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

• Decision Date: 28 December 1990
• Docket Number: No. 90 C 3881.,90 C 3881.
• Citation: 754 F. Supp. 1324
• Parties: BROADCAST MUSIC, INC., et al., Plaintiffs, v. CLAIRE'S BOUTIQUES, INC. d/b/a Claire's Boutiques and Arcadia, Defendant.
• Court: U.S. District Court — Northern District of Illinois

754 F. Supp. 1324

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

No. 90 C 3881.

United States District Court, N.D. Illinois, E.D.

December 28, 1990.

Robert G. Krupka, P.C., Nicole J. Klimisch, Kirkland & Ellis, Chicago, Ill., for plaintiff Broadcast Music, Inc.

Mark A. Orloff, Gail J. Berritt, Altheimer & Gray, Chicago, Andrew H. Bart, Lonnie Coleman, Pryor, Cashman, Sherman & Flynn, New York City, for defendant.

MEMORANDUM OPINION AND ORDER

ROVNER, District Judge.

I. INTRODUCTION

This case raises an issue concerning the scope of the "single receiving apparatus" exemption from the Copyright Act's grant to copyright owners of the exclusive right to publicly perform their works. It is brought by Broadcast Music, Inc. ("BMI"), which holds copyrights to musical compositions, against Claire's Boutiques, Inc. ("Claire's"), which owns and operates 749 retail stores. Pending are cross-motions for summary judgment. For the reasons described below, BMI's motion is denied and Claire's motion is granted.

II. FACTS

The essential facts relevant to the pending motions are undisputed.¹ Claire's owns and operates 719 individual retail stores under the name Claire's Boutiques and 30 stores under the name Arcadia. The Claire's Boutiques stores sell women's accessories, and the Arcadia stores sell stationery, games, and novelty items.²

The Claire's Boutiques stores range in size from 458 square feet to 2000 square feet, with an average size of 861 square feet. Ninety-one of the stores are greater than 1055 square feet, and 628 are less than 1055 square feet. The Arcadia stores range in size from 748 square feet to 3300 square feet, with an average size of 2022 square feet. Twenty-seven of the stores are greater than 1055 square feet, and three are less 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 averaged $264,681 in net sales and $20,986 in net profits. The Arcadia stores, which Claire's acquired in October, 1989, averaged $126,381 in net sales and $15,870 in profits during the last quarter of fiscal year 1990, which included the Christmas season.

With the exception of approximately 65 stores,³ Claire's stores receive radio broadcasts which are normally played in the stores during all hours they are open.⁴ The equipment in each store includes a 5-watt stereo receiver, an indoor antenna, two speakers, and speaker wire. The same equipment is also used in Claire's warehouse, which is approximately 10,000 square feet in size.

The receiver used by Claire's is a Radio Shack Optimus STA-20 AM/FM receiver. It does not have built-in speakers, and it has jacks that allow the connection of only two speakers. The speakers are Realistic Minimus 7 speakers, also sold by Radio Shack. They measure six inches by six inches by eight inches. They are designed to be set on a flat surface or hung from a wall or ceiling. Claire's utilizes 18-gauge speaker wire to connect the speakers to the receiver.⁵ Claire's pays $103.96 for each receiver, $39.95 for each speaker, and $2.24 for each indoor antenna. These prices reflect volume discounts of 20 to 25 percent. The record does not indicate the amount Claire's spends on the speaker wire.

Altogether, Claire's owns and operates at least 669 receivers and 1,338 speakers. It orders 20 to 50 receivers per order and up to 300 speakers at a time. It maintains the equipment as a stock item, and a new receiver is shipped when a new store is built or when a receiver breaks and a new one is ordered from Claire's by the individual store. During the last four years, Claire's has spent a total of a little over $100,000 on stereo equipment.

The selling area in most stores is separated from a storage area by a partition wall. In those stores, the receiver is kept on a shelf in the storage area. In some stores, there is a closet rather than a storage area, and the receiver is kept on a shelf in the closet. In yet other stores, in which remodelling has not been completed, the receiver is kept behind the cash register counter. The parties have not contended that there is any material difference between the three arrangements, and have focused their attention on the first and most common arrangement.

The stores have decorative dropped ceilings with a grid composed of lights running just below the dropped ceiling. The speakers are attached to the upper ceiling, and they hang down to a point approximately six inches above the light grid. They are installed by general contractors when the stores are built.

A speaker wire runs from each of the receiver's two speaker jacks up the partition wall and through a hole in the partition wall. One wire is connected to a speaker which hangs from the ceiling in the rear corner of the selling area. This speaker is located at an average distance of five to fifteen feet from the receiver. The other wire runs above the dropped ceiling and is connected to a speaker which hangs from the ceiling at an average distance of twenty to thirty-five feet from the receiver. The speaker wire is concealed as much as possible.

BMI is a performing rights society recognized by the Copyright Act, 17 U.S.C. § 116(e)(3). It licenses public performance of copyrighted musical compositions, including about 50 percent of all compositions performed over the radio in this country.⁶ For an annual fee, BMI offers a license to music users to perform the compositions in its repertoire.

Prior to their acquisition by Claire's, the Arcadia stores subscribed to a commercial background music service. Claire's discontinued the subscription approximately six months after the acquisition. Twenty-four Claire's Boutiques stores also had a trial subscription to a commercial background music service. Claire's ended the trial subscription because its employees preferred listening to the radio.

It is BMI's position that Claire's violates the Copyright Act by playing radio broadcasts in its stores because Claire's is not licensed by BMI. BMI has offered to provide Claire's with a license which would encompass all public performances of BMI music by Claire's at an annual cost of $240 for the first location and $45 to $65 for each additional location. The total cost of the license for all the stores involved in the pending motions would be $40,385, which amounts to an average of $53.92 per store. Claire's has offered to purchase a license encompassing all stores which have a size in excess of 1055 square feet, on the condition that BMI not seek to license the remaining stores. BMI has rejected this offer.

In this action, BMI and various artists who it represents have brought suit for copyright infringement based on specific songs which were broadcast into Claire's stores over the receiver and speakers owned by Claire's. The only dispute raised by the pending motions is whether Claire's is statutorily exempt from the licensing requirements of the Copyright Act pursuant to 17 U.S.C. § 110(5).⁷

III. ANALYSIS

A. Background

The Copyright Act gives a copyright holder certain exclusive rights in her copyrighted works. These include the exclusive rights of public performance of musical works. See 17 U.S.C. § 106.⁸ Unlicensed performances which do not conflict with the exclusive rights granted by the Act do not infringe on the holder's rights. As the Supreme Court pointed out, "no license is required by the Copyright Act, for example, to sing a copyrighted lyric in the shower." Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 155, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (1975).

In Aiken, the Court was faced with the issue of whether the use of a radio in a fast-food establishment infringed on the exclusive rights of the owners of the copyrighted songs broadcast on the radio. The restaurant utilized a receiver with outlets to four speakers mounted in the ceiling. The Court noted that "the broadcast of a copyrighted musical composition by a commercial radio station is a public performance of that composition for profit — and thus an infringement of the copyright if not licensed." 422 U.S. at 158, 95 S.Ct. at 2045. However, the Court's precedents indicated that one who listens to the broadcast through the use of a radio receiver does not perform the composition. Id. at 161, 95 S.Ct. at 2046, citing Fortnightly Corp. v. United Artists, 392 U.S. 390, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968), and Teleprompter Corp. v. CBS, 415 U.S. 394, 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974). The Court then stated:

To hold in this case that the respondent Aiken "performed" the petitioners' copyrighted works would thus require us to overrule two very recent decisions of this Court. But such a holding would more than offend the principles of stare decisis; it would result in a regime of copyright law that would be both wholly unenforceable and highly inequitable.

Id. 422 U.S. at 162, 95 S.Ct. at 2046-47. The Court stated that such a holding would be unenforceable because of the large number of business establishments with radio or television sets, and inequitable because it would authorize "the sale of an untold number of licenses for what is basically a single public rendition of a copyrighted work." Id. at 162-63, 95 S.Ct. at 2047.

In 1976, Congress created an explicit exemption modelled after the Supreme Court's holding in Aiken. This exemption provides:

Communication of a transmission embodying a performance or display of a work by the public reception of the transmission on a single receiving apparatus of a kind commonly used in private homes does not constitute a copyright infringement, unless —

(A) a direct charge is made to see or hear the transmission; or

(B) the transmission thus received is further transmitted to the public.

17 U.S.C. § 110(5).⁹ This provision is discussed in the Report of the House Committee on the Judiciary:

Its purpose is to

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