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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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