will increasingly assume that music transmitted is entertainment to be
exploited free of charge, with the copyright holder already earning sufficient
license fees from the radio or television stations. The negative effect
on the licensing practice of collecting societies, which in future intend
to apply greater efforts to collecting copyright fees from those businesses
that do not fall under the exemption as a means of compensating for their
losses, will be reinforced by the fact that in future businesses that
regard themselves as exempt in the light of the vague test contained in
the legislation will in many cases only be compelled to pay licenses after
long and expensive litigation. This litigation will be pursued by the
collecting societies and will in turn be at the financial cost of copyright
holders.
A further aspect is the unequal treatment of broadcasts received and the
playing of video or sound recordings, which does not fall under the exemption
and continues to be subject to a fee. Although U.S. collecting societies,
even before the current legislative amendment, had practically abandoned
the licensing of smaller businesses, even if they were not subject to
the Aiken exemption or if they continued to use sound recordings requiring
a license for the provision of music on their premises, it is probable
that more attention will be paid to these license payments in the light
of the pending loss of income. Given the unjustified privilege for the
reproduction of broadcast music, collecting societies will also have to
deal with increased difficulties in the enforcement of their claims in
this sector.
Finally, the collecting
societies' negotiating position in the conclusion of overall agreements
with user associations will be weakened, since user associations will
see no occasion to conclude an agreement if the majority of their members
in any event benefit from an exemption. In this way, the negative effects
of the exemption will go commercially beyond the direct loss of the
copyright fees exempted by the statute and involve a number of other
aspects.
In the Commission's
opinion, it is to be feared that the U.S. example will be imitated in
other countries, in particular in Australia and Canada. Such bills are
already under discussion in Australia, while Section 69(2) of the Canadian
Copyright Act likewise exempts the public communication of television
and radio broadcasts from a licensing obligation. Filing proceedings
against the USA might indicate to these countries that European countries
will not accept a reduction in the standard of protection in breach
of the Convention.
As a final consequence,
the Commission also sees the risk of cultural changes. In view of the
reduced earning opportunities in the USA, it is possible that in the
long term less European music will be exported to the USA, while American
copyright holders and music publishers will make greater efforts to
exploit their rights in Europe owing to the deterioration in protection
in their own country.
V. Filing of Dispute Settlement Proceeding Pursuant to TRIPS/GATT
The results of the Commission's Examination prompted the Commission to
file WTO dispute litigation proceedings against the USA for breach of
the Berne and the TRIPS Agreement. With respect to international disputes,
Article 64 of TRIPS refers to the dispute settlement proceedings agreed
within the framework of the founding of WTO and binding on WTO members,
the so-called DSU, which in turn refers in part to the GATT dispute settlement
regulations. The WTO dispute settlement proceedings begin with a 60-day
consultation period between the disputing parties. If the consultations
are unsuccessful, the EU can demand the appointment of an arbitration
panel, which must decide on the dispute within a tight time schedule.
The EU filed the dispute settlement proceedings on January 26,1999. A
decision by the Panel also contains specific recommendation for remedying
the infringement of TRIPS. The parties are obliged to comply with the
decision immediately.
VI. Decision of
WTO Panel
In short, the WTO Panel based its decision on a careful analysis of Article
13 of the TRIPS Agreement. Article 13 was brought by the U.S. as the heart
of the case, as it claims and articulates in its view the scope of the
minor exceptions doctrine.
The Panel first rejected the arguments brought by the U.S. that a value
judgment on the legitimacy of the exception requires to take into account
the interests of small businesses because "they offer economic opportunities
for women, minorities, immigrants and welfare recipients for entering
the economic and social mainstream". Instead, the Panel adopted a
strict three-criteria test under Article 13 of TRIPS, examining whether
the limitations and exceptions to exclusive rights are (1) confined to
special cases, (2) do not conflict with a normal exploitation of the work,
and (3) do not
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