Broadcast Music, Inc. v. Claire's Boutiques, Inc.

• Decision Date: 11 December 1991
• Docket Number: No. 91-1232,91-1232
• Citation: 949 F.2d 1482
• Parties: , 1992 Copr.L.Dec. P 26,842, 21 U.S.P.Q.2d 1181 BROADCAST MUSIC, INC., et al., Plaintiffs-Appellants, v. CLAIRE'S BOUTIQUES, INC., d/b/a Claire's Boutiques, and d/b/a Arcadia, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1482

949 F.2d 1482

60 USLW 2409, 1992 Copr.L.Dec. P 26,842,

21 U.S.P.Q.2d 1181

BROADCAST MUSIC, INC., et al., Plaintiffs-Appellants, v. CLAIRE'S BOUTIQUES, INC., d/b/a Claire's Boutiques, and d/b/a Arcadia, Defendant-Appellee.

No. 91-1232.

United States Court of Appeals Seventh Circuit.

Argued Sept. 4, 1991.

Decided Dec. 11, 1991.

Nicole J. Klimisch, Robert G. Krupka (argued), Sharon E. Kohn, Kirkland & Ellis, Chicago, Ill., for plaintiffs-appellants.

Jeffrey P. DeJong, Gail J. Berritt, Altheimer & Gray, Chicago, Ill., Andrew H. Bart (argued), Pryor, Cashman, Sherman & Flynn, New York City, for defendant-appellee.

Monica L. Thompson, Keck, Mahin & Cate, Chicago, Ill., Bernard Korman, Ann Chaitovitz, American Soc. of Composers, Authors and Publishers, New York City, for American Soc. of Composers, Authors and Publishers, amicus curiae.

George E. Greer, Roberta R. Katz, Louisa Barash, Heller, Ehrman, White & McAuliffe, Seattle, Wash., for Muzak Ltd. Partnership, amicus curiae.

Before CUMMINGS, WOOD, Jr., and KANNE, Circuit Judges.

CUMMINGS, Circuit Judge.

When must the corporate owner of a chain of retail stores pay copyright license fees for playing radio broadcasts in its stores? Plaintiffs Broadcast Music, Incorporated ("BMI") and various named song publishers ¹ sued defendant Claire's Boutiques, Incorporated ("Claire's") for violating copyrights in certain musical compositions. The plaintiff publishers own the copyrights in the compositions at issue but grant to BMI the right to license public performances of these compositions. Claire's, which owns and operates a chain of over 700 retail stores, defended BMI's allegations in the district court by claiming shelter in § 110(5) of the Copyright Act. Section 110(5) exempts under certain circumstances persons who play their radio or television in a public place if received by a single receiving apparatus of a kind commonly used in private homes. Both parties moved for summary judgment. The district court granted Claire's motion, and BMI appealed.

I. FACTS

Pursuant to the district court's request, the parties stipulated to the following facts for the purposes of their summary judgment motions.

A. The Parties

BMI is a non-profit performing rights organization expressly recognized by the Copyright Act. See 17 U.S.C. § 116(e)(3). Individual publishers grant to BMI a non-exclusive right to license public performance rights in their musical compositions. Besides BMI, the plaintiffs in this case own the copyrights to 88 musical compositions that are the subject of this action. ²

Claire's owns and operates 719 stores under the name Claire's Boutiques and 30 stores under the name Arcadia. These retail establishments are located throughout the United States and are open to the public during normal business hours. Claire's stores range in size from 458 square feet to 2000 square feet. The average size of a Claire's Boutique store is 861 square feet, and 628 of the Boutique stores are less than 1055 square feet. The average size of each Arcadia store is 2022 square feet, and 27 out of the 30 Arcadia stores are greater than 1055 square feet.

During fiscal year 1990, Claire's had net sales of $168,674,000 and earned $13,402,000 in net income. The Claire's Boutiques stores accounted for the majority of these sales ($165,767,233).

B. Claire's Sound System

Claire's has a policy to provide the following stereo components to each of its stores: a Radio Shack Optimus STA-20 5-watt stereo receiver, two Realistic Minimus 7 speakers, an indoor antenna, and speaker wire. As a general rule, Claire's ships a radio receiver to each new Claire's store. ³ General contractors install the speakers and associated wiring pursuant to corporate specifications designed to conceal the wiring as much as possible. Stereo receivers are a stock item furnished to each store as a matter of course based on a supply requisition form. When a receiver breaks, the store manager simply orders a replacement receiver from the corporate purchasing manager. In the three and a half year period from 1987 to July 1990, Claire's purchased at least 527 receivers, 1240 speakers, FM antennas, and speaker wire at a total cost of $108,112.42. Claire's currently owns and operates at least 669 receivers and 1338 speakers.

The individual Claire's Boutiques and Arcadia stores use the receivers provided by corporate headquarters to receive and play radio broadcasts during regular business hours. Prior to their acquisition by Claire's in October 1989, the Arcadia stores subscribed to a commercial background music service. In addition, 24 Claire's Boutiques stores had a trial subscription to a commercial background music service. Claire's ended both its subscriptions because it concluded that its employees preferred listening to the radio.

The receivers are ordinarily kept in a small storage room at the back of Claire's stores. ⁴ The door between this room and the selling area is typically closed during business hours. Two strands of speaker wire run from the speaker jacks in the back of the receiver to speakers in the store's selling area. Both strands run through a hole in the wall separating the storage room from the selling area. One strand is attached to a speaker that is hung from the ceiling in the rear corner of the selling area. The other strand of wire runs above the dropped ceiling and is connected to the second speaker which is also hung from the ceiling. The first speaker is an average of 5-15 feet from the receiver, and the second speaker is an average of 20-35 feet from the receiver. Both speakers are hidden by a decorative dropped ceiling.

C. The Parties' Dispute

BMI claims that Claire's violates the Copyright Act by playing radio broadcasts in its stores without first obtaining a license from BMI. BMI has offered to provide Claire's with a license at an annual cost of $240 for the first location and $45-$60 for each additional location. One license agreement would cover all of Claire's locations that use receivers to play radio broadcasts. For all the Claire's stores involved in this litigation, the annual BMI licensing fee would be $40,385, an average of $53.92 per store.

Claire's counter-offered to license only its stores that are in excess of 1055 square feet on the condition that BMI not seek to license those Claire's stores with less than 1055 square feet. BMI rejected Claire's counter-offer and commenced this litigation.

D. The Trial Court Proceedings

BMI filed its complaint against Claire's on July 10, 1990, alleging 88 counts of copyright infringement. On September 5, 1990, Claire's filed an amended answer that included a counterclaim seeking declaratory judgment that Claire's is exempt from licensing requirements pursuant to 17 U.S.C. § 110(5). Claire's also raised several affirmative defenses, including copyright misuse, laches, and unclean hands. ⁵ On November 19, 1990, Claire's filed a motion for summary judgment seeking a ruling that it was exempt from liability under § 110(5). On December 3, 1990, BMI filed a cross-motion for summary judgment on the issue of Claire's liability for copyright infringement. The district court agreed with Claire's that it was exempt under § 110(5), granted Claire's motion for summary judgment, and dismissed the complaint on December 28, 1990. Broadcast Music, Inc. v. Claire's Boutiques, Inc., 754 F.Supp. 1324 (N.D.Ill.1990).

II. ANALYSIS

The district court's ruling was based on stipulated facts. The only issue raised on appeal--whether Claire's is exempt under § 110(5) of the Copyright Act--is a question of law subject to de novo review. Summary judgment will be affirmed only if Claire's is entitled to prevail as a matter of law on the basis of the stipulated facts. See Campbell v. White, 916 F.2d 421, 422 (7th Cir.1990), certiorari denied, --- U.S. ----, 111 S.Ct. 1314, 113 L.Ed.2d 248 (1991). Any necessary inferences from the facts must be drawn in the light most favorable to BMI. Id.

The owner of a copyright in a musical work has the exclusive right "to perform the copyrighted work publicly." 17 U.S.C. § 106(4). One obvious example of a public performance is a live musical concert before a substantial paying audience. A live concert, then, is an infringement unless it is licensed or unless an exemption applies. On the other hand, a rendition of a copyrighted song in the shower is not a public performance and therefore not an infringement, so that there is no need to obtain a license or search for an exemption. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 155, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (1975).

The technologies of radio and television, which separate the performer from the audience, make it harder to specify what constitutes a public performance. By analogy, a radio station "performs a work publicly" when it sends out radio signals corresponding to that work because, like a live performer, the radio station decides what work is performed and directs that work to a substantial audience. But, more to the point of this case, does a store manager (or corporate owner) perform a work publicly when she merely receives and plays those radio signals for the benefit of her customers?

Under the Copyright Act of 1976, it is clear that the store manager does engage in a public performance. See infra at 1488. Some historical background, however, is necessary for a proper understanding of the "single receiving apparatus" exemption contained in § 110(5), which also first appeared in 1976. The Supreme Court addressed "public performance" questions in a series of three cases decided under the Copyright Act of 1909. ⁶ In Buck v. Jewell-LaSalle Realty Co., 283 U.S. 191, 51 S.Ct. 410, 75 L.Ed. 971 (1931), the defendant hotel operator wired a master radio receiving set to each of the public and private rooms in his hotel. Patrons of the hotel could listen to the radio by switching on the loudspeaker in their room. Neither the...