         .   .     .




                           The Attorney             General          of Texas
                                                October     31,   1978
JOHN L. HILL
Attorney General


                                                                     Opinion No. I-i- 12 6 0

                                                                     Re: Application     of Copyright
                                                                     Revision Act of 1976 to perfor-
                                                                     mances of musical works at state
                                                                     colleges and universities.



                              You inquire about the application of federal copyright law to musical
                       performances at state colleges and universities.   The Copyright Revision Act
                       of 1976, 17 U.S.C. SS 101-810, gives a copyright owner the exclusive right to
                       authorize the public performance of his musical works, subject to the Fair
                       Use Doctrine and certain specific exceptions.    17 U.S.C, SS 106(4); 107; 110.
                       Other persons who wish to-perform copyrighted music publicly must secure
                       the copyright holder’s permission, usually by paying him a licensing fee. -See
                       17 U.S.C. S 501(a).

                              Many copyright owners have authorized private performing rights
                       organizations, the American Society of Composers, Authors, and Publishing
                       (ASCAP) and Broadcast Music, Inc. (BMD, to license their works. These
                       organizations have asked state supported colleges and universities to sign
                       blanket licensing agreements, which require the payment of a yearly fee in
                       exchange for the right to perform any composition in the society’s repertory.
                       The fee is based on the institution’s enrollment and the number of major
                       concerts it holds each year.

                               You first ask whether state supported colleges and universities must
                       secure permission for the performance of copyrighted works on campus.
                       Although prior law required a license only when a performance was “for
                       profit,” Act of July 30, 1947, ch. 391, S 104, 61 Stat. 652; see also Annot., 23
                       A.L.R. Fed. 974 (1975), the new law also requires licenir              nonprofit
                       performances, with certain specific exceptions. The following provisions are
                       most relevant to your questions:

                                  Notwithstanding   the provisions of section 106 [17
                                  U.S.C. S 1061, the following are not infringements of
                                  copyright:
                                     (1) performance or display of a work by instructors
                                     or pupils in the course of face-to-face    teaching




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        Honorable Lloyd D. Vincent     -   Page 2      (H-1260)



                   activiti~es of a nonprofit educational institution, in a class-
                   room or similar place devoted to instruction. . .;

                   . . . .

                   (4) performance of a nondramatic literary or musical work
                   otherwise than in a transmission to the public, without any
                   purpose of direct or indirect commercial advantage and
                   without payment of any fee or other compensation for the
                   performance       to any of its performers,       promoters,  or
                   organizers, if -
                          (A) there is no direct or indirect admission charge; or
                           (B) the proceeds, after deducting the reasonable
                           costs of producing the performance,            are used
                           exclusively for educational, religious, or charitable
                           purposes and not for private financial gain, except
                           where the copyright owner has served notice of
                           objection to the performance        under the following
                           conditions;
                               (i) the notice shall be in writing and signed by the’
                               copyright owner or such owner’s duly authorized
                               agent; and
                               (ii)    the notice shall be served on the person
                               responsible for the performance at least seven
                               days before the date of the performance, and shall
                               state the reasons for the objection; and
                               (iii) the notice shall comply, in form, content, and
                               manner of service, with requirements        that the
                               Register     of Copyrights      shall prescribe   by
                               regulation;

        17 U.S.C. S ll0. Section 110(Z)exempts the performance    of musical works in certain
        instructional broadcasts.

               In our opinion, these provisions do not exempt all uses of copyrighted music
        which customarily occur at state colleges and universities.      Section llO(1) excepts
        the performance of a work in the course of face-to-face teaching activities.        The
        exempted teaching activities do not include performances given for the entertain-
        ment of any part of the audience.       l-l. R. Rep. No. 1476, 94th Cong., 2d Sass. 81
        (1976) reprinted in t19761 U.S. Code Cong. & Ad News 5659, 5695 [hereinafter cited
        as PI. R. Rep. No. 14761.

               Section llO(4) states the conditions under which an institution   may hold
        noninstructional  public performances    without securing permission to use copy-
        righted works. There are two threshhold conditions. The performance must be (1)
        without the purpose of direct or indirect commercial advantage and (2) without
        payment of a fee or compensation to any performer, promoter, or organizer. The




                                             p.     4993
Honorable Lloyd D. Vincent      -   Page 3   (H-1260)



first condition requires that the performance be nonprofit; a free performance
sponsored in connection with a profit-making enterprise is “for profit.” H. R. Rep.
No. 1476 at 85; see Herbert v. Stanley Co., 242 U.S. 591 (1917) (performance of
music in restaurant to entertain guests was public performance).          The second
condition is designed to prevent the free use of copyrighted material where fees or
percentages are paid to performers, promoters, and producers. H. R. Rep. No. 1476
at 85. However, it does not prevent the free use of copyrighted material where the
performers and organizers receive a salary for duties encompassing the perfor-
mance instead of being paid directly for the performance.       A legislative report
gives as an example a school orchestra performance directed by a music teacher
who receives an annual salary. g In the case of colleges and universities, musical
performances in which salaried employees participate as organizers, directors or
performers would fit the second condition.      However, if an outside performer
receives a fee for an appearance, the second condition would be violated, and
permission for his use of copyrighted material would have to be secured.

       Once the threshhold conditions in section llO(4) are satisfied, one of two
additional standards must also be met. Either there must be no direct or indirect
admission charge, or the proceeds must be “used exclusively for educational,
religious, or charitable purposes and not for private financial gain.” Thus, a
university could charge admission for a concert by the student orchestra, but would
not have to seek permission to use copyrighted music if the proceeds were used for
bona fide educational purposes.     H. R. Rep. No. 1476 at 86. Section 110(4)(B)
empowers the copyright owner to stop a performance for which ,admission is
charged by serving notice on the person responsible for it at least seven days in
advance.    The burden is on the copyright owner to object in accordance with
procedures established by federal regulations.  See 42 Fed. Reg. 64, 684 (1977) (to
be codified as 37 C.F.R. S 201.13(c)); 17 U.S.CT.      (Supp. 1978). Whether the
proceeds of concert admission fees are used for educational purposes must be
determined on the facts of each case.

       You suggest that article 3, section 51 of the Texas Constitution, which forbids
the   gift of public funds, would prevent you from signing blanket license
agreements.    We believe you may pay license fees, consistently with article 3,
section 51, for performances not within the exceptions of section ll0, such as a
performance ,by an outside person who receives a fee for his appearance.              In
addition, when a copyright holder objects to a proposed performance pursuant to
section 110(4)(B), payment of licensing fees will undoubtedly be necessary to secure
the withdrawal of his objection.      Under these circumstances,     the licensing fees
would generally constitute a reasonable expense of authorized university activities.

      Whether or not an institution    may also enter into a particular licensing
agreement depends upon all the relevant facts. Article 3, section 51 requires that
the college or university receive adequate consideration for its payment of license
fees. See Dodson v. Marshall, 118 S.W.2d 621 (Tex. Civ. App. - Waco 1938, writ
dism’d);ttorney    General Opinions H-520 (1974); H-403 (1974). The adequacy of
consideration received for licensing fees depends on such factors as the extent to




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        Honorable Lloyd D. Vincent      -   Page 4      (H-1260)



        which the school will use music covered by the license in nonexempt performances,
        the administrative  convenience afforded by the blanket licensing scheme, and the
        costs of securing permission for performances through alternative    means. This
        determination is for college and university authorities.

                You also ask whether these agreements violate federal anti-trust             laws.
        Combinations to restrain competition or fix prices in performing rights can violate
        federal anti-trust laws. Alden-Rochelle, In& v. American Society of Composers,
        Authors and Publishers, 80 F. Supp. 888 (S.D.N.Y. 1948); Alfred Bell & Co., Ltd, v.
        Catalda Fme Arts, Iii& 74 F. Supp. 973 (S.D.N.Y. 1947). ASCAP has been th;
        defendant in Ianti-trust suits brought by the Department of Justice and is operating
        under a 1950 consent decree entered in the District Court for the Southern District
        of New York.         Columbia Broadcasting System, Inc. v. American Societv of
                                                CCn 73
        Composers, Authors, and Publisher-‘s, ~0.z     n.. 3-n
                                                    r.zo   ~a” I..>
                                                               \zo “I-
                                                                    Lir. -377),
                                                                         I:     cert. granted, 47
        U.S.L.W. 3187 (U.S. Oct. 3, 1978;T (Nos. 77-1578, 77-15831, [hereinafter CBS v.
           CAP].     Although the consent decree authorizes the district court to set a
        reasonable licensing fee when a licensee and ,ASCAP cannot agree, private
        plaintiffs are not restricted to this method of pressing claims against ASCAP. E
        at 134, 139.

               The Columbia Broadcasting System recently sued ASCAP and BMI, alleging
        that their blanket licensing method violated the Sherman Act. 15 U.S.C. S 1; CBS
        ASCAP, supra, at 132. The performing rights associations offered television
        stations an annual license and a per program license, but CBS sought a method of
        licensing which reflected its actual use of music. They alleged that the blanket
        licensing system constituted an illegal tying or block-booking arrangement, in that
        the station was compelled to pay license fees for music it did not use, in order to
        license the music it wanted.      The trial court found no anti-trust     violations.
        Columbia Broadcasting System, Inc. v. American Society of Composers, 400 F.
        supp. 737 (S.D.N.Y. 1975).

                The court of appeals reversed, holding that the blanket licensing agreement
        constituted an illegal price-fixing device, because copyright owners received an
        artificial price through combining to sell their product. CBS v. ASCAP, 562 F.2d at
        136. Price fixing may be legal when it is absolutely necessary for the market to
        function at all. Ia, However, the court accepted the trial court’s conclusion that
        television stations could negotiate directly for performing rights, and held that the
        price fixing scheme could not be saved by a “market necessity” defense. & at 140.
        See K-91, Inc. v. Gershwin Publishing Corp., 372 F.2d 1 (9th Cir. 1967) cert. denied6
        389 U.S. 1045 (1968). I-
               The agreements offered to state colleges       and universities by the performing
        rights societies resemble in significant respects    the blanket licensing agreements at
        issue in CBS v. ASCAP. They in fact offer              less flexibility since there is no
        provision for per program or per performance          licensing.     Whether or not these
        agreements violate the anti-trust laws depends       on the facts relating to the college




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     Honorable Lloyd D. Vincent     -   Page 5       (H-1260)



     and university market for performing     rights. Facts showing coercion would tend to
     prove illegal block booking, see 400      F. Supp. at 749-51, while facts showing the
     feasibility of direct negotiationwould     undermine the market necessity defense to
     price fixing. We do not resolve fact      questions in the opinion process and cannot
     determine whether these agreements         would constitute restraints of trade as a
     matter of law.

                                        SUMMARY

                State colleges and universities must secure the copyright
                holder’s permission for their musical performances unless
                the performance is exempted by section 107 or ll0 of the
                Copyright Revison Law of 1976. Payment of licensing fees.
                to secure permission for such performances            would not
                violate article 3, section 51 of the Texas Constitution.   State
                institutions of higher education may pay for blanket licenses
                from performing rights societies if they receive adequate
                consideration for the payment.      Whether or not the blanket
                licensing agreements violate the federal anti-trust laws is a
                fact question.

                                                q   Very truly yours,




     APPROVED:




     DAVID M. KENDALL, First Assistant



     a
     C. ROBERT HEATH. Chairman
     Opinion Committee




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