At the Corner Pub, Are They Still Playing Your Song?

The long arm of economic globalization has reached into Flanagan’s Irish Pub with some unsolicited, unwelcome advice about music.

A year ago, owner Dennis Walsh was pleased to find that the royalties he pays to the music industry for the recorded tunes that patrons hear in his suburban Bethesda, Md., club had fallen about $100 a year--courtesy of a new federal law that exempted certain small restaurants and shops from royalties for music heard on radio or TV.

Now comes the World Trade Organization, the Geneva-based enforcement agency for global trade rules, with a preliminary ruling that the law violates copyright agreements the United States has signed with other countries. If the ruling is upheld--and at the WTO, they usually are--the U.S. must either change the law or accept sanctions.

A change in the law could mean that small restaurants and shops would swallow hard and pay up. Or, said Christina Howard, lobbyist for the National Restaurant Assn., “I think restaurants would just turn off the music.”

The situation illustrates the trade-off that countries make when they sign on to the world trading system. They get a place to resolve their own complaints against other countries, but also consent to WTO officials examining their laws in detail and making rulings that can lead to changes.

Not everyone is happy with that. “They can do what they want in their country,” Walsh said. “They don’t have any right to dictate to the United States.”

The music industry and restaurant owners have been natural enemies for years. Songwriters resent it when owners make free use of their music to generate ambience and sales; owners complain that copyright holders send people into their establishments with arbitrary demands for payment and threat of lawsuits. “Legal extortion” is the term used by Walsh, who pays about $1,400 a year in royalties.

‘Home-Style’ TV and Radio

In 1972, Congress passed legislation aimed at helping mom-and-pop shops, saying establishments using “home-style” TVs and radios--basically the type of equipment intended for use in a living room--wouldn’t have to pay royalties on that music. That law became the subject of litigation over, among other things, how small businesses would have to be to qualify.

In 1998, after lobbying by the National Restaurant Assn. and retail trade groups, Congress declared that the rule would apply to restaurants of 3,750 square feet or less and stores of 2,000 square feet or less, though chain operations owning many locations wouldn’t get the benefit.

Music industry officials say they’ve already felt a financial impact, as restaurants and stores began canceling TV and radio payments to Business Music Inc. and the American Society of Composers, Authors and Publishers, groups that collect royalty payments and pass them on to copyright holders.

One faraway party taking note of the U.S. law was the Irish Music Rights Organization in Dublin, which represents about 3,000 songwriters, lyricists and publishers in Ireland. Irish music was gaining popularity outside the country, and Irish musicians felt it wasn’t fair that the United States was denying them some of their royalties. The group estimates that its members are losing $3 million annually due to the U.S. law. Estimates of the Europe-wide effect are $26 million annually.

“These rights do exist everywhere else in the world,” said Eamon Shackleton, an official of the Irish Music Rights Organization. “American creators actually benefit from these rights that exist in Europe and Australia and Asia and all the rest.”

Irish Musicians Take Case to WTO

Those feelings are shared by individual artists, who feel they’re being denied something by restaurant and shop owners who flip on the radio or TV for their music.

“We’re providing a service and we’re helping them out,” said Mairead Ni Mhaonaigh, fiddler and lead singer of Altan, an Irish group that performed its traditional-style music on a U.S. tour this year. “So why shouldn’t they pay for it?”

So, at Irish behest, the European Union brought the issue to the WTO, where a three-member panel last fall heard arguments. Now it has reached a preliminary decision against the expanded U.S. law, saying that it violates the Berne Convention, the world’s main copyright agreement, as well as WTO rules.

It did not act against the original “home-style” equipment standard, however.

“We’re pleased that they upheld it on the home-style exemption,” said Brendan Daly of the Office of the U.S. Trade Representative, which defended the law in the Geneva proceedings. “We’re disappointed that they did not conclude the same with respect to the 1998 amendment.”

He said it was too early to say whether the U.S. would appeal, as that must await a formal ruling.