UNITED STATES – SECTION 110(5) OF US COPYRIGHT ACT
Document: Request for the Establishment of a Panel by the European Communities and their Member States
Date: 16 April 1999
Document codes: WT/DS160/R; WT/DS160/5
Complainant: EU
Respondent: U.S.
Third parties: Australia, Brazil, Canada, Japan, Switzerland
Dispute stage: Panel
Agreements cited: Art. 9.1  Intellectual Property (TRIPS)

Page 70/71
ANNEX I
( of 16 April 1999)
UNITED STATES – SECTION 110(5) OF US COPYRIGHT ACT
Request for the Establishment of a Panel by the European Communities
and their Member States
The following communication, dated 15 April 1999, from the Permanent Delegation of the
European Commission to the Chairman of the Disp ute Settlement Body, is circulated pursuant to
Article 6.2 of the DSU.
My authorities have asked me to submit the following request on behalf of the European
Communities and their Members States for consideration at the next meeting of the Dispute
Settlement Body.
Section 110(5) of the United States Copyright Act, as amended by the "Fairness in Music
Licensing Act" enacted on 27 October 1998, exem pts, under certain conditions, the communication
or 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 (sub-
paragraph A) and, also under certain conditi ons, communication by an establishment of a
transmission or retransmission embodying a perfor mance or display of a non dramatic musical work
intended to be received by the general public (subparagraph B) from obtaining an authorisation to do
so by the respective right holder. In practice this means that Section 110(5) of the US Copyright Act
permits under certain circumstances, the playing of radio and television music in public places (such
as bars, shops, restaurants etc.) without the payment of a royalty fee.
However, Article (9)1 of the WTO Agreement on Trade-Related Aspects of Intellectual
Property Rights contained in Annex 1C to the Agreement Establishing the
(hereafter the "TRIPS Agreement") obliges WTO Members to comply with Articles 1 to 21 of the
Berne Convention for the Protection of Literary and Artistic Works (hereafter the "Berne
Convention").
Article 11bis(1) of the Berne Convention, as revised by the Paris Act of 1971 grants the
authors of literary and artistic works, including musical works, the exclusive right of authorising not
only the broadcasting and other wireless communication of their works, but also the public
communication of a broadcast of their works by loudspeaker or any other analogous instrument.
Article 11(1) of the same Convention grants the authors of musical works the exclusive right of
authorising the public performance of their works, including such public performance by any means
or process, and any communication to the public of the performance of their works.
As a consequence of the above, Section 110(5) of the United States Copyright Act appears to
be inconsistent with the United States' obligations under the TRIPS Agreement, including, but not
limited to, Article 9(1) of the TRIPS Agreement.
In a communication dated 26 January 1999 (WT/DS160/1-IP/D/16) the European
Communities and their Member States requested consultations with the United States of America
pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of

Disputes contained in Annex 2 of the WTO Agreemen t (hereafter "the DSU"). Such consultations,
which were held on 2 March 1999 in Geneva, have allowed a better understanding of the respective
positions, but have not led to a satisfactory resolution of the dispute.
Accordingly, the European Communities and their Member States request the establishment
of a panel pursuant to Article 6 of the DSU and Article 64:1 of the TRIPS Agreement to examine the
matter in the light of the relevant provisions of the TRIPS Agreement and to find that the United
States of America fails to conform to the obligations contained in the TRIPS Agreement, including,
but not limited to, Article 9(1) of the TRIPS Agreement, and thereby nullifies or impairs the benefits
accruing directly or indirectly to the European Communities and their Member States under the
TRIPS Agreement.
The European Communities and their Member States request that the panel be established
with the standard terms of reference as provided for in Article 7 of the DSU.

ANNEX II
(WT/DS160/6 of 6 August 1999)
UNITED STATES – SECTION 110(5) OF THE US COPYRIGHT ACT
Constitution of the Panel Established
at the Request of the European Communities
Note by the Secretariat
1. At its meeting on 26 May 1999, the DSB established a panel pursuant to the request by the
European Communities (WT/DS160/5), in accordance with Article 6 of the DSU (WT/DSB/M/62).
2. At that meeting, the parties to the dispute agreed that the Panel should have standard terms of
reference. The terms of reference are the following:
"To examine, in light of the relevant provisions of the covered agreements cited by the
European Communities in document WT/DS160/5, the matter referred to the DSB by the
European Communities in that document and to make such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in those agreements."
3. On 27 July 1999, the European Communities made a request, with reference to paragraph 7
of Article 8 of the DSU, to the Director-in-charge to determine of the composition of the Panel.
Paragraph 7 of Article 8 provides:
"If there is no agreement on the panelists within 20 days after the date of the establishment of
a panel, at the request of either party, the Director-General, in consultation with the
Chairman of the DSB and the Chairman of the relevant Council or Committee, shall
determine the composition of the panel by appointing the panelists whom the Director-
General considers most appropriate in accordance with any relevant special or additional
rules or procedures of the covered agreement or covered agreements which are at issue in the
dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall
inform the Members of the composition of the panel thus formed no later than 10 days after
the date the Chairman receives such a request."
4. On 6 August 1999, the Director-in-charge composed the Panel as follows:
Chairperson: Carmen Luz Guarda
Members: Arumugamangalam V. Ganesan
Ian F. Sheppard
5. Brazil, Australia, Canada, Japan and Switzerland reserved their rights as third parties to the
dispute.

I. INTRODUCTION
1. The European Communities and their member States (hereinafter EC/MS) bring this
complaint against the United States of America (US) because they consider that certain aspects of the
US legislation relating to the protection of copyrighted works are incompatible with the US'
obligations stemming from the WTO Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS).
2. While Section 106 Copyright Act gives the right holder of a copyrighted work the exclusive
right to reproduce the work, prepare derivative works, distribute copies of the work and to perform
the copyrighted work publicly, Section 110(5) Copyright Act provides for two exemptions from
copyright protection, which in simple terms can be summarised as follows:
- Under Subsection A, anybody is allowed to perform in his business premises for the
enjoyment of customers under certain conditions, without the consent of the copyright
holder, copyrighted works other than nondramatic compositions such as plays, operas or
musicals from radio or television (TV) transmissions;
- Under Subsection B, anybody is allowed to perform in his business premises for the
enjoyment of customers, "nondramatic music" by communicating radio or TV transmissions
without the consent of the copyright owner in cases where a certain surface is not exceeded
without any practical limitation or above that surface limit by respecting certain conditions as
to the number of loudspeakers used.
3. In the view of the EC/MS these US measures are in violation of the US' obligations under the
WTO-TRIPS Agreement. In particular, the US measures are incompatible with Article 9(1) TRIPS
together with Articles 11(1) and 11 bis(1) of the Berne Convention and cannot be justified under any
express or implied exception or limitation permissible under the Berne Convention or under TRIPS.
These measures cause prejudice to the legitimate rights of copyright owners, thus nullifying and
impairing the rights of the EC/MS.
4. The EC/MS would also like to mention that se veral senior US government officials, which
have testified before the US Congress during the legislative process which led to the present version
of Section 110(5) Copyright Act, have expressed the view that the extension of the scope of this
provision would violate the US' obligations under TRIPS and the Berne Convention.
1,2,3

1 The Register of Copyrights stated on 17 July 1997 in Congress (copy of the entire statement on
international aspects attached – Exhibit EC-11) that: "The Copyright Office beli eves that several of the
expanded exemptions, if passed in their current form, would lead to claims by other countries that the United
States was in violation of its obligations under the Berne Convention for the Protection of Literary and Artistic
Works, incorporated into the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS") of
the Uruguay Round of GATT".
2 At the same occasions, the Assistant Secretary of Commerce and Commissioner of Patents and
Trademarks stated that: " Our trading partners are likely to allege that several of the changes to the copyright
law proposed in Section 2 of the proposed bill may be inconsistent with our obligations under the Berne
Convention and the Agreement on Trade-Related Aspects of Intellectual Property Rights ("the TRIPS
Agreement") administered by the World Trade Organisation. If H.R. 789 is enacted, and we undermine the
rights of copyright owners of musical works to perform their works in public, in particular at a restaurant or
bar as envisioned by Section 2(a) and at the establishments covered by Section 2(c), we are seriously
concerned that they will claim that we are in violation of our internat ional commitments under both the Berne
Convention and the TRIPS Agreement, the latter of which contains a similar right under Article 14(3)" (copy of
the entire statement on international aspects attached – Exhibit EC-12).

5. The EC/MS' economic interests in this matter are significant. According to a study to which
the EC/MS will refer to under Part IV, approximately 70% of all drinking and eating establishments
and 45% of all retail establishments in the US can play without limitation radio or TV music without
the consent of the copyright owner. This demonstrates clearly the potential of Section 110(5)
Copyright Act to cause very significant losses of licensing income.
II. PROCEDURAL HISTORY
6. The so-called "homestyle exemption", which textually corresponds to the present
subsection A of Section 110(5) Copyright Act, was already contained in the Copyright Act of 1976
which entered into force on 1 January 1978. Subsection B was added to the Copyright Act in
October 1998 by the "Fairness in Music Licensing Act". The practical result of the latter amendment
consists in a significant extension of the scope of the exemption from copyright protection as
compared to the previous "homestyle" exemption.
7. The US notified their laws and regulations governing the protection of intellectual property
rights (IPRs) to the TRIPS Council
4 on the basis of Article 63(2) TRIPS and the relevant guidelines 5
adopted by the TRIPS Council. At its meeting of July 1996, the US copyright legislation, together
with the copyright legislation of other industrialised WTO Members, was subject to a review carried
out in the TRIPS Council in which the EC/MS inter alia asked a number of questions to the US
concerning copyright protection in the area of copyrighted works to which the US replied in writing.
6
8. On the bilateral level the EC/MS raised their concerns by means of several diplomatic
demarches at various levels, including the political level. Unfortunately, it proved impossible to
make any progress to resolve the issues in this way.
9. By a communication dated 26 January 19997, the EC/MS requested consultations pursuant to
Article 4 DSU and Article 64 TRIPS in conjunction with Article XXII GATT 1994.
10. By communications dated 11 and 12 February 1999 Australia 8 and Canada 9 expressed their
desire to join the consultations pursuant to Article 4 (11) DSU. By a communication dated
15 February 1999, Switzerland10 did likewise. All three requests were accepted by the US.11
11. Consultations between the EC/MS and the US were held in Geneva on 2 March 1999.
Canada participated in these consultations. Prior to the consultations, the EC/MS submitted to the
US a number of written questions, to most of which the US replied orally. These consultations did
not, however, lead to a satisfactory resolution of the matter.
12. By a communication dated 15 April 1999
12, the EC/MS requested the establishment of a
Panel pursuant to Article 64(1) TRIPS and Articles 4(7) and 6(1) DSU. The US refused the
establishment of a Panel at the meeting of the DSB on 28 April 1999. At the DSB meeting held on
26 May 1999, the Panel was established.

3 For the sake of accuracy, it has to be mentioned that the statements referred to under point 4 have
been made on the basis of an earlier proposal (H.R. 789 attached as Exhibit EC-13) which provided for slightly
wider exception than the one contained in the present Section 110(5) Copyright Act.
4 WTO Doc. IP/N/1/USA/C/1 and 2.
5 WTO Doc. IP/C/M/7.
6 WTO Doc. IP/Q/USA/1.
7 WTO Doc. WT/DS/160/1.
8 WTO Doc. WT/DS/160/4.
9 WTO Doc. WT/DS/160/2.
10 WTO Doc. WT/DS/160/3.
11 Note from the Permanent Mission of the United States to the WTO dated 31 March 1999.
12 WTO Doc. WT/DS/160/5.

13. The terms of reference of the Panel are the following:
"To examine in light of the relevant provisions of the covered
agreements cited by the European Communities in document
WT/DS 160/5 the matter referred to the DSB by the EC/MS in that
document and to make such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in
those agreements."13
14. Five WTO Members have notified under Article 10(2) DSU their interest in the matter before
the panel. These third parties are Australia, Brazil, Canada, Japan and Switzerland.14
III. PROTECTION OF COPYRIGHTED WORKS AND THE EXCEPTIONS THERETO
UNDER THE US COPYRIGHT ACT
1. Historical background: Section 110(5) Copyright Act before the 1998 amendment ("the
homestyle exemption")
15. Under Section 106 Copyright Act (1976), the right holder of a work has the exclusive right to
reproduce the work, prepare derivative works and distribute copies of the work. Under Section
106(4) of said Act, the owner of copyright has also the exclusive right "to perform the copyrighted
work publicly".
16. In order fully to understand the exemptions contained in the present version of
Section 110(5), it is essential to consider its previous version. Prior to 1999, Section 110(5) only
consisted of the current Subsection A (minus the words " except as provided in subparagraph (B) ").
Subsection B was added to the statute in October 1998 by the "Fairness in Music Licensing Act".
The 1976 version of Section 110(5) was generally referred to as "the homestyle exemption". It reads
as follows:
"Notwithstanding the provisions of Section 106, the following are
not infringements of copyright:
(5) communication or transmi ssion 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, unless:
(a) a direct charge is made to see or hear the transmission, or
(b) the transmission thus received is further retransmitted to the
public."
17. In broad terms, the homestyle exemption covered the use of a "homestyle" radio or TV in a
shop, a bar, a restaurant or any other place frequented by the public. The exemption did not apply to
venues playing tapes, CD's or other mechanical music.
18. The ratio legis of the homestyle exemption goes back to the 1975 US Supreme Court case
Twentieth Century Music Corp. v. Aiken..
15 Mr Aiken was the owner of a small fast-food restaurant
who operated a radio with outlets to four speakers in the ceiling. This installation received the

13 WTO Doc. WT/DS/160/6.
14 WTO Doc. WT/DS/160/6.
15 Twentieth Century Music Corp. v. Aiken, 422 U.S. 151 (1975) (Exhibit EC-1).

transmission of various radio stations which include d protected musical works. At that time it was
believed that the 1931 Jewell-Lasalle Supreme Court ruling 16 meant that a business establishment
had to obtain a licence to pick up a broadcast and in order to legally communicate it to the public.
However, Mr Aiken had no licence from the right holders of the copyrighted works that were
broadcast through the radio on his premises. The Supreme Court exempted Aiken from liability
under the 1909 Copyright Act (which is the predecessor of the 1976 Act), as, according to the Court,
what he was doing could not be considered as "performing" within the meaning of said Act.17
19. However, in the Copyright Act (1976), the new definition of "perform" clearly covered what
Mr Aiken had been doing. In order to keep the "Aiken" activities permissible without the consent of
the right holder, a specific provision has been inse rted into the Copyright Act to provide users with
an exemption from copyright liability.
20. In order to qualify for the exemption, the transmission must be received on "a single
receiving apparatus of a kind commonly used in private homes". The benefit of the exemption is lost
if a direct charge is made to see or hear the transmission or if the transmission is retransmitted to the
public.
21. An important question arises as to what is to be considered "a single receiving apparatus of a
kind commonly used in private homes" . Technology is under constant evolution and the "household
radio" technology of the 70's has been superseded several times, having as a practical effect that the
scope of the homestyle exemption has continuously been extended.
22. Although it is clear that, in practice, the homestyle exemption has applied in the past and
continues to apply at present primarily to radio and TV broadcasts, and satellite and cable TV, the
wording of Section 110(5) Copyright Act (1976) appears in view of the EC/MS to be also applicable
to a wider range of transmissions, including computer networks and the internet.18
23. The scope of Section 110(5) (in its "homestyle" version) has evolved over the years. At the
time of the adoption of the Copyright Act (1976), the intention of the US Congress appeared to be
that the scope of the exemption should be narrow and apply only to small commercial establishments
"where mom is behind the counter and dad does the cashier". 19 However, the Congressional intent
was rather ambiguous, as indicated by the following passage: that "(i)t applies to performances and
displays of all types of works, and its purpose is to exempt from copyright liability anyone who
merely turns on, in a public place, an ordinary radio or TV (…)". 20

16 Buck v. Jewell-Lasalle Realty Co. 283 U.S. 191 (1931).
17 Under Section 101 US Copyright Act to perform a work means "to recite, render, play, dance or act
it, either directly or by means of any device or process" , while to transmit a performance or display it is "to
communicate it by any device or process whereby image s or sounds are received beyond the place from which
they are sent".
18 We will come back to this issue when discussing Article 110(5)(B) Copyright Act below.
19 Compare also reply by the US administration to questions by Canada and the EC/MS within the
TRIPS Council, 30 October 1996, WTO Doc. IP/Q/USA/1 at p. 12 with a reference to H.R. Rep. N°1476, 94 th
Congress, 2d Session 87 (1976) (Exhibit EC-2) "The basic rationale of this clause is that the secondary use of
the transmission by turning on an ordinary receiver in public is so remote and minimal that no further liability
should be imposed. (…). [T]he Committee considers [the particular fact situation of Aiken] to represent the
outer limit of the exemption, and believes that the line should be drawn at this point. Thus the clause would
exempt small commercial establishments whose proprieto rs merely bring onto their premises standard radio or
TV equipment and turn it on for their customers' enjo yment, but it would impose liability where the proprietor
has a commercial sound system installed or conver ts a standard home receiving apparatus (…) into the
equivalent of a commercial sound system".
20 See H.R. Rep. N° 1476, 94th Congress, 2d Session 86 (1976) (Exhibit EC-3).

24. According to the statements by the US authorities made in connection with this case, US
Courts have also interpreted this provision narr owly: if the receiving equipment and loudspeakers
were too sophisticated and powerful, the exemption would not apply.21 In fact, when looking closely
at the vast litigation on Section 110(5) Copyrigh t Act (1976), one does not come to the same
conclusion. In these 20 years of litigation, two periods can be distinguished.
25. Until the early 90's, the main elements that C ourts took into consideration in this respect
were:22
- the physical size of the establishment (in terms of square footage, e.g. by comparing with the
size of Aiken's23 restaurant);
- the economic significance of the establishment;
- the number of speakers;
- whether the speakers were free standing or built into the ceiling;
- whether, depending on its revenue, the establishment was of a type that would normally
subscribe to a background music service;
- the noise level of the areas within the establishment where the transmissions were made
audible;
- the extent to which the receiving apparatus was to be considered as one commonly used in
private homes; and
- the configuration of the installation.
As a result of the ambiguous statutory language of Section 110(5) Copyright Act (1976), the selective
use of these criteria during a decade of litigation has given rise to a certain degree of inconsistency of
the case law.
24
26. In recent years, rather than to look at the legislative history of Section 110(5) Copyright Act
(1976) and the intention of the legislator, Courts started to focus more on the plain text of the
homestyle exemption, resulting in a broader interpretation of the exemption. As a result of this, large
chain store corporations were found to be exempt from applying for a licence and paying a licence
fee. Edison
25 and Claire's Boutiques26 are illustrative decisions which were taken by two different
Federal Appeal Courts one month from each other.

21 Reply by the US authorities to questions by Canada and the EU within the TRIPS Council,
30 October 1996, WTO Doc. IP/Q/USA/1 at p. 12.
22 A non-exhaustive list of relevant Court cases applying the Section 110(5) exemption is attached as
Exhibit EC-4.
23 See under footnote 15 above.
24 It appears from the analysis of US case law on the homestyle exemption that, although surface was
not the only criterion used for the application, no Cour t has ever favourably applied it to an eating or drinking
establishment with more than 1500 square feet of total space (the Aiken restaurant was 1,055 square feet). In
the same vein, the homestyle exemption does not appear to have been applied by Courts to establishments
using more than 4 speakers.
25 BMI v. Edison Bros. Stores Inc., US Court of Appeals for the Eight Circuit, N° 91-2115,
January 13, (Exhibit EC-5). In the early 80's, Edison Brothers, an important chain retail store, reached an
understanding with a major US collecting society (BMI) on a "radio policy" designed to exempt its more than
1500 stores from copyright liability. The terms of the arrangement were as follows: (a) only two speakers may

27. The core question in both cases was whether in the case of a large nation-wide company,
with annual revenues of several hundred million dollars and with a large number of outlets, each
outlet using a single receiver of a kind commonly used in private homes, Section 110(5) Copyright
Act (1976) was still applicable.
27 In both cases the Courts' answers were in the affirmative.
According to the Courts, the only relevant factors in assessing the applicability of the exemption are
the quantity and the quality of the receiving apparatus used in a particular premise. The physical size
of the establishment qualifying for the exemption, the ownership and/or the corporate structure of the
establishment or any other factor considered in previous case law were declared irrelevant with
regard to the application of the homestyle exemption.
28. In the early nineties, a coalition of business associations started active lobbying of Congress
members in order to secure both a clarification of Section 110(5) and a widening of its scope. The
coalition's efforts rapidly bore fruit. As from 1995 several bills were introduced in the US House of
Representatives and in the US Senate aimed at significantly extending the scope of the homestyle
exemption.
29. On 6 and 7 October 1998, a bill, entitled Fairness in Music Licensing Act , was adopted by,
respectively, the US House of Representatives and the US Senate. The bill consisted of adding a new
Subsection B to Section 110(5) of the US Copyright Act, while the wording of the homestyle
exemption remains unchanged under Subsection A. It was signed by the President on 27 October
1998, and entered into force on 26 January 1999.
2. Current scope and application of Section 110(5) of the US Copyright Act
30. Section 110(5) now contains two distinct exemptions: the so-called "homestyle exemption"
under Subsection A modified as to the kind of works covered and a new exemption under Subsection
B (sometimes referred to as the "business exemption").
(a) Subsection A
31. The exact meaning and scope of the "homestyle" exemption, now under Subsection A of
Section 110(5), after the adding of Subsection B to the statute, and preceded by the expression
"except as provided for in subparagraph (B)", appears to be as follows.
While Section 110(5) Copyright Act applied to all kinds of copyrighted works before the 1998
amendment, apparently, Section 110(5)(A) Copyright Act is now intended to exclude from its scope
"nondramatic musical works" and continues to apply to all other types of works, including e.g. plays,
sketches, operas, operettas, musicals, because Section 110(5)(A) Copyright Act refers to "works" in
general, while the scope of Subsection B is expressly limited to "nondramatic musical works".

be attached to a radio receiver, (b) the speakers must be placed within 15 feet of the receiver, (c) speakers that
are built into walls must not be used, only portable speakers are allowed, (d) only the radio may be played, no
tapes or records. In order to comply with this policy, Edison Brothers made a considerable investment. In
1988, BMI adopted a new policy concluding that the exemption of Section 110(5) could never apply to chain
stores, no matter what kind of equipment was used. However, Edison Brothers successfully challenged this
interpretation before Court. This has led an important number of large chain stores to adapt their music
installation in order to benefit from the exemption. Some of these chains even cancelled their subscription to
background music from other sources than radio.
26 BMI v. Claire's Boutiques Inc., US Court of Appeals for the Seventh Circuit, N° 91-1232,
December 11, 1991 (Exhibit EC-6). This case also opposed right holders and a chain store corporation, the
factual and legal situation was similar to the Edison case.
27 Both in Edison and Claire's Boutiques, each store was fully owned and centrally managed by Edison
Inc. and Claire's Boutique Inc. No franchising system was applied. The Claire's Boutique Stores had an
individual surface between 861 and 2,000 square feet. Edison stores had an individual surface per outlet
between 800 and 1,200 square feet.

32. What has been said on Section 110(5) Copyright Act (1976) above continues to apply to
subsection A of the current Section 110(5) Copyright Act with the proviso that the scope of this
provision has apparently been limited by excluding nondramatic musical works which are now dealt
with in Section 110(5)(B) Copyright Act. However, given that the limitations on the size of the
establishment have been greatly relaxed in subsection B, it is doubtful whether Courts will uphold the
limit on the size of the establishment, which they have set in the case law on Section 110(5)
Copyright Act (1976).
28
(b) Subsection B
33. Subsection B of Section 110(5) Copyright Act reads as follows:
"Notwithstanding the provisions of Section 106, the following are
not infringements of copyright :
(B) communication by an establishment of a transmission or
retransmission embodying a performance or display of a
nondramatic musical work intended to be received by the general
public, originated by a radio or TV broadcast station licensed as
such by the Federal Communications Commission, or, if an
audiovisual transmission, by a cable system or satellite carrier, if -
(i) in the case of an establishment other than a food service or
drinking establishment, either the establishment in which the
communication occurs had less than 2,000 gross square feet of
space (excluding space used for customer parking and for no other
purpose), or the establishment in which the communication occurs
has 2,000 or more gross square feet of space (excluding space used
for customer parking and for no other purpose) and -
(I) if the performance is by audio means only, the
performance is communicated by means of a total of not more than 6
loudspeakers of which not more than 4 loudspeakers are located in
any 1 room or adjoining outdoor space; or
(II) if the performance or display is by audiovisual
means, any visual portion of the performance or display is
communicated by means of a total of not more than 4 audiovisual
devices, of which not more than 1 audiovisual device is located in
any 1 room, and no such audiovisual device has a diagonal screen
size greater than 55 inches, and any audio portion of the
performance or display is communicated by means of a total of not
more than 6 loudspeakers, of which not more than 4 loudspeakers
are located in any 1 room or adjoining outdoor space;
(ii) in the case of a food service or drinking establishment in
which the communication occurs has less than 3,750 gross square
feet of space (excluding space used for customer parking and for no
other purpose), or the establishment in which the communication
occurs has 3,750 gross square feet of space or more (excluding
space used for customer parking and for no other purpose) and

28 Compare footnote 22.

(I) if the performance is by audio means only, the
performance is communicated by means of a total of not more than 6
loudspeakers of which not more than 4 loudspeakers are located in
any 1 room or adjoining outdoor space; or
(II) if the performance or display is by audiovisual
means, any visual portion of the performance or display is
communicated by means of a total of not more than 4 audiovisual
devices, of which not more than one audiovisual device is located in
any 1 room, and no such audiovisual device has a diagonal screen
size greater than 55 inches, and any audio portion of the
performance or display is communicated by means of a total of not
more than 6 loudspeakers, of which not more than 4 loudspeakers
are located in any 1 room or adjoining outdoor space ;
(iii) no direct charge is made to see or hear the transmission or
retransmission;
(iv) the transmission or retransmission is not further transmitted
beyond the establishment where it is received; and
(v) the transmission or retransmission is licensed by the
copyright owner of the work so publicly performed or displayed."
(ba) Exempted uses
34. The exemption contained in Section 110(5)(B) Copyright Act covers transmissions or
retransmissions embodying a performance
29 or display30 of a nondramatic musical work intended to
be received by the general public, originated from a radio or TV broadcast station licensed as such by
the Federal Communications Commission. This basically covers a situation which appears similar to
the one covered by the homestyle exemption, i.e. establishments which are open to the public may
play radio or TV on their premises for the enjoyment of their customers without the consent of the
right owners.
35. A last difference is that Subsection B does not apply to "works" in general but only to
"nondramatic musical works", i.e. songs, and not to operas, operettas, musicals.
36. While the former "homestyle exemption" a nd the present Subsection A limit the exemption
to the use of a single receiving apparatus commonly used in private homes, this condition is
completely absent in Subsection B for cases where the establishment does not exceed a certain size.
For all larger establishments the "homestyle" requirement has been replaced by much less stringent
conditions in relation to the audio or TV equipment which can be used.
37. Moreover, retransmissions which were not expressly exempted under Section 110(5)
Copyright Act (1976) are now expressly exempted. Under the US Copyright Act, to "transmit" a
program means "to communicate it by any device or process whereby images or sounds are received
beyond the place where they are sent".
31 Consequently, to "retransmit" a program means to further
transmit a transmission, as is for example the case with cable TV operators, who receive TV signals

29 Under Section 101 Copyright Act to perform a work means to recite, render, play, dance or act,
either directly or by means of any device or process.
30 Under Section 110 Copyright Act to display a work means to show a copy of it either directly or
indirectly by means of any device.
31 Section 101 Copyright Act.

and retransmit them to their subscribers, or with satellites, which receive the earth-to-satellite signals
and retransmit them to the earth.
38. Most TV programmes in the US are transmitted either by over-the-air broadcast or by cable
or satellite. Therefore, the express inclusion of this transmission mode makes TV programmes fully
subject to the exceptions in all forms of transmission.
39. It is presumed that Section 110(5)(B) Copyright Act applies in a case of public
communication of musical works involving new te chnologies such as computer networks (e.g.
Internet) in view of the wording of this provision. This transmission mode, the importance of which
increases from day to day, is now subject to the exemption from copyright protection.32
(bb) Exempted users
40. For the application of the exemption to the establishments other than food service or drinking
establishments, the following conditions apply:
- if the establishment has less than 2,000 gross square feet (= 186 square meters), the
exemption applies without any further condition, i.e. any audio equipment also of a
professional character and any number of loudspeakers can be used;
- if the establishment has more than 2,000 gross square feet of space, the exemption applies
under the following conditions:
- if the performance is by audio means only, it may be communicated by means of a
maximum of 6 loudspeakers, of which not more than 4 may be located in any one
room;
- if the performance or display is by audiovisual means:
- any visual portion of the performance may be communicated by a maximum
of 4 audiovisual devices, of which not more than one may be located in any
one room. Moreover such devices should not have a diagonal screen size
larger than 55 inches;
- any audio portion of the performan ce may be communicated by a maximum
of 6 loudspeakers, of which not more than 4 may be located in any one room.
41. For food service or drinking establishments
33, the following even more generous conditions
apply:
- if the establishment has less than 3,750 gross square feet (= 348 square meters) of space
(excluding parking space) the exemption applies without conditions, i.e. any kind of

32 The following example is mentioned as an illustration of a situation in which this becomes relevant:
an FCC-licensed radio (or TV) broadcaster parallels its over-the-air transmissions on the internet (as an audio
back-up to his web-site). These programmes are received by a PC connected with a number of loudspeakers in
a bar or other establishment meeting all the conditions set out in Section 110(5)(B) Copyright Act.
33 Which are defined in Section 101 Copyright Act amended by Section 205 of the Fairness in Music
Licensing Act as : " restaurant, inn, bar, tavern or any other similar place of business in which the public or
patrons assemble for the primary purpose of being served food or drink, in which the majority of the gross
square feet of space that is non-residential is used for that purpose, and in which nondramatic musical works
are performed publicly".

audio(-visual) equipment, including professional equipment and any number of loudspeakers
may be used;
- if the establishment has more than 3,750 gross square feet of space, the exemption applies
under the following conditions:
- if the performance is by audio means only, it may be communicated by means of a
maximum of 6 loudspeakers, of which not more than 4 may be located in any one
room;
- if the performance or display is by audiovisual means:
- any visual portion of the performance may be communicated by a maximum
of 4 audiovisual devices, of which not more than one may be located in any
one room. Moreover such devices should not have a diagonal screen size
larger than 55 inches;
- any audio portion of the performan ce may be communicated by a maximum
of 6 loudspeakers, of which not more than 4 may be located in any one
room.
42. The exemption applies to " establishments" which are now defined by Section 101 of the US
Copyright Act (upon amendment by Section 205 of the Fairness in Music Licensing Act) as " a store,
shop or any similar place of business open to the general public for the primary purpose of selling
goods or services in which the majority of the gross square feet of space that is non-residential is
used for that purpose and in which nondramatic musical works are performed publicly ".
This definition also reconfirms the findings of the two Circuit Courts referred to above
34 in relation to
Section 110(5) Copyright Act (1976) that in orde r to meet the copyright exception each individual
store, shop or place of business has to be looked at individually, it being irrelevant if a company
operates several thousand such places of business all over the US.
(bc) General conditions
43. No direct charge must be made to the public to see or hear the transmission or
retransmission. This condition also applies to the homestyle exemption. However, this condition
has no potential whatsoever to limit the exception, because the operator of the establishment remains
completely free to amortise the acquisition and operating costs of the audio(-visual) equipment by
charging his customers for the goods and services sold accordingly.
44. The transmission or retransmission may not be further transmitted beyond the establishment
where it is received . Further transmission or retransmissi on would of course imply that a new
audience is reached, and would thus be a further communication to the public. Thus also this
condition has in practice no potential to limit the exception in any meaningful manner.
45. The transmission or retransmission must be licensed by the copyright owner of the work
performed. This means that the original broadcaster must be properly licensed by the right holder.
Given that virtually all radio or TV stations in the Unites States are licensed by performing rights
organisations, this condition is also unlikely to have any practical effect to limit the scope of the
exemption.

34 Compare footnotes 25 and 26.

(c) Summary
46. The exemptions from copyright protection contained in Article 110(5) Copyright Act can be
summarised as follows:
As far as copyrighted works excluding nondramatic musical works are concerned, anybody in the US
can play such works from radio or TV on his business premises for the enjoyment of his customers
without the consent of the copyright owner. The only condition in the law which has the potential to
somewhat reduce the benefit of the exception from applying to all business premises in the US,
consists in requiring that a single apparatus of a kind commonly found in private homes be used,
without defining in the law what is meant by this. The other conditions are unlikely to have any
limiting effect in practice.
47. As to nondramatic musical works, anybody can play such works originating from radio or
TV in his establishment for the enjoyment of his customers without the consent of the copyright
holder. In case the establishment being below a certain size (3,750 square feet for restaurants and
bars and 2,000 square feet for all other establishments), no further conditions apply with a potential
to limit the number of exempted establishments. In case the premises exceed these size limits, there
exist some rather generous limitations in relation mainly to the number of loudspeakers which can be
used. In any event, the use of professional equipment is perfectly permissible.
IV. QUANTITATIVE EFFECTS ON COPYRIGHT OWNERS
48. In order to illustrate the scope of the exception, as far as the establishments referred to under
Section 110(5)(B) Copyright Act are concerned, and on which no limitations as to the audio(-visual)
equipment used exist, the following figures are instructive.
49. On the basis of a 1998 Dun & Bradstreet's "Dun's Market Identifiers Market Profile" 35,36,
which is a data base containing information, inter alia on square footage, of more than 6,5 million
US businesses, the following can be said:
In 1998, the following number of establishments were contained in the D&B database (this was also
the approach by the CRS in 1995), while the total figures as estimated by D&B are given in brackets:
- 7,819 (49,061) drinking establishments of a square footage below 3,750 square feet (= 73 %
(85 %) of all US drinking establishments filed in the D&B database);
- 51,385 (192,692) eating establishments of a square footage below 3,750 square feet (= 70 %
(68 %)of all US eating establishments filed in the D&B database);
- 65,589 (281,406) retail establishments of a square footage below 2,000 square feet (=45 %
(42 %) of all US retail establishments filed in the D&B database).
50. These figures comprise bars, restaurants, tea-rooms, snackbars, etc. and retail stores.
However, other sectors in which a number of establishments are likely to be exempted as well were
not taken into account (for example: hotels, financial service outlets, estate property brokers, other
types of service providers).

35 Further explanations and the data provided by Dun & Bradstreet are contained in Dun's Market
Identifiers Market Profiles (Exhibit EC-7).
36 The 1995 figures of this data base were used by the US Congress Research Service to establish in
1996 the number of establishments in certain size categories to be covered by the new law.

51. To put the results of these data otherwise approximately 70% of all drinking and eating
establishments in the US and 45% of all retail establishments in the US are entitled under
Section 110(5) Copyright Act, without any limitation, to play music from the radio and TV on their
business premises for the enjoyment of their customers without the consent of the copyright owners
thus depriving the latter of a significant source of licensing income.
52. All other - larger - establishments are of course benefiting from the exception under
Section 110(5)(B) Copyright Act, if they meet the very lenient conditions as to the number of
permissible loudspeakers.
V. INCOMPATIBILITY OF THE US LEGISLATION WITH ITS OBLIGATIONS
UNDER THE WTO AGREEMENT ON TRADE-RELATED ASPECTS OF INTELLECTUAL
PROPERTY RIGHTS
1. Short Negotiating History of the TRIPS Agreement
37
53. At the Ministerial Conference which launched the Uruguay Round of Multilateral Trade
Negotiations at Punta del Este, Uruguay in September 1986, TRIPS was included into the negotiation
agenda as one of the so-called new topics. Multilateral rulemaking in the IPR area had been so far
dominated by the World Intellectual Propert y Organisation (WIPO) which administers or
co-administers practically all important conventions in this area. There existed at the outset different
views between industrialised count ries, who wished to achieve a comprehensive coverage of all
intellectual property rights and developing countri es (LDCs) who wanted to limit work to a Code
against trade in counterfeit goods.
54. During the negotiating process the view of those who pursued a comprehensive approach
prevailed. This had as a consequence that practically all existing IPRs were included in TRIPS. To
start with the principles of national treatment and most favoured nation treatment (the latter being a
novelty in the area of IPRs) were stipulated. The most important WIPO conventions (the Paris
Convention covering industrial property rights and the Berne Convention covering copyright as well
as the Washington Treaty for the protection of semiconductor topographies) were included by
reference, also to make these conventions subj ect to an efficient dispute settlement system.
Furthermore extensive rules for the enforcement of the substantive IPR standards were provided,
which constituted an absolute novelty for international IPR rulemaking.
55. The so-called Dunkel text on TRIPS of December 1991 became almost verbatim part of the
Final Act adopted at the Marrakech Ministerial Conference in April 1994 which successfully
concluded the Uruguay Round Negotiations. The provisions of TRIPS became fully applicable to
non-developing country Members of the WTO from 1 January 1996 (Article 65(1) TRIPS).
2. Copyright protection under TRIPS
56. The substantive provisions for the protection of copyright (including related rights) are
contained in Section 1 of Part II, i.e. Articles 9- 14 of the TRIPS Agreement. Article 9 stipulates the
principle that WTO Members have to comply with the substantive provisions of the Berne
Convention (its Articles 1 to 21) and reiterates the basic principle of copyright protection, i.e.
protection extends only to expressions and not to ideas, methods of operation or mathematical
concepts.
57. Article 12 of the Agreement provides minimum standards for the term of protection of
copyrighted works. The term of protection for many works is the life of the author plus 50 years.

37 For a detailed report of the negotiating history of TRIPS see Gervais, The TRIPS Agreement:
Drafting History and Analysis, London 1998, pp 3-28.

58. Article 9(2) of the Berne Convention bans the imposition of limitations on, or exceptions to,
the reproduction right except in special cases when such limits or exceptions do not conflict with a
normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the
right holder. Article 13 TRIPS, which has also to be read together with Article 20 Berne Convention,
makes this provision also applicable to all other exclusive rights in copyright and related rights, thus
narrowly circumscribing the limitations and exceptions that WTO member countries may impose.
3. Section 110(5) Copyright Act in the light of Article 9(1) TRIPS together with
Article 11bis (1) and 11(1) Berne Convention
59. For ease of presentation, both Subsections of Section 110(5) Copyright Act will be dealt with
together for the legal analysis.
(a) Article 9(1) TRIPS
60. This provision reads :
"Members shall comply with Articles 1 through 21 of the Berne
Convention and the Appendix thereto…"
This provision has as a consequence that the obligations contained in Articles 1 through 21 of the
Berne Convention have become part of the obligations under TRIPS and are fully subject to the
WTO dispute settlement system
38,39
(b) Article 11 bis (1) Berne Convention
61. The provision which is of particular relevance for the case at hand is Article 11 bis(1) Berne
Convention which reads:
"(1) Authors of literary and artistic works shall enjoy the
exclusive right of authorising:
(i) the broadcasting of their works or the communication thereof to
the public by any other means of wireless diffusion of signs, sounds
or images;
(ii) any communication to the public by wire or by rebroadcasting of
the broadcast of the work, when this communication is made by an
organization other that the original one;
(iii) the public communication by loudspeaker or any analogous
instrument transmitting, by signs, sounds or images, the broadcast
of the work."
62. Article 11 bis was introduced into the Berne Convention at the occasion of the Rome
Revision (1928), and further elaborated by the Br ussels Revision (1948) in a period where public
communication by loudspeakers, radio etc. had b ecome a very important means of communication.

38 Compare Gervais, The TRIPS Agreement, Drafting History and Analysis, 1998, at p. 72.
39 See also Message from the President of the Un ites States transmitting the Uruguay Round Trade
Agreements, texts of Agreements Implementing Bill, Statement of Administrative Action and Required
Supporting Statements, 103
d Congress, 2d Session, House Document 103-316, Vol. 1, p. 981, September 1994
(Exhibit EC-8).

Such a means of communication was clearly similar to the public performance of a work, except that
it increased the potential audience.
63. Each of the uses described in Article 11bis(1)(i) to (iii) Berne Convention is to be considered
as a separate use, which requires a separate authorisation for each such use by the owner of the
copyright.40 It is Article 11 bis(1)(iii) Berne Convention which is the relevant provision for the case
of hand.
64. There can be no doubt that communications to the public not only emanating from radio
broadcasts but also from TV are covered by Article 11 bis Berne Convention.41 There can also be no
doubt that under Article 2 Berne Convention 42 that musical works, dramatic, dramatic-musical or
other musical works qualify as literary and artistic works. Thus it can be concluded that the works
for which Section 110(5) Copyright Act (in both alternatives) denies protection, are protected works
under Articles 11bis and 2 Berne Convention.
65. While the term public communication 43 has not been defined in the Berne Convention, the
Programme for the Brussels Revision 44 provides some guidance as to what is meant by public
communication:
"…above all where people meet in the cinema, in restaurants, in tea
rooms…"
66. While Subsection A of Section 110(5) Copyright Act refers expressly to "…performance or
display of a work by the public reception…" , also the communication of a musical work in an
establishment to its customers as described in Subsection B of Section 110(5) Copyright Act
constitutes a public communication in the sense of Article 11bis(1) Berne Convention.45

40 The underlying reasoning for this is explained in WIPO, Guide to the Berne Convention, 1978, at pp
68-69: "The question is whether the licence given by the author to the broadcasting station covers, in addition,
all the use made of the broadcast, which may or may not be for commercial ends.
11bis.12. The Convention's answer is « no ». Just as, in the case of a relay of a broadcast by wire, an
additional audience is created (paragraph (1)(ii)), so, in this case too, the work is made perceptible to listeners
(and perhaps viewers) other than those contemplated by the author when his permission was given. Although,
by definition, the number of people receiving a broadcast cannot be ascerta ined with any cer tainty, the author
thinking his license to broadcast as covering only the direct audience receiving the signal within the family
circle. Once this reception is done in order to entertain a wider circle, often for profit, an additional section of
the public is enabled to enjoy the work and it ceases to be merely a matter of broadcasting. The author is given
control over this new public performance of his work.
11bis.13. Music has already been used as an example, but the right clearly covers all other works as
well-plays, operettas, lectures and other oral works. Nor is it confined to entertainment; instruction is no less
important. What matters is whether the work which has been broadcast is then publicly communicated by
loudspeaker or by some analogous instrument e.g., a television screen.
11bis.14. Note that the three parts of this right are not mutually exclusive but cumulative, and come
into play in all the cases foreseen by the Convention."
41 Compare OMPI / WIPO, Guide to the Berne Convention, 1978, p. 66 (Exhibit EC-9).
42 Compare OMPI / WIPO, Guide to the Berne Convention, 1978, p. 14 (Exhibit EC-10).
43 The term "communication to the public" is synonymous.
44 Comments in Programme for the Brussels Conference: Documents 1948, at pp 266 et seq.
45 Both acts are also clearly covered by the definition given by US domestic law under Section 101
Copyright Act, which defines public performance or display of a work as: "(…)To perform or display a work
publicly means: (1) to perform or display at a place open to the public or at any place where a substantial
number of persons outside of a normal circle of family and its social acquaintances is gathered; or (2) to
transmit or otherwise communicate a performance or display the work to a place specified by clause (1) or to
the public by means of any device or process, whet her the members of the pub lic capable of receiving the

67. Under Article 11 bis(1) Berne Convention, the public communication has to be "by
loudspeaker or any other analogous instrument". In this context, it is irrelevant whether the
loudspeakers are incorporated in the radio or TV set or other apparatus (including for example a
computer) or if they are separate. It is obvious that the communication to the public envisaged in
Section 110(5) Copyright Act covers the case that the musical works are played over loudspeakers to
the customers of the businesses. In any event, music transmitted over radio or TV can only be made
audible by means of some sort of loudspeaker.
68. By denying copyright protection to musical works (in Subsection A to copyrighted works
other than nondramatic musical works) when they are received via radio or TV by hertzian waves
and subsequently played on business premises for the enjoyment of customers, the US is not granting
the protection which it is obliged to grant under Article 9(1) TRIPS together with Article 11bis(1)(iii)
Berne Convention.
(c) Article 11(1) Berne Convention
69. This provision reads :
"(1) Authors of dramatic, dramatico-musical and musical works
shall enjoy the exclusive right of authorizing :
 (i) …
 (ii) any communication to the public of the performance of their
works."
70. While Article 11 bis(1)(iii) Berne Convention necessitates that the musical work has been
transmitted by hertzian waves at some point during its way to the reception apparatus,
Article 11(1)(ii) Berne Convention covers the case when the entire transmission was by wire.
46
71. The considerations put forward above under Article 11bis Berne Convention as to works and
communication to the public apply mutatis mutandis to Article 11(1) Berne Convention.
72. It can, therefore, be said that the playing of music or other copyrighted works from radio and
TV on the business premises for the enjoyment of customers as described in Section 110(5)
Copyright Act constitutes acts which are protected by Article 11(1)(ii) Berne Convention if the entire
radio or TV transmission is by wire. By denying such protection, the US is violating its obligations
under Article 9(1) TRIPS together with Article 11(1)(ii) Berne Convention.
4. Permissible exceptions to copyright protection
73. While the US have at some point in time disputed that a "homestyle radio" is a "loudspeaker
or other analogous instrument" in the sense of Article 11 bis(1)(iii) Berne Convention, they have
subsequently exclusively relied on assertions that Section 110(5) Copyright Act would be permissible
under exception clauses contained in the Berne Convention and TRIPS. The US have in particular
referred to so-called "minor exceptions" under the Berne Convention, to Articles 9(2) and 11 bis(2)
Berne Convention and Article 13 TRIPS.

performance or display receive it in the same place or in separate places and at the same time or at different
times(…).".
46 See the unequivocal language in WIPO, Guide to the Berne Convention, 1978, at p. 65 which reads:
"the communication to the public of a performance of the work. It covers all public communication except
broadcasting which is dealt with in Article 11bis. For example, a broadcasting organisation broadcasts a
chamber concert. Article 11bis applies. But if it or some other body diffuses the music by landline to
subscribers, this is a matter for Article 11".

74. The EC/MS would like to observe that the burden to invoke and prove the applicability of an
exception fall on the party invoking the exception. This standard is in accord with the Appellate
Body reports in United States - Standards for Reformulated and Conventional Gasoline
47 and United
States - Measures Affecting Woven Wool Shirts and Blouses from India.48
75. In this situation, the EC/MS would like to sa y that in their view, none of the exceptions to
copyright protection contained in the TRIPS Agreement and the Berne Convention can excuse -
totally or in part - the exceptions contained in Section 110(5) Copyright Act. The EC/MS will
comment in more detail on this issue in light of arguments which the US might wish to submit in this
context to the Panel.
5. Nullification and impairment
76. Under Article 64(1)TRIPS, Article XXIII GATT and Article 3(8)DSU, the violation of the
US' obligations under the TRIPS Agreement are considered prima facie to constitute a case of
nullification or impairment.
VI. CONCLUSION
77. The EC/MS therefore respectfully request the Panel to find that the US has violated its
obligations under Article 9(1) TRIPS together with Articles 11 bis(1)(iii) and 11(1)(ii) Berne
Convention and should bring its domestic legislation into conformity with its obligations under the
TRIPS Agreement.

47 WT/DS2/AB/R, p. 22 (adopted on 20 May 1996).
48 WT/DS33/AB/R, p. 16 (adopted on 23 May 1997).

ATTACHMENT 1.2
ORAL STATEMENT OF THE EUROPEAN COMMUNITIES AND THEIR
MEMBER STATES AT THE FIRST MEETING WITH THE PANEL
(8 and 9 November 1999)
I. INTRODUCTION
1. The European Community (EC) and its Member States (MS) first of all would like to thank
you Ms Chairperson and Members of the Panel for taking on this case in anticipation of the time and
effort which you will devote to it. These thanks are extended also to the Members of the Secretariat
who assist this Panel in its task.
2. This is the fourth panel on TRIPS and the first one on copyright issues. The findings of this
Panel are likely to be of significant importance for the implementation by Members of issues namely
in relation to the section on copyright of the TRIPS Agreement and the interrelationship between
TRIPS and the Berne Convention.
3. We set out our understanding of the facts of this case and our arguments in the first written
submission dated 5 October 1999 in which it is explained why we consider that certain aspects of the
US' legislation relating to the protection of copyrighted works are incompatible with the US'
obligations stemming from the WTO Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS). We will refrain today from repeating all facts and arguments made in the written
submission, but will rather concen trate on what we consider to be the pivotal facts and arguments.
We will also comment provisionally on the First Written Submission of US of 26 October 1999 and
Third Party submissions. The EC/MS will of course reply in full to the US and Third Party
Submissions in our rebuttal submission.
4. To put it in telegraphic style, the particular situation under US copyright law, which is the
object of the EC/MS' complaint, presents itself as follows:
While Section 106 Copyright Act gives the right holder of a copyrighted work the exclusive right to
reproduce the work, prepare derivative works, distribute copies of the work and to perform the
copyrighted work publicly, Section 110(5) Copyright Act provides for two exemptions from
copyright protection, which in simple terms can be summarised as follows:
- under Subsection B, anybody is allowed to perform in his business premises for the
enjoyment of customers "nondramatic music" by communicating radio or television (TV)
transmissions without the consent of the copyright owner in cases where a certain surface is
not exceeded without any practical limitation or above that surface limit by respecting certain
conditions as to the number of loudspeakers used;
- under Subsection A, anybody is allowed to perform in his business premises for the
enjoyment of customers without the consent of the copyright holder, any other copyrighted
works such as plays, operas or musicals from radio or TV transmissions under the condition,
in particular, that the equipment used can be considered "homestyle".
5. In the view of the EC/MS these US' measures are in violation of the US' obligations under
the WTO-TRIPS Agreement. In particular, the US' measures are incompatible with Article 9(1)
TRIPS together with Articles 11(1) and 11 bis(1) of the Berne Convention and cannot be justified
under any express or implied exception or limitation permissible under the Berne Convention or
under TRIPS. These measures cause prejudice to the legitimate rights of European copyright owners,
thus nullifying and impairing the rights of the EC/MS.

6. The EC/MS' economic interests in this matter are significant. According to a study to which
the EC/MS will refer to in more detail, approxima tely 70% of all drinking and eating establishments
and 45% of all retail establishments in the US can play without limitation radio or TV music without
the consent of the copyright owner. This demonstrates clearly the potential of Section 110(5)
Copyright Act to cause very significant losses of licensing income.
II. PROTECTION OF COPYRIGHTED WORKS AND THE EXCEPTIONS THERETO
UNDER THE US COPYRIGHT ACT
1. Historical background: Section 110(5) Copyright Act before the 1998 amendment
("the homestyle exemption")
7. Under Section 106 Copyright Act (1976), the right holder of a work has the exclusive right to
reproduce the work, prepare derivative works and distribute copies of the work. Under
Section 106(4) of said Act, the owner of copyright has also the exclusive right "to perform the
copyrighted work publicly".
8. In order fully to understand the exemptions contained in the present version of
Section 110(5), it is helpful to consider its previous version. Prior to 1999 Section 110(5) only
consisted of the current Subsection A. Subsection B was added to the statute in October 1998 by the
"Fairness in Music Licensing Act". The 1976 version of Section 110(5) was generally referred to as
"the homestyle exemption". In broad terms, the homestyle exemption covered the use of a
"homestyle" radio or TV in a shop, a bar, a restaurant or any other place frequented by the public.
The exemption did not apply to the playing of tapes, CD's or other mechanical music.
9. The ratio legis of the homestyle exemption goes back to the 1975 US Supreme Court case
Twentieth Century Music Corp. v. Aiken (full text in Exhibit EC-1). Mr Aiken was the owner of a
small fast-food restaurant who operated a radio. This installation received the transmission of
various radio stations which included protected musical works. At that time it was believed that a
business establishment had to obtain a licence to pick up a broadcast and in order to legally
communicate it to the public, but Mr Aiken had no licence from the right holders of the copyrighted
works that were broadcast through the radio on his premises. The Supreme Court exempted Aiken
from liability under the 1909 Copyright Act (which is the predecessor of the 1976 Act), as,
according to the Court, what he was doing could not be considered as "performing" within the
meaning of said Act.
10. However, in the Copyright Act (1976), the new definition of "perform" clearly covered what
Mr Aiken had been doing. In order to keep the "Aiken" activities permissible without the consent of
the right holder, a specific provision has been inse rted into the Copyright Act to provide users with
an exemption from copyright liability.
11. The scope of Section 110(5) (in its "homestyle" version) has evolved over the years. At the
time of the adoption of the Copyright Act (1976), the intention of the US Congress appeared to be
that the scope of the exemption should be narrow and apply only to small commercial establishments
"where mom is behind the counter and dad does the cashier". However, the Congressional intent was
not altogether clear (a good example of the ambiguity of the legislator's intent can be seen in the
Congressional record which we have submitted as Exhibit EC-3).
12. While the US claim repeatedly that US Courts have interpreted this provision narrowly, in
fact, when looking closely at the vast litigation on Section 110(5) Copyright Act (1976), one does not
come to the same conclusion. In these 20 years of litigation, two periods can be distinguished.
13. Until the early 90's, the main elements that C ourts took into consideration in this respect
were:

- the physical size of the establishment;
- the economic significance of the establishment;
- the number of speakers;
- whether the speakers were free standing or built into the ceiling;
- the extent to which the receiving apparatus was to be considered as one commonly used in
private homes.
As a result of the ambiguous statutory language of Section 110(5) Copyright Act (1976), Courts
selectively focused on various criteria or different sets of criteria, what has lead to a certain degree of
inconsistency of the case law.
14. In recent years, rather than to look at the legislative history of Section 110(5) Copyright Act
(1976), Courts started to focus more on the plain text of the homestyle exemption, resulting in a
broader interpretation of the exemption. As a result of this, large chain store corporations were found
to be exempt from applying for a licence and paying a licence fee. Edison and Claire's Boutiques are
illustrative decisions which were taken by two different Federal Appeal Courts one month from each
other.
15. The core question in both cases was whether in the case of a large nation-wide company,
with annual revenues of several hundred million dollars and with a large number of outlets, each
outlet using a single receiver of a kind commonly used in private homes, Section 110(5) Copyright
Act (1976) was still applicable. In both cases the Courts' answers were in the affirmative. According
to the Courts, the only relevant factors in assessing the applicability of the exemption are the quantity
and the quality of the receiving apparatus used in a particular premise. The physical size of the
establishment qualifying for the exemption, the ownership and/or the corporate structure of the
establishment or any other factor considered in previous case law were declared irrelevant with
regard to the application of the homestyle exemption.
16. The EC/MS do not see a contradiction between these two appellate decisions and the two
appellate decisions cited by the US in its first written submission under point 7, because the relevant
business surfaces in the two cases cited by the US were significantly larger than in the Edison and
Claire's Boutiques cases (in the Sailor Music case, the average surface was 3,500 square feet, while
in Edison and Claire's Boutiques, the surfaces were 800 - 1,200 square feet and 900 - 2,000 square
feet respectively).
17. In the early nineties, a coalition of business associations started active lobbying of Congress
members in order to secure a widening of the scope of Section 110(5). The coalition's efforts rapidly
bore fruit. As from 1995 several bills were introduced in the US House of Representatives and in the
US Senate aimed at significantly extending the scope of the homestyle exemption.
18. In October 1998, a bill, entitled Fairness in Music Licensing Act, was adopted by the
Congress, signed by the President and entered into force on 26 January 1999.
2. Current scope and application of Section 110(5) of the US Copyright Act
19. Section 110(5) now contains two distinct exemptions: the so-called "homestyle exemption"
under Subsection A modified as to the kind of works covered and a new exemption under
Subsection B (sometimes referred to as the "business exemption").

20. The exact meaning and scope of the "homestyle" exemption, now under Subsection A of
Section 110(5), after the adding of Subsection B to the statute, and preceded by the expression
"except as provided for in subparagraph (B)", appears to be as follows.
While Section 110(5) Copyright Act applied to all kinds of copyrighted works before the 1998
amendment, apparently, Section 110(5)(A) Copyright Act is now intended to exclude from its scope
"nondramatic musical works" and continues to apply to all other types of works, including e.g. plays,
sketches, operas, operettas, musicals, because Section 110(5)(A) Copyright Act refers to "works" in
general, while the scope of Subsection B is expressly limited to "nondramatic musical works".
While the EC/MS are pleased to learn that this interpretation is shared by the US (point 9 first written
submission), we would nevertheless remark that this interpretation may not the one necessarily
followed by all US Courts. There might be Courts which do not draw the a contrario conclusion and
apply the exemption contained in Section 110(5)(A) Copyright Act to any sort of literary and artistic
work.
Exempted uses
21. The exemption contained in Section 110(5)(B) Copyright Act covers transmissions or
retransmissions embodying a performance or display of a nondramatic musical work intended to be
received by the general public, originated from a radio or TV broadcast station licensed as such by
the Federal Communications Commission. This basically covers a situation which appears similar to
the one covered by the homestyle exemption, i.e. establishments which are open to the public may
play radio or TV on their premises for the enjoyment of their customers without the consent of the
right owners.
22. A last difference is that Subsection B does not apply to "works" in general but only to
"nondramatic musical works", i.e. popular music, and not to operas, operettas, musicals.
23. While the former "homestyle exemption" a nd the present Subsection A limit the exemption
to the use of a single receiving apparatus commonly used in private homes, this condition is
completely absent in Subsection B for cases where the establishment does not exceed a certain size.
For all larger establishments the "homestyle" requirement has been replaced by much less stringent
conditions in relation to the audio or TV equipment which can be used; in practical terms, it limits
the number of loudspeakers to six. Moreover, communications to the public from retransmissions
which were not expressly exempted under Section 110(5) Copyright Act (1976) are now expressly
exempted.
24. Most TV programmes in the US are transmitted either by over-the-air broadcast or by cable
or satellite. Therefore, the express inclusion of this transmission mode makes TV programmes fully
subject to the exceptions in all forms of transmission.
25. It is presumed that Section 110(5)(B) Copyright Act applies in a case of public
communication of musical works involving new te chnologies such as computer networks (e.g.
Internet) in view of the wording of this provision. This transmission mode, the importance of which
increases from day to day, is now subject to the exemption from copyright protection. The following
example is mentioned as an illustration of a situation in which this becomes relevant: an FCC-
licensed radio (or TV) broadcaster parallels its over-the–air transmissions on the internet (as an audio
back-up to his web-site). These programmes are received by a PC connected with a number of
loudspeakers in a bar or other establishment meeting all the conditions set out in Section 110(5)(B)
Copyright Act. While the EC/MS appreciate that communications over a digital network also
involve the reproduction right and distribution right, we are not concerned with these rights in this
case.

In this case, we are exclusively concerned with the communication to the public right and nothing in
the US first written submission supports in our view the US' assertion (point 16 first written
submission) that communications to the public of works where a computer serves as the receiving
and amplifying apparatus would not be covered by the exemptions contained in Section 110(5)
Copyright Act.
Exempted users
26. The legislator has made a distinction between food service and drinking establishments on
the one hand and other establishments on the other. For the application of the exemption to the
establishments other than food service or drinking establishments, the following conditions apply:
- if the establishment has less than 2,000 gross square feet (= 186 square meters), the
exemption applies without any further condition, i.e. any audio equipment also of a
professional character and any number of loudspeakers can be used;
- if the establishment has more than 2,000 gross square feet of space, the exemption applies
under the following conditions:
- if the performance is by audio means only, it may be communicated by means of a
maximum of 6 loudspeakers, of which not more than 4 may be located in any one
room;
- if the performance or display is by audiovisual means:
- any visual portion of the performance may be communicated by a maximum
of 4 audiovisual devices, of which not more than one may be located in any
one room. Moreover such devices should not have a diagonal screen size
larger than 55 inches;
- any audio portion of the performan ce may be communicated by a maximum
of 6 loudspeakers, of which not more than 4 may be located in any one
room.
27. For food service or drinking establishments, the following even more generous conditions
apply:
- if the establishment has less than 3,750 gross square feet (= 348 square meters) of space the
exemption applies without conditions, i.e. any kind of audio(-visual) equipment, including
professional equipment and any number of loudspeakers may be used;
- if the establishment has more than 3,750 gross square feet of space, the exemption applies
under the following conditions:
- if the performance is by audio means only, it may be communicated by means of a
maximum of 6 loudspeakers, of which not more than 4 may be located in any one
room;
- if the performance or display is by audiovisual means:
- any visual portion of the performance may be communicated by a maximum
of 4 audiovisual devices, of which not more than one may be located in any
one room. Moreover such devices should not have a diagonal screen size
larger than 55 inches;

- any audio portion of the performan ce may be communicated by a maximum
of 6 loudspeakers, of which not more than 4 may be located in any one
room.
28. The exemption applies to " establishments" which are now defined by Section 101 of the US
Copyright Act (upon amendment by Section 205 of the Fairness in Music Licensing Act) as " a store,
shop or any similar place of business open to the general public for the primary purpose of selling
goods or services in which the majority of the gross square feet of space that is non-residential is
used for that purpose and in which nondramatic musical works are performed publicly".
Summary
29. The exemptions from copyright protection contained in Article 110(5) Copyright Act can be
summarised as follows: As far as copyrighted works excluding nondramatic musical works are
concerned (this is Subsection A of Section 110(5) Copyright Act), anybody in the US can play such
works from radio or TV on his business premises for the enjoyment of his customers without the
consent of the copyright owner. The only condition in the law which has the potential to somewhat
reduce the benefit of the exception from applying to all business premises in the US, consists in
requiring that a single apparatus of a kind commonly found in private homes be used, without
defining in the law what is meant by this. The other conditions are unlikely to have any limiting
effect in practice.
30. As to nondramatic musical works (this is Su bsection B of Section 110(5) Copyright Act),
anybody can play such works originating from radio or TV in his establishment for the enjoyment of
his customers without the consent of the copyright holder. In case the establishment being below a
certain size (3,750 square feet for restaurants and bars and 2,000 square feet for all other
establishments), no further conditions apply with a potential to limit the number of exempted
establishments. In case the premises exceeding these size limits, there exist only limitations as to the
number of loudspeakers which can be used. In any event, the use of professional equipment is
perfectly permissible.
III. QUANTITATIVE EFFECTS ON COPYRIGHT OWNERS
31. In order to illustrate the scope of the exception, as far as the establishments referred to under
Section 110(5)(B) Copyright Act are concerned, and on which no limitations as to the audio(-visual)
equipment used exist, the following figures are instructive.
32. In 1999, the Dun & Bradstreet Corp. has prepared a quantitative analysis in order to find out
how many businesses in the US fall below the su rface thresholds established by Section 110(5)
Copyright Act, thus escaping copyright liability . The methodology used by Dun & Bradstreet was
identical to the methodology used in an analysis it had prepared in 1995 for the US Congressional
Research Service during the legislative process of what eventually became the Fairness in Music
Licensing Act.
33. The analysis is based on 1998 figures using Dun & Bradstreet's database comprising more
than 6.5 million businesses all over the US.
The result of the analysis is that:
- 73% of all US drinking establishments have a surface of below 3,750 square feet;
- 70% of all US eating establishments have a surface below 3,750 square feet; and
- 45% of all US retail establishments have a surface below 2,000 square feet.

34. These figures comprise bars, restaurants, tearooms, snackbars, etc. and retail stores.
However, other sectors in which a number of establishments are likely to be unconditionally
exempted as well were not taken into account (for example : hotels, financial service outlets, estate
property brokers, other types of service providers).
35. To put the results of these data otherwise, approximately 70 % of all drinking and eating
establishments in the US and 45 % of all retail establishments in the US are entitled under
Section 110(5) Copyright Act, without any limita tion, to play music from radio and TV on their
business premises for the enjoyment of their customers without the consent of the copyright owners
thus depriving the latter of any potential source of licensing income for this use of his work. All
other - larger - establishments are of course benefiting from the exception under Section 110(5)(B)
Copyright Act, if they meet the very lenient conditions as to the number of permissible loudspeakers.
36. Dun & Bradstreet had prepared alternative figures based on its own estimations rather than
on actual answers received to its questionnaires to which we have also referred in our First Written
Submission. Given that the results of both analyses are very similar, we do not intend to repeat the
figures here.
37. For comparison purposes the figures which have been prepared by Dun & Bradstreet in 1995
on behalf of the US Congress, the results were as follows:
- the first scenario used the assumption that premises being unconditionally exempted from
copyright liability not exceed the surface of the Aiken establishment which was 1,055 square
feet:
- 16 % of all US eating establishments,
- 13.5 % of all US drinking establishments, and
- 18 % of all US retail establishments.
fall below this surface threshold, thus benefiting from the unconditional exemption.
- the second scenario was based on the alternative assumption that the unconditional copyright
exemption would apply to eating and drinking establishments with a surface below 3,500
square feet and retail establishments below 1,500 square feet:
- 65 % of all US eating establishments,
- 72 % of all US drinking establishments, and
- 27 % of all US retail establishments.
fall below this alternative surface threshold, thus benefiting from the unconditional
exemption.
38. These figures do not only corroborate the figures of the 1999 Dun & Bradstreet analysis but
also demonstrate very clearly the very significant increase of the scope of the exemption under the
1976 Copyright Act in comparison to today's exception. The scope for eating establishment has seen
an increase by 437%, for drinking establishments by 540% and for retail establishments by 250%.
We will come back to these figures and explain why they are of relevance to this case later on.

IV. INCOMPATIBILITY OF THE US LEGISLATION WITH ITS OBLIGATIONS
UNDER THE WTO AGREEMENT ON TRADE-RELATED ASPECTS OF INTELLECTUAL
PROPERTY RIGHTS
1. Section 110(5) Copyright Act in the light of Article 9(1) TRIPS together with
Articles 11bis(1) and 11(1) Berne Convention
39. Given that the distinction between both Subsections of Section 110(5) Copyright Act may
not be entirely clear, these Subsections will be taken together for the legal analysis.
Article 9(1) TRIPS
40. This provision reads :
"Members shall comply with Articles 1 through 21 of the Berne
Convention and the Appendix thereto…"
This provision has as a consequence that the obligations contained in Articles 1 through 21 of the
Berne Convention have become part of the obligations under TRIPS and violations of these
provisions are fully subject to the WTO dispute settlement system.
Article 11bis(1) Berne Convention
41. The provision which is of particular relevance for the case at hand is Article 11 bis(1) Berne
Convention which reads :
"(1) Authors of literary and artistic works shall enjoy the exclusive
right of authorising :
- (i) the broadcasting of their works or the communication
thereof to the public by any other means of wireless
diffusion of signs, sounds or images;
- (ii) any communication to the public by wire or by
rebroadcasting of the broadcast of the work, when this
communication is made by an organisation other that the
original one;
- (iii) the public communication by loudspeaker or any
analogous instrument transmitting, by signs, sounds or
images, the broadcast of the work."
42. Article 11 bis was introduced into the Berne Convention at the occasion of the Rome
Revision (1928), and further elaborated by the Br ussels Revision (1948) in a period where public
communication by loudspeakers, radio etc. had b ecome a very important means of communication.
Such a means of communication was considered to be clearly similar to the public performance of a
work, except that it increased the potential audience.
43. Each of the uses described in Article 11bis(1)(i) to (iii) Berne Convention is to be considered
as a separate use, which requires a separate authorisation for each such use by the owner of the
copyright. It is Article 11bis(1)(iii) Berne Convention which is the pertinent provision for the case of
hand.

Article 11(1) Berne Convention
44. While Article 11 bis(1)(iii) Berne Convention necessitates that the musical work has been
transmitted by hertzian waves at some point during its way to the reception apparatus,
Article 11(1)(ii) Berne Convention covers the case when the entire transmission was by wire.
2. Compatibility of Section 110(5) Copyright Act with Articles 11 bis(1)(iii) 11(1)(ii) Berne
Convention
45. Given that the US appear to concede that Section 110(5) Copyright Act is at variance with
Articles 11bis(1) and 11(1) Berne Convention (point 17 first written submission), we will limit our
presentation of the analysis today to the following remarks and refer to the systematic presentation of
the legal analysis on Articles 11 bis(1)(iii) and 11(1)(ii) Berne Convention to our first written
submission. By denying copyright protection to works when they are received via radio or TV by
hertzian waves and subsequently played on business premises for the enjoyment of customers, the
US are not granting the protection which it is obliged to grant under Article 9(1) TRIPS together with
Article 11bis(1)(iii) Berne Convention.
46. The considerations put forward under Article 11 bis Berne Convention apply mutatis
mutandis to Article 11(1) Berne Convention. It can, therefore, be said that the playing of music or
other copyrighted works from radio or TV on the business premises for the enjoyment of customers
as described in Section 110(5) Copyright Act constitutes acts which are protected by Article 11(1)(ii)
Berne Convention if the entire radio or TV transmission is by wire. By denying such protection, the
US are violating its obligations under Article 9(1) TRIPS together with Article 11(1)(ii) Berne
Convention.
3. Permissible exceptions to copyright protection
47. The EC/MS would like to observe that the burden to invoke and prove the applicability of an
exception falls on the party invoking the exception. This standard is in accord with the Appellate
Body reports in United States - Standards for Reformulated and Conventional Gasoline and United
States - Measures Affecting Woven Wool Shirts and Blouses from India.
4. The exceptions to copyright protection under TRIPS and the Berne Convention
48. The US point out in point 18 of their first written submission that:
"The Berne Convention permits members to make "minor
reservations" to the exclusive rights guaranteed by Berne, including
limitations to the public performances right in Article 11 and 11 bis
TRIPS. Article 13 articulates the standard by which the
permissibility of these limitations to exclusive rights must be
judged."
The EC/MS would disagree with this statement.
49. The Berne Convention allows certain exceptions to the specific exclusive rights conferred.
Article 9(2) Berne Convention allows exceptions to the reproduction right and Articles 10 and 10 bis
Berne Convention define precisely certain possible free uses of otherwise protected works.
50. As to the public performance and communication to the public right contained in Article 11
Berne Convention, no exceptions or limitations are foreseen in the Berne Convention.
51. As to the exclusive rights covered by Article 11bis Berne Convention, a certain "fine tuning"
facility is provided in paragraph two which reads:

"It shall be a matter for legislation in the countries of the Union to
determine the conditions under which the rights mentioned in the
preceding paragraph may be exercised, but these conditions shall
apply only in the countries where they have been prescribed. They
shall not in any circumstances be prejudicial to the moral rights of
the author, nor to his right to obtain equitable remuneration which,
in the absence of agreement, shall be fixed by competent authority."
While "countries of the Union" are given the freedom to determine conditions for the exercise of the
rights, this freedom is limited by the minimum requirement that a copyright owner obtains as a
minimum equitable remuneration. Section 110(5) Copyright Act fails to provide such equitable
remuneration.
52. It is true that some discussion in WIPO on so-called "minor reservations" have taken place
during the Brussels and Stockholm Conferences, but the precise scope of Berne rights, subject to
such minor reservations, has never been fully clarified. In any event, such minor reservations would
be limited to public performances of works for religious ceremonies, military bands and the needs of
the child and adult education. All these uses are characterised by their non-commercial character and
it is obvious that the uses contemplated in Section 110(5) Copyright Act do not meet this
requirement.
53. As an intermediate result, it can be said that the Berne Convention does not contain an
express or implied provision which would justif y the exceptions contained in Section 110(5)
Copyright Act.
54. While the US would appear to agree up to this point, it expresses the view that Article 13
TRIPS provides an exception clause which, if its threefold conditions are met, can permit exceptions
to the exclusive rights conferred by Articles 11 and 11 bis of the Berne Convention. The EC/MS
disagree with this interpretation of Article 13 TRIPS.
55. First of all, Article 20 Berne Convention clearly speaks against the US' interpretation of
Article 13 TRIPS because it only allows "countries of the (Berne) Union to enter into special
agreements among themselves, in so far as such agreements grant to authors more extensive rights
than those granted by the (Berne) Convention". In other words, the Berne Convention countries
cannot agree in another treaty to reduce the Berne Convention level of protection. The US
interpretation of Article 13 TRIPS would exactly have the effect to reduce the Berne Convention
level of protection.
56. Article 20 Berne Convention is mirrored in the TRIPS Agreement by Article 2(2), which
stipulates that:
"Nothing in Parts I to IV of th is Agreement shall derogate from
existing obligations that Members may have to each other under the
…, the Berne Convention".
57. Furthermore, the US' interpretation of Article 13 TRIPS would lead to the absurd result that
TRIPS would diminish the level of protection cont ained in the pre-existing Berne Convention. The
opposite is true; both the EC/MS and the US fought vigorously and in the end successfully to
increase the pre-existing levels of protection through TRIPS.
58. Even if Article 13 TRIPS were considered to be applicable to Articles 11 or 11 bis Berne
Convention, as far as the latter is concerned any permissible exception or limitation would at least
have to give the author an equitable remuneration (Article 11 bis(2) last sentence Berne Convention)
what Section 110(5) Copyright Act fails to do. This view appears to be fully shared by Australia (see
points 2.10 and 5.2 of its Third Party Submission).

59. In any event, the three criteria set out in Article 13 TRIPS are not met by Article 110(5)
Copyright Act, neither as far as Subsection A nor Subsection B is concerned.
60. Before analysing the three conditions contained in Article 13 TRIPS, a few more systemic
remarks on the US argumentation on this issue appears to be necessary.
61. The US give at several places in their first written submission (e.g. points 28, 29) the
impression that the exclusive rights contained in the Berne Convention and TRIPS would form a
hierarchical order with "important" rights and "unimportant" rights, and refers to the public
performance rights contained in Articles 11(1)(ii) and 11 bis(1)(iii) Berne Convention as "secondary"
rights. The EC/MS disagree with this view. Each and every exclusive right stipulated in the Berne
Convention and TRIPS are equally important separate rights, which have to be looked at on the basis
of theirs respective merits. The relative importance to an individual copyright owner will vary
according to the kind of work involved and the way in which he manages his works.
62. From this, it follows that contrary to what the US appear to suggest under points 28 and 29 of
their first written submission, it is not possible to argue under Article 13 TRIPS that by increasing the
level of protection in relation to one specific exclusive right, it can be justified to reduce the
protection of another exclusive right below minimum standard. In other words, one cannot justify a
below standard protection for the public performance rights by an above standard protection of the
reproduction right. Also Australia underlines in its Third Party Submission (see, for example,
point 3.8) that the different exclusive rights granted to a copyright owner have to be looked at
separately.
63. Furthermore the US also refer at several instances to agreements between private operators
or their associations and associations representing copyright owners (e.g. point 12 first written
submission) and claim that these private agreements were similar to what was finally codified by
Section 110(5) Copyright Act. While the US have not made available the agreement to which
reference has been made, the appreciation of the two leading US collecting societies has been
expressed in unambiguous terms in a joint press release by BMI and ASCAP on the day following
the passage of the Fairness in Music Licensing Act by Congress of which I will cite only a few
passages (the text of the entire press release will be submitted as Exhibit EC-8).
"With this music licensing legislation, which seizes the private
property of copyright owners, the United States Government has
severely penalised American songwriters, composers and
publishers… The earnings of songwriters, composers and publishers
have been reduced by tens of millions of dollars annually."
More importantly, the US' argument to refer to privat e agreements in order to justify provisions of a
statute is of a circular nature. It is the task of the law to set the legal framework and to grant certain
rights. It is only after the legislator has established this legal framework that the private economic
operators can start to act within this framework. Only if the law stipulates a public performance right
can the parties usefully agree on a licensing contract. For uses which are free such as the ones
contemplated in Section 110(5) Copyright Act ther e is no object for a licensing contract because
there is no right to be licensed in the first place. In its Third Party Submission, Australia points
rightly out that the right to obtain remuneration has to be distinguished from a situation in which the
right owner elects not to pursue his entitlement (see points 3.12 and 3.13).
64. The US are also making reference to the inherent administrative difficulties to license a great
number of small establishments. Logically speaking, questions of enforcement of a right cannot be
used to excuse its very existence. One can onl y enforce a right if it is recognised by the law.
European collecting societies are successfully licensing great numbers of also small businesses and
do apparently not encounter insurmountable obstacles. In the US, it would appear that if indeed the
collecting societies were to encounter administrative difficulties, this is because collection societies

in the US have never developed the necessary administrative structure to licence small
establishments due to a lack of legal protection for extended periods of time in the US. The US'
argument is further flawed by the fact that Section 110(5) denies protection to copyrighted works
emanating from the radio and TV. The playing of copyrighted works from CDs and tapes is not
covered by the exceptions. In other words the operators of establishments have to obtain licences to
play music from CDs or tapes, but they can play music from the radio or TV without a license. This
differentiation is difficult to justify. Either the licensing of a great number of establishments meets
insurmountable difficulties, then it should meet these difficulties independently of the medium used
or it does not.
65. Let's now look more specifically at the three conditions to make limitations or exceptions to
exclusive rights under Article 13 TRIPS permissible:
- They have to be confined to certain special cases;
- They may not conflict with a normal exploitation of the work; and
- They may not unreasonably prejudice the legitimate interests of the right holder.
These three conditions have to be met cumulatively.
66. When the US claim that Section 110(5) Copyright Act confines the exclusion from copyright
protection to "certain special cases" (pages 13-14 first written submission)
49, this would appear to
the EC/MS rather to be a claim that the exceptions are well defined in the sense of legal certainty.
However, nothing is said about what makes the playing of music from the radio and TV for the
enjoyment of customers "special" as compared to other cases. One of the questions coming
immediately to one's mind is why is the playing of music from the radio or TV "special" as compared
to music played from CDs or cassettes. The remark by Australia in its Third Party Submission (see
point 5.5) that "… Section 110(5) Copyright Act appears to provide a blanket exemption for such
establishments rather than dealing with special
 cases" comes to the same conclusion.
67. Furthermore, the fact that very significant numbers of establishments are covered by the
exception demonstrates that the exemption rather constitutes the rule than the exception in a situation
in which one half to more than two thirds of all US establishments are covered by the exception.
68. As to Section 110(5)(A) Copyright Act, the reference to "homestyle receiving apparatus" is
in itself so imprecise that it does not even create any legal certainty leave alone precisely defining a
"special case" in the sense of Article 13 TRIPS.
The notion of homestyle receiving apparatus is a moving target that is subject to the developments of
technology. Today's audio sets which are purchased by ordinary private customers to be played in
their homes may have several hundred Watts of output capable of servicing many times the surface
involved in the historic Aiken case.
69. The limitations or exceptions may not conflict with the normal exploitation of the work. As
pointed out above, this analysis has to be carried out on the basis of each exclusive right individually.
70. Articles 11(1)(ii) and 11bis(1)(iii) Berne Convention create an exclusive right for a copyright
owner to grant permission for the public performance of his work. While it is difficult to establish
with precision what kind of performance to the public would not form part of the normal exploitation
of the exclusive public performance rights, it appears in the view of the EC/MS safe to say that at
least all uses which create an economic benefit to the users of the works are comprised in the normal

49 See paragraphs 24-26.

exploitation. The ample case law and the legislative history of Section 110(5) Copyright Act make it
utterly clear that playing music on the commercial establishment is not an event which happens
incidentally, but is a deliberate commercial act to attract customers and to make their stay on the
premises of the establishment more enjoyable with the ultimate objective to enhance turnover and
profit. This latter aspect is expressly recognised by the NLBA in a News release referred to by the
US in their Exhibit US-7. In view of the EC/MS, there can be no doubt that the normal exploitation
of the exclusive right concerned includes these commercial activities. This view is also shared by
Australia in its Third Party Submission (points 5.6 and 5.7).
71. These arguments apply to both Subsections of Section 110(5) Copyright Act. The author of
dramatic musical works, like the author of popular music both expect that their exclusive rights not
be disregarded at least for such activities which are carried out by others for commercial gain. The
US is offering no evidence whatsoever to support its assertion that owners of dramatic musical works
do not expect any benefit from the rights curtailed by Section 110(5) Copyright Act (point 31 first
written submission). Also the argument that "C ongress intended that this exception would merely
codify the licensing practice already in effect…" has to be refuted as circular. Only if there is a right,
there can be a licence.
72. The exception may not unreasonably prejudice the legitimate interests of the right holder.
The legitimate interest of the right holder consists in being able to prevent all instances of a certain
use of his work protected by a specific exclusive right done by a third party without his consent.
Clearly, these legitimate interests include as a minimum all the commercial uses by a third party of
his exclusive rights. By creating exceptions co ntained in Section 110(5) Copyright Act, these
legitimate interests are diminished, thus prejudiced. This view is shared by Australia in its Third
Party Submission point 5.10.
73. While it is difficult to draw the precise line between reasonable and unreasonable prejudice,
in view of the EC/MS both exceptions contained in Section 110(5) Copyright Act cause unreasonable
prejudice to the owner of the exclusive right concerned.
74. While the US claim that the economic effect of Section 110(5) Copyright Act was minimal,
even before the passage of the 1998 Amendment, no evidence whatsoever is offered to support this
assertion. To the contrary, the vast body of case law on the pre-1998 homestyle exemptions makes it
clear that very significant economic interests were at stake. This is further corroborated by the long
and acrimonious legislative debate on the 1998 Amendment. Already under the Aiken scenario the
1995 CRS study showed that 13.5%, 16 and 18% of all US drinking, eating and retail establishments
were covered by the exemption. Given that the Aiken surface had been doubled by the Courts before
the 1998 Amendment and given that the Courts might after the 1998 Amendment use in
Subsection A, the surface categories set out in Subsection B, the coverage of Subsection A is likely
to be similar or even identical to the coverage of Subsection B. In practical terms, this means that at
least one half of all US service establishments are likely to be covered by the Subsection A
exemption. While it is irrelevant for the question of unreasonable prejudice to look at the degree of
aggressiveness of licensing activities by the collecting societies, the US' assertion that the
establishments exempted under Subsection A … are the least likely to be aggressively licensed by the
PROs… (point 34 first written submission) is in contradiction with the US' statement (point 10 first
written submission) that the PROs have used harassment and abusive tactics in the licensing practice.
75. As to Section 110(5)(B) Copyright Act, the unreasonableness of the prejudice flowing to the
rightholder becomes fully apparent when 73% of all drinking establishments, 70% of all eating
establishments and 45% of all retail establishments are unconditionally covered by the exception and
the rest of establishments may additionally be exempted under lenient conditions. In this situation,
the denial of protection has been elevated to being the rule and protection of the right has become the
exception.

76. In relation to the analyses prepared by Dun & Bradstreet one branch of the US government
may consider them "meaningless by themselves" the fact of the matter is that the 1995 analysis has
been commissioned by the US Congress, because some meaningful insight into the effects of the size
of an exemption was expected. The 1998 analysis is but a re-run of the 1995 analyses based on 1998
figures. In view of the EC/MS, it is irrelevant to quantify the actual financial losses suffered by the
rightholders concerned. It is sufficient to demonstrate the potential of the prejudice suffered.
77. As to the criticism by the US that the EC has made no attempt to address the effects of these
exceptions on its rightholders, it is sufficient to say that at least 25 % of all music played in the US
belong to EC copyright owners.
78. To sum-up our legal argumentation, Ms Chairperson, Members of the Panel, let me point out
the following:
In the view of the EC/MS, which is apparently sh ared by the US, Section 110(5) Copyright Act is at
variance with Article 9(1)TRIPS together with Articles 11(1)(ii) and 11bis(1)(iii) Berne Convention.
79. The EC/MS do not agree with the US defence that the exception stipulated in Section 110(5)
Copyright Act can be justified under Article 13 TRIPS. In view of the EC/MS Article 13 TRIPS is
not applicable to Articles 11 and 11 bis Berne Convention because both Article 20 Berne Convention
and Article 2(2) TRIPS do not allow that TRIPS extends the scope of exceptions allowable under
Berne. In any event, no exception to Article 11 bis Berne Convention could ignore the requirement
stipulated in Article 11 bis(2) last sentence Berne Convention which requires as the bottom line that
the rightholder receive equitable remuneration. Such equitable remuneration is not foreseen in
Section 110(5) Copyright Act.
80. Finally, even if Article 13 TRIPS would be applicable to Articles 11 or 11 bis Berne
Convention none of its three conditions, which have to be met cumulatively, would be met by either
alternative contained in Section 110(5) Copyright Act. Of course, based on WTO precedents, the US
bear the full burden of proof to establish that Article 13 TRIPS would be applicable and all its
conditions be met.
5. Nullification and impairment
81. Under Article 64(1) TRIPS, Article XXIII GATT and Article 3(8)DSU, the violation of the
US' obligations under the TRIPS Agreement are considered prima facie to constitute a case of
nullification or impairment.
V. CONCLUSION
82. The EC/MS therefore respectfully request the Panel to find that the US have violated their
obligations under Article 9(1) TRIPS together with Articles 11 bis(1)(iii) and 11(1)(ii) Berne
Convention and should bring their domestic legisla tion into conformity with their obligations under
the TRIPS Agreement. Of course, the EC/MS would be pleased to reply to any question the Panel
might have. The written version of this statement will be made available during the course of
tomorrow at the latest.

ATTACHMENT 1.3
RESPONSES OF THE EUROPEAN COMMUNITIES AND THEIR MEMBER STATES TO
WRITTEN QUESTIONS FROM THE PANEL – FIRST MEETING
(19 November 1999)
I. REPLIES TO QUESTIONS FROM THE PANEL TO THE EUROPEAN
COMMUNTIES AND THEIR MEMBER STATES
Legislation in the EC
Q.1 What types of minor exceptions apply to the public performance of works in the EC
law or the laws of the EC member States, and in particular whether any limitations apply to
food service and drinking establishments and establishments other than food service and
drinking establishments (below referred to as "other establishments").
See reply under question 2.
Q.2 Is the communication to the public of mu sic contained in broadcasts or played from
sound recordings or live performances subject to exclusive rights or right of remuneration in
the EC law or the laws of the EC member States, and are the rights in respect of such uses of
music exercised by the right holders or by their collective management organizations?
While the Panel uses here and in other instances the term "minor exception", the EC/MS
would like to note that this term is not a term of art neither under the Berne Convention nor under
TRIPS. We will refer to "exceptions" where referring to Article 13 TRIPS or express exceptions
under the Berne Convention and to "minor reservations" where referring to the concept which has
been addressed at the Brussels and Stockholm Diplomatic Conferences of the Berne Union.
There exists no EC law, which addresses directly the question of exceptions to public
performance of works; this matter is exclusively de alt with in the domestic laws of Member States.
Given the very short time available to prepare these replies, it was not possible to collect this
information.
Questions on exceptions to exclusive rights have been asked to the EC/MS in the context of
the review of the implementation by WTO Members and replies have been provided to the TRIPS
Council in 1996. These replies have been reproduced in documents IP/Q/name of WTO Member/1.
According to the information of which we dispos e, it appears safe to say that none of the
Member States of the EC has an exception to copyright protection identical or similar to
Section 110(5) US Copyright Act. Upon expre ss request, the Irish Music Rights Organisation
(Imro), whose complaint to the EC is historically at the origin of this dispute settlement case, has
confirmed that it and other Collecting Societies in the MS of the EC are actively and systematically
enforcing the rights stipulated by Articles 11 bis(1)(iii) and 11(1)(ii) Berne Convention, and that this
activity generates significant amounts of income (1.2 million IR£ for 1998 for Ireland alone; of this
amount 0.86 million IR£ accrues to bars, night-clubs, guesthouses, hair & beauty salons, hotels,
restaurants, retail shops and stores), which is distributed to the right holders.

Impact on the market
Q.3 Please provide information on the estimated losses to the EC right holders resulting
from the exemptions contained in Section 110(5), if possible divided between Subsections (A)
and (B) of that paragraph.
It is very difficult to establish precise figures for losses suffered by EC right holders from the
operation of Section 110(5) Copyright Act. But in view of the EC/MS, it is not our task to
demonstrate such precise figures.
However, in view of having an order of magnitude of losses which European owners of
copyrighted works are likely to suffer, the EC/MS would like to refer the Panel to the order of losses
for all right holders, which the two major US Collecting Societies have estimated, when the old
coverage of the "homestyle exemption" was enla rged by the Fairness in Music Licensing Act in
1998, to represent an amount of "tens of millions of dollars" per year (see Exhibit produced during
first substantive meeting and now reproduced as Exhibit EC-14).
The losses to be allocated to EC right holders are the part of these "tens of millions of
dollars" proportionate to the EC authors' market share for which we have given estimates in our reply
to question 5 below.
This analysis would suggest that the losses suffered by EC authors are, in any event, in the
sphere of millions of dollars per year.
Q.4 Please provide any available information or estimations on the revenues collected by
the EC collecting societies, in particular:
(a) The total revenues from the licensing of public performance of music divided between
the major categories of uses, including:
(i) broadcasting and rebroadcasting within the meaning of Article 11 bis(1)(i) and
(ii) of the Berne Convention,
(ii) public communication within the meaning of Article 11 bis(1)(iii), and
(iii) other rights, including those referred to under Article 11(1) of the Berne
Convention;
(b) As regards the revenues collected from food serving and drinking establishments and
other establishments, what is the breakdown as between royalties for the public
performance of broadcast music and the public performance of music from other
sources;
(c) Breakdown of these revenues between various sources of revenue, in particular the
percentage of the revenues collected from small business establishments (e.g. of the type
covered by Section 110(5)).
Information or estimations of the revenues collected by all Collecting Societies in the EU in
relation to the licensing of the public performance of music under the categories mentioned in this
question are not available to EC/MS.
It should be noted by the Panel that the Collecting Societies in the EU do not necessarily
categorise the revenues they collect in respect of the licensing of the public performance of music by
reference to the Articles, paragraphs and sub-paragraphs of the Berne Convention or by reference to
the categories mentioned in subsections (b) and (c) of this question.

However, the EC/MS have been able to obtain illustrative information in respect of one EU
Member State from the Irish Music Rights Organisation (Imro). Imro is a Collecting Society, which
licenses and collects revenue in respect of the public performance of music in Ireland. If one were to
extrapolate the quantitative data for Ireland to the level of the EC, Ireland representing roughly one
hundredth of the EC's population (3.6 million for Irel and; 370 million for the EC), the Irish figures
would have to be multiplied with a factor of 100.
(a) (i) In its financial year, which ended on 31 December 1998, Imro collected revenues in
respect of broadcasting and rebroadcasting of music (approximating to the rights
provided for in Article 11 bis(1)(i) and (ii) Berne Convention amounting to
IR£ 3,634,594 (€ 4,614,982).
(ii) In the same financial year, Imro collected revenues from the licensing of the public
performance of music by means of radio and TV (approximating to the right
provided for in Article 11bis(1)(iii)) in the amount of IR£ 1,242,210 (€ 1,577,281).
(iii) In the same financial year, Imro collected revenue from the licensing of all public
performances of music in the amount of IR£ 6,237,676 (€ 7,920,214). This does not
include the revenue collected in respect of the licensing of broadcasting and
rebroadcasting (approximating to Article 11 bis(1)(i) and (ii)) mentioned at
subsection (a) above. Excluding the radio and TV public performance revenue, Imro
collected IR£ 4,995,466 (€ 6,342,933) in respect of the licensing of all other public
performances of music (including those referred to under Article 11(1) Berne
Convention).
(b) As indicated above, during its most recent financial year, Imro collected revenues in the
amount of IR£ 1,242,210 (€ 1,577,281) in respect of the public performance of broadcast
music from food serving and drinking establishments and other establishments. In that same
financial year, Imro collected revenues in the amount of IR£ 6,237,676 (€ 7,920,214) in
respect of the public performances of music from all sources (including the public
performance of broadcast music) in food serving and drinking establishments and other
establishments.
(c) Imro estimates that it collected revenue from the licensing of the public performance of
music by means of radio and TV in small business establishments amounting to
approximately IR£ 861,098 (€ 1,093,369) during its most recent financial year. The
categories of establishment mentioned in the Section 110(5) Copyright Act are not the basis
used by Imro in identifying revenue from " small business establishments ". However, in
identifying the revenue from small business establishments, Imro has included the revenue
collected from retail shops, bars, nightclubs, guesthouses, hotels, restaurants, hair and beauty
salons. The revenue collected from these small business establishments for the licensing of
the public performance of music by means of radio and TV represented 13.8 % of the public
performance revenue collected by Imro in that year.
Q.5 In view of paragraph 77 of your oral statement at the first substantive meeting that
25 per cent of all music played in the US belongs to EC right holders, please provide
information about what amount of revenue is transferred from the US CMOs to the EC CMOs
for the last three years for which data are available. What is the proportion of this transferred
revenue in relation to the total revenues collected by EC CMOs?
An assessment of the market share of European authors for copyrighted works, which are
communicated via radio and TV to the public, is a very difficult task, and the best one can achieve is
an estimate. It has to be recalled that a typical musical work has not only a significant number of
holders of copyrights and neighbouring rights (song writers, text writers, singers, musicians,

producers, publishers, broadcasters, etc) but also the category of authors typically comprises more
than one.
Moreover, statistics on record sales are apparently not organised in function of the origin of
the right holder of a given work, but rather in function of the origin of the producer. The Frank
Sinatra song "My way", for instance, was written by a French composer. Part of this song's licensing
income accrues to an EC right holder. The record with the Frank Sinatra version was however
produced in the US. Sales of that record will therefore not be categorised as "sales of a French
record".
The figure of 25% used in point 77 of our oral statement is based on estimate provided to the
EC by the industry, which used published data which suggested for 1988 a 23% "market share" of
United Kingdom performing artists in relation to sales of recorded music in the US. This of course
requires two additional assumptions to be relevant for the communication to the public, the first
being that the presence of performing artist is proportionate to the presence of authors of texts or
music; and secondly, that there exists a proportionality between the sale of recorded music to the
incidence of communication to the public via radio or TV.
Another way to estimate European authors' "market share" is by looking at the ratio of
distributions received from US Collecting Societies. The figures, which we have received from
ASCAP (see Exhibit EC-15) for 1998 indicate th at EC right holders receive x% of total
distributions.
1
The EC/MS would point out that both figures sugge st that EC authors represent a significant
"market share" of the US market for the communication to the public by radio or TV.
Q.6 Please provide a copy of the full study by Dun & Bradstreet referred to in EC Exhibit 7.
Please comment on the US observations contained in paragraph 37 of its submission, especially
with regard to deductions to be made from the relevant numbers?
The EC/MS have made available - as part of Exhibit EC-7 - copy of a document prepared by
Dun & Bradstreet in which the results of its 1999 analysis on the basis of 1998 data are shown. We
attach - as requested by the Panel - our entire documentation concerning the Dun & Bradstreet
analysis (see Exhibit EC-16).
The 1999 - as well as the 1995 - analysis of the impact of Section 110(5) address the
potential impact of the exceptions. The US in point 37 of their first written submission makes an
attempt to transform the data of potential impact to information on actual impact.
In view of EC/MS, it is the potential impact, which is relevant for the analysis of Article 13
TRIPS, and not actual impact, which is extremely difficult if not impossible to establish with a
sufficient degree of certainty. It would appear that the US Congress in 1995 also considered it more
instructive to ask for data on potential impact than on actual impact.
Q.7 Please provide any market information concerning other countries that you would
consider relevant for the case at hand.
The EC/MS do not dispose of market data concerning other countries.

1 This information has been provided to the EC in confidence.

International treaty obligations
Q.8 Please explain which individual exclusive rights under which specific provisions of
Articles 11(1) and 11 bis(1) of the Berne Convention are a ffected to what extent by which
specific provision of Subsection (A) and/or (B) of Section 110(5)?
As pointed out in points 61-72 of our first written submission, and reconfirmed in points
41-46 of our oral statement at the first meeting with the Panel, it is the view of the EC/MS - which is
apparently shared by the US, Australia and Switzerland – that both Subsections of Section 110(5)
Copyright Act are at variance with Article 11bis(1)(iii) and Article 11(1)(ii) Berne Convention.
Both provisions of the Berne Convention cover the same exclusive right, i.e. the
communication to the public of a protected work. The distinction being drawn between the two
provisions relate to the way (i.e. hertzian waves for Article 11bis and through cable for Article 11) in
which the works reach the place where they are eventually played to the public (see also the citation
from the guide to the Berne Convention cited in footnote 46 of our first written submission). Both
Subsections of Section 110(5) allow the playing of music for the enjoyment of customers.
Q.9 Is the potential scope of application rather than the existing actual impact of
Section 110(5)(A) and (B) relevant for the examination of its consistency with Article 11 bis(1)
or Article 11(1) of the Berne Convention, as the case may be, or for assessing whether
Section 110(5) meets the requirements of Article 13 of the TRIPS Agreement, in particular its
second and third conditions ?
In the view of the EC/MS, Section 110(5) is incompatible with Articles 11 bis and 11 Berne
Convention simply because an exclusive right is denied, which according to both Parties is the case.
The dichotomy between potential scope and actual impact is, in the view of the EC/MS, of relevance
for the three conditions contained in Article 13 TRIPS. This would of course require that Article 13
TRIPS be applicable as an exception to Articles 11 bis and 11 Berne Convention, something that the
EC/MS have repeatedly denied (see also reply to question 11 below).
In the view of the EC/MS, it is the potential impact, which is of primary importance to assess
the conditions contained in Article 13 TRIPS. Seen from the right owner, his exclusive right is not
only menaced by those who actually perform the acts prohibited by the exclusive right but also by all
those who are free to decide to do so at any time and without having to inform him or his Collecting
Society of their intentions.
It is the potential, which is created which sets the market conditions. This argument can also
be illustrated by reference to another field of IPR. In the patent area, long and acrimonious
discussions took place in the Uruguay Round negotiations on TRIPS in relation to compulsory
licenses, which generated eventually the disciplines contained in Articles 27(1) and 31 TRIPS.
In the review of the TRIPS implementation by WTO Members which was carried out during
1996-1997, it became apparent that very few and in several case no single compulsory licence has
been granted over an extended period of time by a great number of countries reviewed, despite the
fact that practically all these countries had provisions on their statute books which allowed the grant
of compulsory licences. Also here, the impact of compulsory licences cannot be reasonably
measured by the mere number of licenses granted in a given period of time, but can only be fully
appreciated by the impact of the possibility to grant compulsory licences on the market place as such.
In a country in which it is relatively easy to obta in a compulsory licence, a right owner will be more
inclined to grant a contractual licence on more disadvantages terms than if the system makes it more
difficult to obtain a compulsory licence.
Q.10 Could the EC further explain the legal basi s for its interpretation that the exception of
Article 13 of the TRIPS Agreement applies only to those copyrights which were introduced by

the TRIPS Agreement in addition to those protected in Article 1 – 21 of the Berne Convention?
Does this conflict with the argument that the three conditions of Article 13 of the TRIPS
Agreement can apply in addition to any requirements under exceptions embodied in the Berne
Convention?
The TRIPS Agreement has been negotiated, at least from the perspective of the EC/MS, to
improve the level of protection of IPRs as compared to the pre-existing situation. Given that the
Berne Convention already contained a system of well-defined exceptions to specific rights, there
existed no need to define a general exception for all rights covered by Section 1 Part II of TRIPS. If
the latter had been the objective, exceptions would have been created for Berne rights, going beyond
those contained in the Berne Convention before TRIPS. Such a result would clearly be incompatible
with Article 20 Berne Convention and Article 2(2) TRIPS.
The EC/MS negotiating position is well reflected in MTN.GNG/NG11/W/68 (Exhibit EC-
17). The proposed text on the draft TRIPS Article on limitations and exceptions (Article 8 of the
proposal) allowed Members to provide for limitations, exceptions and reservations in relation to
certain related rights as permitted by the Rome Convention. It did not, however, allow to provide for
limitations and exceptions to Berne rights. It is in teresting to note that the US had apparently the
same objective when stating in their submission to the negotiating group (doc.
MTN.GNG/NG11/W/14/Rev.1, Exhibit EC-18) that " Any limitation and exceptions to exclusive
economic rights shall be permitted only to the extent allowed and in full conformity with the
requirements of the Berne Convention (1971)".
The argument that the three conditions of Article 13 TRIPS can apply in addition to any
requirement under exceptions embodied in the Be rne Convention, is made under the alternative
hypotheses that Article 13 TRIPS is applicable to Articles 11bis and 11 Berne Convention.
Q.11 What is the legal basis for the EC view that the "minor reservations" doctrine under
the Berne Convention justifies only pre-existi ng exceptions? Does this "grandfathering" of
exceptions relate to exceptions existing prior to the conclusion of the Berne Convention, prior
to the revision or amendment of certain articles (e.g., Article 9(2) in 1967 or Article 11 bis in
1928/1948), prior the date of entry into force of the Berne Convention for a particular country
entering the Union, or prior to the entry into force of the TRIPS Agreement?
Discussions in the Berne Union on the issue of "minor reservations" were never conclusive.
However, one can conclude from several sources that it was intended to preserve or as the Panel puts
it to "grandfather" pre-existing "minor reservatio ns". The WIPO Guide to the Berne Convention
under point 11.6 states that :
"It is in relation to this Article that the question of the "minor
reservations" arises… At Stockholm (1967), it was agreed that the
Convention did not stop member countries from preserving
(emphasis added) their law on exceptions which come under this
heading of "minor reservations."
Furthermore, the Report of the Stockholm Conference (1967) (as cited in Ricketson, The
Berne Convention at p. 535 - attached as Exhibit EC-11) states:
"210. It seems that it was not the intention of the Committee to
prevent States from maintaining (emphasis added) in their national
legislation provisions based on the declaration contained in the
General Report of the Brussels Conference."
The intent not to admit new "minor reservations" is confirmed by the fact that the Brussels
Conference decided against the adoption of a general provision because this could "positively incite

those nations which had not, to this time, recognised such exceptions to incorporate them in their
laws" (Ricketson, The Berne Convention: 1886-1986, at pp. 533 and 536).
As to the timing aspect, the benefits of the "minor reservations" doctrine should only accrue
to those national legislations which have been on the statute books on or before 1967. The EC/MS
would argue that countries acceding to the Berne Convention after 1967 are either completely
prevented from "grandfathering" under the "minor reservations" doctrine or can only "grandfather"
their pre-1967 exceptions (of course if all the other conditions are also met). To argue otherwise
would give "newcomers" more rights than to established Members.
This logic has also been followed in a TRIPS grandfather provision Article 24(4) where the
relevant timeframe is identical for establishment Members and newcomers. The entry into force of
TRIPS would appear to be an irrelevant point in time for the "minor reservations" doctrine.
Q.12 Since under Article 11 bis(2) equitable remuneration has to be paid, are there ways to
provide such equitable remuneration other than through compulsory licensing ?
It would appear that a country could set minimum or precise levels of royalties to be paid for
the different uses protected under Article 11 bis Berne Convention. Another way to provide for
equitable remuneration could be the introduction of a levy system for the audio/TV equipment
purchased by the establishment being allowed to play copyrighted works without authorisations,
whereby the proceeds from such a levy system are distributed to the right holders.
II. REPLIES OF THE EUROPEAN COMMUNITIES AND THEIR MEMBER STATES
TO QUESTIONS FROM THE PANEL ADDRESSED TO BOTH PARTIES
Q.1 Please explain the extent to which the case law concerning Section 110(5) cited in your
respective submissions is relevant for the purposes of interpreting the present subsection (A) of
that paragraph.
The caselaw is first of all relevant to appreciate the development of the exceptions contained
in Section 110(5) Copyright Act (1976) to the Fairness in Music Licensing Act (1998). As far as
Section 110(5)(A) is concerned, the caselaw would appear to remain relevant for all the elements of
the exception which have remained unchanged under the new law.
Categories of works
Q.2 The Panel understands that the text of the original Section 110(5) is identical to that of
the present subsection (A) minus the words "except as provided in subparagraph (B)". The
preparatory work reproduced in exhibits EC -3 and US-1 (H.R. Rep. No. 94-1476 (1976))
explains that the provision "applies to perfor mances and displays of all types of works".
Paragraph 31 of the EC submission and paragraph 9 of the US submission (and certain other
paragraphs) contain an interpreta tion according to which this text, as contained in subsection
(A), is intended to exclude from its scope "nondramatic musical works". Please clarify your
interpretation of the text of this provision, on the one hand, as part of the original paragraph,
and, on the other hand, as part of subsection A, and, to the extent that, in your view, the text
should be understood differently in these two contexts. Explain why.
While we consider that Section 110(5) has to be looked at as an entity, we have pointed out
our understanding of a possible dividing line be tween Section 110(5)(A) and (B) as far as the
respective coverage of copyrighted works is concerned, both in our first written submission (see
points 31 and 32) and in our oral statement (see point 20). In the latter, we have also referred to the
possibility of diverging interpretations by US Courts.

Q.3 What is the definition of the term "n ondramatic musical work" in the context of
Section 110(5)? What types of musical works are either included in or excluded from the
application of the provisions of that Section, and which types of copyright holders are affected
by the provisions of Subsections (A) and (B)? Does it also cover communication to the public of
live music performances? For example, would the performance of, e.g., one song from a
musical, constitute a performance of a "dramatic" or of a "nondramatic" musical work? Is it
still a "dramatic" work if a song from a musical is performed separately and by another artist?
To what extent the notion of "nondramatic musical work" corresponds or is intended to
correspond with the notion of "small musical rights" applied in the practice of CMOs ?
Given that neither the Berne Convention nor TRIPS provide for such a distinction, we would
expect that the US points out this distinction existing in its statute, while we reserve our right to
comment on such explanations.
Licensing practice
Q.4 Paragraph 4 of the US oral statement at the first substantive meeting states that
Section 110(5) is limited to only certain secondary uses of broadcasts of public performances,
for which the right holder has already been compensated for the primary performance. In
which way, if any, do licensing arrangements between collective management organisations
(CMOs) and broadcasting organisations in the US or the EC take into account the potential
additional audience created by means of further communication by loudspeaker etc. of
broadcasts to the public within the meaning of Article 11bis(1)(iii) of the Berne Convention?
The EC/MS would like to reiterate that in their view, each exclusive right has to be looked at
separately. Therefore, for each use, an express authorisation of the right holder has to be granted.
While it would - from a purely legal point of view - be possible that the broadcaster also obtains - and
pays for - a license for "downstream" users of his broadcast (third party beneficiary licence), the
EC/MS are not aware of the existence of such a practice in the US for the uses concerned in this case.
Interpretation of treaty obligations
Q.5 What is the legal nature of materials including "General Reports" of Diplomatic
Conferences of the Berne Convention countries in light of Article 31 of the Vienna Convention
on the Law of Treaties (VCLT)? Are they "s ubsequent agreements on the interpretation or
application" in the meaning of Article 31(3) (a), "subsequent practice" in the meaning of
Article 31(3)(b), "rules of international law applicable between the parties" in the meaning of
Article 31(3)(c), or a "special meaning … given to a term if its established that the parties so
intended"?
Materials such as the "General Reports" of Diplomatic Conferences of the Berne Convention
would appear to be in the nature of negotiating history. They therefore could constitute "preparatory
works" of the Convention within the meaning of Article 32 VCLT. Since, the EC/MS do not
consider that an interpretation of the "ordinary meaning" of the relevant provisions of Articles 11 and
11bis Berne Convention as incorporated into TRI PS according to Article 31(1) VCLT leads to a
result which is manifestly absurd or unreasonable, they do not consider that there is any scope for
relying on the General Reports as "preparatory works" for the purpose of determining the meaning of
these provisions of the Berne Convention.
The relevant parts of the General Reports may constitute or be evidence of an agreement or
instrument on the interpretation or application of the Berne Convention of the kinds described in
Article 31(3) VCLT. The obvious difficulty with this suggestion is that there is no language
whatsoever in Articles 11 and 11 bis Berne Convention capable to be interpreted as allowing "minor
reservations" or as having a special meaning to the same effect.

A further possibility, which may be easier to reconcile with the text of the Berne Convention,
is to consider that the "agreement" between the parties in 1967 was to modify the Berne Convention
so as to allow what has been referred to in the diplomatic conferences as "minor reservations". This
option however encounters difficulties because the Berne Convention contains specific provisions
and procedures for amendment in its Article 27. This makes it difficult to argue that an amendment
was effected in a General Report of the diplomatic conference.
Another possibility, which the EC would mention is that the statements about minor
reservations in the General Reports could constitute genuine "reservations" to the treaty, expressed
by certain parties and accepted by the other parties through their approval of the General Reports.
This approach suffers from a similar difficulty to the "amending agreement" theory since the Berne
Convention provides for reservations in its Article 28 and requires them to be expressed in the
instrument of ratification (see also Articles 19-21 VCLT) .
The question of whether they constitute customary international law is discussed under reply
to question 8 below. However, the EC/MS consider that for the present case it is not necessary to
resolve the issue of the legal nature of the "minor reservations" doctrine. The content of the "minor
reservations" is such that they cannot excuse the US measures subject of this dispute, whatever their
legal nature.
The origin of the "minor reservations" is considered to be the General Report of the Brussels
Conference (1948) in which it is stated that:
"Your Rapporteur-General has been entrusted with making an
express mention of the possibility available to national legislation to
make what are commonly called minor reservations. The Delegates
of Norway, Sweden, Denmark, and Finland, the Delegate of
Switzerland and the Delegate of Hungary, have all mentioned these
limited exceptions allowed for religious ceremonies, military bands
and the needs of the child and adult education. These exceptional
measures apply to Articles 11bis, 11ter
, 13 and 14. You will
understand that these references are just lightly pencilled in here, in
order to avoid damaging the principles of the right."
 2
Its existence is considered to be confirmed by General Report of the Stockholm Conference
(1967):
"In the General Report of the Brussels Conference, the Rapporteur
was instructed to refer explicitly, in connection with Article 11, to
the possibility of what it had been agreed to call 'the minor
reservations' of national legislation. Some delegates had referred to
the exceptions permitted in respect of religious ceremonies,
performances by military bands, and the requirements of education
and popularisation. The exceptions also apply to articles 11bis,
11ter, 13 and 14. The Rapporteur ended by saying that these
allusions were given lightly without invalidating the principle in the
right.
It seems that it was not the intention of the Committee to prevent
States from maintaining in their national legislation provisions

2 The Berne Convention for the Protection of Literary and Artistic Works from 1886 to 1986,WIPO,
Geneva, 1986, page 181.

based on the declaration contained in the General Report of the
Brussels Conference." 3
Whatever the legal nature of the principle set out in these texts, the EC/MS consider that
there was a clear intention to limit the "minor reservations" to:
- non-commercial uses described in the General Reports: religious ceremonies, performances
by military bands, and the requirements of child and adult education;
- such exceptions existing in the legislation of the MS of the Berne Union at the time the
conferences took place (1967 at the latest), i.e. to grandfather pre-existing practices. This
appears expressly from the use of the terms "maintain" and "preserve" and the clear intention
not to undermine (or "invalidate the principle of") the right by allowing the creation of new
exceptions expressed in the Brussels General Report (supra).
Since both the US "homestyle" and "business" exemptions are clearly far removed from
"religious ceremonies", "military bonds" and "the requirements of child or adult education" but are of
an obvious commercial nature and cover a wide proportion of business establishments and because
the "homestyle exemption" in original formulation was only introduced in 1976/78 (and the "business
exemption" in the "Fairness in Music Licensing Act" has only been introduced in 1998) it would
appear that they cannot in any event benefit from the "minor reservations" doctrine.
Q.6 In your view, what is the relationship between Article 13 of the TRIPS Agreement and
Article 11bis(2) of the Berne Convention? Does Article 13 of the TRIPS Agreement prevail
over the exception in Article 11 bis(2) with respect to the exclusive rights conferred by Article
11bis(1)(i-iii) of the Berne Convention in the sense that when the three conditions of Article 13
are met, no requirement to pay equitable remuneration arises? Do the requirements of
Article 11bis(2) of the Berne Convention prevail as a lex specialis over the requirements of
Article 13 of the TRIPS Agreement, in the sense that if equitable remuneration is paid, there is
no need to comply with the three-conditions test under Article 13? Do the requirements of
Article 13 and Article 11 bis(2) apply on a cumulative basis in the sense that, on the one hand,
even if the three-condition test of Article 13 is fulfilled, there is an additional, fourth
requirement to pay equitable remuneration, and on the other hand, even if equitable
remuneration is paid consistently with Article 11 bis(2), is it necessary to comply in addition
with the three conditions of Article 13? Please explain.
As pointed out in our presentation at the oral hearing, the EC/MS are of the view that
Article 13 TRIPS is not applicable as an exception to exclusive rights contained in the Berne
Convention (see points 54-58; please compare also reply given to question 10 by the Panel to the
EC/MS). If one were to apply Article 13 TRIPS to the Berne rights the relationship between Article
13 TRIPS and Article 11bis(2) Berne Convention becomes relevant. In view of the EC/MS, it would
appear that in any event the equitable remuneration requirement constitutes a condition sine qua non
for the grant of exceptions to the rights stipulated by Article 11bis(1) Berne Convention.
Q.7 In your view, to what extent has the Berne Convention become part of customary
international law, and if so, in particular which part of the Articles 1–21 of the Berne
Convention?
In view of the EC/MS, the Berne Convention is not part of customary international law.
Customary international law is "constant and uniform usage, accepted as law". 4 It cannot be lightly

3 Records of the Intellectual Property Conference of Stockholm WIPO, Geneva, 1971, paragraphs 209-
210, page 1166.
4 Asylum Case: Columbia v Peru (1950) ICJ Rep p266.

inferred that a treaty provision has become customary international law. 5 The Berne Convention is
not universally accepted and those countries that have accepted it have accepted different versions.
The EC/MS do not therefore believe that it is possible to speak of a "constant and uniform usage".
They also do not see how the principles set out in it can be considered as having been "accepted as
law" independently of its provisions.
Q.8 Has the "minor exceptions" doctrine under the Berne Convention, and especially in the
context of Articles 11 bis(1) and 11(1) of the Berne Convention, acquired the status of
customary international law? What is the legal significance of the "minor exceptions" doctrine
under the Berne Convention in the light of subparagraph (3)(a-c) or paragraph (4) of Article 31
of the VCLT or in the light of Article 32 of the VCLT? Has the "minor exceptions" doctrine or
any other implied exceptions been incorporated, by virtue of Article 9.1 of the TRIPS
Agreement, together with Articles 1-21 of th e Berne Convention into the TRIPS Agreement?
Please explain.
As explained in the reply given to question 5, the EC/MS do not consider the Berne
Convention to be part of customary international law. For the EC/MS it follows that the "minor
reservations" doctrine is unlikely to form part of customary international law. One particular
difficulty arises out of their exceptional character, which would prevent them becoming "constant
and uniform usage, accepted as law".
The EC/MS would not exclude that the "minor reservations" doctrine has, by virtue of
Article 9(1) TRIPS, whatever its legal significance may be, become part to the TRIPS Agreement.
The EC/MS do not understand what the Panel intends by reference to "other implied exceptions".
With regard to Article 31(4) VCLT, the EC/MS do not see what term in Articles 11 and
11bis Berne Convention the "minor reservations" doctrine could give a special meaning to.
Q.9 What else other than religious ceremonies, performances by military bands, charitable
concerts or requirements of education does the "minor reservations" doctrine cover? Does it
only cover non-commercial uses? Was this doctrine be conceived of only with respect to
Article 11 of the Berne Convention, or was it also extended to Article 11 bis(1)(iii) of the Berne
Convention, given that these articles concern diff erent types of rights? What such instances of
implied exceptions could be relevant for this dispute?
The General Report of the Brussels Conference (1948), which refers to the "minor
reservations" doctrine in relation to Article 11 Berne Convention, mentions an exhaustive list of
circumstances where the doctrine may apply. These circumstances were limited to religious
ceremonies, military bands and child/adult education.
From these circumstances, it can - in view of the EC/MS - be concluded that "minor
reservations" cannot apply to commercial activities. This view is also supported by a reference to the
minutes of the Brussels Conference where it is made clear that "these limitations should have a
restricted character and that, in particular, it did not suffice that the performance, representation or
recitation was 'without the aim or profit' for it to escape the exclusive right of the author" (see
Ricketson, The Berne Convention : 1886-1986, at p. 536).
Q.10 In order to meet the first condition of Article 13 of the TRIPS Agreement ("certain
special cases"), is it enough if the limitation or exception is defined in great precision?
The criterion "certain special cases" requires that these cases have to be singled out for their
particularities from the totality of cases covered by an individual right.

5 North Sea Continental Shelf Cases (1969) ICJ Rep p3.

"Special" means "out of the ordinary". Therefore this notion has a qualitative element.
Special cases have to be distinguished from the non-special, i.e. normal cases. In other words, a rule-
exception distinction has to be drawn.
There is also a quantitative element involve d, whereby the ratio between "certain special
cases" and the normal cases can under no circumstances exceed a de minimis threshold.
Q.11 Under the second condition of Article 13, in which respect, if at all, is a normal
exploitation of the "work" the same as a normal exploitation of "exclusive rights" relating to
that work?
In the view of the EC/MS, the analysis has to be done in relation to a specific exclusive right.
Thus the normal exploitation of the work under Article 13 TRIPS is the normal exploitation of this
very exclusive right in relation to a given work.
By arguing otherwise, entire exclusive rights could be done away with under Article 13
TRIPS if only the "core" rights would be maintained.
This latter approach would be clearly at variance with the very foundation of the Berne
Convention, which establishes a sophisticated system of different exclusive rights with different fine
tuning mechanisms.
Q.12 To what extent is it appropriate in evaluating the compliance of a law with the
conditions of Article 13 of the TRIPS Agreem ent based on looking at the current market
situation in a given country?
The EC/MS do not fully understand what is meant by "current market situation in a given
country".
It would appear clear to us that the three conditions contained in Article 13 TRIPS have to be
analysed for the territory of a given country, here the US, given that the protection of intellectual
property rights is based on the principle of territoriality.
Q.13 To what extent subsequent technological and market developments (e.g., new means of
transmission of or increased use of background music or television) are relevant for the
interpretation of the conditions under Article 13 of the TRIPS Agreement?
It would also appear that this analysis has to be based on the socio-economic environment
existing in the country concerned. We have however repeatedly pointed out that in our view, the
economic effects of an exception have to be assessed as to its potential effect. See also our reply to
question 9 to the EC/MS above.
Q.14 Is it justified to define the three conditions exclusively by reference to a particular
market, or is a comparative analysis of licen sing practices in other Members with similar
economic conditions warranted?
While it would appear, also in the light of the reply to question 12 above, that the three
conditions referred to in Article 13 TRIPS have to be analysed by reference to the situation in the
WTO Member concerned, data from other Members at a similar level of socio-economic
development can be useful to corroborate or contradict original data in the country concerned or to
provide data which is for practical reasons unavailable in the Member concerned.
Q.15 Under the third condition of Article 1 3, should the concepts of "unreasonable
prejudice" and "legitimate interests" be defined based on existing, legally guaranteed
entitlements, or do these concepts also connote an aspect of normative concern of right

holders? In the latter case, what could be the normative concern at issue? In addition to an
empirical analysis of prejudice to legitimate interests, how could such a normative element be
taken into account in defining the threshold of the third condition of Article 13?
It is not quite clear to the EC/MS what is meant by "normative concern". As also pointed out
in the reply to question 18 below, the EC/MS consider that both normative and empirical elements
have to be taken into consideration under Article 13 TRIPS and that empirical elements can have an
impact on normative questions. We would also refer to the example given in the reply to question 18
below.
Q.16 What is the extent of "reasonable" prejudi ce to the legitimate interests of rights holders
that is permissible under the third condition of Article 13?
All three conditions referred to in Article 13 TRIPS are intended to make sure that the
exception-rule situation not be reversed. The reasonable prejudice has to be compared within the
unreasonable prejudice. While, as we have pointed out earlier (see points 73 et seq. of our oral
statement), it may be difficult to draw an exac t line between reasonable / unreasonable prejudice,
there can be no doubt in view of the EC/MS that the prejudice caused by an exception which covers
45 to more than 70 % of establishments can under no circumstance be considered reasonable because
it reverses the rule-exception situation.
Q.17 With a view to giving distinct meaning to the second and the third condition of
Article 13, in which respect does an extent, degree or form of interference with exclusive rights
below the threshold of "conflict with normal exploitation" differ from an extent, degree or
form of interference with exclusive rights that exceeds the threshold of a reasonable prejudice
to the interests of the right holder ? In other words, how does a permissible degree of prejudice
under the third condition relate to "normal exploitation" under the second condition of
Article 13?
The EC/MS agree that the second and third conditions of Article 13 TRIPS are distinct
conditions, which must be applied cumulatively.
First, the requirement that an exception or limitation does not conflict with normal
exploitation of the work would appear to call for a more normative or qualitative approach than the
third requirement. This appears from the comparison of the word "conflict" (in the sense of
"interfere with" or "not be consistent with") with the term "unreasonably prejudice".
Second, "normal exploitation of the work" requirement differs from the "legitimate interests
of the right holder" in a number of ways. Exploitation, which is not "normal", may still be a
"legitimate interest" of the right holder. Also, "exploitation" refers to the ways in which an author
may obtain a reward from an exclusive right in his work, whereas his "interests" may cover other
matters than financial interests in the exploitation of the particular right in question, such as his
interest in an acknowledgement of his work or information about its use.
As a result of the excessive coverage of situations by Section 110(5) (see also the results of
the Dun & Bradstreet analysis to which we have referred repeatedly), there can be no doubt in view
of the EC/MS that neither of the latter two conditions of Article 13 TRIPS are met.
Q.18 Should quantitative empirical or normative approaches be used in defining the three
conditions of Article 13?
In view of the EC/MS, both quantitative and normative elements have to be used for the
interpretation. There are also instances in which quantitative data can influence a normative
assessment like in the situation where it is established from quantitative data that the exception

covers more than one half of all situations, thus reversing the rule-exception principle which
underlies Article 13 TRIPS.

ATTACHMENT 1.4
RESPONSES OF THE EUROPEAN COMMUNITIES AND THEIR MEMBER STATES TO
WRITTEN QUESTIONS FROM THE UNITED STATES – FIRST MEETING
(19 November 1999)
Q.1 Does the EC have any factual support for its assertion that European music represents
25 % of all music played in the US?
Please see reply to question 5 asked by the Panel to the EC/MS.
Q.2 On what facts does the EC base its assertion that establishments in the US have
"adapted their music installation" or have cancelled contracts for commercial music services in
the wake of the Claire's Boutiques and Edison Bros. decisions?
It clearly appears from the complaint for Declaratory Judgement and the Motion of Plaintiff
for summary judgement in the case Edison Brothers Stores Inc. v. Broadcast Music Inc. (Edison
case) (see Exhibits EC-19 and EC-20) that Edison adapted the music equipment in its stores in order
to benefit from the homestyle exemption. This is referred to as the "Edison radio policy" which was
initially agreed with BMI until it revoked its agreement (which gave rise to the Edison proceedings).
In its amicus curiae brief submitted to the Court of Appeals in the Claire's Boutiques
proceedings (see Exhibit EC-21), ASCAP declared that it believed that "this decision (i.e. the District
Court's decision), if not reversed, will result in a very substantial reduction in license fees from
owners of establishments who use music by means of radios and loudspeaker systems and from
background music licensees, many of whose subscribers will cancel their subscriptions and substitute
radio music".
Q.3 Does the EC contend that no exceptions to the public performance are permissible to
Berne Article 11 rights?
As pointed out in the reply to question 11 by the Panel to the EC/MS, the discussions in
WIPO on the "minor reservations" doctrine have concentrated on Article 11 Berne Convention. In
view of the EC/MS, Section 110(5) under no circumstances would qualify as a "minor reservation" as
addressed in WIPO even if the "doctrine" were applicable to Article 11 Berne Convention.
Q.4 Does the EC contend that the "minor reservations" doctrine does not permit any
exceptions other than those that existed in Member countries at the time of accession to the
Berne Convention?
Please see reply to question 11 by the Panel to the EC/MS.
Q.5 Please list and describe any exemptions in copyright laws or neighbouring rights laws
of EC/MS to the public performance right, and provide the dates of enactment of such
exemptions.
The US are referred to the replies given by the EC/MS in the context of the TRIPS review on
copyright and related rights which has been carried out during the first semester of 1996 in the
TRIPS Council, for which the WTO Secretariat has established an extensive documentation.
Furthermore, we would like to draw the attention of the US to the fact that all laws and regulations
relevant for the implementation of the TRIPS Agreement have been notified to the TRIPS Council in
the manner provided therein.

Q.6 Out of the 70% of all eating and drinking establishments and 45% of all retail
establishments that the EC alleges are impact ed by the 1998 Amendment, does the EC have
any factual data regarding:
- how many of these establishments play music at all ?
- how many of these establishments play radio music as opposed to recorded music?
All percentage figures given in the Dun & Bradstreet analyses, including of course the basis
of 100%, are potential users. The exempted potential users are free to benefit from the possibility
offered by Section 110(5) at will at any point in time and without any notification to the right holders
or their collecting societies. Therefore, the EC/MS would consider that the question of "how many
establishments actually play music from the radio or recorded at a given point in time?" is of
secondary importance and factually difficult to establish.
Q.7 On what facts does the EC base its assertion that EC right holders have lost or will lose
revenue as a result of Section 110(5)(B). What is the estimated amount of the losses or
projected losses?
As appears from the joint press release by BMI and ASCAP on the day after the adoption by
Congress of the Fairness in Music Licensing Act (see Exhibit EC-14), the total losses from these
measures to right holders amount to "tens of millions of dollars per year". The losses suffered by EC
right holders will be an amount proportionate to their share in the US market for which we have
submitted an estimate in reply to question 5 of the Panel to the EC/MS.
Q.8 Have EC right holders ever received any revenue from secondary performances in US
establishments of works other than nondramatic musical works? If so, please provide factual
support. If the EC alleges that its right holders have lost or will lose revenue as a result of
Section 110(5)(A), please provide supporting data and the estimated amount of such losses.
The EC assumes that the US means by the phrase " secondary performances " (a term
unknown in the Berne Convention and TRIPS) the performances over which authors enjoy exclusive
rights under Articles 11bis(1)(iii) and 11(1)(ii) Berne Convention.
In the time available, it has not been possib le for the EC/MS to consult with all the
Collecting Societies in the EU on this question. However, the EC/MS have received information
relating to this question from the Irish Music Rights Organisation (Imro), the Collecting Society
which administers the public performance right in music for most of the music right holders resident
in Ireland. Imro has confirmed that, on behalf of its Members, who are right holders in the public
performance right in dramatic musical works, it entrusts the collection of revenue in the US in
respect of public performance in those works to the US Collecting Societies, subject only to the
exclusion of the performance of those works on stage or in similar circumstances. Imro specifically
confirms that it entrusts to the US Collecting Societies the collection of revenues deriving from the
broadcasting and rebroadcasting of those dramatic musical works in the US (approximating to the
right provided for in Article 11 bis(1)(i) and (ii) Berne Convention) and from the public performance
of broadcasts of those dramatic musical works in the US (approximating to the right provided for in
Article 11bis(1)(iii) Berne Convention).
Q.9 Given that the EC's assertion that exceptions to exclusive rights under Berne
Article 11bis must be assessed in the light of Article 11 bis(2), how would the EC evaluate the
permissibility of Section 110(5), which implicates two separate exclusive rights, only one of
which is subject to a right of equitable remuneration?

If an exception from copyright liability is provided for in a national law of a WTO Member,
which concerns several exclusive rights for which different conditions apply, these different
conditions have to be met cumulatively.
Q.10 Does the EC contend that under no circumstances may an exemption for any
commercial purpose be permissible to the Berne Article 11 and 11bis rights?
The EC/MS are of the view that the "minor re servations" doctrine does not allow exceptions
for a commercial use of the right. See also repl y to question 9 from the Panel to both Parties. We
would, however, not exclude that an exception for commercial purposes could, if properly
formulated, meet the requirements set out in Article 11bis(2) Berne Convention.

I. INTRODUCTION
1. In the light of the extensive number of questions, to which the Parties and Third Parties have
replied recently, and because of the often quite detailed discussions held at the first substantive
meeting with the Panel on 8-9 November 1999, the EC/MS will take this opportunity to present their
case in a systematic way and highlight the remaining conflictual issues.
II. FACTUAL ELEMENTS
2. A large number of factual elements have been clarified in the process up to now. In view of
the EC/MS, there remain certain important factual elements, which require further clarification.
1. Economic significance for the author of musical works of the communication to the
public rights as compared to the other exclusive rights enjoyed by the author
3. The principal aim of copyright is to compensate authors for their creative efforts and
investment. Thus, through appropriate licensing arrangements authors are able to control and to be
adequately remunerated for each protected use of their intellectual property.
4. Yet, in the last decades, certain uses have become more important in commercial terms than
others. In particular, according to some US commentators, "the right of public performance has
become the most important legal right, providin g the largest single source of income, for most
composers, lyricists and music publishers".
1
5. The magnitude of the commercial value of the right of public performance, or
communication to the public, for authors, whether considered on its own or in comparison to
reproduction rights, is significant and confirmed by the figures published annually by collecting
societies. For instance, in Belgium, where a single collecting society is responsible for the collection
of all rights related to musical works (thus making a comparison more immediate), the total revenues
distributed to authors in 1998 for performance rights amounted to BEF 867 mio (€ 21 mio), while in
the first semester of the same year the amount distributed for mechanical reproduction rights was
only BEF 324 mio (€ 8 mio). This means that about 60 % of all authors' income came from the right
of communication to the public.
2
6. This illustrates well the consequent scale, in quantitative terms, of the loss that exemptions
similar to those provided under Section 110(5) Copyright Act cause for authors. Following our
domestic example, in Europe revenues distributed for TV and radio broadcast in small establishments
open to the public represent between 26 % and 10 % of the total public performance revenues.
Consequently, exemptions similar to those at issue in the present case would diminish the overall
income that authors receive from their work in an order of 15 to 6 %. These figures and proportions
make it utterly clear that the exclusive rights stipulated by Articles 11 bis(1)(iii) and 11(1)(ii) Berne
Convention are not some secondary, ancillary rights worth little or nothing in reality, but constitute
very significant exclusive rights not only in absolute terms but also when compared with the other
exclusive rights guaranteed by the Berne Convention and TRIPS.

1 B. Korman and I. F. Koenigsberg, "Performing rights in music and performing rights societies", in
33 Journal of Copyright Society, 1986, pp 332 et seq. (Attached as Exhibit EC-22).
2 See Exhibit EC-23.

2. Interplay and separation between Subsections A and B contained in Section 110(5)
Copyright Act
7. Both Parties interpret Section 110(5) Copyright Act – by way of an a contrario argument
from Subsection B – to mean that Subsection A applies to all sorts of literary and artistic works with
the exception of nondramatic musical works.
8. While this interpretation has been put forward by both Parties, it is however uncertain that
US Courts would invariably share this interpretati on. The risk that a US Court might rely textually
on Subsection A entails the danger that it would apply the exception contained in Subsection A to all
literary and artistic works, including nondramatic musical works.
9. In this context, another element merits clarific ation. During the first meeting with the Panel
on 8-9 November 1999, the US, upon a question from the Panel, made some explanatory remarks on
the definition of nondramatic musical works. It explained that a dramatic musical work would be
definitively categorised as such at the moment of the creation of the work. This would have the
consequence that an aria from an opera or a song from a musical work would continue to be
considered as a dramatic musical work, even if played individually.
10. According to the information available to th e EC/MS, this does not correctly reflect the
situation under US' law and practice. The categorisation of a work as dramatical / nondramatical
depends on the circumstances of the performance of the work. This means that a song from a
dramatic musical work played on its own, outside the dramatic work, will be considered as a
nondramatic work. Furthermore, it is important to note that all the music originating from a dramatic
musical work, but being performed as nondramatic works, is part of the repertoire licensed in the US
by ASCAP and BMI.
3 This does not mean that right holders of dramatic works do not get any
remuneration for the public performance of their works. In the US, the communication to the public
of dramatic works is licensed directly by the right holder, without ASCAP and BMI acting as
intermediaries.
11. These serious difficulties to clearly separate both Subsections constitute a further argument
to treat both Subsections as an entity, where the common objective consists in allowing the
widespread use of literary and artistic works in a vast variety of establishments for the enjoyment of
customers, if the works have been received by radio or TV.
3. Internet
12. While the EC/MS have already in their first written submission drawn the Panel's attention to
the fact that Section 110(5) Copyright Act is likely to also apply to cases involving certain
communications via the Internet,
4 the US have, in particular by referring to other exclusive rights,
which are not the object of this case, tried to exclude or minimise this danger. 5 T h e E C / M S a r e
pleased to see in the US' reply to question 6 by the Panel to the US that the US do no more exclude
this possibility. In any event, there can be no doubt that Section 110(5) Copyright Act fully applies
where a computer is used as a receiving device for radio or TV broadcasts.
4. Third country practices
13. While the EC/MS were not able in the short time since the US' replies were received, to
verify the accuracy of the reply on third country practices given on question 16 by the Panel to the
US, it is remarkable, albeit not surprising that not a single country mentioned allows an exception to

3 See citation in footnote 1 above.
4 See point 39.
5 See point 16.

copyright protection for situations comparable to Section 110(5) Copyright Act. It is also noteworthy
that a certain number of countries (Brazil, India, the Philippines and South Africa) do not yet have to
comply with the copyright section of Part II of TRIPS because they benefit from additional
transitional periods under Article 65(2) TRIPS and their domestic legislation has not yet been subject
to TRIPS review.
5. US practices
14. It is worth noting that examples of exceptions, which are similar to the third country
practices indicated by the US, do exist also in the US copyright law outside Section 110(5) Copyright
Act. These are in particular provided in Section 110(1) to (4) Copyright Act and are not under
dispute in this case.
III. LEGAL ELEMENTS
1. Article 9(1) TRIPS together with Articles 11bis(1)(iii) and 11(1)(ii) Berne Convention
15. While the drafting of the submissions is not identical, the Parties appear to agree that
Section 110(5) Copyright Act creates exceptions to the exclusive rights stipulated in the provisions
referred to above. The divergence of views rela tes to the issue of if and to what extent these
exceptions can be justified by other provisions of the Berne Convention or TRIPS.
2. "Minor reservations" doctrine
16. At the occasion of two diplomatic conferences of the Berne Union, some discussion took
place on the issue of "minor reservations", which is reflected in the General Reports of both
diplomatic conferences.
(a) Legal character
17. As we have pointed out in our reply to question 5 of the Panel to the EC/MS and US, it is
unclear what legal standing the "minor reservations" doctrine has. For the reasons pointed out, these
General Reports of diplomatic conferences can, in principle, be used under Article 31(3) VCLT to
interpret the Berne Convention, however there is no language in Articles 11 bis and 11 Berne
Convention being susceptible of being interpreted in a "minor reservations" way.
18. The option that the "minor reservations" doctrine constitutes customary international law, by
which the text of the Berne Convention has been modified, has been discarded by both Parties.
6
19. A further option is that the General Reports constitute evidence of an agreement between the
Berne Union Members to modify the Berne Convention accordingly. Not only is the language used
in the General Report of the Brussels Conference (1948): "You will understand these references are
just lightly pencilled in (emphasis added)" 7, not supportive of such an approach, but also Article 27
Berne Convention would create a serious obstacle to such an interpretation.
20. Finally, the option of considering that the relevant language in the General Reports
constitutes genuine reservations, encounters similar obstacles as the "agreement approach" because
Article 28 Berne Convention prescribes procedures for invoking reservations which have not been
followed in the case before us.

6 See replies to question 8 by the Panel to both Parties.
7 See citation contained in reply to question 5 by the Panel to both Parties.

(b) Scope and timing
21. Eventually, the EC/MS consider that these diff icult legal questions can remain unresolved in
the case before us, because the exceptions provided for in Section 110(5) Copyright Act go, in many
aspects, significantly beyond what the "minor reservations" doctrine would have allowed.
22. As far as the scope of "minor reservations" is concerned, only three instances for exceptions
have been mentioned in the General Reports, which were religious ceremonies, playing of military
bands, child and adult education. There can be no doubt and, as it appears, nobody has argued so far
that the exceptions created by Section 110(5) Copyright Act fit under any of the three headings or are
comparable with any one of them.
23. Furthermore, there exists clear textual evidence that the "minor reservations" doctrine was
intended to "grandfather" the practices referred to in the preceding paragraph, existing on or prior to
the Diplomatic Conference in 1967. At that time the US did not have any such exception clause, and
the US only became a Berne Union Member in 1989.
24. To recapitulate, whatever the legal status of the "minor reservations" doctrine, Section 110(5)
Copyright Act would clearly not be covered by its scope nor by its "grandfathering" aspect. In other
words, no exception under the Berne Convention excuses Section 110(5) Copyright Act.
3. Article 13 TRIPS
25. While both Parties agree apparently to the principle, which is clearly set out in Article 2(2)
TRIPS and Article 20 Berne Convention, that the TRIPS Agreement was intended to increase the
level of protection of intellectual property rights, the US argue that Section 110(5) Copyright Act
could be justified under Article 13 TRIPS.
26. The application of Article 13 TRIPS to the rights contained in Article 11 bis(1) Berne
Convention, has also to be seen in relation to Article 11 bis(2) Berne Convention, which stipulates a
specific exception clause for the rights contained in Article 11 bis(1) Berne Convention. This means
that any exception would, as a minimum, have to provide for the equitable remuneration to be
granted to the right holder. This is not the case under Section 110(5) Copyright Act. The EC/MS are
of the view that Article 11 bis(2) Berne Convention applies to all exceptions and limitations to
Article 11bis(1) Berne Convention. There is no language whatsoever to support the US' view that
Article 11bis(2) Berne Convention only applies to compulsory licences. The language in the title of
Article 11bis Berne Convention is irrelevant given that it is not based on a negotiated text but on a
draft done by the International Bureau of WIPO.
8
27. The EC/MS have consistently argued that Article 13 TRIPS, for a multitude of reasons, does
not apply to Articles 11 bis(1) and 11(1) Berne Convention. Even if one were to give to Article 13
TRIPS a role in the context of exceptions to exclusive rights under Berne Convention, one would
have to respect the principle that TRIPS rather than to grant new or extend existing exceptions, has as
objective to reduce or eliminate existing exceptions. Also the language of Article 13 TRIPS itself
says that:
"Members shall confine (emphasis added) their limitations or
exceptions… "

8 See footnote 1 to Article 1 Berne Convention.

This language is in remarkable contrast to the language used in all other TRIPS exception clauses,
i.e. Articles 17, 26(2) and 30 TRIPS, which provide that:
"Members may provide (emphasis added) limited exceptions …"
(a) Scope
28. On the assumption that Article 13 TRIPS was intended to contain existing exceptions under
the Berne Convention, it would have been necessary for the US to point out precisely the extent of
the pre-existing exceptions to Articles 11 bis and 11 Berne Convention. The "minor reservations"
doctrine as pointed out above, has addressed pre-existing situations of religious ceremonies, playing
of music by military bands and child and adult education, and would, under no hypothesis, have
covered Section 110(5) Copyright Act, leave al one gone beyond, so that Article 13 TRIPS could
serve any "confining" job.
29. The EC/MS do not understand the relevance of the US' arguments in relation to the WIPO
Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT), which were
adopted by a Diplomatic Conference in December 1996. These treaties (signatories 51 WCT, 50
WPPT) have to date only been ratified by a sm all number of contracting Parties (9 WCT – 7 WPPT;
the EC/MS have not yet ratified) and have not reached the threshold of thirty ratifications necessary
for entry into force. It is difficult to imag ine that such treaties, which are still in a nasciturus state,
can add or subtract anything to / from obligations under the TRIPS Agreement which has been in
force since 1995 and by which more than 130 WTO Members are bound.
(b) Conditions of Article 13 TRIPS
30. Even if one were to argue that Article 13 TRIPS creates new exceptions also to existing
rights under the Berne Convention, a situation which would of course be irreconcilable with the
argument that TRIPS is intended to improve the level of IPR protection and thus Article 13 TRIPS to
reduce or eliminate existing exceptions, the effect s of Section 110(5) Copyright Act are such that
none of the three conditions set out in Article 13 TRIPS would be met.
31. As to "certain special cases", the EC/MS have pointed out
9 why we think that Section 110(5)
Copyright Act does not meet this requirement. Fr om a plausibility point of view, it appears obvious
that an exemption, which covers from 45% to more than 70% of all existing establishments, does not
represent "certain special cases" but reverses the rule-exception relationship.
32. In relation to the second and third conditions, the EC/MS have indicated their view in reply
to questions 11 and 12 from the Panel to both Parties and in our oral statement of the first meeting
with the Panel on 8-9 November 1999.
10 The EC/MS continue to believe that the analysis has to be
based on an assessment in relation to the exclusive right concerned, given the sophisticated
distinction of individual exclusive rights under the Berne Convention. To argue otherwise would
entail the risk that entire exclusive rights can be disregarded as long as the core economic right
remains protected; a situation, which also the US would consider as not being contemplated by
Article 13 TRIPS.
11
33. The EC/MS cannot follow the argumentation of the US in reply to question 18 by the Panel,
in which they put forward the idea that the analysis has to be based on both aspects, i.e. individual
exclusive right and whole work. While one can indeed imagine a cumulative test, the test will be

9 See reply to question 10 by the Panel to both Parties and points 66 to 68 of our oral statement at the
first meeting with the Panel.
10 See points 69 to 71.
11 See US reply to question 18 from the Panel to the US.

failed if only one of its constituent element fails. In other words, if the test is not met on the basis of
the individual exclusive right, the entire test is not met and it is irrelevant of how the analysis for the
entire work turns out.
34. Finally, the EC/MS would like to reiterate that according to well-established WTO
jurisprudence
12, it is the task of the US to prove that the exceptions invoked are applicable and their
conditions fully met.
IV. CONCLUSION
35. Under Article 64(1) TRIPS, Article XXIII GATT and Article 3(8) DSU, the violation to the
US' obligations under the TRIPS Agreement are considered prima facie to constitute a case of
nullification or impairment.
36. The EC/MS therefore respectfully request the Panel to find that the US have violated their
obligations under Article 9(1) TRIPS together with Articles 11 bis(1)(ii) and 11(1)(ii) Berne
Convention and should bring their domestic legisla tion into conformity with their obligations under
the TRIPS Agreement.

12 See reference under point 47 of our oral presentation at the first meeting with the Panel.

I. INTRODUCTION
This is the second hearing in this case and thus the last opportunity for the Parties to present
their facts and arguments as a whole to you.
The EC/MS will present its case in the light of the facts and arguments made available by the
Parties and third Parties. Wherever necessary, we will also comment on the US' replies to questions
from the Panel and the EC/MS and on the US' rebuttal statement dated 24 November 1999.
II. FACTUAL ELEMENTS
1. It would appear to the EC/MS that the coverage of Section 110(5) Copyright Act has by now
been largely clarified by the Parties with the exception of the question of the interplay and separation
between Subsections A and B and the applicability to the IT world and Internet.
2. As to the first issue, the plain text of Subs ection A would suggest that all copyright works,
which are susceptible to be communicated to the public by loudspeaker, are covered. Subsection B
defines its coverage as nondramatic musical works. While it appears possible to draw an a contrario
argument from Subsection B with the result that Subsection A does not apply to nondramatic musical
works, it is far from certain that US Courts would consistently follow this a contrario argument.
When the US mention (point 4 of their rebuttal statement) that there exists « … consistent
jurisprudence of US Courts interpreting the homestyle exemption… » , the EC/MS would like to
remark that there exists not a single US Court decision to date, which interprets the scope of
Section 110(5)(A) Copyright Act.
3. Also, the distinction between dramatic and nondramatic musical works remains unresolved.
While the US have pointed out at the first meeting upon a question from the Panel that the distinction
is made definitively when the work is created, the EC/MS have put forward in their rebuttal
statement that, according to US literature, the dividing line is not a permanent one, but depends on
the circumstances of the performance. In other words, this would suggest that an individual aria from
an opera or a song from a musical played on the radio or TV are to be considered as nondramatic,
which in turn has important repercussions for the licensing practice.
4. While the EC/MS appreciate that in the IT world other exclusive rights than the ones covered
by Section 110(5) Copyright Act are relevant for communications to the public, no argument has
been put forward by the US, that the exemptions contained in Section 110(5) Copyright Act do not
apply in the digital context.
III. LEGAL ELEMENTS
5. While the language used by the US differs, it would appear that the US agree in essence with
the EC/MS.
Section 110(5) Copyright Act is inconsistent with Article 9(1) TRIPS together with
Articles 11bis(1)(iii) and 11(1)(ii) Berne Convention unless the US can demonstrate that their
measure is covered by an exception provision.
6. The US argue that Article 13 TRIPS allows the exceptions to Articles 11 bis(1) and 11(1)
Berne Convention, which are contained in Section 110(5) Copyright Act.
In view of the EC/MS, the exemptions cont ained in Section 110(5) Copyright Act cannot be
justified under any kind of argumentation in relation to Article 13 TRIPS.

7. The EC/MS have pointed out in detail why in their view, Article 13 TRIPS is not applicable
to the Berne rights, which have been incorporated into TRIPS by reference. The plain text, the
negotiating history and the object and purpose of TRIPS militate for this result.
8. However, even if one were to argue that Article 13 TRIPS may play a role in the context of
exceptions to Berne rights, the exceptions contained in Section 110(5) Copyright Act cannot be
justified.
9. It would appear that the US agree that one of the major objectives of the TRIPS Agreement
consists in increasing the level of IPR protection as compared to the level of protection prevailing
under the pre-existing WIPO Conventions. This in turn means for Article 13 TRIPS that – if it were
applicable to Articles 11 bis(1) and 11(1) Berne Convention – its objective would have to consist in
limiting any wider pre-existing Berne exceptions.
10. While the Berne Convention provides for a number of exceptions such as Articles 9(2), 10,
10bis, there exists no exception provision to Article 11 Berne Convention and Article 11 bis Berne
Convention has a specific exception provision in its paragraph 2, which provides that – as a
minimum – the right holder has to be granted equitable remuneration. The US themselves do not
claim that Section 110(5) Copyright Act can be justified by Article 11bis(2) Berne Convention.
1. "Minor reservations" doctrine
11. In this situation, the US claim the benefit of the "minor reservations" doctrine, which, in the
US view, has been further clarified and articulated by TRIPS Article 13 (see point 2 of the rebuttal
statement).
12. Discussions have indeed taken place on so-called minor reservations at the occasion of two
diplomatic conferences of the Berne Union in 1948 and 1967. We have considered in detail the
possible legal character of the references to "minor reservations" in the General Reports of these
diplomatic conferences in our reply to question 5 by the Panel to the EC/MS. We have concluded
that the legal significance of the "minor reservations" doctrine under public international law is
doubtful.
13. The US claim that the "minor reservations" doctrine constitutes "subsequent practice" in the
sense of Article 31(3)(b)VCLT. However, such "subsequent practice" is a tool, among others, to
interpret provisions of treaty language, which need interpretation. In the case at hand, it is utterly
clear that Article 11 Berne Convention does not contain an exception provision and Article 11 bis
Berne Convention contains an exception provision whose conditions are not met by Section 110(5)
Copyright Act. Thus no need exists to interpret the plain language any further.
(a) Scope of the "minor reservations" doctrine
14. The list of alleged exception provisions, which is contained in Exhibit US-22, merely states
figures of Articles without even specifying the statute to which these articles belong, and without any
explanation as to their context. This does not contribute anything to establishing "subsequent
practice", and even less so to determining the scope of the "minor reservations" doctrine. The US
have referred also to the "minor reservations" doc trine in relation to exceptions provided for in 10
countries Members of the Berne Union (the Berne Union is presently composed of more than 130
Members). All these exceptions are characterised by their non-commercial character and mostly
reflect the exceptions, which also exist in the US copyright law, notably in Section 110, paragraphs
(1) to (4) Copyright Act. These situations ar e not the ones covered by Section 110, paragraph (5)
Copyright Act.
15. All this leads us to the conclusion that it is difficult to give any legal status to the "minor
reservations" doctrine. As we have pointed out repeatedly, there is fortunately no need to decide this

thorny issue in the case before the Panel, because the exceptions contained in Section 110(5)
Copyright Act do under no circumstance meet the requirements on scope and timing as referred to in
the General Reports.
16. The only instances, which were mentioned in the discussions on "minor reservations" at the
two diplomatic conferences were military bands, religious services and child and adult education.
Obviously, Section 110(5) Copyright Act is not limited to any of these categories. But even if one
were to argue that these three instances were only illustrative, their common features consist in being
for non-commercial activities and for a well-defined social purpose. Given that Section 110(5)
Copyright Act is directly intended to serve commercial interests by the use of the copyright works in
commercial establishments for the enjoyment of customers with the objective to enhance turnover
and profit neither of these common characteristics can be found in Section 110(5) Copyright Act.
17. The US argument that the underlying policy consideration for Section 110(5) Copyright Act
consists in fostering small businesses is spurious at best. First of all, it has to be remembered that
copyright owners themselves are in their vast majority "small businesses" and second as is well
evidenced in the Claire's Boutique case (see Exhibit EC-6) the homestyle exemption applies to big
corporations. Claire's Boutique Inc. had a yearly turnover in the vicinity of 200 million dollars and
net earnings in excess of 13 million dollars.
(b) The "minor reservations" doctrine as a grandfathering device
18. As to the aspect of timing for the adoption of minor exceptions, we maintain our view that
the citations from the General Reports make it utterly clear that the "minor reservations" doctrine was
intended to "grandfather" existing practices and not as an invitation to Berne Union Members to
subsequently adopt such "minor reservations".
19. Also as to the application of grandfather provisions to newcomers to a convention, our
arguments remain. There is no reason to treat newcomers any better than established Members, by
allowing them to reduce the level of obligations at a time when an established Member would no
more be allowed to do so. This approach is perfectly neutral as to the level of development of a
country Member or candidate to an international convention.
20. The case of the Berne Convention represents indeed a good illustration of the non-
discriminatory effects of this approach in a situation in which the vast majority of developing
countries were already a Member of the Berne Union at the moment the US joined. Furthermore,
TRIPS has taken exactly this approach for its grandfather provisions (see Articles 4(d) and 24(4)
TRIPS).
(c) Tunis Model Law on Copyright
21. A further argument to support our view that the "minor reservations" doctrine under no
circumstances covers the situations contemplated by Section 110(5) Copyright Act, can be drawn
from the "Tunis Model Law on Copyright", which has been adopted in 1976 (i.e. after the last
reference to "minor reservations" at the diplomatic conference in 1967). This model law was
intended to provide the legislators in developing countries with guidance on how to draft a copyright
statute in compliance with the Berne Convention (for more details, see the description contained in
WIPO, Background Reading Material on Intellectual Property, 1988 at pp. 255-257, Exhibit EC-24).
This model law "provides for a fairly wide variety of limitations to copyright : both free uses
and non-voluntary licenses" but none of these limitations resembles even remotely the exemptions
contained in Section 110(5) Copyright Act. The text of the Tunis Model Law referred to is
reproduced in our written text.

Free uses according to the Model Law include:
(a) use of a work for one's own personal and private requirement;
(b) quotations compatible with fair practice and to the extent not exceeding that justified
by the purpose;
(c) the use of a work for illustration in publications, broadcast or sound or visual
recordings for teaching, provided that such use is again compatible with fair practice
and that the source and the name of the author are mentioned by the user;
(d) the reproduction in the press or communication to the public of articles on current
economic, political or religious topics published in newspapers or periodicals and
broadcast works of the same character, provided that the source is indicated by the
user and such uses were not expressly prohibited when the work was originally made
accessible;
(e) the use of a work that can be seen or heard in the course of a current event for
reporting on that event;
(f) the reproduction of works of art and architecture in a film or television broadcast, if
their use is incidental or if the said work is located in a public place;
(g) the reprographic reproduction of protected work, when it is made by public libraries,
non-commercial documentation centres, scientific institutions and educational
establishments, provided that the number of copies made is limited to the needs of
their activities and the reproduction does not unreasonably prejudice the legitimate
interest of the author;
(h) the reproduction in the press or communication to the public of political speeches,
speeches delivered during legal proceedings, or any lecture or sermon delivered in
public, etc, provided that the use is exclusively for the purpose of current
information and does not mean publishing a collection of such works.
(d) WCT and WPPT
22. Finally, the US rely on the WIPO Copyright Treaty (WCT) and WIPO Performances and
Phonograms Treaty (WPPT) in order to suggest that some wide undefined exceptions must exist
under the Berne Convention.
23. We have already pointed out in the rebuttal statement that given the nasciturus status of these
treaties, which are not even in force and not yet ratified by the EC/MS, whatever they stipulate
cannot reduce the level of protection of Berne or TRIPS, or create new exceptions which have not
previously existed under Berne or TRIPS.
But also from a substantive point of view nothing in the text of Article 10 WCT suggests that
new exceptions would have been contemplated. While Article 10(1) WCT creates limitations and
exceptions to new exclusive rights being created by the WCT, Article 10(2) addresses the cases in
which the WCT makes Berne rights applicable to the digital network environment, which was not
covered under Berne Convention previously.
24. This is in contrast with the case before us, where Section 110(5) Copyright Act is at variance
with Articles 11bis and 11 Berne Convention whose scope has not been modified by TRIPS.

25. The arguments put forward in relation to Article 10 WCT apply mutatis mutandis to
Article 16 WPPT.
26. All in all, it can be said that there exists no exception or limitation provision – express or
implied – under the Berne Convention which could justify the exemptions contained in
Section 110(5) Copyright Act, leave alone an exception or limitation provision which when
"narrowed down" by Article 13 TRIPS could justify Section 110(5) Copyright Act.
2. Article 13 TRIPS
27. In the hypothesis that the Panel should consider that Article 13 TRIPS is of relevance for the
assessment of Section 110(5) Copyright Act, we now apply the three steps test provided for in
Article 13 TRIPS to Section 110(5) Copyright Act.
(a) Certain special cases
28. We have pointed out repeatedly why we consider that the exemptions contained in
Section 110(5) Copyright Act do not constitute "certain special cases". We do not intend to repeat
the reasons here, but think it is sufficient to say that exceptions which unconditionally exempt 45 to
more than 70% of all retail, drinking and eating establishments from copyright liability for playing of
copyright works from the radio or TV and exempting the remainder of such establishment under
generous conditions cannot be considered as certain special cases, such exemptions are rather a
reversal of the rule-exception principle.
(b) Conflict with the normal exploitation
29. Here again we have pointed out in detail the reasons why we consider that the exemptions
created by Section 110(5) Copyright Act (see for example our replies to questions 11 and 12 from the
Panel to both Parties) do conflict with the normal exploitation. We would limit ourselves to mention
here again the sheer size of the exception, which covers huge proportions of entire business sectors
unconditionally and thus, conflict with the normal exploitations of the public performance rights.
(c) Unreasonable prejudice to the legitimate interests of the right holders
30. We do not intend to repeat all the arguments we have made in support of our view that the
exemptions contained in Section 110(5) Copy right Act do indeed unreasonably prejudice the
legitimate interests of the right holders, but we would like to concentrate on the new quantitative
guestimates made in this context by the US in its rebuttal statement (points 33 et seq.).
31. We agree as pointed out in our reply to question 12 by the Panel to both Parties that the
economic prejudice to the right holder has to be assessed primarily on the basis of the economic
effects in the country, which provides the exceptions. As we have said earlier, and as the US
themselves put forward during the negotiations of the TRIPS exceptions' clause (see US submissions
to the negotiating group doc. MTN.GNG/NG 11/W/14/Rev. 1, Exhibit EC-18, and Article 6 in doc.
MTN.GNG/NG 11/W/70, Exhibit EC-25), we are of the view that it is more appropriate to look at the
potential impact (as opposed to the actual impact) because it can be established with a higher degree
of certainty and is less subject to unforeseen changes.
32. We have provided an analysis on the potential economic effects of Section 110(5) Copyright
Act, which has never been challenged in a substantiated manner by the US. This analysis
demonstrates that 73% of all drinking establishments, 70% of all eating establishments and 45% of
all retail establishments in the US are unconditionally exempted by Section 110(5) Copyright Act and
all remaining such establishments are exempted if a condition essentially on the number of
loudspeakers is met. In our view, these results make it utterly clear that the exemptions stipulated in

Section 110(5) Copyright Act do constitute an unreasonable prejudice to the legitimate interest of the
right holder.
(i) US guestimate of losses
33. In its rebuttal submission, the US have made an attempt to minimize the prejudice on the
basis of guestimated actual losses based on historic distributions by one single collecting society
(ASCAP).
In view of the EC/MS, this approach is fundamentally flawed for a number of reasons:
34. The distributions from collecting societies to right holders are a function of their collections
on the market and the collections on the market in turn are a function of the legal protection of the
relevant exclusive rights.
In the US, the rights referred to in Articles 11 bis(1)(iii) and 11(1)(ii) Berne Convention were
not at all protected until 1976 (see the US Supreme Court Decision in Aiken, Exhibit EC-1). While
these exclusive rights were protected in general from 1976, the "homestyle" exemption was
introduced at the same time by the previous version of Section 110(5) Copyright Act.
This exemption already excluded a wide range of commercial uses (see for example the
situations in the Claire's Boutique and Edison cases, Exhibits EC-6 and EC-5 respectively), thus
seriously reducing the number of businesses subject to a need to obtain a license.
35. Furthermore, the fact that the National Licensed Beverage Association (NLBA) has,
according to the US, concluded in 1995 an agreemen t with the US collecting societies, which
excludes all establishments below 3,500 square feet from copyright liability and under certain
conditions excludes larger establishments from such liability (see first written submission by the US
points 12-14) lead to a situation in which, for the eating and drinking establishments which are
members of the NLBA, no licensing fees have been collected since the entry into force of this
agreement.
36. Just as a reminder, the figures given in the US Congress sponsored Dun & Bradstreet
Analysis (see oral statement by the EC/MS at the fi rst hearing, point 37) show that the unconditional
exemption of eating and drinking establishments with less than 3,500 square feet cover 65% and 72%
of all such establishments respectively.
37. Also the use of a figure of losses, which is attributable to EC right holders only in the context
of establishing the prejudice under Article 13 TRIPS misinterprets Article 13 TRIPS.
For all conditions referred to in Article 13 TRIPS, the effect on all right holders, US right
holders, EC right holders and right holders from other countries, have to be taken together. The
specific impact on EC right holders is perfectly irre levant at this stage. It only becomes relevant in
the context of Article 22 DSU.
38. A further shortcoming in the US quantitative guestimate consists in the fact that, while there
exist three collecting societies for the collection of the proceeds for the rights concerned in this case,
the US only provide figures for one of them.
(ii) Alternative bottom-up approach
39. While we have repeatedly argued that it is the potential impact rather than the actual impact,
which should be applied to an analysis under Article 13 TRIPS, the EC/MS consider that the
following bottom-up approach gives at least some pl ausible indications of the order of actual losses
suffered by right holders as a consequence of the operation of Section 110(5) Copyright Act.

40. In the database run by Dun & Bradstreet (see Exhibit EC-16), the figures for 1998 show for
the entire US:
- 49,061 drinking establishments, and
- 192,692 eating establishments,
with a square footage of below 3,750 square feet and
- 281,406 retail establishments with a square footage of below 2,000 square feet.
These figures are likely to be lower that the actual number of establishments when compared
to the figures for eating establishments on the basis of the US Census Bureau data for 1996 (see
Exhibit US-18) from which a figure of 240,000 eating establishments below 3,750 square feet
resorts.
41. As a second step, we would agree with the US that not all these establishments would
actually play music from the radio or TV on their premises for the enjoyment of their customers.
The US offer in their rebuttal submission (see point 39) the hypotheses that 30.5% of all
eating and drinking establishments with a surface below 3,750 square feet, actually play music from
the radio in their establishments.
While this assumption has not been motivated by the US, we will use this hypothesis for this
analysis and apply it equally to retail establishments.
This process demonstrates that:
- 14,700 drinking establishments,
- 57,800 eating establishments, and
- 84,400 retail establishments,
which all fall below the 3,750/2,000 square feet threshold actually play music from the radio on their
premises without having to pay for a license. This analysis disregards the playing of music from TV.
42. As a subsequent step, the appropriate licensing fee for playing music from the radio in the
relevant establishments, has to be selected from the licensing schedules of ASCAP (an excerpt is
provided as Exhibit EC-26) and BMI (an excerpt is provided as Exhibit EC-27).
Given that ASCAP and BMI represent different repertories, licenses have to be sought from
both in order to play the radio in the business establishments.
The lowest ASCAP and BMI licensing fees for eating and drinking establishments add up to
an amount of 410 US$ per year. This can also be compared to the fee schedule contained in Exhibit
US-7, which effectively mentions yearly licensing fees of 455 US$ for establishments smaller than
1,500 square feet, 869 US$ for establishments between 1,500/2,500 square feet and 1,265 US$ for
establishments between 2,500/3,500 square feet.
For retail establishments, the lowest fee categories of BMI and ASCAP add up to 283.50
US$ per year.

43. When applying the respective rate to the number of establishments playing music from the
radio in their establishments, one arrives at the amount of lost revenue by BMI and ASCAP as a
consequence of the operation of Section 110(5) Copyright Act.
For eating and drinking establishments, the lost revenues amount to 29.725 mio US$ and for
retail establishments, lost revenues amount to 23.93 mio US$ which adds up to a total of 53.65 mio
US$.
44. These are the losses in relation to all right holders, US right holders, EC right holders and
right holders from third countries. This analysis also confirms the claim made by BMI and ASCAP
in their press release on the day following passage of the Fairness in Music Licensing Act (see
Exhibit EC-14) when they state that:
"The earnings of song writers, composers and publishers have been
reduced by tens of millions of dollars annually"
45. This excursion into the sphere of estimated actual losses suffered by copyright owners from
the operation of Section 110(5) Copyright Act confirms the analysis based on potential losses
presented earlier and does in the view of the EC/MS clearly indicate that the exceptions provided for
in Section 110(5) Copyright Act do unreasonably prej udice the legitimate interests of the copyright
owner and thus also the third condition contained in Article 13 TRIPS cannot be met.
IV. CONCLUSION
46. The EC/MS therefore respectfully request the Panel to find that the US have violated their
obligations under Article 9(1) TRIPS together with Articles 11 bis(1)(iii) and 11(1)(ii) Berne
Convention and should bring their domestic legisla tion into conformity with their obligations under
the TRIPS Agreement.
Of course, the EC/MS would be pleased to reply to any further question the Panel might
have. As to the replies provided by WIPO, the EC/MS reserve their right to comment after having
had the possibility to carefully look at them.

ATTACHMENT 1.7
COMMENTS FROM THE EUROPEAN COMMUNITIES AND THEIR
MEMBER STATES ON THE LETTER FROM THE DIRECTOR GENERAL
OF WIPO TO THE CHAIR OF THE PANEL1
(12 January 2000)
1. The European Communities and their Member States (EC/MS) would like to express through
you their appreciation to the International Bureau of WIPO for its work done to reply to the Panel's
three questions.
2. As to the substance of the replies given, we note that no evidence in relation to the existence
and scope under the Berne Convention of any exception or limitation including the so-called "minor
reservations" doctrine, which would be susceptible of justifying the exemptions contained in
Section 110(5) US Copyright Act, is contained in WIPO's replies and annexes.
3. In view of the EC/MS, this confirms our conclusion already expressed in point 26 of our
presentation at the second substantive meeting that:
"All in all, it can be said that there exists no exception or limitation
provision – express or implied – under the Berne Convention which
could justify the exemptions contained in Section 110(5) Copyright
Act, leave alone an exception or limitation provision which when
"narrowed down” by Article 13 TRIPs could justify Section 110(5)
Copyright Act."
4. The EC/MS trust that they will be invited to comment on any substantive remarks that may
be made by the US based on the WIPO reply and annexes.

1 This submission by the EC contained also comments on a letter from a law firm representing ASCAP
to the USTR that was copied to the Panel. This part of the submission is not reproduced here; neither is the
letter in question nor the US comments on it reproduced in the attachments to this report. See section VI.B of
the report.

I. INTRODUCTION
1. Section 110(5) of the United States Copyright Act of 1976 1 is fully consistent with the
United States' obligations under the Agreement on Trade-Related Aspects of Intellectual Property
Rights (the "TRIPS Agreement" or "TRIPS"). The TRIPS Agreement, incorporating the substantive
provisions of the Berne Convention on Literary and Artistic Works (1971) ("Berne Convention"),
allows Members to place minor limitations on the exclusive rights of copyright owners. Article 13 of
TRIPS provides a standard by which to judge the appropriateness of such limitations or exceptions.
The exemptions embodied in Section 110(5) fall within the Article 13 standard: they are special
cases which do not conflict with a normal exploitation of the work and they do not unreasonably
prejudice the legitimate interests of the right holder.
II. FACTUAL BACKGROUND
2. The United States has one of the strongest systems of intellectual property protection in the
world. Under the U.S. copyright system, copyright holders are granted a "bundle" of exclusive
rights. Specifically, Section 106 of the Copyright Act grants to right holders the exclusive right to do
and authorize:
(i) the reproduction of a copyrighted work;
(ii) the preparation of derivative works based upon the copyrighted work;
(iii) the distribution of copies of the copyrighted work to the public;
(iv) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and
motion pictures and other audiovisual works, to perform the copyrighted work
publicly;
(v) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and
pictorial, graphic, or sculptural works, the right to display the copyrighted work
publicly; and
(vi) in the case of sound recordings, to perform the copyrighted work publicly by means
of a digital audio transmission.
3. Section 110 of the Copyright Act provides for several limited exceptions to one of these
exclusive rights – the public performance right. The exemptions in Section 110 include exceptions to
the performance right for certain educational, charitable and religious uses, as well as the provisions
challenged by the EC in this proceeding, Section 110(5)(A) and (B).
A. S
ECTION 110(5)(A)
4. Section 110(5)(A) constituted the entire Section 110(5) exemption for the 22 years prior to
the passage of the Fairness in Music Licensing Act of 1998 ("the 1998 Amendment"). 2

1 United States Copyright Act of 1976, Act of Oct. 19, 1976, Pub. L. 94-553, 90 Stat. 2541(as
amended).
2 The 1998 Amendment added a new subsection (B) to Section 110(5). Consequently, the previous
Section 110(5) was redesignated Section 110(5)(A). Fairness in Music Licensing Act of Oct. 27, 1998, P.L.
105-298, 112 Stat. 2830, 105th Cong. 2nd Sess. (1998).

Section 110(5)(A) exempts public performances communicated by means of "homestyle" receiving
equipment, subject to certain additional limitations, and provides as follows.3
Notwithstanding the provisions of section 106, the following are not
infringements of copyright:
(5) 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, unless –
(A) direct charge is made to see or hear the transmission; or
(B) the transmission thus received is further transmitted to the
public.
5. In establishing the "homestyle" exemption in 1976, Congress intended to exempt from
copyright liability small stores and restaurants whose owners merely turned on an ordinary radio or
television set while they worked. As explained in the House Report accompanying the 1976 revision
of the Copyright Act,
[T]he clause would exempt small commercial establishments whose
proprietors merely bring onto their premises standard radio or
television equipment and turn it on for their customers' enjoyment,
but it would impose liability where the proprietor has a commercial
'sound system' installed or converts a standard home receiving
apparatus (by augmenting it with sophisticated or extensive
amplification equipment) into the equivalent of a commercial sound
system.
4
According to the House Report, factors to consider in particular cases would include the size,
physical arrangement, and noise level of the areas within the establishment where the transmissions
were made, and the extent to which the receiving apparatus was altered or augmented for the purpose
of improving the quality of the performance.
5 The Conference Report elaborates on the rationale for
the exemption, noting that it would be justified in situations where the defendant was a small
commercial establishment and "not of sufficient size to justify, as a practical matter, a subscription to
a commercial background music service".6

3 Section 110(5), both (A) and (B), also exempt th e display right. Because that right has little or no
economic relevance to copyright owners in musical works, it is not discussed here.
4 Report of the House Committee on the Judiciary, H.R. Rep. No. 94-1476, 94 th Cong., 2d Sess. 87
(1976) (hereinafter " House Report") (the relevant page is annexed hereto as exhibit US-1).
5 Id. The factors to consider in applying the exemption are largely based on the facts of a case
decided by the United States Supreme Court immediately prior to the passage of the 1976 Copyright Act,
Twentieth Century Music Corp. v. Aiken , 422 U.S. 151 (1975). In Aiken, the Court held that an owner of a
small fast food restaurant was not liable for playing music in a 1,055 square-foot shop that had only four
speakers and a radio. The House Report describes the fact situation in Aiken as representing the "outer limit" of
the homestyle exemption. Id.; see also exhibit EC-1.
6 Conference Report of the House Committee on the Judiciary, Subcommittee on Courts and
Intellectual Property, H.R. Rep. No. 94-1733, 94th Cong., 2d Sess. 75 (1976) (hereinafter "Conference Report")
(annexed as exhibit US-2).

6. By its nature, the licensing of thousands of individual restaurants and retail establishments is
a difficult and resource-intensive process.7 Naturally, there is a point at which the potential licensing
revenue does not justify the administrative burden of the licensing process. The licensing process is
especially difficult with respect to smaller esta blishments that might benefit from the homestyle
exception. Congress expected the homestyle exemption to have a limited economic effect because it
essentially codified the licensing practices of th e performing rights organizations ("PROs") with
respect to such establishments. As observed in the House Report on the homestyle exception, "in the
vast majority of cases no royalties are collected today, and the exemption should be made explicit in
the statute".
8
7. In the almost two and one-half decades since the homestyle exemption was enacted, U.S.
courts have applied the exception narrowly and in a manner consistent with Congress's intent. Of the
forty decisions reported under Section 110(5) (now Section 110(5)(A)), only three courts have found
that the defendant was entitled to take advantage of the exception. In reaching their conclusions,
courts have generally engaged in a highly fact-specific analysis, taking into account the factors cited
in the text and legislative history of Section 110(5)(A). For example, in Sailor Music v. Gap Stores,
Inc., the Court of Appeals for the Second Circuit found that a chain store was not entitled to the
homestyle exception because it used four to seven speakers recessed in the ceilings of its stores, and
in the court's words, "was of sufficient size to justify, as a practical matter, a subscription to a
commercial background music service".
9 Similarly, in Broadcast Music, Inc. v. United States Shoe
Corp., the Court of Appeals for the Ninth Circuit followed Gap Stores in denying the applicability of
the homestyle exemption to a chain of retail stores. The Court expressly relied on the fact that the
size and nature of the Defendant's operation justified the use of a commercial background music
system.10
8. Two courts have given relatively greater weight to equipment, rather than other factors, in
applying the homestyle exception. These two courts did not consider corporate revenues or
ownership structure, but rather focused on the fact that the chain stores at issue had extremely limited
stereo equipment. In Broadcast Music, Inc. v. Claire's Boutiques , for example, the "receiving
apparatus" at issue retailed at $129.95, had just five watts of power, and was able to drive only two
speakers, each of which measured 7 inches x 5 inches x 4 inches (approximately 18 x 13 x 10 cm).
The Court then went on to conduct a stringent analysis of the stereo system, requiring the Defendant
to prove that each of the components of the system was "home-type," and also that the components

7 See Music Licensing in Restaurants and Retail and Other Establishments, Hearing before the House
of Representatives, Subcommittee on Courts and Intellectual Property, Committee on the Judiciary (July 17,
1997) (hereinafter "Judiciary Committee Hearing") (testimony of Patrick Collins, SESAC, at 109-110). Due to
the length of the Judiciary Committee Hearing transcript, we are not annexing this document, however, the
transcript is available on the internet at: h ttp://commdocs.house.gov/committees/judiciary/hju43667.000/
hju43667_0.htm.
8 House Report, at 86 (exhibit US-1).
9 Sailor Music v. Gap Stores, Inc. , 668 F.2d 84 (2d Cir. 1981), cert. denied , 456 U.S. 945 (1982)
("Gap Stores") (the cases interpreting section 110(5)(A) are annexed as exhibit US-3 in alphabetical order).
10 Broadcast Music, Inc. v. United States Shoe Corp., 678 F.2d 816 (9th Cir. 1982). See also Red
Cloud Music Co. v. Schneegarten, Inc., 27 U.S.P.Q.2d 1219 (C.D. Cal. 1992) (following the United States Shoe
decision). Other courts across the country have also applied this type of nuanced analysis of equipment and
establishment size and revenues in finding that the homestyle exception did not apply. E.g., Hickory Grove
Music v. Andrews , 749 F. Supp. 1031 (D. Mont. 1990) (restaurant with 1,192 square feet using radio and
recessed speaker system did not qualify for section 110(5) exemption); Little Mole Music v. Mavar's
Supermarket, 12 U.S.P.Q.2d 1209 (N.D. Ohio 1988) (chain of supermarkets did not qualify for 110(5)
exemption based on use of six to ten ceiling speakers and physical size); Merrill v. Bill Miller's Bar-B-Q
Enters., 688 F. Supp. 1172 (W.D. Tex. 1988) (chain of restaurants did not qualify for 110(5) because
equipment was not homestyle, physical size was 1000 - 1500 sq. feet and annual revenues justified a
commercial subscription service).

were configured in a manner commonly found in a home. 11 Similarly, in Broadcast Music, Inc. v.
Edison Brothers , the court was persuaded that the exemption applied where it found that the
company used only "low grade radio-only" receivers, with no more than two portable speakers
placed within 15 feet (4.6m) of the receiver.12
9. Taken as a whole, the substantial body of case law under Section 110(5)(A) demonstrates its
limited nature and careful application by the courts. In addition, however, it is important to
recognize that the 1998 Amendment dramatically limited the homestyle exception even further. As
the EC acknowledges, Section 110(5)(A) no longer covers nondramatic musical works at all. Rather,
it covers only other types of works, such as plays and operas. No licensing mechanism currently
exists for right holders to collect royalties on a co llective basis for secondary performances of these
other types of works in establishments. As a practical matter, no royalties are collected for these
secondary performances, and thus the statutory exemption for homestyle receiving equipment has no
effect on this market.
B. S
ECTION 110(5)(B)
10. In the mid-1990s, in response to complaints from different sectors of the small business
community of various abuses by the PROs, 13 Congress undertook consideration of a proposed
expansion of the homestyle exemption advocated by a coalition of business associations (the
"coalition"). The proposal put forward by the coalition was much broader than that which was
eventually passed into law, and called for a complete exemption for the performance of nondramatic
musical works, regardless of the type of establishment, size of establishment or equipment used to
broadcast the work. It also would have permitted further retransmission beyond where the
transmission was received. The only limitations were that no admission fee could be charged, and
that the transmission must be properly licensed.
14

11 Broadcast Music Inc. v. Claire's Boutiques, 949 F.2d 1482, 1493 (7th Cir. 1991).
12 Broadcast Music Inc. v. Edison Bros. Stores, Inc. , supra. The EC makes the unsubstantiated
statement in its submission that, as a result of this case, chain stores have adapted their music installation to
qualify for the exemption or even canceled their subscrip tion to music services. EC Submission, p. 9 note 25.
The EC offers no support or citations whatsoever for these statements, and the U.S. is not aware of any cases in
which this scenario actually occurred.
13 Specifically, there was widespread complaint from small business owners about harassment and
abusive tactics by the PROs in the licensing process. See generally, Judiciary Committee Hearing, statement of
Bruce A. Lehman, the Assistant Secretary of Commerce and Commissioner of Patents and Trademarks, at 42,
statement of Pete Madland on behalf of the Tavern League of Wisconsin at 220, and testimony of Peter Kilgore
on behalf of the National Restaurant Association at 235-236.
14 The coalition's proposal was reflected in H.R. 789, the Fairness in Music Licensing Act of 1997, by
Representative James Sensenbrenner, annexed hereto as exhibit US-4. This proposal, not the provisions at
issue in this case, were the basis of the testimony by the Register of Copyright, Marybeth Peters, and Bruce
Lehman, that is cited by the EC in its submission. EC first submission, para. 4. While the EC cites the portion
of Ms. Peters' statements relating to this much broader exemption that was not enacted into law, they neglect to
mention her statement on Section 110(5)(A). With respect to Section 110(5)(A), Ms. Peters noted that an ad
hoc committee had investigated 110(5) in the context of U.S. accession to the Berne Convention and stated: "I
strongly believe that the existing section 110(5) is fine, given what is required by the Berne Convention, and
may be similar to exemptions that you see in a few other countries." Judiciary Committee Hearing at 46.
Furthermore, the EC mischaracterizes the statements by Ms. Peters and Mr. Lehman concerning the
TRIPS-compatibility of the coalition proposal. Even a cu rsory reading of the quoted statements reveals that
Ms. Peters and Mr. Lehman actually expressed the belief that the proposed amendments would lead to claims
by other countries that the United States was in violation of its obligations – an unsurprising view since the EC
had already complained about the TRIPS-consistency of the homestyle exemption, and had initiated a formal
investigation of the provision at the time the statements were made. See also exhibits EC-11 and EC-12.

11. At that time, the PROs also proposed amendments to Section 110(5) that they believed
"accurately reflect[ed] uses by small commercial establishments in the marketplace". 15 Th e PROs'
proposal, in addition to suggesting a square footage limit of 1,250 sq. ft. (116.2 sq. m.), also
advocated specific equipment limitations of no more than four loudspeakers and two TV screens not
greater than 44 inches (1.1m). 16 Notably, the scope of the exemption advocated by the PROs in this
initial proposal was broader than the courts' interpretation of the existing homestyle exemption, and
thus represented a modest expansion of the exemption.
12. In October of 1995, the National Licensed Beverage Association ("NLBA"), which had been
one of the initial proponents of an amendment to Section 110(5) and an important member of the
coalition, settled its differences with the PROs and signed a private group licensing agreement. This
agreement applied to most of the NLBA's wide membership, and was also available to any eating,
drinking or retail establishment licensed to sell alcohol for on-premise consumption. 17 It exempts
establishments affiliated with the NLBA from paying licensing fees for the performance of music by
radio or television if:
(i) the establishment is smaller than 3,500 sq. ft. [325.28 m. sq.], or,
(ii) the establishment is 3,500 sq. ft. or larger and no more than 6 radio and/or TV
speakers are used, with no more than 4 in any one room; and no more than 3 TVs of
a screen size smaller than 55 inches [1.4 m.] are used, with no more than 2 TVs in
any one room; and
(iii) no direct charge was made to see or hear the transmission and there was no
retransmission.18
13. The NLBA agreement also provided reduced licensing rates for music performances by other
means, such as mechanical music, live performances, establishment-owned jukeboxes and radio and
TV performances not qualifying for the exemption.19 The largest U.S. PRO, the American Society of
Composers, Authors and Publishers (ASCAP), praised the agreement, calling it a "fair
compromise",20 and stating that it would benefit small businesses while ensuring that the rights of
"songwriters, composers and music publishers will remain protected". 21 Again, it is notable that the
scope of the exemption in this voluntarily negotiated agreement is almost identical to the legislation
that, three years later, in 1998, became the Fairness in Music Licensing Act. Moreover, at the time
that the agreement was concluded with the NLBA, the PROs offered to extend the same proposal to
the National Restaurant Association and other members of the business coalition, but, at that time, it
was rejected.
22

15 Letter of July 24, 1995 to The Honorable Carlos Moorhead from ASCAP, BMI, Inc. and SESAC,
Inc., (annexed hereto as exhibit US-5).
16 Id. at 5-6.
17 Any establishment that is a member of the NLBA can take advantage of the terms of the agreement
and establishments which are not members of NLBA can, by joining the NLBA, also avail themselves of the
agreement. To be a member of the NLBA, an establishment must sell alcohol on its premises, a condition that
applies to all bars and taverns, as well as a very large number of restaurants.
18 NLBA News, April 1997 (annexed hereto as exhibit US-6).
19 Id.; see also Music Licensing Agreement with ASCAP, BMI & SESAC for NLBA Members, 2-3
(attached as exhibit US-7).
20 ASCAP Playback, February 1996 (annexed as exhibit US-8).
21 ASCAP Playback, December 1995 (annexed as exhibit US-9).
22 Judiciary Committee Hearing (testimony of Wayland Holyfield, on behalf of ASCAP at 75). The
NRA did not accept the offer, however, because of their view that its standards were more appropriately
reflected in legislation, rather than a private commercial agreement.

14. In October 1998, after extended negotiations be tween the PROs and the coalition, Congress
passed legislation amending Section 110(5), with te rms very similar to the NLBA agreement. The
1998 amendment revised Section 110(5) to add subsection (B), which applies exclusively to
nondramatic musical works. The new subsection (B) exempts secondary performances of
nondramatic musical works based on defined criteria of square footage and/or equipment, subject to
three additional limitations. It provides in full as follows:
(5)(B) communication by an establishment of a transmission or
retransmission embodying a performance or display of a
nondramatic musical work intended to be received by the general
public originated by radio or television broadcast station licensed as
such by the Federal Communications Commission, or, if an
audiovisual transmission, by a cable system or satellite carrier, if:
(i) in the case of an establishment other than a food service or
drinking establishment, either the establishment in which the
communication occurs has less than 2,000 gross square feet of space
(185.9 m. sq.) (excluding space used for customer parking and for
no other purpose) and:
(I) if the performance is by audio means only, the
performance is communicated by means of a total of not
more than 6 loudspeakers, of which not more than 4
loudspeakers are located in any 1 room or adjoining outdoor
space; or
(II) if the performance or display is by audiovisual
means, any visual portion of the performance or display is
communicated by means of a total of not more than 4
audiovisual devices, of which not more than 1 audiovisual
device is located in any 1 room, and no such audiovisual
device has a diagonal screen size greater than 55 inches, and
any audio portion of the performance or display is
communicated by means of a total of not more than 6
loudspeakers, of which not more than 4 loudspeakers are
located in any 1 room or adjoining outdoor space;
(ii) in the case of a food service or drinking establishment,
either the establishment in which the communication occurs has less
than 3,750 gross square feet of space (348.5 m. sq.) (excluding space
used for customer parking and for no other purpose), or the
establishment in which the communication occurs has 3,750 gross
square feet of space or more (excluding space used for customer
parking and for no other purpose) and:
(I) if the performance is by audio means only, the
performance is communicated by means of a total of not
more than 6 loudspeakers, of which not more than 4
loudspeakers are located in any 1 room or adjoining outdoor
space; or
(II) if the performance or display is by audiovisual
means, any visual portion of the performance or display is
communicated by means of a total of not more than 4
audiovisual devices, of which not more than one audiovisual

device is located in any 1 room, and no such audiovisual
device has a diagonal screen size greater than 55 inches, and
any audio portion of the performance or display is
communicated by means of a total of not more than 6
loudspeakers, of which not more than 4 loudspeakers are
located in any 1 room or adjoining outdoor space;
(iii) no direct charge is made to see or hear the transmission or
retransmission;
(iv) the transmission or retransmission is not further transmitted
beyond the establishment where it is received; and
(v) the transmission or retransmission is licensed by the
copyright owner of the work so publicly performed or displayed.
23
15. This legislation was part of a larger bill in which the term of protection for copyright was
extended by twenty years, giving copyright owners substantially more protection than that required
by international agreements.
16. Contrary to the assertions of the EC, Section 110(5)(B) does not apply to the communication
of works over the Internet. 24 In fact, neither Section 110(5)(A) or Section 110(5)(B) exempts
communications over a digital network. Such communications, by the very nature of the
technological process of transmission, involve numerous incidences of reproduction, and could
implicate the distribution right as well. When a work is transmitted to a distant location over a
computer network, temporary RAM copies are made in the computers through which it passes, by
virtue of the technological process of transmission. 25 This is an essential function of the way that
digital information is transported over a digital network. The Section 110(5) exemptions, both (A)
and (B), only apply to the performance right, and do not affect copyright holders' exclusive
reproduction and distribution rights. Therefore, even under Section 110(5) as amended,
establishment owners generally must still seek a license for the reproduction and possibly distribution
rights implicated by Internet transmissions.
III. LEGAL ANALYSIS
17. The EC devotes almost its entire legal argument to arguing that Articles 11 and 11 bis of the
Berne Convention are implicated by the Section 110(5) exemptions. This issue is not in dispute. The
relevant issue in this case is not whether Berne rights are implicated, but whether the provisions at
issue are permissible exceptions under the standard of TRIPS Article 13. In its submission, the EC
does not substantively address this central issue at all.
18. TRIPS Article 9(1) incorporates Articles 1 through 21 of the Berne Convention. The Berne
Convention permits members to make "minor reservations" to the exclusive rights guaranteed by
Berne, including limitations to the public performance right in Article 11 and 11 bis.
26 T R I P S

23 P.L. 105-298, Section 202 (annexed as exhibit US-10).
24 EC first submission, para. 39.
25 The US courts have consistently held that RAM copies implicate the copyright holder's
reproduction right. See, e.g., MAI Sys. Corp. v. Peak Computer, Inc. , 991 F.2d 511 (9 th Cir. 1993), cert.
dismissed, 114 S.Ct. 671 (1994); Stenograph L.L.C. v. Bossard Assocs. , 144 F.3d 96, 101-02 (D.C.Cir. 1998)
(these cases are annexed as exhibit US-11). This conclu sion was codified in Title III of the Digital Millennium
Copyright Act at section 301.
26 World Intellectual Property Organization, Guide to the Berne Convention for the Protection of
Artistic and Literary Works (Paris Act 1971) 103 (1978) ("WIPO Guide to the Berne Convention").

Article 13 articulates the standard by which the permissibility of these limitations to exclusive rights
must be judged. This standard is based on the language in Berne Article 9(2), 27 which pertains to
exceptions to the reproduction right, and provides: "It shall be a matter for legislation in the
countries of the Union to permit the reproduction of such works in certain special cases, provided
that such reproduction does not conflict with a normal exploitation of the work and does not
unreasonably prejudice the legitimate interests of the author."
19. Article 13 of the TRIPS Agreement provides that "Members shall confine limitations and
exceptions to exclusive rights to certain special cases which do not conflict with a normal
exploitation of the work and do not unreasonably prejudice the legitimate interests of the right
holder." This provision must be interpreted in accordance with the principles of treaty interpretation
set out in Article 31 of the Vienna Convention, which provides in relevant part that "A treaty shall be
interpreted in good faith in accordance with the or dinary meaning to be given to the terms of the
treaty in their context and in the light of its object and purpose.28
20. The text of Article 13 plainly establishes cumulative requirements for exceptions to exclusive
rights. Any exception must apply only to certai n special cases, cannot conflict with a normal
exploitation of the work, and, in addition, cannot cause unreasonable prejudice to the legitimate
interests of the right holder.
21. The context of Article 13 includes other exceptions in the TRIPS Agreement that provide
WTO members a certain amount of flexibility in implementing the relevant provisions of the
Agreement. Articles 17, 26 and 30 contain language very similar to Article 13 and apply this
exception to trademarks, industrial designs and patents, respectively. Article 1.1 of TRIPS also
emphasizes flexibility, and provides that "Members shall be free to determine the appropriate method
of implementing the provisions of this Agreement within their own legal system and practice".
22. The object and purpose of Article 13, as reflected in its text, are to allow certain exceptions
to the exclusive rights conferred by a copyright. The object and purpose should be considered in
light of the "Objectives" of the Agreement, set forth in Article 7, which provides that the provisions
of the Agreement are designed to result in mutual advantages to producers and users, and contribute
to a balance of rights and obligations.
23. Each of the criteria in Article 13 of the TRIPS Agreement must be interpreted in light of
these principles. Under such an analysis, the exceptions in Section 110(5)(A) and (B) satisfy
Article 13 because they are confined to special cases which do not conflict with normal exploitation
and do not unreasonably prejudice the legitimate interests of copyright holders.
A. S
ECTION 110(5) APPLIES TO CERTAIN SPECIAL CASES
24. As a preliminary matter, Section 110(5) is confined to "certain special cases." The TRIPS
Agreement does not elaborate on the criteria for a case to be considered "special," and WTO
Members have flexibility to determine for themselves whether a particular case represents an
appropriate basis for an exception to exclusive rights. The limiting adjectives "certain" and "special"
in Article 13 do indicate that exceptions should be "clearly delineated," rather than vague and open
ended.29

27 See also Gervais, The TRIPS Agreement: Drafting History and Analysis, §2.72, 90 (1998).
28 India - Patent Protection for Pharmaceutical and Agricultural Chemical Products ,
WT/DS50/AB/R, 18 AB Report, 18 December 1997 (citi ng Vienna Convention, done at Vienna, 23 May 1969,
1155 U.N.T.S. 221; 8 International Legal Materials 679 (1969)).
29 Gervais at 90.

25. Section 110(5)(A) is confined to certain special cases – i.e. , those involving use of a
"homestyle" receiving apparatus. This is a fact-specific standard, but nonetheless one that is
well-defined. Courts have considered the various factors articulated in the text and legislative history
of the provision in determining whether a given establishment meets the Section 110(5)(A) standard.
Although judges may have weighed the various factors differently in making their individual
decisions, these cases reflect the reasonable and consistent application of a fact-specific standard in a
common-law system.
26. Section 110(5)(B) is also confined to certain special cases, and defines with great precision
the establishments that are entitled to benefit from the exception. The size and equipment limitations
in the law are unambiguous, and can be applied with ease.
B. S
ECTION 110(5) DOES NOT CONFLICT WITH NORMAL EXPLOITATION
27. There is no normative definition in TRIPS as to what constitutes the "normal exploitation" of
a copyrighted work. The normal exploitation of a work, however, can and must necessarily include
permissible exceptions to an author's exclusive rights – it is for the purpose of allowing those
exceptions that Article 13 was included in the TRIPS Agreement. Limitations and exceptions to
exclusive rights by definition deprive a copyright owner of potential compensation for certain uses of
his or her work. If every time a copyright owner was deprived of any potential compensation, such
deprivation constituted a conflict with normal exploitation, then Article 13 would have no meaning.
28. To determine what constitutes normal exploitation, the Panel must look at all "the ways in
which an author might reasonably be expected to exploit his work in the normal course of events". 30
Under U.S. copyright law, the copyright owner of a musical work has a broad range of exclusive
rights. Those most important to such right holders include the right to reproduce their work in copies
and phonorecords, the right to distribute and sell those copies and phonorecords, and the right to
perform their music publicly.31 Section 110(5) is an exception to only the public performance right.
29. With respect to the public performance right, by far the most significant area of exploitation
for the copyright owner is the primary performance of the work. The compensation paid by
broadcasters for the right to broadcast the musical work is particularly important. Royalties from
broadcasting and live performance are the principal means by which copyright owners in
nondramatic musical works receive compensation for the public performance of their works.
Section 110(5) does not affect a copyright owner's right to be compensated for these types of
exploitation. Rather, it affects only secondary uses of broadcasts. Moreover, it does not exempt all
secondary performances, but only those in establishments that use homestyle receiving equipment, or
meet the square footage and other criteria in the statute. Finally, even in those establishments
exempted by Section 110(5), owners must still pay licensing fees for the use of recorded music, on
CD or cassette tapes, and for live performances of music.
30. Furthermore, as noted by Professor Ricketson, a use does not conflict with normal
exploitation if the copyright owner would not othe rwise expect to collect a fee from that use.
32 It is
important to emphasize that the issue in this dispute is the scope of normal exploitation in the United
States. Thus, even though a use may technically fall within the exclusive rights of the copyright
owner, it may not normally be capable of being exploited within a particular market or jurisdiction.

30 Sam Ricketson, The Berne Convention for the Protection of Literary and Artistic Works:
1886-1986, 483 (Kluwer 1987). This language refers to the use of the phrase "normal exploitation" in the
context of Berne Art. 9(2).
31 This includes the right to broadcast their work found in Berne Art. 11bis.
32 Ricketson, at 483 (an example of uses that would not conflict with normal exploitation is "uses for
which [the copyright owner] would not ordinarily expect to receive a fee - even though they fall strictly within
the scope of his [exclusive] right").

With respect to the homestyle exemption in Sect ion 110(5)(A), even before nondramatic musical
works were removed from its scope by the passage of the 1998 Amendment, it was limited to
establishments that were not large enough to justify a subscription to a commercial background
music service.33 As noted in the House Report, Congress intended that this exception would merely
codify the licensing practices already in effect by the right holders and their licensing organizations.34
Congress's intent and scope has been followed by the courts, as discussed above. Since 110(5)(A)
only affected establishments that were not likely otherwise to enter into a license, or would not have
been licensed under the practices at that time, it did not conflict with the expectations of right holders
concerning the normal exploitation of their works.
31. Now that Section 110(5)(A) excludes nondramatic musical works ( e.g., songs commonly
played on the radio rather than as part of a larger dramatic performance such as an opera) from its
scope, it is even more clear that it does not conflict with the normal exploitation of copyrighted
works. For nondramatic musical works, there is, at least, a collective licensing mechanism (the
PROs) that generates some revenue from secondary performances. For the remaining works covered
by the exemption, such as operas, plays, and musicals, there is no such system for the collective
licensing of secondary performances, and little or no direct licensing by right holders to retail, eating
or drinking establishments. Owners of copyright in these works do not and have never expected
direct revenue from secondary performances in such establishments. In other words, licensing this
aspect of the performance right is not a part of how an author "might reasonably [] expect[] to exploit
his work in the normal course of events.
35
32. In the case of Section 110(5)(B), a significant portion of the establishments exempted by that
section had already been exempted, for almost a quarter of a century, by the homestyle exception.
Owners of copyrights in nondramatic musical works had no expectation of receiving a fee from these
establishments. Moreover, even if Section 110(5)(B) had not been passed, many of the
establishments now eligible for that exemption would have been able to avail themselves of the
nearly identical exemption under the NLBA agreem ent voluntarily concluded by the PROs. Thus,
even prior to the passage of the 1998 Amendment, copyright owners would not normally expect a fee
from these establishments either. In the final analysis, a small number of establishments may not
have been entitled to take advantage of either the homestyle exemption or the NLBA agreement; and
thus were newly exempted under Section 110(5)(B). However, when viewed against the panoply of
exploitative uses available to a copyright owner under the U.S. Copyright Act, this minor limitation
on some secondary uses on broadcasts to the public simply does not rise to the level of a conflict with
normal exploitation.
C. S
ECTION 110(5) DOES NOT UNREASONABLY PREJUDICE THE LEGITIMATE INTERESTS OF THE
RIGHT HOLDER
33. While the "conflict with normal exploitation" standard of TRIPS Article 13 looks to the
amount of market displacement caused by a limitation or exception, the "unreasonable prejudice"
standard measures how much the right holder is harmed by the effects of the exception. It is
important to recognize that the issue in this analysis is not whether the right holder's interests are
prejudiced. Given that any exception to exclusive rights may technically result in some degree of
prejudice to the right holder, the key question is whether that prejudice is unreasonable.
36

33 Conference Report, 75 (exhibit US-2).
34 House Report, 86 (exhibit US-1).
35 Ricketson, 483. This language refers to the use of the phrase "normal exploitation" in the context
of Berne Art. 9(2).
36 WIPO Guide to the Berne Convention at 55-56.

1. Section 110(5)(A)
34. The economic effect of Section 110(5)(A) was minimal even before the passage of the 1998
Amendment, and thus caused no unreasonable prejudice to any legitimate interests of EC right
holders. Returning again to the fundamental intent of the provision, it was to exempt from liability
small shop and restaurant owners whose establishments, for a variety of reasons, would not have
justified a commercial license. In general, where no such licenses would have been sought or issued
in the absence of an exception, there is literally no economic detriment to the right holder from an
explicit exception.
37 The establishments exempted by Section 110(5)(A), with small square footage
and elementary sound equipment, are the least likely to be aggressively licensed by the PROs and
licensing fees for these establishments would likely be the lowest in the range. 38 Furthermore, given
their size and that the playing of music is often in cidental to their services, these establishments are
among those most likely simply to turn off the radio if pressed to pay licensing fees.
35. With the passage of the 1998 Amendment, and the removal of nondramatic musical works
from the scope of Section 110(5)(A), this section has been limited even further and ceased to have
any real economic relevance. As described above, there is, for all practical purposes, no substantial
licensing market for secondary performances in retail, eating or drinking establishments for works
now covered by Section 110(5)(A). In other words, these establishments are not and could not be
significant sources of revenue for right holders. Therefore, this exception does not prejudice the
legitimate interests of these right holders.
36. Perhaps most probative of this issue, the EC has not made any attempt, in its submission, to
address the effect of this exception on its right holders. Nowhere in its submission are there any
concrete allegations as to the prejudice the EC believes it suffers as a result of Section 110(5)(A).
2. Section 110(5)(B)
37. In the section of its submission entitled "Quantitative effects on copyright owners," the EC
provides no information about the quantitative effects on copyright owners of Section 110(5)(B).
Instead, the EC provides the Panel with a few statistics – meaningless by themselves – concerning
the square footage of certain drinking, eating and retail establishments in the United States. For
several reasons, these numbers do not serve as a useful basis for estimating the economic impact of
Section 110(5)(B) on right holders. They fail to account for the majority of the relevant factors that
determine whether a right holder would be economically prejudiced at all by the exemption in
Section 110(5)(B). Even assuming for the sake of argument the accuracy of the figures cited by the
EC, in order to obtain a reasonable estimate of the number of establishments from which copyright
owners have truly lost revenue as a result of the FMLA, one would have to:
- subtract from those gross totals the sizable number of establishments that do not play music;
- subtract from that number the establishments that rely on music from some source other than
radio or TV (such as tapes, CDs, jukeboxes, or live music);
- subtract again for the number that were not licensed prior to the passage of the FMLA and
which the PROs would not be able to license anyway regardless of the exemption;
- subtract once more for the establishments that would simply take advantage of the NLBA
agreement practically identical to Section 110(5)(B) if the statutory exemption were not
available; and,

37 See supra para. 6 (discussion of licensing practice).
38 See Judiciary Committee Hearing, letter from Marilyn Bergman, ASCAP President and Chairman
of the Board, at 175-186.

- finally, subtract again for the establishments that would prefer to simply turn off the music
rather than pay the fees demanded by the PROs.
While these figures are impossible to estimate with scientific precision, there is ample reason to
believe that they represent substantial numbers of establishments. Even a realistic figure of the
number of establishments from which copyright owners have lost revenue, however, would not
present a true figure of economic harm to EC right holders. Whatever revenues could be collected
from these smaller establishments would then have to be reduced again by the portion due to right
holders in the EC, as opposed to all other right holders.
38. The EC makes no attempt to take these factors into account but rather merely asserts that
copyright owners have been deprived of a signif icant source of income. Without providing any
support for this assertion, the EC has not presented a prima facie case that any prejudice suffered by
EC right holders is unreasonable within the meaning of Article 13 of the TRIPS Agreement.
39. In light of the history of the 1998 Amendment, and the close similarity between that
legislation and the voluntary agreement reached between the PROs and the NLBA in 1995, the EC's
claim that copyright holders are suffering unreasonable prejudice is even more tenuous. As
previously discussed, the PROs voluntarily concluded the agreement with the NLBA that exempts
almost the same establishments. Far from alleging unreasonableness, the PROs hailed this agreement
as a "fair" deal that "protected" their members' rights. Marilyn Bergman, President and Chairman of
ASCAP, explained in ASCAP's 1996 Annual Report, "We are proud to have reached a resolution
with the NLBA and it is a good one for both of our organizations".
39
40. Finally, the analysis of unreasonable prejudice must also take into account the limited
resources of the PROs and the small percentage of the market actually licensed by the PROs. In light
of the certainty provided by the precise limitations of the Section 110(5)(B) exemption, the PROs can
now efficiently redirect their licensing resources toward those establishments not eligible for the
Section 110(5)(B) exemption, and thus compensate for any minor prejudice they might suffer. In
fact, the largest PRO has already stated its intent to do exactly this, as well as generate additional
income by encouraging live and recorded music, for which there is no exemption. Even before the
1998 Amendment went into effect, ASCAP outlined its plan to "reverse the effects" of the
legislation: "A critical element of our plan will be to aggressively license those eligible
establishments that have withheld royalty payment and to promote the value of live and mechanical
music to a large number of newly targeted establishments."
40
IV. CONCLUSION
41. For all of these reasons, the Panel should find that both Section 110(5)(A) and
Section 110(5)(B) of the U.S. Copyright Act m eet the standards of Article 13 of the TRIPS
Agreement and the substantive obligations of the Berne Convention. Both provisions are limited to
certain special cases, and do not conflict with a normal exploitation of the work, nor cause
unreasonable prejudice to the legitimate interests of EC right holders. Accordingly, this Panel should
dismiss the claims of the EC in this dispute.

39 Marilyn Bergman, Safeguarding the Creative Community , ASCAP Annual Report, 1 (1996)
(annexed as exhibit US-12).
40 ASCAP, Playback, October-November-December 1998, at 2 (emphasis added) (annexed as exhibit
US-13).

ATTACHMENT 2.2
ORAL STATEMENT OF THE UNITED STATES AT THE
FIRST MEETING WITH THE PANEL
(8 November 1999)
I. INTRODUCTION
1. Good morning, Madame Chair and members of the Panel. We are pleased to have this
opportunity to appear before you to present the arguments of the United States in defense of the
Section 110(5) music licensing exemptions. We welcome any questions you may have, and we look
forward to responding to them.
2. The United States has one of the strongest systems of intellectual property protection in the
world. In fact, the 1998 music licensing amendment was part of a larger bill in which the term of
protection for copyright was extended by twenty y ears, giving copyright owners substantially more
protection than that required by international agreements. To help the Panel focus on the real issue in
this dispute, we have provided you a chart, exhibit US-14, which outlines the scope of the
exemptions in the relevant context.
II. BACKGROUND OF SECTION 110(5) EXEMPTIONS
3. Turning to exhibit US-14, we see that the U. S. copyright system grants a bundle of exclusive
rights to right holders. Specifically, right holders are granted the exclusive right to do and authorize:
(1) the reproduction of their work in copies and phonorecords, (2) the distribution and sale of those
copies and phonorecords, (3) the adaptation, translation, arrangement or other transformation of their
work, (4) the public performance of their work, (5) the display of their work, and (6) with respect to
sound recordings, the public performance by means of a digital audio transmission. Of these rights,
the most important to a right holder in musical works are the reproduction, distribution and public
performance nights.
4. Section 110(5) effectively limits only one of these exclusive nights – the public performance
right. Moreover, Section 110(5) has no effect on the most significant area of public performance
exploitation for a copyright owner – the primary performance of his or her work (for example,
broadcasting of works over the television and radio). Rather, the exception is limited to only certain
secondary uses of broadcasts of public performances, for which the right holder has already been
compensated for the primary performance.
5. The EC grossly exaggerates the scope of Section 110(5). It is important to remember that
there are two exceptions contained in Section 110(5): the Section 110(5)(A) homestyle exemption
(which has been narrowed), and Section 110(5)(B), which was added by the 1998 amendment.
Almost all of the EC's allegations are based on speculation regarding the impact of the 1998
Amendment, which created Section 110(5)(B).
6. With respect to the homestyle exemption, the EC acknowledges that its scope has been
limited by the 1998 Amendment's removal of nondramatic musical works from its purview.
However, the EC attempts to distort the standing body of caselaw developed by U.S. courts over
more than twenty years regarding the scope of the homestyle exemption.
7. As we demonstrated in our first submission, in the almost two and one-half decades since the
homestyle exemption was enacted, U.S. courts have applied the exception narrowly and in a manner
consistent with the text of the statute and with Congress's stated intent. Of the forty decisions
reported under Section 110(5) (the homestyle exemption), only three courts have found that the

defendant was entitled to take advantage of the exception. Of those three cases, only two courts, in
Claire's Boutiques and in Edison Bros., found that chain stores qualified for the exemption. In both
cases the deciding factor was the limited and unsophisticated homestyle-type equipment used in the
stores. For example, in Edison Bros., the stores used only a radio-only receivers with two portable
speakers placed within 15 feet of the receiver. These two cases are not "illustrative" as the EC has
claimed this morning and in their submission. They are the only cases finding that a chain store
qualified for the exemption.
8. The mid-1990s brought a call for relief from small businesses against what they viewed as
abusive collecting tactics and harassment by the collecting societies. Over the next several years, a
broad expansion of the homestyle exemption was advocated by a diverse coalition of businesses. In
response, the collecting societies proposed legislation exempting establishments based on size and
equipment. Indeed, the legislation that ultimately became Section 110(5)(B) last year, after intensive
negotiations with the business coalition and the co llecting societies, was remarkably similar to the
agreement the collecting societies voluntarily negotiated with the National Licensed Beverage
Association three years earlier. At that time, ASCAP, the largest U.S. collecting society, praised the
NLBA agreement, calling it a "fair compromise."
III. SECTION 110(5) MEETS ARTICLE 13'S STANDARD
9. As we noted in our first submission, the relevant issue in this case is not whether Berne
Convention rights are implicated, but whether the provisions at issue are permissible exceptions
under the TRIPS articulation, in Article 13, of the Berne "minor reservations" standard. TRIPS
Article 13 articulates the standard by which the permissibility of limitations (or "minor
reservations") to exclusive rights must be judg ed. Indeed, TRIPS Article 13 is based on the Berne
standard for exceptions to the exclusive reproduction right, Berne Article 9(2).
10. In considering, the scope of Berne Convention rights such as those at issue in this case, it is
important to remember the basic distinction that exists in copyright law between exceptions to
exclusive rights and compulsory licenses. Sections 110(5)(A) and (B) are exceptions to an
exclusive right. By contrast, with respect to certain rights, Berne permits countries to provide a
compulsory license in lieu of an exclusive right. With a compulsory license, an author is deprived
of the right to authorize or prohibit use of the work, provided that compensation is provided.
Exceptions and compulsory licenses are subject to different standards of review under Berne.
Exceptions to exclusive rights are generally subject to the doctrine of "minor reservations."
Compulsory licenses are subject to the standard of equitable remuneration, such as articulated in
Article 11 bis(2). For this reason, Article 11 bis(2) is not relevant to the Panel's consideration of
Sections 110(5)(A) and (B).
11. The central issue for the Panel then, is to determine whether, in accordance with TRIPS
Article 13, Section 110(5) exempts from copyright infringement "special cases which do not conflict
with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of
the right holder".
12. As a preliminary matter, Section 110(5) is confined to "certain special cases". The TRIPS
Agreement does not elaborate on the criteria for a case to be considered "special", and WTO
Members have flexibility to determine for themselves whether a particular case represents an
appropriate basis for an exception to exclusive rights. The limiting adjectives "certain" and "special"
in Article 13 do indicate that exceptions should be "clearly delineated", rather than vague and open
ended.
13. The homestyle exemption is confined to certain special cases – that is, those involving use of
a "homestyle" receiving apparatus in small businesses which would not generally pay for a
commercial license. This is a fact-specific standard, but nonetheless one that is well-defined. Courts

have considered the various factors articulated in the text and legislative history of the provision in
determining whether a given establishment meets the homestyle exemption standard. Although
judges may have weighed the various factors differently in making their individual decisions, these
cases reflect the reasonable and consistent application of a fact-specific standard in a common-law
system.
14. The 1998 Amendment is also confined to certain special cases, and defines with great
precision the establishments that are entitled to benefit from the exception. The size and equipment
limitations in the law are unambiguous, and can be applied with ease. The legislative history of the
1998 Amendment demonstrates Congress's view that the straightforward square footage criteria
would curtail overreaching and abusive tactics by the collecting societies.
IV. NORMAL EXPLOITATION
15. The two central assessments therefore, are whether Section 110(5) conflicts with normal
exploitation and unreasonably prejudices the legitimate interests of the copyright holder. First,
limitations and exceptions to exclusive rights by definition deprive a copyright owner of potential
compensation for certain uses of his or her work. If every time a copyright owner was deprived of
any potential compensation, such deprivation constituted a conflict with normal exploitation, then
Article 13 would have no meaning.
16. To determine what constitutes normal exploitation, the Panel must look to the ways in which
an author might reasonably be expected to exploit his work in the normal course of events. As
outlined in exhibit US-14, under U.S. copyright law, the copyright owner of a musical work has a
broad range of exclusive rights. Section 110(5) is an exception to only one of the three most
important exclusive rights – the public performance right. Of the uses protected by this public
performance right, Section 110(5) affects only ce rtain secondary uses, and does not affect the most
significant area of public performance exploitation for the copyright owner, the primary performance
of the work. Moreover, even in those establishmen ts exempted by Section 110(5), owners must still
pay licensing fees for the use of recorded music, on CD or cassette tapes, and for live performances
of music.
17. As we emphasized in our submission, the rele vant market to assess the scope of normal
exploitation in this dispute is that of the United States. Thus, even though a use may technically fall
within the exclusive rights of the copyright owner, it may not normally be capable of being exploited
within a particular market or jurisdiction. With respect to the homestyle exemption, even before
nondramatic musical works were removed from its scope by the passage of the 1998 Amendment, it
was limited to establishments that were not large enough to justify a subscription to a commercial
background music service.
18. Indeed, this exception merely codified the licensing practices already in effect by the right
holders and their licensing organizations. Since the homestyle exemption only affected
establishments that were not likely otherwise to enter into a license, or would not have been licensed
under the practices at that time, it did not conflict with the expectations of right holders concerning
the normal exploitation of their works.
19. Now that the homestyle exemption excludes nondramatic musical works
(e.g., songs
commonly played on the radio rather than as part of a larger dramatic performance such as an opera)
from its scope, it is even more clear that it does not conflict with the normal exploitation of
copyrighted works. For nondramatic musical works (such as pop, jazz or rock songs), there is, at
least, a collective licensing mechanism (the collecting societies) that generates some revenue from
secondary performances. For the remaining works covered by the homestyle exemption, such as
operas, plays, and musicals, there is no such system for the collective licensing of secondary
performances, and little or no direct licensing by right holders to retail, eating or drinking

establishments. Owners of copyright in these works do not and have never expected direct revenue
from secondary performances in such establishments.
20. In the case of the 1998 Amendment, a significant portion of the establishments exempted by
that section had already been exempted, for almost a quarter of a century, by the homestyle
exception. Owners of copyrights in nondramatic musical works had no expectation of receiving a fee
from these establishments. Moreover, even if the 1998 Amendment had not been passed, many of
the establishments now eligible for that exemption would have been able to avail themselves of the
nearly identical exemption under the NLBA agr eement voluntarily concluded by the collecting
societies. We would note that both the NLBA agreement and the 1998 Amendment are based on
square footage, as well as equipment. In the NLBA agreement, the square footage requirement is
3,500 square feet, and in the 1998 Agreement it is 3,750 square feet, a difference of only 250 square
feet. Thus, even prior to the passage of the 1998 Amendment, copyright owners would not normally
have expected a fee from these establishments either.
21. In the final analysis, a small number of establishments may not have been entitled to take
advantage of either the homestyle exemption or the NLBA agreement; and thus were newly
exempted under the 1998 Amendment. However, given that copyright owners did not expect to
receive compensation from most of the uses exempted by the statute, this minor limitation on some
secondary uses on broadcasts to the public simply does not rise to the level of a conflict with normal
exploitation. Therefore, the Section 110(5) exemptions do not conflict with normal exploitation.
V. UNREASONABLE PREJUDICE
22. The "unreasonable prejudice" standard measures how much the right holder is harmed by the
effects of the exception. It is important to recogniz e that the issue in this analysis is not whether the
right holder's interests are prejudiced. Any exception to exclusive rights may technically result in
some degree of prejudice to the right holder. The key question is whether that prejudice is
unreasonable.
23. The economic effect of the homestyle exemption was minimal even before the passage of the
1998 Amendment, and thus caused no unreasonable prejudice to any legitimate interests of EC right
holders. Returning again to the fundamental intent of the provision, it was to exempt from liability
small shop and restaurant owners whose establishments did not justify a commercial license. Rather,
the homestyle exemption merely codified then existing licensing practices. In general, where no such
licenses would have been sought or issued in the absence of an exception, there is literally no
economic detriment to the right holder from an explicit exception. As noted by ASCAP, the
establishments exempted by the homestyle exemption, with small square footage and elementary
sound equipment, are the least likely to be aggressively licensed by the collecting societies and
licensing fees for these establishments would likely be the lowest in the range. (ASCAP's letter
introduced at the Judiciary Committee Hearings). Furthermore, given their size and that the playing
of music is often incidental to their services, these establishments are among those most likely simply
to turn off the radio if pressed to pay licensing fees.
24. With the passage of the 1998 Amendment, and the removal of nondramatic musical works
from the scope of the homestyle exemption, this section has been limited even further and ceased to
have any real economic relevance. As we have demonstrated, there is, for all practical purposes, no
substantial licensing market for secondary performances in retail, eating or drinking establishments
for the limited category of works now covered by the homestyle exemption (dramatic works such as
operas). In other words, these establishments are not and could not be significant sources of revenue
for right holders. Therefore, this exception does not prejudice the legitimate interests of these right
holders.
25. In the section of its submission entitled "Quantitative effects on copyright owners," and here
again today, the EC provides the Panel with a few statistics – meaningless by themselves –

concerning the square footage of certain drinking, eating and retail establishments in the United
States, intended to show the dramatic effect of the 1998 Amendment. For several reasons, however,
these numbers are not relevant. They certainly do not serve as a useful basis for estimating the
economic impact of the 1998 Amendment on right holders. They fail to account for the majority of
the relevant factors that determine whether a right holder would be economically prejudiced at all by
the exemption in the 1998 Amendment. Even assuming for the sake of argument the accuracy of the
figures cited by the EC, in order to obtain a reasonable estimate of the number of establishments from
which copyright owners have truly lost revenue as a result of the 1998 Amendment, one would have
to:
- subtract from those gross totals the sizable number of establishments that do not play music;
- subtract from that number the establishments that rely on music from some source other than
radio or TV (such as tapes, CDs, jukeboxes, or live music);
- subtract again for the number that were not licensed prior to the passage of the 1998
Amendment and which the collecting societies would not be able to license anyway
regardless of the exemption;
- subtract once more for the establishments that would simply take advantage of the NLBA
agreement practically identical to the 1998 Amendment if the statutory exemption were not
available; and,
- finally, subtract again for the establishments that would prefer to simply turn off the music
rather than pay the fees demanded by the collecting, societies.
While these figures are impossible to estimate with scientific precision, there is ample reason to
believe that they represent substantial numbers of establishments.
26. Even a realistic estimate of the number of establishments from which copyright owners have
lost revenue, however, would not present a true picture of economic harm to EC right holders.
Whatever revenues could be collected from these smaller establishments would then have to be
reduced again by the portion due to right holders in the EC, as opposed to all other right holders.
27. The EC makes no attempt to take these factors into account but rather merely asserts that
copyright owners have been deprived of a signif icant source of income. Without providing any
support for this assertion, the EC has not presented prima facie case that any prejudice suffered by
EC right holders is unreasonable within the meaning of Article 13 of the TRIPS Agreement.
28. In light of the history of the 1998 Amendment, and the close similarity between that
legislation and the voluntary agreement reached between the collecting societies and the NLBA in
1995, the EC's claim that copyright holders are suffering unreasonable prejudice is even more
tenuous. As previously discussed, the collecting societies voluntarily concluded the agreement with
the NLBA that exempts almost the same establishments. Far from alleging unreasonableness, the
collecting societies hailed this agreement as a "fair" deal that "protected" their members' rights.
29. Finally, the analysis of unreasonable prejudice must also take into account the limited
resources of the collecting societies and the small percentage of the market they actually license. For
example, the revenues generated by ASCAP from general licensing average 14% of overall revenues.
This 14% includes significant sources of revenues that are unaffected by Section 110 (5). In addition
to radio music played in establishments, it includes use of music at large gatherings such as
conventions and in establishments such as circuses, theme parks, shopping malls, sports events and
roller and ice rinks. It also includes revenues from certain live performances and from recorded

music (CDs, records and tapes). Therefore, any revenue loss to the collecting societies as a result of
Section 110(5) is necessarily a small fraction of the 14% of total revenues.
30. In light of the certainty provided by the precise limitations of the 1998 Amendment, the
collecting societies can now efficiently redirect their licensing resources toward those establishments
not eligible for the Section 110(5)(B) exemption, and thus compensate for any minor prejudice they
might suffer. In fact, ASCAP has already stated its intent to do exactly this, as well as generate
additional income by encouraging live and recorded music, for which there is no exemption. As
noted in our first submission, even before the 1998 Amendment went into effect, ASCAP outlined its
plan to "reverse the effects" of the legislation.
31. We believe that a thorough analysis of all the issues will lead you to conclude that both the
homestyle exemption and the 1998 Amendment are fully consistent with the TRIPS Agreement.
Thank you.

ATTACHMENT 2.3
RESPONSES OF THE UNITED STATES TO WRITTEN QUESTIONS
FROM THE PANEL – FIRST MEETING
(19 November 1999)
I. REPLIES TO QUESTIONS FROM THE PANEL TO THE UNITED STATES
Q.1 Please provide:
(a) a consolidated version of the current text of Section 110(5) of the US Copyright Act
together with the current text of Section 106;
(b) a copy of the study by the US Congressio nal Research Service on the impact of the
proposed legislation referred to in paragraph 5.3 of the Australian submission;
(c) if possible, a copy of the full text of the group licensing agreement between the US
collective management organizations (CMOs) and the National Licensed Beverage
Association (NLBA) referred to in your submission.
(a) There is no official U.S. Government text consolidating Section 110(5). We are providing
the Panel with a copy of a commercial service's consolidated Section 110(5), as well as the
current text of Section 106 at exhibit US-15.
(b) It is our understanding that the CRS "study" referred to by Australia involved only the
preparation of a couple of estimates, resulting in the one chart attached at exhibit US-16.
(c) We have been advised by the NLBA that its Agreement with the collecting societies contains
a strict nondisclosure provision, and cannot be released. However, we have attached an
NLBA circular, as well as a letter from the organization, both of which provide an overview
of its main terms. (See exhibit US-17.)
Exceptions and limitations
Q.2 In paragraph 17 of its first submission, the US states – with respect to the EC
allegations that Section 110(5) of the US Copyright Act violates Articles 11 and/or Article 11 bis
of the Berne Convention in combination with Article 9.1 of the TRIPS Agreement – "this issue
is not in dispute" and that the dispute centres around the exceptions and limitations in
Article 13 of the TRIPS Agreement. Could the US clarify whether it accepts that Section
110(5)(A)(B) in its revised form is not consistent with Articles 11 and/or 11 bis of the Berne
Convention read in combination with Article 9.1 of the TRIPS Agreement, but that it claims
that Section 110(5) is fully justified by the exceptions and limitations provided in Article 13 of
the TRIPS Agreement?
The U.S. does not dispute that Section 110(5)(A) and (B) implicate Articles 11 and 11 bis of
the Berne Convention. That is to say, it affects rights that are protected under those Articles. The
question of whether Section 110(5) is consistent with those Articles cannot be determined, however,
without looking both to the scope of the rights that they afford, and to the exceptions which are
permitted to those rights. Only if Section 110(5) does not fall within the exceptions permitted to
Articles 11 and 11bis will it be inconsistent with them.
The U.S. does not claim that TRIPS Article 13 permits exceptions or limitations that would
not be allowed by the Berne Convention, with respect to Berne rights. The U.S. does claim that

Section 110(5) is justified under the minor reservations doctrine. TRIPS Article 13 is relevant
because it provides an explicit test under which a minor reservation must be evaluated. TRIPS
Article 13 is a mechanism for evaluating what would, and what would not, be permissible under
Berne. (For further discussion of this issue, please see U.S. Response to Panel Question 14.)
Categories of works
Q.3 Section 110(5)(B) applies to "performance or display of a nondramatic musical work".
What was the objective of excluding works ot her than nondramatic musical works from the
scope of application of Subsection (B)? When is "display" of a nondramatic musical work
relevant? To what extent does Subsection (B) apply to categories other than musical works, in
particular to audiovisual works?
Nondramatic works were the focus of Subsectio n (B) for two related reasons. First, the
impetus for the enactment of Subsection (B) was complaints from business owners about the
licensing tactics of the PROs. Since PROs do not license dramatic musical works, there were no
complaints about the licensing of such works, and thus there was no reason to address these works in
the amendment. Furthermore, in as much as the PROs do not license them, there is effectively no
licensing of secondary performances of dramatic musical works in establishments affected by the
exemption. To our knowledge, individual right holders do not license these types of secondary
performances. Without any licensing taking place in this field, there was no need for
Section 110(5)(B) to include such works.
A display of a nondramatic musical work is almost never relevant. The only occasion in
which it would conceivably arise would be an audiovisual transmission in which sheet music was
held up to the camera. It should also be noted that the display right, while present in U.S. law, is not
required by the Berne Convention.
Subsection (B) does not to apply to any categories of works other than nondramatic musical
works. The application of this provision to works other than nondramatic musical works, and in
particular audiovisual works, turns on the cons truction of the word "embodying". Subsection (B)
exempts only the performances of nondramatic musical works which occur in the process of an
audiovisual transmission. While the establishment owner would not be required to pay a license fee
for the performance of music during television programs, he or she would still be required to pay the
copyright owners of the other works performed, such as cinematographic works. In practice,
however, there is no licensing of the secondary performances of other types of works, including
audiovisual works, to bars, restaurants and retail establishments.
Establishments covered
Q.4 Under Subsection 110(5)(B) of the U.S. Copyright Act, if (I) an establishment other
than a food service or drinking establishment has less than 2,000 gross square feet of space or
(ii) a food service or drinking establishment has less than 3,750 gross square feet of space, and
if it wants to play nondramatic musical works, can it use any professional equipment or can it
use only a homestyle-type equipment described in Subsection 110(5)(A)?
If an establishment falls within the 2,000/3,750 square footage limit, the equipment
limitations of Subsection (A) do not apply.
Rights affected
Q.5 What types of transmissions are covered by Section 110(5)(A) and (B), in particular:
(a) Please specify separately in respect of Subsection (A) and (B) whether they cover:

(i) original broadcasts over the air;
Both Subsections A and B would cover if the broadcasts originated from a radio or TV
station licensed by the FCC.
(ii) original satellite broadcasting;
Both Subsections A and B would cover.
(iii) rebroadcasting by terrestrial means or by satellite;
Both Subsections A and B would cover.
(iv) cable retransmission of original broadcast;
Both Subsections A and B would cover.
(v) original cable transmission or other transmission by wire.
Both Subsections A and B would cover.
(b) In the above-mentioned cases, is there a difference between the treatment of audio and
audiovisual transmissions?
Generally, there is no difference in treatment except in regard to the technical aspects of the
receiving devices.
(c) What are the objectives and implications of the specific reference to audiovisual
transmissions by a cable system or satellite carrier in Subsection (B)? What situations
are intended to be either included or excluded?
Because cable systems and satellite carriers are not licensed as "radio or television station
licensed as such" by the FCC, they were specifically included in Subsection (B). This makes
application of the provision uniform and predictable, applying to most audiovisual
transmissions without distinctions between originating source.
(d) Does Subsection (A) apply to transmissions regardless of whether they are intended to
be received by the general public (cf. the wording of Subsection (B))?
Under Subsection (A), the performance must be by "the public reception of the transmission
on a single receiving apparatus . . .". If the reception was not public, then Subsection (A)
would not apply. For both sections, if transmissions are not received by the public, then they
would not implicate the author's exclusive rights under Berne Article 11 and 11 bis. For
example, if the radio were playing in a person's car, or in the private back office of a
restaurant, there would be no exercise of the public performance right.
As the Panel notes, for Subsection (B), there is the added requirement that the transmission
must have been intended to be received by the general public. Presumably this would
exclude from the exemption transmissions intended for a more select audience, such as music
subscription or on-demand services. There is no such requirement in Subsection (A). For all
practical purposes, however, this limitation is implicit in Subsection (A), since homestyle
devices are not likely to be capable of receiving other types of transmissions than those
intended for the public.

Q.6(a) Are Internet transmissions covered by Section 110(5)(A) and (B)?
Internet transmissions would generally not be covered by Sections 110(5)(A) or (B) because
those sections apply only to the public performance right. See answer to sub-question (b)
below. It is unclear whether the performance aspect of an internet transmission would be
covered by either Section 110(5)(A) or (B). Under Subsection (A), the courts have not
determined whether a computer would be consid ered a "single receiving apparatus of a type
commonly used in homes", although it should be observed that computers differ in many
ways from the stereo and radio receivers contemplated by the legislative history of the
homestyle exception and the case law of Section 110(5)(A). In the case of Subsection (B),
most Internet transmissions will not originate from television or radio stations licensed as
such by the FCC, nor will they be AV transmissions by satellite or cable systems. However,
if an FCC-licensed broadcaster itself streams its signal on the Internet, the performance
aspect of the broadcast might fall within Subsection (B).
(b) Paragraph 16 of the US submission says that "establishment owners generally must still
seek a licence for the reproduction and possibly distribution rights implicated by
Internet transmission". Please explain to what extent reproductions are created by a
person who listens to a radio transmission "streamed" over the Internet and whether
an authorization is required for such reproductions, as well as under what
circumstances a person who receives radio transmissions "streamed" over the Internet
would violate the distribution right. Please clarify whether any small stores or
restaurants covered by Section 110(5) have acquired a reproduction or distribution
licence for communicating by a loudspeaker music streamed over the Internet, and
from whom such licences have been or could be obtained.
Temporary reproductions are created by all transmissions that traverse a computer network.
This a technical requirement of sending digital information – the information is sent from
one computer, and goes through numerous other computer servers before it reaches its final
destination. Each one of the computer servers through which the information passes makes a
copy of that information in the process of passing it on. Under U.S. law, these copies
implicate an author's reproduction right.
The process of creating temporary reproductions occurs whether or not a transmission is
"streaming". The term "streaming" means only that a reproduction of the entire work may
not be created on the recipient's computer. Reproductions still occur as the information is
transmitted across the network.
The distribution right could be implicated by copies of the work, or parts of the work, being
deposited on the recipient's computers. This occurs with many streaming technologies, in
which portions of the streamed work are "cached" on the recipient's computer as a backup or
buffer to the portion being performed or displayed on-screen.
The United States has no information regarding whether or how business owners have
obtained or could obtain licenses for the practices described above. The idea of a business
owner performing broadcast works over a computer for the benefit of his or her patrons is
still a novel one, with which we have no experience.
Even in the event that such forms of reception become more widely used, it is important to
note that the owner of an establishment would receive no greater, or broader, ability to play
music than he receives from his radio. In consultations prior to this Panel, the EC voiced
concerns that this Subsection would apply to a variety of new music services that could
become available over the Internet, such as on-demand music. However, since the
Subsection is limited to transmissions "intended to be received by the general public," a

restaurant or small business owner would only have access to the same broadcasts he or she
could get over a common radio or TV. Access to those same broadcasts over a computer,
and only to those originating from the relatively small number of licensed radio stations,
pose no additional threat to copyright owners.
(c) Assuming that a food service or drinking or other establishment would be required to
acquire a reproduction and/or distribution licence for the public performance of music
transmitted over the Internet, would this affect the scope to which it would be
permissible to provide limitations to the public performance right in the law?
Yes, the requirement to obtain a license for the reproduction and/or distribution of music
performed over the internet could affect the scope of permissible exceptions to the public
performance right. Although it is difficult to answer this question without any licensing
experience in this area, it appears that right holders could take into account in their licensing
practices for reproduction/distribution any diminished revenues for performances. The
exception from the public performance right might then cause right holders no economic
prejudice whatsoever. Moreover, right holders could simply withheld authorization of the
reproduction or distribution in any instance in which they wished to prevent an unauthorized
public performance.
Q.7 What is the purpose for exempting under Section 110(5) communications to the public
of music broadcasts but not of music from tapes or CDs or live music? In which respect are
administrative difficulties with licensing thousands of small establishments for playing
broadcasts more difficult to surmount than thos e arising in the context of collecting royalties
for playing tapes or CDs or live music?
The United States does not argue that administrative difficulties in licensing small
establishments are more severe with respect to broadcasts as opposed to CDs or live music. Part of
the rationale for this distinction is a historical one. In the Aiken decision, the Supreme Court decided
that a radio broadcast was not a public performance. When Congress overruled the rationale, though
not the result of Aiken, in the 1976 Copyright Act by declaring that playing the radio was a public
performance, it created an exemption to the exclusive right of public performance based on the fact
pattern of the Aiken case (ie., a small establishment of approximately 1055 square feet with limited
receiving equipment). The equitable considera tion that the copyright owner had already been
compensated once is reflected in the legislative history of both Sections 110(5)(A) and (B).
Congress thus determined to encourage small business by creating the exception, but at the same time
limited the scope of that exemption to broadcasts.
Governmental proceedings to set or adjust royalties
Q.8 Please clarify the purpose of a new paragraph added to Section 110 concerning the
impact of the exemptions provided under par agraph (5) on any administrative, judicial, or
other governmental proceedings to set or adjust royalties, in particular whether the intention is
that the exemptions can or cannot be reflected in the royalties payable to right holders for
broadcasting or other transmissions.
Our understanding is that this paragraph was drafted by the collecting societies to ensure that
the exemption in Section 110(5)(B) would not be taken into consideration in any proceeding to
determine the amount of royalties each of the right holders should be paid by the collecting societies.
One can surmise that the provision was the result of a business decision on the part of the collecting
societies that the passage of Section 110(5) should not affect the distribution of their royalty
payments to right holders.

Impact on the market
Q.9 Please provide any available information or estimations on the actual or potential
beneficiaries of the exemption in Section 110(5), in particular:
(a) Percentage of food service or drinking establishments and establishments other than
food service and drinking establishments (b elow other establishments) that benefitted
from the original "homestyle" exemption;
In 1996, the Congressional Research Service estimated that based on the square footage
guidelines of the Aiken case (1,055 square feet), approximately 16% of eating establishments
and 13.5% of drinking establishments, were eligible for the homestyle exemption.
Combined with the estimate from the Nationa l Restaurant Association that approximately
x% of restaurants use the radio (and x% use the television)
1, the result is that less than 5% of
restaurants and drinking establishments might have been eligible for the original homestyle
exemption with respect to radio music and less than 3% with respect to television usage.
Exhibit US-18 (Letter from the National Restaurant Association, 18 November 1999).
(b) Percentage of food service or drinking esta blishments and other establishments that fall
under the relevant size limits of Subsection (B) (3,750 square feet and 2,000 square feet
respectively);
The National Restaurant Association (NRA) estimates that 36% percent of table service
restaurants in the United States (those with sit-down waiter service) are less than 3,750
square feet, and approximately 95% of fast-food restaurants are less than 3,750 square feet.
Exhibit US-18. In 1996, the Congressional Research Service conducted an analysis of a
legislative proposal from ASCAP and BMI that would have exempted restaurants under
3,500 square feet. CRS estimated that 65.2% of restaurants would fall under this size limit
and 71.8% of drinking establishments. Exhibit US- 16. The United States has not been able
to obtain information regarding the number of retail establishments that may fall under
2,000 square feet.
(c) Percentage of such establishments either be low or above the limit that are likely to be
exempted when other factors, in particular the limits on equipment, are taken into
account.
The United States has no access to data regarding the establishments likely to be exempted
by Section 110(5)(B) based on equipment usage.
Q.10 Please provide information on the licensing practices of the three US CMOs in regard
to public performance of music by food service and drinking establishments and other
establishments, in particular:
The United States is pleased to provide the fo llowing information in response to the Panel's
questions numbered 10, 11 and 12. We would like to note that, as we mentioned at the first meeting
with the Panel, in preparation for this case we re quested information from the largest U.S. collecting
societies (ASCAP and BMI) regarding their licensing practices, but that information was not
provided. In response to the Panel's questions, we have renewed and reiterated these requests to the
collecting societies. If they are responsive, we may be able to provide the Panel with additional
information in the future. See Exhibit US-19.

1 Confidential Exhibit US-18.

(a) The percentage of such establishments in which broadcast music was licensed before
the 1976 Copyright Act;
The United States does not have detailed information regarding the pre-1976 period;
however, in the House Report cited in the U. S. First Submission, (Exhibit US-1), Congress
found that the majority of beneficiaries of the homestyle exemption were not licensed.
(b) The percentage of such es tablishments in which broadcast music was licensed since the
entry into force of the 1976 Copyright Act unt il the entry into force of the Fairness in
Music Licensing Act (for the last three years for which data are available);
According to surveys conducted by the National Restaurant Association in 1996-1997, 16%
of table service establishments and 5% of fast food establishments in the United States were
licensed before the 1998 Amendment. According to Census Bureau Data, in 1996 there were
approximately the same number of table service and fast food restaurants in the United
States. (Confidential Exhibit US-18, NRA letter reporting estimates based on Census Bureau
figures of 183,253 table service restaurants in the United States and 185,891 quick-service
restaurants). Thus, averaging 16% and 5%, it appears that approximately 10.5% percent of
restaurants were licensed in the United States.
Information from ASCAP, the largest collecting society also indicates the relatively low
level of licensing of establishments. In her testimony before Congress in 1997, Marilyn
Bergman, the President of ASCAP stated that "the total number of ASCAP restaurant
licensees does not exceed 70,000." Exhibit US-20, page 177. The Census Bureau figures
cited above indicate that there are approximately 368,044 total restaurants (table and
quick-service) in the United States. Thus, it appears that even the largest U.S. collecting
society, ASCAP, estimates that it licenses no more than 19% of the restaurants in the United
States.
(c) To what extent collecting societies license the use by such establishments of music other
than broadcast music (such as live music and music performed by means of sound
recordings or jukeboxes) (for the last three years for which data are available).
The United States has no data regarding the extent to which the collecting societies attempt
to collect from establishments under 3750 or 2000 square feet for the use of live music,
recorded music or jukeboxes.
Q.11 Please provide any available information or estimations on the revenues collected by
the US collecting societies (for the last three years for which data are available), in particular:
(a) The total revenues from the licensing of public performance of music divided between
the major categories of uses, including (a) broadcasting and retransmission within the
meaning of Article 11 bis(1)(I) and (ii) of the Berne Convention (b) public
communication within the meaning of Article 11bis(1)(iii) and (c) other rights, including
those under Article 11(1) of the Berne Convention;
ASCAP's annual reports for 1995-1997, attached as exhibit US-21, indicate that the revenues
from broadcasting are by far its most significant source of revenue.
Revenues from the licensing of public performances of music by television broadcast
amounted to 32%-33% of ASCAP's annual revenues in 1995, 1996 and 1997. Revenues
from radio broadcasts amounted to 25%-26% of ASCAP annual revenues in each of those
same years. The actual revenue figures are as follows (in millions):

1995 1996 1997
Radio $110 $120 $124.7
TV $141.8 $158.4 $155.2
Total revenue $436.8 $482.6 $482.1
Precise figures on the amount of revenues from public communication by loudspeaker are
not available. The only available statistics are ASCAP's receipts for so-called "general and
background licensing", which include all licensing revenues from food, drinking and retail
establishments, as well as from licensees such as conventions, circuses, theme parks and
sports events. It must be remembered that these general figures include all licensing
revenues from such establishments, including revenues from the playing of recorded music
and live bands. For this reason, these figures do not represent the potential loss of revenue
from the Section 110(5)(A) or (B) exemptions, but most certainly represent an upper bound
on those losses. For each of the years 1995, 1996 and 1997, general licensing revenue
amounted to approximately 14% of ASCAP's total revenue.
1995 1996 1997
General licensing $63.2 $66.2 $67.3
The other sources of revenue reported by ASCAP in each of the three years include revenues
from symphonies and concerts (1%), revenues from foreign collecting societies (25%-26%),
and interest and member dues (1%).
(b) As regards the revenues collected from food service and drinking establishments and
other establishments, what is the breakdown as between royalties for the public
performance of broadcast music and the public performance of music from other
sources;
As described above, in ASCAP's case, total revenues from food service, drinking and other
establishments is less than 14% of total revenues for the years 1995-97. The United States
does not have access to data itemizing ASCAP's general licensing revenues by broadcast
music and music from other sources.
Surveys conducted by the NLBA, however, indicate that the use of recorded music from CDs
and tapes (26% in member establishments) or background music services (18%) is very
significant in its members establishments, and approximately as prevalent as the use of radio
music (28%). The same survey showed that the public performance of live music (37%) was
even more prevalent than the use of radio music. See Letter from NLBA (November 18,
1999) Exhibit US-17. Given that many establishments play music from several different
sources, these percentage figures do not represent the percentage of total royalties collected
for the use of music from each of these sources. For example, the percentage of royalties
collected for the use of radio music is almost certainly less than 28% because many
establishments that play radio music also play music from other sources.
The United States estimates that approximately 74% of all restaurants play some kind of
music. From this data, as well as confidential NRA estimates, it can safely be assumed that
no more than 44% of licensing fees from restaurants can be attributed to radio music.
(c) Breakdown of these revenues between various sources of revenue, in particular the
percentage of the revenues collected from food serving and drinking establishments and
other establishments; to the extent possible , please break down these figures between

food service and drinking establishment and other establishments that fall below and
above the respective size limits provided for in Subsection (B);
To the extent that this information is available, it has been provided in the answer to
question 10 and sub-questions (a) and (b), above.
(d) What is the likely impact of the amended Section 110(5) on the revenues collected
earlier from such establishments.
The effect of the amended Section 110(5) on the revenues of the collecting societies is likely
to be minimal. ASCAP collects just 14% of its total revenues from general licensees,
including eating, drinking and retail establishments. Much of this revenue is for the public
performance of live or recorded music, rather than broadcast music. Based on the data
provided by the NLBA and other sources, it can be conservatively estimated that radio music
accounts for a maximum of 28% to 44% of revenues from eating and drinking
establishments. 28%-44% of 14% is equivale nt to 3.9% - 6.2% of total revenues. In
addition, this figure must be reduced further, since all restaurants and bars are not eligible for
the Section 110(5) exemptions. Even using the EC's figure that 70% of all U.S. restaurants
would be exempt under Section 110(5)(B), it appears that the exception for radio music will
have a maximum effect on revenues of 2.7% - 4.3%.
Q.12 Can the US confirm the EC statement in para graph 77 of its oral statement at the first
substantive meeting that at least 25 per cent of all music played in the US belongs to EC
copyright owners? If not, could the US give alternative estimates?
The United States does not agree with the EC statement. In particular, we cannot agree with
the EC's implication that 25% of royalties collected in the United States are due to EC right holders.
In fact, the United States is surprised by the EC's statement, given that a 1998 internal EC analysis of
the economic effect of the homestyle exception on EC right holders estimated that just 6.2% of
ASCAP revenues were distributed to all foreign collecting societies, and that just 5.6% of BMI
revenues were due to all foreign collecting societies. Obviously, the percentage payable to EC
collecting societies would be significantly less than these figures for total payments to all foreign
collecting societies. European Commission, Examination Procedure Regarding the Licensing of
Music Works in the United States of America (23 Feb. 1998).
Q.13 Please provide any market information concerning other countries that you would
consider relevant to the case at hand.
Market conditions in the United States are the most relevant to the case at hand and thus the
United States does not believe that market information concerning other countries is necessary to the
resolution of this case. Right holders' legitimate expectations regarding the exploitation of their work
in a particular market must be guided by the conditions in that market.
International treaty obligations
Q.14 Could the US explain how, absent express wording to that effect in the TRIPS
Agreement, Article 13 of the TRIPS Agreement "constitutes the articulation" of the "minor
reservation" doctrine under the Berne Convention? Does the US claim that Article 13 of the
TRIPS Agreement can be invoked on its own or only through the "minor reservation" doctrine
under the Berne Convention?
During the negotiation of Article 13 in TRIPS, the question posed by the Panel was discussed
at length, and there were differing views regarding the need for Article 13. Eventually, the position
that prevailed recognized that practically every country had small exceptions to exclusive rights

under Berne, either through statutory law, case law or practice, and that the inclusion of Article 13
was an effective way to measure the appropriateness of such exceptions.
In the draft of the TRIPS text from July 23, 1990 (W/76), this statement is made regarding
Article 13: "In respect of the rights provided for at point 3, the limitations and exemptions, including
compulsory licensing, recognized under the Berne Convention(1971) shall also apply mutatis
mutandis". Furthermore, a prominent scholar, and author of a book on the negotiating history of
TRIPS comments:
The interpretation of [Article 13] is possible only in the light of
Article 2(2) and 9(1) of the Agreement and, by incorporation,
Article 20 of the Berne Convention. Hence, Article 13 does not
create new exceptions, even though when read separately from these
other provisions, one would be tempted to say that it allows
countries to create new compulsory licenses. . . . Yet this line of
argument must fail. Introducing new compulsory licenses would in
almost all cases violate the Berne Convention. Article 13 allows a
dispute settlement panel to review exceptions, including the so
called "small exceptions", to ensure that they pass the test. . .
[Quotes report from the Brussels Conference mentioning minor
reservations applicable to Article 11, 11 bis, 11 ter, 13 and 14.]
When these exceptions are invoked, they may from now on be
submitted to the general test of Article 13. . . (emphasis added).
D. Gervais, The TRIPS Agreement: Drafting History and Analysis,
89-80 (1998).
Importantly, this interpretation is also confirmed by the language and history of subsequent
treaty affirming Berne rights. The WIPO Copyright Treaty (WCT) and the WIPO Performances and
Phonograms Treaty (WPPT) were adopted by the WIPO Diplomatic Conference on December 20,
1996, at Geneva. The WCT requires compliance with the substantive rights of Berne (WCT,
Article 1(4)), and includes language very similar to Article 13 of TRIPS. Furthermore, the WCT
specifically provides that it is a "special agreement within the meaning of Article 20 of the Berne
Convention". WCT, Article 1(1). With respect to both the WCT (in Article 10) and the WPPT (in
Article 16), it was believed important to incorporate the same standard for judging limitations and
exceptions as already applied in the TRIPS Agreement and the Berne Convention.
The WCT explicitly clarifies the application of the standard set forth in TRIPS Article 13 to
existing provisions of the Berne Convention as well as the rights established in the new Treaty.
Article 10(1) of the WCT provides that:
(1) Contracting Parties may, in their national legislation,
provide for limitations of or exceptions to the rights granted to
authors of literary and artistic works under this Treaty in certain
special cases that do not conflict with a normal exploitation of the
work and do not unreasonably prejudice the legitimate interests of
the author.
Article 10(2) clarifies that this standard also applies in respect of the implementation of any
limitations on or exceptions to any rights under the Berne Convention:
(2) Contracting Parties shall, when applying the Berne
Convention, confine any limitations of or exceptions to rights
provided for therein to certain special cases that do not conflict with

a normal exploitation of the work and do not unreasonably prejudice
the legitimate interests of the author.
The Agreed Statement concerning Article 10 of the WCT further buttresses this view:
It is understood that the provisions of Article 10 permit Contracting
Parties to carry forward and appropriately extend into the digital
environment limitations and exceptions in their national laws which
have been considered acceptable under the Berne Convention.
Similarly these provisions should be understood to permit
Contracting Parties to devise new exceptions and limitations that are
appropriate in the digital network environment.
It is also understood that Article 10 neither reduces nor extends the
scope of applicability of the limitations and exceptions permitted by
the Berne Convention.
If no minor exceptions or limitations were permitted under Berne, there would be no reason
for Article 10(2) of the WCT or the cited provision of the Agreed Statement.
Article 10 of the WCT reflects the same text included as Article 12 in the Basic Proposal for
the 1996 Diplomatic Conference (CRNR/DC/4). The commentary on the Basic Proposal is
enlightening. After observing that the TRIPS Agreement already enunciated this standard for
permissible limitations and exceptions to rights, it states that "[n]o limitations, not even those that
belong in the category of minor reservations, may exceed the limits set by the three step test".
The EC and the U.S. are signatories of both the WCT and the WPPT.
Q.15 In the light of Article 2.2 of the TRIPS Agreement and Article 20 of the Berne
Convention, can Article 13 of the TRIPS Agreement derogate from the requirement under
Article 11bis(2) of the Berne Convention to provide "equitable remuneration"?
Article 13, as explained above, in no way derogates from the protection afforded under the
Berne Convention and consequently is entirely consistent with TRIPS Article 2.2 and Berne
Article 20. In fact, Article 13 strengthens the protection under the Berne Convention, by providing
explicit criteria to judge exceptions where none existed before.
In particular as applied to Article 11 bis(2), Article 13 does not derogate from the right to
equitable remuneration. Minor exceptions apply in respect of many of the rights under Berne,
explicitly including Article 11 and 11 bis. Should a party choose to implement a compulsory
licensing regime under Article 11 bis(2), as opposed to having a small exception to that right, such a
system must provide for equitable remuneration. The U.S. compulsory licensing regime, for
example, as it applies to secondary retransmissions of broadcast signals by cable systems clearly falls
within, and complies with, this provision. (For further discussion of this issue, please see US
Response to Panel Question 6 to US and EC.).
Q.16 Are there exceptions similar to the US Section 110(5)(A) or (B), or examples of "minor
reservation" exceptions in the copyright laws of other countries?
There are numerous exceptions similar to U.S. Section 110(5)(A) and (B), and examples of
minor reservation exceptions, in the copyright laws of other countries. Although the United States
has not been able, in the time provided, to review the copyright laws of all other WTO or Berne
Members, even a limited review of the copyright laws of a handful of WTO members reveals a
number of exceptions to the public performance right, including a number in EC Member States.

For example, the Australian copyright law provides a number of exceptions to the public
performance right. Section 46 provides an exemption for public performances by wireless apparatus
or by a record "at premises where persons reside or sleep, as part of the amenities provided
exclusively for residents or inmates of the premises or for those residents or inmates and their
guests". Copyright Act 1968 (amended 1994), Section 46. The commercial nature of this exemption
is notable, as it applies to hotels and guest houses. Parliament of Australia, Standing Committee on
Legal and Constitutional Affairs, "Don't Stop the Music!: a report on the inquiry into copyright,
music and small business", 29 (May1998) (ava ilable at www.aph.gov.a u/house/committee/laca/
reports/copyrigh/index.htm. Australia also exempts public performances for educational purposes.
Id., Section 28.
Under the Belgian copyright law, Section 22, an author "may not prohibit . . . communication
to the public of a work shown in a place accessible to the public where the aim of the []
communication to the public is not the work itself". Law on Copyright and Neighboring Rights 1994
(amended 1995), Art. 22(1) . Belgium also has an exception for the "free performance of a work
during a public examination where the purpose of the performance is not the work itself, but
assessment of the performer . . ." Id.
Under the Copyright Law of Finland, "A publish ed work may also be publicly performed in
events where the performance of such works is not the main feature, provided that no admission fee
is charged and the event is not arranged for profit". Copyright Act (amended 1997) Law 446/ 1995,
Art. 21. The same law also contains an exemption for public performances "in connection with
religious services and education". Id. Denmark also provides an exception for public performances
of non-dramatic works on radio or television "on occasions when the performance of such works is
not the main feature of the event, provided that no admission fee is charged and the event is not for
profit". Act on Copyright 1995, Sec. 21.
New Zealand exempts public perf ormances of musical works at educational establishments.
Copyright Act 1994, Section 47 . The Philippines excepts public performances for educational and
charitable purposes . Intellectual Property Code of the Philippines, Sec. 184 (1997). India, in
addition to educational exemptions, also exempts "the performance of a literary, dramatic or musical
work by an amateur club or society, if the performance is given to a non-paying audience . . ." India
Copyright Act 1957 (amended 1994), Sections 52(l), 52(I).
Canada provides a number of exceptions to the public performance right. Copyright Act 1994
(amended 1997). It provides several exceptions for educational purposes, see Sections 2 9.4 & 29.5 ,
and for performances "at any agricultural or agricultural-industrial exhibition or fair," Section
32.2(2), as well as a blanket exception for any public performance of a musical work – whether live
or by "communication signal" – by a religious or ganization or institution, education institution,
charitable or fraternal organization in furtherance of a religious educational or charitable object.
Section 32.2.(3) . The later section specifically provides that under such circumstances, no such
organization "shall be held liable to pay any compensation". (Emphasis added.)
South African law provides that "the copyright in a literary or musical work shall not be
infringed by the use thereof in a bona fide demonstration of radio or television receivers or any type
of recording equipment or playback equipment to a client by a dealer in such equipment. Copyright
Act of 1978 (amended May 1995).
Finally, the United States references Brazil's letter to the Panel of 17 November 1999, in
which Ambassador Amorim noted that Brazilian copy right law contains exceptions in the sense of
the minor reservations doctrine.
Q.17 Precisely how do you justify the submission that the provisions of Section 110(5)(A) and
(B) constitute a special case within the meaning of Article 13 of the TRIPS Agreement?

Article 13 requires that exceptions be limited to certain special cases. The Oxford Dictionary
defines "certain" as "determined; fixed" and "definite". The New Shorter Oxford Dictionary (ed.
Lesley Brown), 364 (1993). The word "special" is defined as "exceptional", "distinguished from
others of the kind by a particular quality or feature; distinctive in some way", "appointed or
employed for a particular purpose or occasion", "having an individual or limited application or
purpose", and "containing details, precise, specific". Id. at 2971. These definitions contain a
significant degree of overlap, and the key criterion that emerges from the requirement that exceptions
be limited to "certain, special" cases is that the exception be both well-defined and of limited
application. One report of the TRIPS negotiating history explains as follows: "When these
exceptions are invoked, they may from now on be submitted to the general test of Article 13, which
should be interpreted on the basis of Article 9(2) of the Berne Convention. The two tests contained
in that Article are cumulative. In addition, any exception must be clearly delineated so as to apply
only to "certain special cases". Gervais, at 90.
The negotiating history of Berne Article 9(2) reinforces this view. The original text
proposed for Article 9(2) listed three areas of permissible exceptions, the third of which was "certain
particular cases, provided (I) that reproduction is not contrary to the legitimate interests of the author,
and (ii) that it does not conflict with a normal exploitation of the work". The Conference decided,
however, that a more general formula for exceptions was preferable, and instead of the three areas of
exceptions, adopted a proposal of the United Kingdom to modify the text to allow exceptions "in
certain special cases" that met the two conditions. WIPO, Records of the Stockholm Conference ,
1144-46, paras. 78, 81, & 86 (1967). The WIPO Guide to the Berne Convention also supports the
idea that the phrase "certain special cases" in Artic le 9(2) is not intended as a separate threshold
requirement for exceptions, and does not discuss the imposition of any limitation on the purposes for
which an exception can be made. WIPO – Guide to the Berne Convention, 55, para. 9.6 (focusing
exclusively on the "two" conditions that limit the power to make exceptions: conflict with normal
exploitation and unreasonable prejudice).
Thus, the concept of "special" need not include the concept of the purpose of the exception.
To the extent that the purpose of an exception is relevant under TRIPS Article 13, it is only necessary
that the exception have a particular purpose. By itself, the term "special" does not convey any
priority of purpose, or preference for one purpose over another.
Moreover, in considering whether an exception constitutes a "special case," it is critical that a
WTO Panel not judge the desirability of a country's public policy rationale for an exception. In an
organization as diverse as the WTO, a Panel should not determine the acceptability of a Member's
public policy objectives. There is no support in the TRIPS Agreement for a Panel to determine
acceptable policy rationales for exceptions under Article 13 of TRIPS. The purpose for which
countries may make exceptions to exclusive rights is not the central focus of Article 13; rather, it is
tangentially relevant, if at all. It is the scope of the exception and its effect on right holders that is
key.
As discussed in the U.S. first submission, paragraphs 24-26, the exceptions in
Sections 110(5)(A) and (B) of the U.S. Copyrigh t Law are well-defined and limited to particular
circumstances. Section 110(5)(A) is limited to cases involving use of a homestyle receiving
apparatus, and Section 110(5)(B) is confined to cases involving establishments meeting its clear size
and equipment requirements.
Moreover, important public policy concerns underlie both Sections 110(5)(A) and (B). With
respect to 110(5)(A), the record is clear that Congress was concerned with small "mom and pop"
businesses. Small businesses play a particularly important role in the American social fabric. They
foster local values and innovation and experimentation in the economy. Small businesses also create
a disproportionately greater number of economic opportunities for women, minorities, immigrants,

and those formerly on public assistance, and thus are an essential mechanism by which millions enter
the economic and social mainstream. The State of Small Business: Report of the President , (U.S.
GPO: Washington) 3 (1998).
Important public policy concerns also support the exception in Section 110(5)(B). With
respect to many of the businesses exempted, the same concerns relating to the social importance of
small businesses apply. E.g., Congressional Record (Oct. 7, 1998); Letter from Representative
James Sensenbrenner, Jr. to Members of Congress, "Key small business vote next week"
(Mar. 20, 1998). In addition, the legislative history of this provision is replete with concern over
abuses of the PROs. By exempting small busines ses, many of whom the collecting societies had
already agreed to exempt in the context of the NLBA Agreement, Congress believed that it was
resolving the issue of abusive licensing practices without causing any unreasonable prejudice to right
holders.
Q.18 Does Article 13 of the TRIPS Agreement permit the balancing of revenues generated or
likely to accrue under individual exclusive rights, inter alia , for purposes of determining
"normal exploitation" of works, and/or "unrea sonable prejudice to legitimate interests of
rights holders", or is it necessary to consider each individual exclusive right separately?
This question, like question 19, appears to assume that the Panel must either consider each
right separately or consider all rights together. On the contrary, both paradigms are relevant.
Exceptions should be considered in the context of all the exclusive rights granted to the right holder,
as well as the context of the particular right to which the exception applies.
Exceptions can take many forms. Some exceptions might represent a great intrusion on one
particular exclusive right, and no intrusion on any other exclusive right. Other exceptions might
represent a lesser degree of intrusion on several exclusive rights. Both kinds of exceptions might
violate the TRIPS Agreement, and the analytical framework of Article 13 must take both situations
into account.
Thus, a Panel considering an exception should consider the scope of the exception vis-à-vis
the scope of all the right holders' exclusive rights, as well as the scope of the exception vis-à-vis the
exclusive right to which it applies. Whether an exception applies to one exclusive right or several is
relevant in the analysis of conflict with normal exploitation and unreasonable prejudice. Similarly,
the degree to which an exception affects a particular exclusive right is also relevant to that analysis.
Whether any particular exception is determined to conflict with normal exploitation or cause
unreasonable prejudice is ultimately a highly fact-specific inquiry that will turn on the precise
circumstances of the exception and the market at issue.
The text of Article 13 supports this broad analysis. Article 13 requires that exceptions be
limited to cases that do not conflict with a normal exploitation of the "work", not a normal
exploitation of the particular right affected. If the drafters had meant to limit the analysis to the
exclusive right to which an exception applied, the provision could easily have referenced the "normal
exploitation of such exclusive rights". It is also significant that Article 13 also references
unreasonable prejudice to the "legitimate interest s of the right holder" without any limiting language
regarding their legitimate interests in a particular right.
The fact that an exception must be evaluated in the overall context of the rights granted by a
country does not imply that a country could completely eliminate an exclusive right if that right were
economically unimportant. TRIPS established minimum standards. The exclusive rights set forth in
Articles 1-21 of the Berne Convention (minus 6 bis) and in Part I, Section 1 of TRIPS must be
provided. Moreover, Article 13 references "limitations or exceptions" to exclusive rights. The
abolition of an exclusive right is not equivalent to a limitation to such right. So long as the exclusive

right is provided, however, the relative economic importance of that exclusive right would be a
relevant factor in the Article 13 analysis.
Actual revenues from exclusive rights are also important in the Article 13 analysis.
Marketplace realities guide the expectations of benefit of copyright owners. In determining the scope
of normal exploitation, and unreasonable prejudice it is highly appropriate to look at marketplace
realities. The concepts of normal exploitation and unreasonable prejudice cannot be determined in
the abstract.
Q.19 In considering criteria for determining "normal exploitation" and/or "unreasonable
prejudice to legitimate interests of rights holders" under Article 13 of the TRIPS Agreement,
is it necessary to consider each individual exclusive right separately?
See answer to Question 18, above.
Q.20 Could the US further explain how the provision of Article 11 bis(2) of the Berne
Convention could amount to a greater degree of derogation from substantive copyright law
than an exception under Article 13 of the TRIPS Agreement?
This question could also be phrased: "How could a right of remuneration under
Article 11bis(2) of the Berne Convention amount to a greater degree of derogation from exclusive
rights than an exception under the minor reservations doctrine applicable to Article 11 bis?" As
discussed above, Article 13 does not "provide" exceptions that are not already provided for by Berne,
it merely furnishes a standard under which they can be judged.
Generally speaking, a compulsory license may be much broader, and may abrogate more
rights, than an exception. The minor reservation doctrine, applied to Article 11bis, would only allow
narrow and reasonable exceptions to a right holder's rights. Should a country choose to substitute a
right of remuneration for the exclusive right under Article 11 bis, rather than creating a narrow
exception targeted to address a particular problem, it could result in a far greater diminution of
revenues. A compulsory license under 11 bis(2) potentially could abrogate all of a right holder's
rights under Article 11 bis – including his right to license his work to radio stations, television
stations, and cable systems. Especially in the context of certain audiovisual works, which receive
virtually all their revenue through this mechanism, it can be seen how broad this abrogation would
be. Furthermore, although the right holder would still be entitled to some compensation for use of
the work, he cannot set the price of that compensa tion himself. It will most likely be set by an
administrative or quasi-governmental entity, which could determine that the work is worth far less
than the right holder himself believes, or could get in a free market.
In contrast, under the minor reservations doctrine, outright exceptions to the Berne rights
must be narrow, and cannot conflict with normal exploitation or prejudice a right holder's legitimate
interests in the work. Exceptions which pass this test will likely be narrower and have less impact on
the right holder than the licenses authorized by Article 11bis(2).
In sum, under Article 11 bis(2), a country can put any condition on a right holder's rights,
provided that he is not deprived of equitable remuneration, which he does not even have the authority
to determine himself. In contrast, under the minor reservations doctrine, as judged through TRIPS
Article 13, countries can only create narrow exceptions which have a reasonable effect.
Q.21 Does the US protect broadcasting rights through the performance rights protected in
Section 106 of the US Copyright Act?
Assuming that by "broadcasting rights" the Pane l is referring to the right of broadcasting of
the copyright owner under Article 11 bis (as opposed to broadcasters' rights in the programming that
they produce), the simple answer is yes.

Broadcasting is only one means by which a work may be publicly performed. The copyright
owner generally has the exclusive right under U.S. copyright law to authorize or prohibit that
broadcast. The right of public performance in Section 106 of the U.S. Copyright Act includes the
broadcasting right in Berne Article 11bis as well as other types of public performances.
II. REPLIES OF THE UNITED STATES TO QUESTIONS FROM THE PANEL
ADDRESSED TO BOTH PARTIES
Q.1 Please explain the extent to which the case law concerning Section 110(5) cited in your
respective submissions is relevant for the purposes of interpreting the present subsection (A) of
that paragraph.
The United States believes that the case law is relevant because Section 110(5) was TRIPS
consistent even before non-dramatic musical works were excluded from its scope. Moreover, the
case law also provides guidance as to the bounds of the exception with respect to works other than
non-dramatic musical works.
Categories of works
Q.2 The Panel understands that the text of the original Section 110(5) is identical to that of
the present subsection (A) minus the words "except as provided for in subparagraph (B)". The
preparatory work reproduced in exhibits EC-3 and US-1 (H.R. Rep. No. 94-1476 (1976))
explains that the provision "applies to perfor mances and displays of all types of works".
Paragraph 31 of the EC submission and paragraph 9 of the US submission (and certain other
paragraphs) contain an interpretation acco rding to which this text, as contained in
subsection (A), is intended to exclude from its scope "nondramatic musical works". Please
clarify your interpretation of the text of this pr ovision, on the one hand, as part of the original
paragraph, and, on the other hand, as part of subsection A, and, to the extent that, in your
view, the text should be understood differently in these two contexts. Explain why.
With respect to the original (homestyle) exemption, the precursor to subsection A, as noted,
the intent was to exempt the public performance of all types of work, within the other limitations of
the exemption. The 1998 Amendment narrowed the scope of the homestyle exemption. Subsection
B refers to "nondramatic musical works" and the scope of subsection A is specifically limited to
whatever is not detailed in subsection B. See also U.S. Response to Panel Question 3 to the U.S.
Thus, given that nondramatic musical works are covered under Subsection B, they are not included
within Subsection A. The United States observes that on this particular question of fact – the scope
of Section 110(5) – there is no dispute between the parties to the case.
Q.3 What is the definition of the term "n ondramatic musical work" in the context of
Section 110(5)? What types of musical works are either included in or excluded from the
application of the provisions of that Section, and which types of copyright holders are affected
by the provisions of Subsections (A) and (B)? Does it also cover communication to the public of
live music performances? For example, would the performance of, e.g., one song from a
musical, constitute a performance of a "dramatic" or of a "nondramatic" musical work? Is it
still a "dramatic" work if a song from a musical is performed separately and by another artist?
To what extent the notion of "nondramatic musical work" corresponds or is intended to
correspond with the notion of "small musical rights" applied in the practice of CMOs?
The term "nondramatic musical work" is not defined in Section 110(5). However, as we
have discussed, nondramatic musical works are typically those not accompanied by a dramatic
performance, such as a play or opera. Nondramatic music represents most of the music played in the
United States since it encompasses pop, rock, jazz, and ethnic music. The United States wishes to
clarify our preliminary answer at the first meeting of the Panel with the Parties, and note our
understanding that the PROs do license nondramatic renditions of dramatic musical works.

Licensing practice
Q.4 Paragraph 4 of the US oral statement at the first substantive meeting states that
Section 110(5) is limited to only certain secondary uses of broadcasts of public performances,
for which the right holder has already been compensated for the primary performance. In
which way, if any, do licensing arrangements between collective management organisations
(CMOs) and broadcasting organizations in the US or the EC take into account the potential
additional audience created by means of further communication by loudspeaker etc. of
broadcasts to the public within the meaning of Article 11bis(1)(iii) of the Berne Convention?
The United States does not assert that licensing arrangements between broadcast
organizations and the collecting societies include royalties for secondary performances by the
receiving public. In assessing the economic impact of Section 110(5), however, and specifically the
extent of prejudice to a copyright owner, the Pa nel should take note that the copyright owner has
already been compensated once for the broadcast or radio transmission of a particular public
performance.
Interpretation of treaty obligations
Q.5 What is the legal nature of materials including "General Reports" of Diplomatic
Conferences of the Berne Convention countries in light of Article 31 of the Vienna Convention
on the Law of Treaties (VCLT)? Are they " subsequent agreements on the interpretation or
application" in the meaning of Article 31(3)(a), "subsequent practice" in the meaning of Article
31(3)(b), "rules of international law applicable between the parties" in the meaning of Article
31(3)(c), or a "special meaning … given to a term if its established that the parties so
intended"?
The General Reports of Diplomatic Conferen ces of the Berne Convention countries may,
depending on the context, be considered to be preparatory work for revisions to the Berne
Convention, or evidence of the circumstances surrounding the adoption of the text of the revisions to
the Berne Convention; thus they would be anal yzed under Article 32 of the Vienna Convention.
They are not "agreements on the interpretation or application" of the Berne Convention, they do not
represent a widespread "subsequent practice" of the parties to the Convention, and they do not as
such constitute "rules of international law applic able between the parties." Thus they do not fall
within any of the categories listed as Article 31(3)(a), (b) or (c).
Q.6 In your view, what is the relationship between Article 13 of the TRIPS Agreement and
Article 11bis(2) of the Berne Convention? Does Article 13 of the TRIPS Agreement prevail
over the exception in Article 11 bis(2) with respect to the exclusive rights conferred by
Article 11bis(1)(I-iii) of the Berne Convention in th e sense that when the three conditions of
Article 13 are met, no requirement to pay equitable remuneration arises? Do the requirements
of Article 11bis(2) of the Berne Convention prevail as a lex specialis over the requirements of
Article 13 of the TRIPS Agreement, in the sense that if equitable remuneration is paid, there is
no need to comply with the three-conditions test under Article 13? Do the requirements of
Article 13 and Article 11 bis(2) apply on a cumulative basis in the sense that, on the one hand,
even if the three-condition test of Article 13 is fulfilled, there is an additional, fourth
requirement to pay equitable remuneration, and on the other hand, even if equitable
remuneration is paid consistently with Article 11 bis(2), is it necessary to comply in addition
with the three conditions of Article 13? Please explain.
As a fundamental matter, it must be clarified that the "equitable remuneration" language of
Article 11bis(2) only applies to, and indeed is a shorthand for, compulsory licenses. Article 11 bis(2)
allows a country to put any conditions on a right holder's broadcasting rights, provided that they do
not deprive the right holder of equitable remuneration. This is a compulsory license. Compulsory

licenses may be much broader than an exception, and are a different mechanism for limiting rights
than the minor reservations doctrine.
Article 11bis(2) is consistently described as a provision authorizing compulsory licenses:
- "Long discussions – in the subcommittee as in the General
Committee – was caused by para. 2 [of Article 11bis ] which enables
Union countries to introduce obligatory licenses in favor of the
radio." (Report on The Brussels Conference for the Revision of the
Berne Convention, Dr. Alfred Baum, Zurich, 1948.)
- "This provision [Article 11 bis(2)] allows member countries
to substitute, for the author's exclusive right, a system of compulsory
licenses." (WIPO Guide to the Berne Convention, 70.)
- "The reference to "conditions" in article 11 bis(2) is usually
taken to refer to the imposition of compulsory licenses, but the form
of these licenses is left to national legislation to determine."
(S. Ricketson, The Berne Convention for the protection of literary
and artistic works: 1886-1986, 525 (1987)).
Notably, the minor reservations doctrine, discussed at length in the negotiating history of
Berne and in subsequent treatises, is never linked in any way to compulsory licenses or to
Article 11bis(2). In the General Report at the Brussels Conference (1948), Marcel Plaisant explicitly
discusses the applicability of minor reservations to Article 11bis: "These exceptional measures apply
to Articles 11 bis, 11 ter, 13 and 14". (Quoted in Ricketson, p. 534.) The right to remuneration
provision in Article 11 bis(2) was already in the Convention at that time. If the drafting committee
had intended that minor reservations should be subject to some additional requirement with respect
only to Article 11bis, it surely would have mentioned that fact in the Report. Likewise, in the WIPO
Guide to the Berne Convention, Article 11 bis(2) is discussed on page 70 under the heading
"Compulsory Licenses". The minor reservation doctrine, is discussed on page 65: "It is in relation to
Article 11 that the question of the 'minor reservations' arises. . . . It was agreed at Brussels that these
exceptions (which apply also to Articles 11bis, 11ter, 13 and 14) were valid". No mention is made of
Article 11bis(2), and there is no indication that it relates to the minor reservations doctrine.
Q.7 In your view, to what extent has the Berne Convention become part of customary
international law, and if so, in particular which part of the Articles 1-21 of the Berne
Convention?
The United States is continuing to consult in ternally regarding the issues raised by this
question, as well as the following one. For this reason, the following views must be considered
preliminary, and we may elaborate further in our Second Submission to the Panel.
The United States does not consider that the Berne Convention has become part of customary
international law. In the view of the United States, there is not the required degree of consistency
and uniformity of practice, nor do non-signatories States view the obligations of the Berne
Convention as sufficiently obligatory, to consider it part of customary international law. First
negotiated in 1886, the Berne Convention has been revised five times with two additions since that
time. The current text is that of the Paris revision of 1971. Many countries are not party to the Berne
Convention, do not comply with its provisions, or ha ve not accepted some of the latter revisions of
the Convention. The United States acceded to the Berne Convention only in 1989 when it passed
domestic legislation to conform its law to Berne requirements. Berne Convention Implementation
Act of 1988, H.R. Rep. No. 100-609, 100
th Cong., 2d Sess. (1988).

Q.8 Has the "minor exceptions" doctrine under the Berne Convention, and especially in the
context of Articles 11 bis(1) and 11(1) of the Berne Convention, acquired the status of
customary international law? What is the legal significance of the "minor exceptions" doctrine
under the Berne Convention in the light of subparagraphs (3)(a-c) or paragraph (4) of
Article 31 of the VCLT or in the light of Arti cle 32 of the VCLT? Has the "minor exceptions"
doctrine or any other implied exceptions been incorporated, by virtue of Article 9.1 of the
TRIPS Agreement, together with Articles 1- 21 of the Berne Convention into the TRIPS
Agreement? Please explain.
The "minor exceptions" doctrine under the Berne Convention has not acquired the status of
customary international law. The doctrine under the Berne Convention constitutes subsequent
practice of Berne Members under Vienna Convention Article 31(3)(b). See U.S. Response to Panel
Question 16 to the U.S. regarding minor exceptions in the laws of other Berne members. The minor
exceptions doctrine is also explicitly referenced in the preparatory work of the Berne Convention,
which constitutes a supplementary means of interpretation under Article 32 of the Vienna
Convention. See U.S. response to Panel Question 14 to the U.S.
The "minor exceptions" doctrine has been incorporated into TRIPS by the specific
articulation in Article 13 of the standard by which to judge such minor exceptions. See U.S. response
to Panel Questions 14 and 15 to the U.S. The 1996 WIPO Copyright Treaty also confirms that Berne
countries intended to allow minor exceptions to Berne rights. See U.S. response to Panel Question
14 to the U.S.
Q.9 What else other than religious ceremonies, performances by military bands, charitable
concerts or requirements of education does the "minor reservations" doctrine cover? Does it
only cover non-commercial uses? Was this doctrine be conceived of only with respect to
Article 11 of the Berne Convention, or was it also extended to Article 11 bis(1)(iii) of the Berne
Convention, given that these Articles concern different types of rights? What such instances of
implied exceptions could be relevant for this dispute?
Minor reservations cover exceptions that meet the standard now articulated in TRIPS
Article 13. The doctrine is not limited to the specific examples cited by some countries in the
negotiating history, and subsequent practice of many countries demonstrates the applicability of the
doctrine to a wide variety of types of exceptions. As set forth in the negotiating history, the doctrine
was intended to extend to Article 11bis.
Q.10 In order to meet the first condition of Article 13 of the TRIPS Agreement ("certain
special cases"), is it enough if the limitation or exception is defined in great precision?
See our response to Question 17 of the Panel's questions to the United States.
Q.11 Under the second condition of Article 13, in which respect, if at all, is a normal
exploitation of the "work" the same as a normal exploitation of "exclusive rights" relating to
that work?
See our response to Question 18 of the Panel's questions to the United States.
Q.12 To what extent is it appropriate in evaluating the compliance of a law with the
conditions of Article 13 of the TRIPS Agreem ent based on looking at the current market
situation in a given country?
The current situation in a given country is extremely important in that it determines the
bounds of normalcy in that market and sheds light on the reasonableness of any prejudice suffered by
right holders. A contrary approach – evaluating the TRIPS Article 13 criteria by reference to
hypothetical future or potential market situations – would be unworkable, and finds no support in the

TRIPS Agreement. That is not to say that the evolution of market conditions is irrelevant. It is
possible that exceptions justifiable under Article 13 at one point in time may become unacceptably
broad with the passage of time and changes in the market. It is also possible that an exception that
fails to meet the Article 13 criteria at a certain time may in fact meet those criteria as market
conditions evolve.
It seems highly speculative to attempt to determine whether the conditions of Article 13 are
met with respect to any potential market situation. One could also hypothesize changes in the market
that would affect the degree of prejudice caused by an exception to exclusive rights. The WTO
dispute settlement system is not based on such speculation. To look at anything other than the
current market situation would be tantamount to reading into TRIPS a requirement that exceptions
avoid any potential conflict with normal exploi tation of a work and avoid even the possibility
 of
unreasonable prejudice to the right holder. The plain text of Article 13, however, provides that
exceptions must be evaluated by the extent to which they "do" not conflict with a normal exploitation
and "do" not cause unreasonable prejudice.
Q.13 To what extent subsequent technological and market developments (e.g. new means of
transmission of or increased use of background music or television) are relevant for the
interpretation of the conditions under Article 13 of the TRIPS Agreement?
Technological and market developments are relevant to the interpretation of the conditions
under Article 13 of TRIPS to the extent that they relate to a particular case at a particular time. The
Article 13 analysis should be based on the current state of technology and market development, as
opposed to speculation about future possibilities. See U.S. Response to Question 10, above.
Q.14 Is it justified to define the three conditions exclusively by reference to a particular
market, or is a comparative analysis of licen sing practices in other Members with similar
economic conditions warranted?
TRIPS Article 1.1 provides guidance on this question, and provides that WTO Members are
"free to determine the appropriate method of impl ementing the provisions of this Agreement within
their own legal system and practice". This provision would mean little if the reasonableness of a
country's exceptions were determined in part by foreign right holders' licensing practices in other
Members. Similarly, Article 5(2) of Berne provides that "apart from the provisions of this
Convention, the extent of protection, as well as the means of redress afforded to the author to protect
his rights, shall be governed exclusively by the laws of the country where protection is claimed."
The spirit of this provision is that, except where Berne specifically provides otherwise, countries are
free to determine the content of their own national laws regarding the extent of copyright protection.
A Member's national market is the most important determinant of normalcy and
reasonableness with regard to that Member. It cannot be assumed that right holders have identical
interests in various WTO Members, even where similar economic conditions prevail. There is no
support in the TRIPS Agreement for requiring that any exception to exclusive rights be justified not
only by reference to the prejudice it might cause to right holders' in the market that it would affect,
but also by reference to the prejudice it would cause in theory if it were imposed in a completely
separate market.
A comparative analysis of other WTO Members is particularly inappropriate with respect to
the issue of "certain, special cases." Local history and tradition may play a major role in determining
whether a particular country considers a case sufficiently special to warrant an exception to an
exclusive right. TRIPS certainly does not require that other Members share the same social values.
Q.15 Under the third condition of Article 1 3, should the concepts of "unreasonable
prejudice" and "legitimate interests" be defined based on existing, legally guaranteed
entitlements, or do these concepts also connote an aspect of normative concern of right

holders? In the latter case, what could be the normative concern at issue? In addition to an
empirical analysis of prejudice to legitimate interests, how could such a normative element be
taken into account in defining the threshold of the third condition of Article 13?
Existing, legally guaranteed entitlements to an exclusive right are one factor in defining the
concepts of unreasonable prejudice and legitimate interests. Existing entitlements determine the
benefits that a right holder might legally expect from his work, and thus provide helpful guidance in
evaluating prejudice to the right holder's interests. In addition, the concepts of unreasonable
prejudice and legitimate interests do also connote an aspect of normative concern to right holders.
Q.16 What is the extent of "reasonable" prejudi ce to the legitimate interests of rights holders
that is permissible under the third condition of Article 13?
The extent of prejudice that may be deemed reasonable under TRIPS Article 13 must be
determined on the facts and circumstances of each case, and cannot be established in the abstract due
to the myriad potential factors that may influe nce the inquiry in any particular instance. To
determine whether prejudice is unreasonable, the Panel should undertake a fact-intensive inquiry into
the extent of the prejudice suffered by right holders subject to an exception, and then must ultimately
balance these facts to reach a conclusion based on reason, rather than on a per se notion of the
permissible degree of prejudice.
Q.17 With a view to giving distinct meaning to the second and the third condition of
Article 13, in which respect does an extent, degree or form of interference with exclusive rights
below the threshold of "conflict with normal exploitation" differ from an extent, degree or
form of interference with exclusive rights that exceeds the threshold of a reasonable prejudice
to the interests of the right holder? In other words, how does a permissible degree of prejudice
under the third condition relate to "normal exploitation" under the second condition of
Article 13?
The normal exploitation element of Article 13 looks to the amount of market displacement
caused by the exception or limitation at issue. In other words, are there areas of the market in which
the copyright owners would expect to exploit hi s or her work which are not now available to be
exploited because of this exemption? Note that it is only the normal exploitation that is at issue –
uses from which an owner would not expect to receive compensation are not part of normal
exploitation. In contrast, the legitimate interest element of Article 13 looks at the amount of harm
that is caused to the owner, economic or otherwise, by whatever provision is in dispute. Although
these two elements may overlap, they are not coextensive. One could imagine a situation in which a
large part of the market was displaced, but, because it was not a particularly profitable market and the
right holder lost very little money, there was not unreasonable prejudice of the owners' interests.
Likewise, one could imagine a situation in which relatively little of the market was displaced, but,
because those few uses were so lucrative, the owner's legitimate interests would be unreasonably
prejudiced.
Q.18 Should quantitative empirical or normative approaches be used in defining the three
conditions of Article 13?
A quantitative empirical approach is the most appropriate approach to the Article 13
conditions. The grant of an exclusive right compensates the author for his initiative and creativity
and for his investment and risk in producing the work. Exceptions should neither unreasonably
prejudice the right holders' economic rewards, nor should not undermine the incentive to create.
Without an empirical analysis of the actual effect of an exception on the market, it is not possible to
determine the extent to which a right holder is actually prejudiced and the reasonableness of that
prejudice. For example, the fact that a right holder has not collected royalties from a particular
market for decades is at least a relevant factor bearing on the reasonableness of an exception
applicable to that particular market.

The context, object and purpose of Article 13 are also relevant to this discussion. The TRIPS
Agreement is a trade agreement, and its purpose was to "reduce distortions and impediments to
international trade". TRIPS, preamble. The Ag reement was negotiated against the backdrop of a
wide variety of national systems, and was intended to contribute to "the mutual advantage of
producers and users" and "a balance of rights and obligations". As mentioned above, the drafters also
intended that Members would have flexibility in implementing the Agreement within the context of
"their own legal system and practice". These guiding principles support the position that the analysis
of the conditions of Article 13 must be grounded in local market realities, and in the actual practice
and experience of right holders and users in the country concerned.

ATTACHMENT 2.4
RESPONSES OF THE UNITED STATES TO WRITTEN QUESTIONS FROM THE EUROPEAN
COMMUNITIES AND THEIR MEMBER STATES – FIRST MEETING
(19 November 1999)
Q.1 Does the US agree that Section 110(5) US Copyright Act would be inconsistent with
Article 11bis(1)(iii) Berne Convention if it were not for the minor reservations doctrine? If not
why not?
The US agrees that any exception to the exclusive right under Article 11 bis(1)(iii) would be
inconsistent with the Berne Convention if it were not for the minor reservations doctrine. If there
were no minor reservations doctrine, then no exceptions would be permitted to the exclusive rights
under either Berne Article 11 or Berne Article 11bis. This would mean that exceptions for marching
bands, religious services or school activities, found in many European Union member states' laws as
well as those of other WTO Members, would all be inconsistent with the Berne Convention. For
further discussion of this and related issues, see US response to Panel Questions to the United States
and the European Communities, numbers 8 and 9.
Q.2 Would the US in particular confirm that it does not consider that Section 110(5) can be
justified under Article 11bis(2) Berne Convention?
The U.S. confirms that it does not consider that any exception to an exclusive right can be
justified under Berne Article 11 bis(2). That provision does not speak to whether exceptions to an
exclusive right are permissible, but merely authorizes a country to substitute a compulsory license for
that exclusive right. Only compulsory licenses can be evaluated under Article 11 bis(2). For further
discussion of this and related issues, see US response to Panel Question 6 to the United States and the
European Communities.
Q.3 The US seems to concede that TRIPS does not diminish any rights available under the
Berne Convention. Would the US not therefore agree that Article 13 TRIPS, rather than being
considered as an exemption in its own right, can only be considered as a further limitation of
any possibility to maintain limitations, reservat ions or exceptions that may be contained in the
Berne Convention?
No. Article 13 is not a further limitation on the possibility of providing exceptions to
exclusive rights under Berne; rather, it articulates the standard by which implied exceptions to Berne
should be evaluated.
Q.4 Does the US agree that the purpose of minor reservations under the Berne Convention
is to allow Parties to maintain existing minor exceptions when acceding to the Berne
Convention?
No. The U.S. does not agree with this statement. Although the negotiating history of Berne
may contain some references to countries' desire not to encourage exceptions (and thus the minor
reservations doctrine was kept implicit, rather than specified in the text of the Convention), a general
desire to minimize exceptions is not equivalent to an intent to prohibit them.
Q.5 Where in the negotiating history of TRIPS does the US find a basis for its contention
that Article 13 TRIPS was designed to "artic ulate" the minor reservations under the Berne
Convention? Does the US consider that the possibility of "minor reservations" can apply to all
rights guaranteed under the Berne Convention?
See U.S. response to Question 14 from the Panel to the United States.

Q.6 In paragraph 32 of its First Written Submission the US seeks to justify the "business
exemption" by saying that it adds only a "small number of establishments" to those benefiting
from the pre-existing homestyle exemption. Would the US please provide an estimate of this
additional "small number of establishments"? If the US Congress were to further increase the
thresholds, would the US then seek to justify the new version under Article 13 TRIPS by
arguing that most of the establishments c overed by the newly-formulated exemption were
exempted under the pre-existing version?
See U.S. Response to Panel Questions 9-10 to the United States for the data available to the
United States. The United States will not spec ulate concerning the hypothetical sub-question posed
in the above question.
Q.7 What percentage of establishments would h ave to be excluded from protection under
Article 110(5) US Copyright Act before it ceased to qualify for exemption under Article 13
TRIPS according to the US ?
See U.S. Response to Question 16 from the Panel to the United States and the European
Communities.
Q.8 Could the US please explain why the playing of copyrighted works originating from
radio or TV broadcasts may be excluded from protection and not the playing of copyrighted
works directly from tapes or cassettes?
See U.S. Response to Question 7 from the Panel to the United States.
Q.9 Could the US please provide a copy of the NLBA licence which it claims at
paragraph 13 of its First Written Submission is based on similar criteria to those used in
Section 110(5)?
See U.S. response to Panel Question 1 to the United States and exhibit US-16.
Q.10 In paragraph 4 of its Oral Statement, the US states that the Article 110(5) "exception is
limited to only certain secondary uses of broadcasts of public performances, for which the right
holder has already been compensated for the primary performance." Does the US really
consider that payment of a royalty for the "pri mary performance" may be considered to also
compensate for "secondary uses"?
See U.S. response to Panel Question 4 to the United States and the European Communities.
Q.11 Please explain why you consider the other exception provisions of TRIPS (Articles 17,
26(2) and 30) to be relevant context for the inte rpretation of Article 13 and what consequences
you draw? What is the relative importance of these other provisions of TRIPS and the
exceptions, reservations or limitations allowed under the Berne Convention as context for the
interpretation of Article 13?
Under Article 31 of the Vienna Convention, other provisions of a treaty are part of the
context for the purpose of interpreting a particular provision. In considering the interpretation of
Article 13 of TRIPS, it would be inappropriate not to consider three other similarly worded
provisions governing exceptions in the Agreement. Generally under TRIPS, the permissibility of
exceptions is determined by similar (though not identical) standards in relation to copyrights, patents,
industrial designs as well as trademarks. These exceptions reinforce the principle that the TRIPS
Agreement was intended to balance the interests of producers and users of intellectual property.
There is no basis in the negotiating history of TRIPS to assume that WTO Members used similar
wording, but nevertheless intended to permit exceptions of radically differing scope, with respect to
different types of intellectual property rights.

Moreover, Articles 30 and 31 reinforce the point made in U.S. Response to Panel Question 6
to the United States, in that they reflect the clear distinction in intellectual property between
exceptions (for which equitable remuneration is not required) and compulsory licenses (for which
equitable remuneration is required).

I. INTRODUCTION
1. In this case, the Panel is faced with two important questions under the TRIPS Agreement.
First, the Panel must decide on the proper standard to evaluate an exception to an exclusive right
under the Berne Convention that has been challenged under the provisions of the TRIPS Agreement.
Second, the Panel must apply that standard to the case at hand to determine whether the exception is
permissible under Berne and TRIPS. The proper determination to both of these questions leads to the
conclusion that Section 110(5)(A) and (B) of the U.S. Copyright Law are permissible under the
Berne Convention and the TRIPS Agreement.
2. The minor reservations doctrine is well-founded in the history and practice of the Berne
Convention, and should be applied to exceptions to the Berne rights at issue here — Article 11 and
11bis rights. That doctrine, however, has been clar ified and further articulated by TRIPS Article 13,
which is the standard by which such exceptions are to be judged. The Article 13 test should be used
by the Panel as the means to judge the permissibility of Section 110(5) under Berne. The exemptions
in Section 110(5) fall within the Article 13 standard: they are special cases which do not conflict
with a normal exploitation of the work and they do not unreasonably prejudice the legitimate
interests of the right holder.
II. FACTUAL ISSUES
3. As an initial matter, several factual issues relating to Section 110(5)(A) require clarification.
First, the United States emphasizes that there is no factual dispute before the Panel regarding the
works covered under the current Section 110(5)(A), and the text of the provision itself is
unambiguous. Both parties agree that the homestyle exemption was substantially narrowed by the
removal of nondramatic musical works from its spectrum, and that the exemption now applies only to
works other than nondramatic musical works.1
4. Although it has failed to provide any evidence of prejudice to EC right holders as a result of
Section 110(5)(A), the EC has nevertheless made unsupported factual assertions regarding the scope
of this provision. The scope of Section 110(5) is a question of fact to be established before this
Panel, as it is an accepted principle of international law that municipal law is a fact to be proven
before an international tribunal. 2 Despite the plain language of Section 110(5)(A) regarding the
requirement of homestyle receiving equipment, the EC asks the Panel to consider that at some point
in the future, U.S. courts might expand that exemption by applying the square footage and size
requirements of Section 110(5)(B) to subsection (A).
3 The Panel should give no weight to the EC's
speculative and unsupported assertion that U.S. courts might begin to ignore the text of
Section 110(5)(A) in the future. The consistent jurisprudence of U.S. courts interpreting the
homestyle exemption is dispositive evidence of the scope of this law.4

1 EC Oral Statement, para. 20.
2 See India - Patent Protection for Pharmaceutical and Agricultural Chemical Products,
WT/DS50/AB/R, Report of the Appellate Body, adopted 19 December 1997 ("India Mailbox"), paras. 65-66.
3 EC first submission, para. 32.
4 See Judge Lauterpacht, Case Concerning the Guardianship of an Infant [1958], ICJ Rep., Sep. Op., at
91 (It is settled practice among States that internationa l judicial bodies should accept, and treat as binding,
questions of municipal law and practice decided by competent municipal courts); Case Concerning the
Payment of Various Serbian Loans Issued in France [1929], PCIJ Rep., Series A, No. 20, at 46; Case
Concerning Certain German Interests in Polish Upper Silesia [1926], PCIJ Rep., Series A, No. 7, at 19; Case
Concerning the Payment in Gold of Brazilian Federal Lo ans Contracted in France [1929], PCIJ Rep., Series A,
No. 21, at 124-25 (The PCIJ attached controlling weight to the manner in which French courts had interpreted
French legislation). See also India - Mailbox, para. 65.

5. The EC also argues that two particular cases, Edison Bros. and Claire's Boutiques , are
"illustrative" of a judicial trend toward broadening the homestyle exemption. 5 Far than being
illustrative, however, these two cases are the only decisions allowing chain stores to take advantage
of the homestyle exception. Furthermore, as explained in the U.S. first submission, these cases are
consistent with the body of U.S. case law under Section 110(5), in that they involved the use of
extremely limited receiving equipment.
6. With respect to Section 110(5)(B), the EC again wrongly asserts that the prohibitions against
charging admission fees and retransmission "have no potential whatsoever to limit the exception."
6
As a factual matter, the prohibitions do limit the scope of both subsections. There is a market for
paid events at restaurants in the United States – for example, sporting events. If restaurants charged a
fee for entrance, it would change the nature of a customer's visit to a restaurant, signifying that the
main reason for the visit was to attend an event, not necessarily to eat. This requirement thus limits
the impact of the exemption.
III. TRIPS ARTICLE 13 IS THE APPLICABLE STANDARD FOR EVALUATING
EXCEPTIONS
7. Given that this case was initiated under the WTO TRIPS Agreement, the text of that
Agreement should be the starting-point for the Panel's legal analysis regarding the exceptions in
Section 110(5) of the U.S. Copyright Law. In th is case, the plain language of Article 13 indicates
that it is the appropriate standard by which to judge exceptions to exclusive rights such as
Section 110(5). This interpretation of Article 13 is confirmed by the recently-concluded WIPO
Copyright Treaty ("WCT"), as well as the negotiating history of the TRIPS Agreement.
8. The EC argues that TRIPS Article 13 should not apply to this case because Article 13 would
then represent a derogation from the protection afforded by the Berne Convention, in violation of
TRIPS Article 2.2 and Berne Article 20. On the contrary, however, this result does not derogate
from Berne because TRIPS Article 13 articulates the standard applicable to minor reservations under
Berne. According to the EC, Berne either does not permit exceptions to Articles 11 and 11 bis at all,
or, if it does permit such exceptions, then Section 110(5) does not fall within those permitted
exceptions because it is commercial in nature and enacted after 1967. These arguments fail,
however, because neither of these factors is determinative in deciding whether an exception falls
within the minor reservations doctrine under the Berne Convention.
A. PLAIN LANGUAGE OF ARTICLE 13
9. The text of Article 13 is straight-forward and applies to "limitations or exceptions to
exclusive rights". In light of this plain language, the Panel should be particularly reluctant to adopt
an interpretation of Article 13 that makes it somehow inapplicable to a "limitation or exception" to an
exclusive right. The EC's position conflicts with the text of Article 13, in that the EC argues that
Article 13 is not applicable to limitations and exceptions to the particular exclusive rights in TRIPS
that have been incorporated from the Berne Convention.
10. The general rule of treaty interpretation in the WTO is that "a treaty shall be interpreted in
good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their
context and in the light of its object and purpose".
7 A corollary to the general rule of interpretation is
that the interpretation must give meaning and effect to all terms of a treaty, and not adopt a reading

5 EC first submission, paras. 26-27, EC Oral Statement, para. 12-16.
6 EC first submission, paras. 43-44.
7 Vienna Convention on the Law of Treaties, Article 31(1). See United States - Standards for
Reformulated and Conventional Gasoline, WT/DS2/AB/R, Report of the Appellate Body, adopted 20 May
1996 (pp. 16-17), India - Mailbox, paras. 43 and 44.

that would reduce or nullify a provision.8 These rules govern a Panel's interpretation of TRIPS. 9 As
we discussed extensively in the U.S. first submission and Statement at the first meeting of the Panel
with the Parties, Article 13 articulates the standard for exceptions within the context of the TRIPS
Agreement and the Berne Convention as incorporated into TRIPS.
10
B. WIPO COPYRIGHT TREATY
11. The WCT represents further evidence of the a pplicability of the standard articulated in
Article 13 to exclusive rights provided under the Berne Convention. As articulated in the U.S.
Response to Panel Question 14 to the United States, the WCT was adopted by consensus in 1996 by
the WIPO Diplomatic Conference. The overwhel ming majority of Berne members (99 out of 119)
and WTO members (94 out of 128) participated in the Diplomatic Conference.
11 Like TRIPS, the
WCT is an Agreement explicitly designed to provide a higher level of protection than that provided
under Berne. Article 1 of the WCT provides that it is a "Special Agreement" within the meaning of
Berne Article 20, provides that it does not derogate from existing obligations under Berne, and also
explicitly requires compliance with Articles 1-21 and the Appendix of the Berne Convention.
12
12. The preamble of the WCT states that the Parties recognized "the need to introduce new
international rules and clarify the interpretation of certain existing rules".13 Article 10(2) of the WCT
is an example of a clarifying interpretation of Berne, and provides: "Contracting Parties shall, when
applying the Berne Convention, confine any limitations or exceptions to rights provided for therein to
certain special cases that do not conflict with a normal exploitation of the work and do not
unreasonably prejudice the legitimate interests of the author." (Emphasis added.) Thus, under the
WCT, exceptions permissible under Berne are those that meet the same standard set out in TRIPS
Article 13. On the other hand, under the EC's interpretation of TRIPS Article 13 – that it cannot
represent the standard governing exceptions to Berne rights because TRIPS would then represent a
derogation of rights provided under Berne – the WCT must represent a derogation of rights provided
under Berne, a conclusion flatly at odds with Article 1 of the WCT.

8 United States - Reformulated Gas; India - Mailbox , para. 46.
9 See India - Mailbox, paras. 43, 46.
10 Neil W. Netanel, The Digital Agenda of the World Intellectual Property Organization: The Impact
of the WIPO Copyright Treaty on TRIPS Dispute Settlement, 37 Va. J. Int'l L. 441, 460 (Winter 1997)
("Article 13 to applies to all exclusive rights"); Laurence R. Helfer, Adjudicating Copyright Claims Under the
TRIPS Agreement: The Case for a European Human Rights Analogy , 39 Harv. Int'l Law J. 357, 380 (Spring
1998) ("On its face, article 13 applies to all copyright limitations and exceptions, both those added by TRIPS
and those incorporated by Berne, and it overrides the more expansive limitations and exceptions set forth in
other Berne articles."); Ruth L. Gana, Prospects for Developing Countries Under The TRIPS Agreement, 29
Vand. J. Transnat'l L. 735, 760 ((1996) (noting that the Article 13 standard "extends to all rights covered by the
TRIPS Agreement, not just the reproductive right."); Pamela Samuelson, The Digital Agenda of the World
Intellectual Property Organization: The U.S. Digital Agenda at WIPO, 37 Va. J. Int'l L. 369, 403 (Winter 1997)
("[at the time of the WCT], it is true that the universa lization of Article 9(2)'s three-step test had already
become an international norm by the adoption of Article 13 of the TRIPS Agreement").
11 For a complete listing of states participating in the Geneva conference, see List of Participants,
WIPO Doc. CRNR/DC/INF.2 at www.wipo.org/eng/dipconf).
12 Article 1 of the WCT is entitled "Relation to the Berne Convention", and provides as follows:
(1) This Treaty is a special agreement within the meaning of Article 20 of the Berne Convention for
the Protection of Literary and Artistic Works, as re gard Contracting Parties that are countries of the
Union established by that Convention. This Treaty shall not have any connection with treatises other
than the Berne Convention, nor shall it prejudice any rights and obligations under any other treaties.
(2) Nothing in this Treaty shall derogate from existing obligations that Contracting Parties have to
each other under the Berne Convention for the Protection of Literary and Artistic Works.
(3) Hereinafter, "Berne Convention" shall refer to the Paris Act of July 24, 1971, of the Berne
Convention for the Protection of Literary and Artistic Works.
(4) Contracting Parties shall comply with Article 1 to 21 and the Appendix of the Berne Convention.
13 WCT, preamble.

C. NEGOTIATING HISTORY OF THE TRIPS AGREEMENT
13. The negotiating history of the TRIPS Agreement further supports our conclusion that
Article 13 applies to Berne rights. As explained by one commentator: "Article 13 allows a dispute
settlement panel to review exceptions, including th e so called 'small exceptions', to ensure that they
pass the test. . . . When these exceptions are invoked, they may from now on be submitted to the
general test of Article 13". 14 The United States has already elaborated on the negotiating history of
TRIPS in its Response to the Panel Question 14 to the United States and in its first submission.
14. In its Response to Question 10 from the Panel, the EC has cited its opening position in the
TRIPS negotiations as evidence of the non-applicability of Article 13 to Berne rights. During the
TRIPS negotiations, the EC had taken the position that the exceptions article in TRIPS should not
apply to Berne rights, but rather should apply onl y to so-called "Berne-plus" rights set forth in
particular provisions of TRIPS.
15 The contrast between the EC negotiating position and the final text
of Article 13, the application of which is not limited to specified exclusive rights, demonstrates that if
WTO Members had intended Article 13 to apply only to certain exclusive rights under TRIPS, they
would have specified that result. Rather, Article 13 was phrased generally, does not indicate any sort
of limited application, and was intended to apply to all exclusive rights.
D. RELATIONSHIP WITH THE BERNE CONVENTION
15. The U.S. view that Article 13 sets forth the standard governing all exceptions or limitations
to exclusive rights is consistent with the context of Article 13, including TRIPS Article 2.2. It does
not imply that TRIPS reduced the level of protecti on below the level permissible under Berne. Even
though not explicitly stated, the Berne Convention permits minor exceptions to the exclusive rights
provided for therein. As acknowledged by the EC in its response to Panel Question 11 to the EC, and
Panel Question 5 to the US and EC, the minor reservation doctrine is well-established under Berne.
16
16. Minor exceptions to the public performance right appear in the copyright laws of very many,
if not virtually all, Berne members. Under Article 31 of the Vienna Convention, subsequent practice
is to be "taken into account, together with the context" in interpreting treaty text. 17 Subsequent
practice is important, according to the International Law Commission, because it "constitutes
objective evidence of the understanding of the parties as to the meaning of the treaty.18 According to
the Appellate Body, subsequent practice under Article 31(3)(b) includes practice that is "concordant,
common, and consistent". 19 Although the United States has not been able to review the copyright
laws of all Berne members, a large number of exceptions were cited in our response to Panel
Question 16 to the United States. Additional countries that permit exceptions to the public
performance right are cited in Exhibit US-22. This widespread practice of allowing minor exceptions
to this particular Berne right illustrates its common acceptance among Berne members.
17. Relevant negotiating history of the Berne C onvention has already been reviewed in this
proceeding, and also clearly establishes the permissibility of minor reservations under Berne. Under

14 D. Gervais, The TRIPS Agreement: Drafting History and Analysis, 89-80 (1998).
15 Exhibit EC-17 ("Contracting parties may, in relation to the rights conferred by a Articles 4, 5, 6, and
7 provide for limitations, exceptions and reservations as permitted by the Rome Convention . . .").
16 The responses of the EC now assert that the existence of the minor reservations doctrine "is
considered to be confirmed" by the General Report of the Stockholm Conference (1967) and that the EC
"would not exclude that the 'minor reservations' doctrine has, by virtue of the Article 9(1) TRIPS, whatever its
legal significance may be, become part to [sic] the TRIPS Agreement." EC Response to Panel Question 5 and
8 to the US and EC.
17 Vienna Convention, Article 31(3).
18 Yearbook of the International Law Commission, Vol. II, p. 221 (1966).
19 Japan - Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, Report
of the Appellate Body, 4 October 1996, at p. 13.

Article 32 of the Vienna Convention, preparatory work of a treaty may be used to confirm the
meaning of the text and context or to clarify ambiguities. The negotiating history regarding minor
exceptions confirms that Berne members intended that exceptions be allowed to the exclusive rights
provided in Articles 11 and 11bis.
18. Contrary to the EC's assertions, minor rese rvations under Berne are not limited to either:
(a) the specific noncommercial uses listed in the General Reports – "religious ceremonies,
performances by military bands and the requirements of child and adult education"; or (b) exceptions
existing in the legislation of the member states of the Berne Union in 1967, at the latest.
19. First, there is no requirement that exempt uses be noncommercial. Although, as a general
rule, noncommercial uses may be less prejudicial to right holders than commercial ones, this is not an
absolute rule. Even the uses discussed in the General Reports are not necessarily noncommercial;
for example, there are many educational institutions or training programs that are run for profit.
Several of the public performance exceptions in EC member state laws exempt educational activities
without specifying that the educational institution must be nonprofit. Exemptions in the laws of
certain third parties to this dispute are also applicable to commercial uses. These include the
Australian law that exempts secondary performances in hotels and guest houses, and the Canadian
law that exempts performances at agricultural fairs and exhibitions.
20 These exceptions demonstrate
that the commercial nature of a use cannot be dispositive.
20. Furthermore, the discussion of the minor reservations doctrine in the General Reports
precludes the notion that the doctrine was limited to the exceptions specifically mentioned in those
Reports. The General Reports only list several traditional exceptions to the public performance right
of Article 11, such as military bands and religious ceremonies. However, the Reports also make
certain to note that the minor reservation doctrine is also applicable to Article 11 bis, 13 and 14, but
do not provide any examples of permissible exceptions to those rights. 21 It must have been intended
that the doctrine apply to exceptions not specifical ly listed in the Reports, otherwise that language
would have no meaning.
21. Second, the EC's argument that the exceptions allowable under the minor reservations
doctrine must be frozen in 1967 fails for a number of reasons. Notably, it is explicitly contradicted
by the language in the Agreed Statement concerning Article 10 of the WCT, which states "It is
understood that the provisions of Article 10 permit Contracting Parties to carry forward and
appropriately extend into the digital environment limitations and exceptions in their national laws
which have been considered acceptable under the Berne Convention." If the exceptions permissible
under Berne were frozen in 1967, then this language would effectively contradict Article 1 of the
WCT, which states that nothing in the Treaty shall derogate from the protection afforded under
Berne.
22. Construing the minor reservation doctrine to a pply only to exceptions in existence in 1967
also creates unfair results in regard to developing countries, and renders the Berne Convention less
applicable in the modern world. Many developi ng countries that are now members of Berne had no
copyright law at all, or only a rudimentary one, in 1967. If the EC's argument that countries can only
"grandfather their pre-1967 exceptions" when acceding to Berne is accepted, then most developing
countries will not be allowed to have any exceptions at all. In addition, the flexibility of the
principles of copyright protection represented in Berne would be drastically undermined were they
not allowed to respond to changes and developments in technology as well as practice. As provided
in the WCT, countries must be able to appropriately extend and adapt exceptions to fit the realities of

20 See U.S. response to Panel Question 16 to the Panel.
21 Records of the Intellectual Property Conference of Stockholm, WIPO, Geneva, 1971, paras.
209-210, p. 1166.

a changing world. The EC's interpretation of Berne, freezing it in 1967, would deprive it of much
relevance in today's intellectual property environment.
E. SIGNIFICANCE OF BERNE ARTICLE 11BIS(2)
23. We note that there has also been some discussion, in third party submissions and in the
questions from the Panel, about the relevance of Article 11 bis(2) to the permissibility of
Section 110(5). We reiterate our position, more fully articulated in the U.S. Response to Panel
Question 6 to the US and EC, that Article 11 bis(2) has no bearing on Section 110(5). Article
11bis(2) merely authorizes a country to substitute a compulsory license, or its equivalent, for an
exclusive right under Article 11 bis. Neither the negotiating history of Berne, nor the subsequent
writings of commentators support the view that 11 bis(2) authorizes outright exceptions to Article
11bis, or represents a standard against which to judge such exceptions. 22 Simply put, Article 11bis(2)
is not related to the minor reservations doctrine, and does not bear upon the scope of exceptions
permissible under that doctrine.23
24. Indeed, interpreting Article 11 bis(2) to apply to exceptions as well as compulsory licenses
leads to illogical and impractical results. For exam ple, where an exception implicates several rights,
such as Section 110(5), only one of which is subject to a right of equitable remuneration, it would be
practically impossible to divide the exception into the different rights affected and then apply
different standards to each right.
F. CONCLUSION
25. In conclusion, as the plain meaning of the provision suggests, Article 13 articulates the
standard by which to determine the permissibility of "exceptions or limitations" to exclusive rights.
By contrast, the EC interpretation of Article 13 is at odds with the text of that provision, as well as its
negotiating history, and is not consistent with the WCT. Furthermore, minor exceptions to exclusive
rights under Articles 11 and 11bis have always been permitted under the Berne Convention, and have
not been limited to any particular purpose or date of enactment. TRIPS Article 13 articulates the
standard governing such minor reservations, and thus is the appropriate focal point of the legal
analysis in the case.
IV. SECTION 110(5) MEETS ARTICLE 13 CRITERIA
26. Sections 110(5)(A) and (B) are consistent with the principles of the minor reservations
doctrine, and satisfy the TRIPS Article 13 standard. Section 110(5) applies to certain special cases,
does not conflict with the normal exploitation of the work and does not unreasonably prejudice the
legitimate interests of the right holder.
A. I
NTERPRETING THE ARTICLE 13 CRITERIA
27. Interpretation of the TRIPS Article 13 criteria requires a fact-intensive analysis by the Panel
that takes into account all the circumstances of an individual case. Article 13 is intended to be a

22 The negotiating history of the TRIPS Agreement also supports the distinction between compulsory
licenses and outright exceptions. Of interest is a late version of Article 13 which included a separate provision
on rights of equitable remuneration, providing: "Any compulsory license (or any restriction of exclusive rights
to a right of remuneration) shall provide mechanisms to ensure prompt payment and remittance of royalties."
Status of Work in the Negotiating Group: Prepared by the chairman, No. 2341 (1 October 1990).
23 The EC implicitly acknowledges the lack of a relationship between 11 bis(2) and the minor
reservations doctrine in its response to Question 12 of the Panel to the EC, in which the Panel asks the EC to
provide examples of ways to provide "equitable remuneration" under 11 bis(2) other than compulsory licensing.
In response, the EC posits several mechanisms, such as royalty schemes and levy systems, that are the
functional equivalent of compulsory licenses.

flexible mechanism to evaluate numerous different exceptions in many different contexts and legal
systems. It does not impose any "per-se" rules with respect to any of the criteria in the Article.
Rather, the permissibility of exceptions under TRIPS Article 13 must necessarily be determined on a
case-by-case basis.
28. In such an analysis, the market of the country imposing the exception is the most relevant.
The United States and the EC are apparently in agreement regarding this issue.
24 Moreover, while
both actual market conditions as well as potential market may be relevant to the analysis under
Article 13, actual conditions are of primary importa nce. An analysis based on assumptions about a
potential market is necessarily less reliable and subject to speculation. The EC, for example, argues
that the Panel should consider the alleged 70% of exempt restaurants as the potential market for its
right holders – even though there is no possibility that all such restaurants actually play radio music
and would be licensed by ASCAP or BMI. The only way to avoid the danger of arbitrariness is to
accord the greatest weight to actual existing market conditions.
B. S
ECTION 110(5)(A) AND (B) APPLY TO CERTAIN, SPECIAL CASES
29. As discussed in the U.S. Response to Panel Question 17 to the U.S., both Section 110(5)(A)
and (B) represent exceptions that apply in certain special cases. The essence of this requirement is
that exceptions be well-defined and of limited application. Both Sections 110(5)(A) and (B) are
sufficiently definite. Section 110(5)(A) is defined by the equipment limitations, and the subsequent
case law which has consistently enforced square footage limitations. Section 110(5)(B) is clearly
defined in the statute by square footage and equipment limitations. Furthermore, to the extent that
the purpose of the exception is relevant, it is only required that the exception have a specific policy
objective. TRIPS does not impose any requirements on the policy objectives that a particular country
might consider special in light of its own history and national priorities. In this case, both exceptions
rest upon sound public policy objectives related to the social benefits of fostering small businesses
and preventing abusive tactics by the collecting societies.
C. N
EITHER SECTION 110(5)(A) OR (B) CONFLICTS WITH NORMAL EXPLOITATION
30. Neither Section 110(5)(A) nor Section 110(5)(B) conflict with the normal exploitation of a
work. Section 110(5)(A), almost by definition, cannot conflict with normal exploitation, as it was
intended precisely to exempt those establishmen ts which would not have otherwise justified a
commercial license.25
31. In evaluating normal exploitation, the Panel must look at the scope of the exception with
respect to the panoply of exclusive rights, as well as with respect to the specific right which it
exempts. As more fully explained in US Response to Panel Question 18 to the U.S., both
perspectives are relevant. While the impact on the particular right affected is relevant, the proportion
of that right to the rest of the exclusive rights is equally so. Notably, the TRIPS Article 13 test does
not say "conflict with the normal exploitation of an exclusive right", but refers to the exploitation of
the "work" as a whole.

24 EC Response to Panel Question 8 to both parties.
25 The EC appears to find a contradiction in the f act that the PROs did not generally license small
business establishments, and that there were many complaints about their licensing practices being abusive
with regard to such establishments. No such contradiction exists. The PROs did not attempt to license the vast
majority of small businesses. Nevertheless, there were complaints that when the PROs did attempt to obtain
licenses from any business, they often did so in an arbitrary and abusive manner, without regard for existing
law or good faith business practices. Small business, generally being the least sophisticated and having the
fewest resources, are the least able to respond to such tactics or defend their rights.

D. NEITHER SECTION 110(5)(A) OR (B) CAUSES UNREASONABLE PREJUDICE
32. Section 110(5)(A) and (B) do not cause right holders unreasonable prejudice, as the
economic impact of the exceptions is minimal. The discussion below focuses primarily on
Section 110(5)(B), since the EC aims most of its criticism, and the minimal empirical analysis it has
conducted, at this subsection. It can be assumed, however, that the impact of subsection (A), the
homestyle exemption, is a mere fraction of the numbers discussed below, as it affects fewer and
smaller establishments than subsection (B). The United States also observes that, despite the more
than 20 year history of the homestyle exemption, the EC has not provided any facts or data showing
any prejudice to EC right holders as a result of the old homestyle exemption or amended
Section 110(5)(A).
26
1. Section 110(5)(B) does not cause unreasonable prejudice because any actual harm to
EC right holders is minimal
33. The amount of prejudice resulting from Section 110(5)(B) is not unreasonable. In our first
submission, the United States noted the irrelevance of the figures provided by the EC, and discussed
the factors by which those figures must be reduced to yield a reasonable approximation of losses to
EC right holders. The following empirical analysis supplements that already provided by the United
States,27 and is based on additional information recently received. It is designed to rebut the EC's
assertions, particularly those made in its responses to the Panel's questions, that Section 110(5) is
likely to cost EC right holders "millions" of dollars. The analysis demonstrates that the maximum
loss to EC right holders of distributions from the largest U.S. collecting society, ASCAP, as a result
of the Section 110(5) exemption is in the range of $294,113 to $586,332 – far less than the "millions"
of dollars claimed by the EC. Especially in light of the size of the U.S. and EC markets, this figure is
truly a minimal one, and does not establish any unreasonable degree of prejudice.
(a) Starting-point in the analysis: total royalties paid to EC right holders: $19.6 million -
$39 million
34. To determine the degree of prejudice to EC right holders from the exemption, the logical
starting-point is the total amount paid to EC right holders by the collecting societies. The EC has
recently provided figures from ASCAP purporting to show that EC right holders received an average
of $39,045,833 from ASCAP for the years 1996, 1997 and 1998.
28 According to the EC data, this
figure of 39 million dollars represents an average of 13.7% of ASCAP's total distributions of
domestic income for those three years. It must be noted here that in an earlier analysis conducted by
the EC to determine the harm to EC right holder s from Section 110(5) before it was amended in
1998, the EC used a figure of "less than 5%" fo r 1996, and noted that ASCAP's distributions to all
foreign collecting societies were just 6.2%.29 The EC estimate of "less than 5%" appears to be based
on the figure "total domestic distributions for EU societies" (19,586,000) 30 as a percentage of total
ASCAP distributions for 1996 (397,379,000) 31 Given the inconsistency in the EC methodology, the
United States' analysis below will proceed based on a range for ASCAP's total payments to EC right
holders of 19.6 million to 39 million.

26 See EC Response to Question 3 asked by the Panel.
27 The data provided in the following analysis reflects that provided in the U.S. Responses to the
Panel's Questions 9-11 to the United States. The empirical calculations above, however, replace those
estimates provided in the U.S. Response to Panel Questions 11.b and 11.d.
28 Exhibit EC-15 (average of three figures in line 4).
29 European Commission, Examination Procedure Re garding the Licensing of Music Works in the
United States of America, 27 (23 Feb. 1998).
30 Exhibit EC-15 (line 2 for 1996).
31 ASCAP Annual Report (1996) (Exhibit US-19).

(b) After reducing for amount attributable to gene ral licensing – losses to EC right holders:
$3.7 - $7.4 million
35. To determine the potential impact of Section 110(5) on total payments to EC right holders,
the figure for such total payments must be reduced to account for the fact that a relatively small
proportion of licensing revenue collected in the United States is attributable to music played in
restaurants, bars and retail establishments. As discussed in the U.S. responses to the Panel's
questions, ASCAP's annual reports demonstrate that the majority – approximately 58% - of
collecting society revenue comes from radio and TV broadcasters.
32 Another quarter of ASCAP's
revenue comes from foreign collecting societies (25-26%). Interest, member dues and revenues from
symphonies and concerts account for approximately 2%. All other licensing revenues account for only
14% of ASCAP total revenues from domestic and foreign sources. This 14% figure includes fees from
commercial background music services, and a wide variety of licensees, including conventions and sports
arenas, as well as all restaurants, bars and retail es tablishments. It represents average collections of
$65,581,000 from general licensees
33 for 1995-97. The average amount collected from such general
licensees ($65,581,000) in turn represents 18.9% of ASCAP's average total domestic receipts for
1995-97 ($346,981,000).34
36. Thus, the first step in determining the losses to EC right holders is to reduce the total
payments to EC right holders to 18.9% of that total. This accounts for the fact that at least 81.1% of
EC income from ASCAP is unaffected by Section 110( 5). This analysis yields a potential range of
loss to EC right holders from Section 110(5) of only 3,701,754 (18.9% of 19,586,000) to 7,379,662
(18.9% of $39,045,833).35
(c) After reducing to account for licensing revenue from general licensees that do not meet the
statutory definition of an "establishment" – losses to EC right holders: $1.85 - $3.69 million
37. These estimates of losses to EC right holders must also be reduced to account for the fact that
many general licensees are not eligible to take advantage of Section 110(5), regardless of whether
they meet the square footage and equipment criteria or not. Section 110(5)(B) applies to
"establishments", which are defined in the same statute as "a store, shop or any similar place of
business open to the general public for the primary purpose of selling goods or services in which the
majority of the gross square feet of space that is nonresidential is used for that purpose". Many types
of general licensees, for example, background music services, sporting events and conventions would
seem not to fit this definition, and thus the royalties paid by these licensees must be excluded from
the analysis of losses resulting from Section 110(5).
38. No data are available to the United States regarding the percentage of general licensees that
might qualify as "establishments" under Section 110(5). It seems reasonable to assume, however,
that the percentage of revenue from such "non-e stablishment" licensees is significant given their
prevalence and size. For that reason, the United States will assume that 50% of general licensing
revenue is attributable to such licensees. After reducing the potential losses to EC right holders to
50%, the resulting range of potential loss is: 1,850,877 (50% of 3,701,754) to 3,689,831 (50% of
$7,379,662).

32 ASCAP Annual Reports 1995, 1996, 1997 (Exhibit US-19).
33 Id. (average of figures for 1995, $63,227,000, 1996, $66,192,000, and 1997, $67,324,000).
34 Id. (average of figures for 1995, $326,482,000, 1996, $356,035,000, and 1997, $358,428,000).
35 This analysis assumes that distributions paid to EC right holders are attributable to the same sources
of revenue in the same proportion as overall revenues. It is entirely possible, however, that distributions to EC
right holders might by attributable to television and radio broadcasters or symphonies to a greater extent than
general licensing.

(d) After reducing to account for licensing revenue from general licensees that do not play the
radio – losses to EC right holders: $.56 million - $1.13 million
39. In addition, it is obviously important to take into account the fact that much of the revenue
from general licensees that qualify as establishments is not attributable to the playing of radio or TV
music, but rather to public performances of mu sic from media other than radio or TV broadcasts,
such as tapes/CDs, live bands, and jukeboxes. According to the National Restaurant Association,
approximately x% of all restaurants play the radio 36, but not necessarily exclusively (they may also
sometimes use live bands or CDs, etc.). According to the National Licensed Beverage Association,
28% of its members play the radio, but again not necessarily exclusively. Taking an average of these
two roughly comparable estimates, the United States assumes that 30.5% of establishments play
radio music.
40. It is important to note that, given that establishments often play music from more than one
source, this estimate – 30.5% of establishments that play the radio – does not correspond with the
percentage of licensing revenue attributable to the playing of radio music, and indeed would
significantly overstate such revenue. Nevertheless, for the purpose of deriving a conservative
estimate and in light of the limited data available, the United States assumes for the sake of only this
analysis that 30.5% of licensing revenue is attributable to the playing of radio music.
Correspondingly, the losses to EC right holders from the Section 110(5) exemption for radio music
must be reduced to this amount, and would range from $564,517 (30.5% of 1,850,877) to $1,125,398
(30.5% of 3,689,831).
(e) After reducing to account for licensing revenue from general licensee establishments that
play the radio and meet size limitations of Section 110(5): losses to EC right holders:
$294,113 to $586,332
41. Certainly the calculation of losses to EC right holders must also take into account that many
eating, drinking and retail establishments that play radio music do not meet the square footage limits
of Section 110(5)(B). Based on figures provided by the National Restaurant Association, 65.5% of
restaurants meet the square footage criteria of the statute. 37 The United States has no data regarding
the percentage of retail establishments that would meet the square footage criteria; however, the EC
has presented a Dun & Bradstreet study commi ssioned by ASCAP purporting to demonstrate that
45% of retail establishments are exempt under Section 110(5)(B).38
42. According to the EC's own e xhibit EC-16, Dun & Bradstreet estimated that there were
683,783 retail establishments in the United States, and 364,404 eating and drinking establishments.
43. Applying 45% to the total number of retail establishments (683,783) results in a total of
307,702 retail establishments that meet the square footage criteria of Section 110(5). Applying
65.5% to the total number of eating and drinking establishments (364,404) results in a total of
238,685 such establishments that meet the square footage criteria of Section 110(5). The total
number of establishments (both retail and eating and drinking) meeting the square footage criteria of
the statute is thus 546,387, which is 52.1% of all establishments. The loss to EC right holders is
further reduced to $294,113 (52.1% of $564,517) to $586,332 (52.1% of $1,125,398).

36 Confidential Exhibit US-18.
37 The EC has presented a different figure, an d estimates that 70% of eating and drinking
establishments fall within the square footage limitations of the statute.
38 EC first submission, para. 51; Exhibit EC-16.

(f) The U.S. Methodology is Conservative
44. The above figure is a conservative one, based on available information. For a number of
reasons, the true amount of economic prejudice to EC right holders is likely to be even less than
$294,113 to $586,332. For example, the United States has assumed that where 30.5% of
establishments play the radio, 30.5% of licensing revenue is attributable to radio-playing. This figure
is obviously too high, given the large proportion of establishments that play music from more than
one type of media. In addition, the United States assumed that the 65.5% of restaurants (and 45% of
retail establishments) that fit within the square footage limits of the exception accounted for a 65.5%
(and 45%) loss of revenue. In fact, the exempt restaurants and retail establishments are necessarily
smaller establishments, and almost certainly represent a smaller proportion of licensing revenue.
45. In addition, the above analysis does not take into account steps that ASCAP and BMI might
take to minimize any impact of Section 110( 5), for example by focusing licensing resources
exclusively on larger stores that generally pay larger fees, or by charging more for the playing of
music from CDs and tapes. Similarly, the analysis does not take into account the establishments that
could take advantage of the private agreement concluded by the PROs with the NLBA. Given the
significant membership of the NLBA, and the fact that membership is open to any establishment that
is licensed to serve alcoholic beverages, the NLBA Agreement should result in another significant
reduction in any estimate of potential losses to EC right holders resulting from Section 110(5).
Because the United States currently has no precise data on this factor, and is trying to keep estimates
as conservative as possible, this element has not been figured into the loss calculation above.
46. The United States recognizes that the above estimates are losses from ASCAP distributions
only. Little data has been available to the United States regarding revenues or distributions of the
smaller of the two major U.S. collecting societies, BMI. While the total loss to EC right holders
would obviously have to take into account the BMI figures, these figures will certainly be even less
than those calculated for ASCAP. As indicate d above in Section IV.1.B, average domestic revenue
for ASCAP for the years 1995-97 was approximately $347 million. BMI's average domestic revenue
in 1995 and 1996 was $260.5 million.
39 Thus, including the BMI figures will not dramatically increase
the any loss to EC right holders.
47. The United States also recognizes that the analysis also does not take into account music
played from the television. Given that few establishments rely exclusively on television for music,
and that the proportion of restaurants using television sets is even lower than the proportion playing
the radio,
40 these figures appear unlikely to significantly increase the loss to EC right holders.
Finally, the United States notes that Section 110(5)(B) exempts establishments above the square
footage limits if they meet certain equipment limits. No information, however, is currently available
on this factor.
48. The United States has endeavored here to present the Panel with the best estimates possible
from the limited data available. The resulting figures are well-founded in fact and logic, and indicate
the insignificant amount of prejudice that EC right holders might actually suffer as a result of Section
110(5). The EC has not to date offered any concrete facts which rebut any of the assumptions made
above. The only data offered thus far to support the EC's claim that its right holders have suffered
unreasonable prejudice comes from a self-serving press release by the U.S. PROs asserting that their
right holders will lose "tens of millions" of dollars. On the basis of this press release, the EC asks the
Panel to conclude that EC right holders will suffer losses "in the sphere of millions of dollars".
41 The
more rigorous analysis presented by the United States refutes this exaggerated and speculative claim,
and establishes the minimal prejudice actually likely to occur.

39 Exhibit US-23.
40 Exhibit US-18.
41 EC Response to Panel Question 4 to the EC.

2. Right holders themselves have viewed size limits comparable to Section 110(5)(B) as
reasonable and voluntarily supported them
49. In considering whether the passage of Section 110(5)(B) has caused right holders any
unreasonable prejudice, the private agreement between the PROs and the NLBA is also highly
relevant. Notably, the PROs voluntarily agreed to a blanket exemption of 3500 square foot in the
context of their private agreement with the NLBA. The fact that they were willing, voluntarily, to
forego the collection of any revenue from such establishments must indicate that the administrative
costs of doing so did not justify the likely returns, and that it was preferable from the right holders'
perspective to seek a higher degree of compliance from non-exempt restaurants.
50. Indeed, throughout the legislative debate regarding Section 110(5)(B), the PROs were
willing to conclude a private agreement with the National Restaurant Association that, like the
NLBA deal, would exempt all restaurants under 350 0 square feet from paying royalties for radio
music. In addition, during legislative consideration of Section 110(5)(B), the "ASCAP and BMI
proposal" revolved around an exemption for establishments smaller than 3500 square feet.
V. CONCLUSION
51. In conclusion, the applicable standard for determining the TRIPS consistency of
Section 110(5) of the U.S. Copyright Act is TR IPS Article 13. Section 110(5) is a permissible
exception to the public performance right based on the criteria articulated in Article 13. Therefore,
the United States respectfully requests that the Panel find that both Section 110(5)(A) and (B) are
consistent with the TRIPS Agreement.

ATTACHMENT 2.6
ORAL STATEMENT OF THE UNITED STATES AT THE SECOND MEETING
WITH THE PANEL
(7 December 1999)
I. INTRODUCTION
1. The exceptions permissible to exclusive rights, and the standard by which they will be
governed are issues of tremendous importance under TRIPS. Article 13 of TRIPS is a key provision
that limits WTO Members' ability to restrict excl usive rights, but also provides them with vital
flexibility in implementing their TRIPS obligations . The proper application of this standard to
Section 110(5)(A) and (B) of the U.S. Copyright Law results in a conclusion that these provisions are
fully consistent with the TRIPS Agreement.
II. FACTUAL ISSUES
2. In our second submission, the United States addressed several factual inaccuracies put
forward by the EC. We won't repeat those explanations here, except to note that where the parties
are in agreement as to the facts, the Panel should not engage in speculation regarding alternative
factual scenarios that do not in fact exist. The parties agree that Section 110(5)(A) does not apply to
nondramatic musical works. The parties agree that the square footage limitations of
Section 110(5)(B) do not apply to Section 110(5)(A). This is the plain language of the statutes; no
U.S. court has ruled otherwise, and these are the only facts before the Panel.
III. TRIPS ARTICLE 13 IS THE APPLICABLE STANDARD FOR EVALUATING
EXCEPTIONS
3. We start with Article 13. The plain language of Article 13 indicates that it is the appropriate
standard by which to judge exceptions to exclusive rights such as Section 110(5). This interpretation
of Article 13 is confirmed by the recently-concluded WIPO Copyright Treaty ("WCT"), as well as
the negotiating history of the TRIPS Agreement.
4. The text of Article 13 is straight-forward and applies to "limitations or exceptions to
exclusive rights". Not some limitations, not limitations to some exclusive rights. Just limitations or
exceptions to exclusive rights. In light of the clear direction from the Appellate Body regarding the
importance of the plain language of the text in the interpretation of WTO agreements, the EC should
face a high hurdle to convince this Panel to disregard it.
5. The WCT represents further evidence of the applicability of the Article 13 standard to
exclusive rights provided under Berne. The EC's submission indicates that the EC "does not
understand" the relevance of this agreement. We submit, however, that where 99 Berne Members get
together and adopt by consensus a document stating that the same standard of TRIPS Article 13
applies to Berne rights, it is highly relevant and extremely important. Under the Vienna Convention,
subsequent agreements and subsequent practice are important tools in treaty interpretation. In the
Japan taxes case, the WTO Appellate Body emphasized that subsequent practice can be established

by concordant pronouncements that establish a pattern implying the agreement of the parties
regarding a treaty's interpretation.1
6. Like TRIPS, the WCT is an agreement explicitly designed to provide a higher level of
protection than Berne. It says explicitly that it is a "Special Agreement" within the meaning of Berne
Article 20, that it does not derogate from existing obligations under Berne, and it specifically requires
compliance with Articles 1-21 and the Appendix of the Berne Convention.
7. Article 10(2) of the WCT specifically states that "when applying the Berne Convention"
Contracting Parties shall confine limitations to those that meet the same test set out in TRIPS
Article 13. The preparatory materials of the WCT are also enlightening, as the Basic Proposal for the
'96 Diplomatic Conference specifically discusses th e application of the 3-step TRIPS test to minor
reservations under Berne.
8. The U.S. view that Article 13 provides the standard governing all exceptions or limitations to
exclusive rights is consistent with the context of Article 13, including TRIPS Article 2.2. It does not
imply that TRIPS reduced the level of protection below the level permissible under Berne. The
Berne Convention permits minor exceptions to exclusive rights.
9. As described at some length in the U.S. Answers to the Panel's Questions and the U.S.
rebuttal submission, the subsequent practice of Berne members indicates widespread acceptance of
the notion that exceptions to Article 11 and 11 bis rights are permissible. Furthermore, the
negotiating history of Berne, in particular from the Brussels and Stockholm conferences, confirms
that Berne members intended that exceptions be allowed to the exclusive rights provided in
Articles 11 and 11bis.
10. Commercial uses are not excluded per se from the scope of the minor reservations doctrine.
The uses discussed in the General Reports may themselves be commercial in certain circumstances.
The specific examples of minor reservations given were never intended to be an exhaustive list. To
quote Ricketson: "The examples of uses given in the records of the Brussels and Stockholm
Conferences are in no way an exhaustive list or determinative or which particular exceptions will be
justified." (p. 536) The discussion of the minor reservations doctrine in the General Reports actually
precludes the notion that the doctrine was limited to the exceptions specifically cited. The General
Reports only list several traditional exceptions to the public performance right of Article 11.
However, the Reports also make certain to note that the minor reservation doctrine is also applicable
to Article 11 bis, 13 and 14. It must have been intended that the doctrine apply to exceptions not
specifically listed in the Reports, otherwise that language would have no meaning.
11. Nor is the applicability of the minor reservations doctrine frozen in 1967. Again, the WCT
provides useful guidance on this issue. The Agreed Statement concerning Article 10 of the WCT
states that Contracting Parties can "carry forward and appropriately extend into the digital
environment limitations and exceptions in their national laws" that have been considered acceptable
under Berne. We note that the EC was a signatory of both the WCT and the Agreed Statement.
12. Construing the minor reservation doctrine to a pply only to exceptions in existence in 1967
also creates inequitable results, and renders Berne less relevant to the modern world. Many
developing countries that are now members of Be rne had no copyright law, or only a rudimentary
one, in 1967. If the EC's argument is accepted, then most developing countries will not be allowed to
have any exceptions. In addition, the flexibility of the principles of copyright protection represented
in Berne would be drastically undermined were they not allowed to respond to changes and
developments in technology as well as practice.

1 Japan - Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, Report
of the Appellate Body, 4 Oct. 1996, at p. 25.

13. For the sake of completeness, I'll now briefly address Article 11 bis(2). This is a compulsory
licensing provision. Compulsory licenses are characterized by the requirement of equitable
remuneration. It is not a wholly separate standard governing exceptions. It does not apply in lieu of
TRIPS Article 13 and it doesn't affect the applicability of TRIPS Article 13 to this case.
Article 11bis(2) can, and should, be read consistently with TRIPS Article 13.
14. Article 11bis(2) applies to "conditions" on 11bis rights. Ricketson writes that "the reference
to 'conditions' in article 11 bis(2) is usually taken to refer to the imposition of compulsory licenses".
(p.525). The WIPO Guide to the Berne Convention (p. 70), the WIPO Glossary of Terms of the Law
of Copyright and Neighboring Rights (pp. 50, 248), and even the title of 11bis(2) assigned by WIPO
also refer to that provision as a compulsory licensing provision. It is highly significant that the
World Intellectual Property Organization – the entity that administers the Berne Convention – has
expressed this clear and consistent view.
15. Article 11bis(2) simply has no bearing on Section 110(5). Neither the negotiating history of
Berne, nor the subsequent writings of commentators support the view that 11 bis(2) represents a
standard against which to judge exceptions to exclusive rights. If Article 11 bis(2) had permitted and
governed exceptions, there would have been no need for the negotiators at the Brussels and
Stockholm conferences to reference Article 11 bis in discussions about the minor reservations
doctrine at all. Article 11 bis(2) is not related to the minor reservations doctrine, and does not bear
upon the scope of exceptions permissible under that doctrine.
IV. SECTION 110(5) MEET S THE ARTICLE 13 CRITERIA
16. I'll turn now to the applicability of Article 13 to Sections 110(5)(A) and (B). These sections
apply to different works and have a different scope. Thus, they must be examined separately. Both
provisions apply to certain special cases, do not conflict with the normal exploitation of the work and
do not unreasonably prejudice the legitimate interests of the right holder.
A. I
NTERPRETING THE ARTICLE 13 CRITERIA
17. Interpretation of the TRIPS Article 13 criteria requires a fact-intensive analysis by the Panel.
Article 13 is intended to be a flexible mechanism to evaluate numerous different exceptions in many
different contexts and legal systems. It demands a 'rule of reason' approach. The permissibility of
exceptions under TRIPS Article 13 must necessarily be determined on a case-by-case basis, taking
into account all the circumstances of an individual case.
18. In such an analysis, the market of the country imposing the exception is the most relevant.
The United States and the EC agree on this issue. Moreover, while both actual losses and potential
losses may be relevant to the analysis under Article 13, the key is a realistic appraisal of the
conditions that prevail in the market. An analysis based on unrealistic and counter-factual
assumptions is not reliable, is speculative, and basically unfair. The only way to avoid the danger of
arbitrariness is to base the analysis on realistic market conditions.
B. S
ECTION 110(5)(A) AND (B) APPLY TO CERTAIN, SPECIAL CASES
19. Both Section 110(5)(A) and (B) represent exceptions that apply in certain special cases. The
essence of this requirement is that exceptions be well-defined and of limited application. Both
sub-sections (A) and (B) are sufficiently definite. Section 110(5)(A) is defined by the equipment
limitations, and the subsequent case law. Section 110(5)(B) is clearly defined in the statute by square
footage and equipment limitations.
20. Furthermore, to the extent that the purpose of the exception is relevant, it is only required
that the exception have a specific policy objective. TRIPS does not impose any limitations on the
policy objectives that a particular country might consider special in light of its own history and

national priorities, and a Panel should be loathe to imply them. In this case, both U.S. exceptions rest
upon sound public policy objectives related to the social benefits of fostering small businesses and
preventing abusive tactics by the collecting societies.
C. N
EITHER SECTION 110(5)(A) OR (B) CONFLICTS WITH NORMAL EXPLOITATION
21. Neither Section 110(5)(A) nor Section 110(5)(B) conflict with the normal exploitation of a
work. The Panel's analysis of the issue of normal exploitation should be a broad one. There is no
textual support in TRIPS for confining the analysis concerning normal exploitation to one exclusive
right. The impact of an exception on a particular exclusive right is relevant, but no more relevant
than the effect of the exception on the exploitation of the work as a whole. When considered in
context, neither Section 110(5)(A) nor Section 110(5)(B) conflict with the normal exploitation of the
works that they cover.
22. Section 110(5)(A) does not conflict with normal exploitation, as it was intended precisely to
exempt those establishments which would not have otherwise justified a commercial license. More
generally, the market to which Section 110(5) applies was never significantly exploited by the PROs.
During Congressional consideration of Secti on 110(5)(B), ASCAP and BMI themselves advocated
an exemption for establishments under 3500 square feet. ( Exhibit US – 16, CRS study comparing
Aiken standard to "ASCAP/BMI proposal"). In addition, they voluntarily signed a private agreement
with the NLBA with the same square footage lim itations. And they offered the same deal to the
NRA. These actions by the PROs constitute important evidence that Section 110(5)(B) does not
conflict with a normal exploitation of a work in the United States market.
D. NEITHER SECTION 110(5)(A) OR (B) CAUSES UNREASONABLE PREJUDICE
23. Finally, we turn to the last prong of the TRIPS Article 13 standard: unreasonable prejudice.
The economic effects of Section 110(5)(A) and (B) are minimal. Neither of these provisions cause
EC right holders unreasonable prejudice. In fact, the EC has yet to provide a shred of evidence that
Section 110(5)(A) causes its right holders any prejudice whatsoever. Given this situation, our
empirical analysis will focus, as has the EC, on Section 110(5)(B).
24. In our first submission, the United States noted the irrelevance of the figures provided by the
EC, and discussed the factors by which those figures must be reduced to yield a reasonable
approximation of possible losses to EC right holders. The EC responded by asserting generally that
the exception was costing its right holders millions of dollars. Thus, in our second submission, the
United States has provided rebuttal evidence that Section 110(5)(B) is not costing EC right holders
millions, but rather an amount that is insignificant. The analysis demonstrated that the maximum
loss to EC right holders of distributions from the largest U.S. collecting society, ASCAP, as a result
of the Section 110(5) exemption is in the range of 294 to 586 thousand dollars. This is in the range
of 1%.
25. The United States has presented the Panel with the most precise estimates possible regarding
the economic prejudice caused by Section 110(5) . We've used data from ASCAP, from the NRA,
from the NLBA, and even from the EC. Our analysis is based on the best information available, and
has a firm factual and logical basis.
26. The EC has not to date offered any facts that rebut in any meaningful way any of the
assumptions on which the U.S. analysis is based. The only "data" on losses offered by the EC thus
far is a statement from a self-serving press release issued by ASCAP and BMI. In its answers to the
Panel's questions, the EC makes some assertions regarding the music licensing market in Ireland.
We do not believe that Ireland is a comparable market to the United States. And even if it was,
actual data from the United States is certainly more relevant to the issue at hand.

27. The Panel's job is to weigh the facts presented. It must weigh the detailed evidence
presented by the United States, which indicates prejudice in the range of a few hundred thousand
dollars, against the assertions of the EC about Ireland. We respectfully submit that the U.S. analysis
is the more credible one, and that it demonstrates that the amount of prejudice suffered by the EC is
not unreasonable – in fact, it is barely measurable.
28. Our analysis is laid out in our Second Submission in significant detail. With the aid of
US-exhibit 24, I will review it here briefly. Exhibit 24 has two pages – one for ASCAP and one for
BMI. We've prepared these exhibits as an aid to this oral presentation, and you'll note that most of
the numbers are rounded off. The precise figures are cited in the U.S. Second Submission. To
simplify the presentation, I'll focus on the ASCAP analysis. As we noted in our brief, however, the
numbers for BMI are even smaller. BMI collects less in annual revenues and collects for a lower
percentage of EC right holders.
1. Starting-point: royalties paid to EC right holders: $19.6 million - $39 million
29. The logical starting-point is the total amount paid to EC right holders by the collecting
societies. In conducting an internal analysis of the effect of Section 110(5) on EC right holders in
1998, the EC based its calculations on distributions from the U.S. PROs to EC collecting societies.
In 1996, such distributions were a bit under 19.6 million dollars.
2
30. In its response to the Panel's questions, however, the EC argues that the relevant number is
far higher, and cites figures from ASCAP purporting to show that EC right holders received an
average of $39 million from ASCAP for the years 1996 – 98. Given the inconsistency in the EC
methodology, the United States' analysis proceeds based on a range of 19.6 million to 39 million.
(line 1 of Exhibit US-24).
31. Now these total figures – 19.6 – 39 million – represent payments from all licensees,
including those that are not affected at all by Section 110(5)(B). So obviously it does not represent a
realistic number for the potential loss to EC right holders. The only loss could come from
establishments that meet the size and equipment limitations and play the radio. So we will take it
step by step to reduce that total figure to exclude revenues that are unaffected by Section 110(5).
2. Reduce to amount attributable to general licensing - $3.7 - $7.4 million
32. Step One – You've got to exclude revenues from TV and radio broadcasting. Nothing in
Section 110(5)(B) touches these revenues. And in fact license fees paid by TV and radio
broadcasters are by far the largest portion of ASCAP's revenues. Licensing fees from establishments
covered by Section110(5)(B) are considered general licensing fees. We know from ASCAP's Annual
Reports that general licensing fees make up only 14% of ASCAP's total revenues. That's 18.9% of
ASCAP's domestic revenues. So as you can see unde r Line 1 of the exhibit, right away you have to
reduce the total amount paid to EC right holders to just 18.9% of that total, or 3.7 – 7.4 million
dollars.

2 The starting figure for BMI was taken from the EC's 1998 Trade Barriers Regulation Investigation
Report, which indicated that of BMI's total distributions to rightholders of 217.3 million in 1996, 5.6% went to
foreign collecting societies. We've made the realistic assumption that two-thirds of these foreign distributions
are paid to EC right holders (217.3 * .056 * .67 = 8.15), and then followed the same calculations as described
for ASCAP.

3. Reduce to account for licensing revenue from general licensees that do not meet the
statutory definition of an "establishment" – losses to EC right holders: $1.85 - $3.69 million
33. Step Two – Section 110(5)(B) does not apply to all general licensing. General licensing is a
very broad category. It essentially applies to anyone that is not a radio or television station.
ASCAP's A-Z list of general licensees is Exhibit US-25. As you can see, this category includes
everything from background music services, colleges and universities, conventions, football teams,
music-on-hold, private clubs, theme parks, trade shows, training seminars and tractor pulls.
Restaurants are certainly included on the list, but so are many other types of licensees. The royalties
paid by these licensees must be excluded from the analysis of losses resulting from
Section 110(5)(B).
34. In accounting for this factor, the United States has made an assumption that 50% of general
licensing revenue is attributable to such licensees. Given the variety of exclusive licensees and
significance of some of the excluded ones, this figure is a conservative one. In Step Two on the
exhibit, you can see that after reducing the potentia l losses to EC right holders to 50%, the resulting
range of potential loss is about 1.8 million to 3.7 million.
4. Reduce to account for licensing revenue from general licensees that do not play the
radio – losses to EC right holders: $.56 million - $1.13 million
35. Now we go to step three. Obviously many restaurants, bars and retail stores do not play
radio music. For most establishments, radio programming – with all of its advertisements, talk and
interruptions – is an unattractive option. Who want s their customers to hear advertisements for their
competitors? Much of the revenue from general licensees that qualify as establishments is not
attributable to the playing of radio or TV music, but rather to public performances of music from
media such as tapes/CDs, live bands, and jukeboxes.
36. The National Restaurant Association and the National Licensed Beverage Association
estimate that approximately 33% and 28% of their members, respectively, play the radio. Such radio
use is often not exclusive. Many establishments that play the radio will often play music from other
sources as well. Taking an average of these two roughly comparable estimates, we have assumed
that 30.5% of establishments play radio music.
37. It is important to note that, given that establishments often play music from more than one
source, this estimate – 30.5% of establishments that play the radio – does not correspond with the
percentage of licensing revenue attributable to the playing of radio music. Revenue from radio music
is going to be much less. Nevertheless, we are being very conservative in these calculations, and
have assumed for the sake of this analysis that 30.5% of licensing revenue is attributable to the
playing of radio music. Correspondingly, the losses to EC right holders from the Section 110(5)
exemption for radio music must be reduced to this amount. In line 3, you can see that this would
range from about half a million to 1.1 million dollars.
5. Reduce to account for licensing revenue from general licensee establishments that play
the radio and meet size limitations of Section 110(5): losses to EC right holders: $294,113 to
$586,332
38. In Step Four, we take a final reduction to take into account the fact that many eating,
drinking and retail establishments that play radio music do not meet the square footage limits of
Section 110(5)(B). According to figures provid ed by the National Restaurant Association, 65.5% of
restaurants meet the square footage criteria of the statute. According to the EC, there are 364,404
eating and drinking establishments in the United States. That means that about 239 thousand meet
the square footage requirements of the statute.

39. On the retail side, the EC has presented a study commissioned by ASCAP purporting to
demonstrate that about 45% of retail stores meet the square footage limits of the statute. The EC also
alleges that there are 683,783 retail establishments in the United States. 45% of 684 thousand is
about 307 thousand.
40. So, even using EC figures for the sake of today's analysis, we have about 239 thousand
exempt restaurants and 307 thousand exempt retail stores. That's a total of 546 thousand exempt
establishments, which is 52.1% of all establishments. In line 4, we've reduced the possible losses to
EC right holders to 52.1%, which is about 294 – 586 thousand dollars.
41. If you follow the same four-step analysis for BMI, the result is a paltry 122 thousand dollars.
6. The U.S. Methodology is Conservative
42. As explained in the U.S. submission, these calcul ations are conservative and – if anything –
overstate the true amount of economic prejudice to EC right holders. Some of the reasons these
figures are conservative include:
- The United States has assumed that where 30.5% of establishments play the radio, 30.5% of
licensing revenue is attributable to radio-playing. This figure is obviously too high, given the
large proportion of establishments that play music from more than one type of media.
- Similarly, the United States assumed that the 65.5% of restaurants (and 45% of retail
establishments) that fit within the square footage limits of the exception accounted for a
65.5% (and 45%) loss of revenue. In fact, the exempt restaurants and retail establishments
are necessarily smaller establishments, and almost certainly represent a smaller proportion of
licensing revenue.
- The analysis also does not take into account steps that ASCAP and BMI might take to
minimize any impact of Section 110(5).
- Similarly, the analysis does not take into account the establishments that could take
advantage of the private agreement concluded by the PROs with the NLBA.
7. Any minimal prejudice from Section 110(5)(B) is reasonable in light of ASCAP and
BMI's advocacy of an exemption of almost identical scope
43. Finally, in considering whether the passage of Section 110(5)(B) has caused right holders
any unreasonable prejudice, the private agreement between the PROs and the NLBA is again
relevant. The PROs voluntarily agreed to a blanket exemption of 3500 square feet. They offered the
same deal to the NRA. Perhaps most sign ificantly, during Congress' consideration of
Section 110(5)(B), the "ASCAP and BMI proposal" also revolved around an exemption for
establishments smaller than 3500 square feet. Presumably, ASCAP and BMI would not have
proposed an exemption of 3500 square feet if they felt that such an exemption would cause their
members any real prejudice.
V. CONCLUSION
44. To sum up, the applicable standard for determining the TRIPS consistency of Section 110(5)
of the U.S. Copyright Act is TRIPS Article 13. Section 110(5) is a permissible exception to the
public performance right based on the criteria articulated in Article 13. Therefore, the United States
respectfully requests that the Panel find that both Section 110(5)(A) and (B) are consistent with the
TRIPS Agreement.

45. Furthermore, the United States requests that the Panel clearly delineate its findings regarding
sub-section (A) and sub-section(B) of Section 110(5), in order to provide maximum guidance to
WTO members regarding the interpretation of the TRIPS provisions at issue.

ATTACHMENT 2.7
COMMENTS ON THE LETTER FROM THE DIRECTOR GENERAL OF
WIPO TO THE CHAIR OF THE PANEL
(12 January 2000)
1. The United States appreciates this opportunity to comment on the material provided to the
Panel by the International Bureau of the World Intellectual Property Organization (WIPO). The
United States further appreciates the Panel’s communication of January 10, 2000, regarding the
deadline for submitting comments on these materials.
2. In the view of the United States, the extensive material provided by WIPO does not raise
issues not already addressed by the Parties and discussed in the two Panel meetings in this case. The
material further confirms the importance that Bern e negotiators attached to the permissibility of
exceptions under Articles 11 and 11 bis, and the existence of the minor reservations doctrine. See,
e.g., Annexes X, XII and XIII. For this reason, the United States considers that these documents
support the U.S. position in this case.

3.1 AUSTRALIA
3.1.1 WRITTEN SUBMISSION OF AUSTRALIA
(1 November 1999)
SYNOPSIS
• Exceptions or limitations to the right of authorising public communication of
broadcast copyright works under the TRIPS Agreement must conform with:
- the general conditions set by TRIPS Article 13, and
- the specific conditions set by Article 11 bis of the Berne Convention as
incorporated in TRIPS,
consistent with the general objectives and principles of TRIPS, in particular
Article 7.
• It would be valuable to clarify the relationship between TRIPS and Berne as they
apply to this specific right:
- there is no hierarchy of authority between TRIPS Article 13 and Berne
Article 11bis(2), but the latter provision provides more direct guidance as to
the present case;
- any exception or limitation would still need to conform with each of the two
provisions;
- this right is to be considered differently from other rights – such as the
general reproduction right – in the light of the specific guidance provided by
Berne 11bis(2);
- 11bis2 specifies that conditions on this right shall in no circumstances be
prejudicial to the author's entitlement to equitable remuneration.
• The diplomatic history of the Berne Convention provides further guidance as to how
the "conditions" allowable under Berne 11bis(2) should be interpreted:
- the right of equitable remuneration was strongly emphasised;
- the only apparent exceptions considered were "minor reservations" relating to
use of the work in a private setting or associated with public interest
objectives, such as in educational or religious contexts.
• Consistent application of these two provisions to the right of public communication
of broadcast works would entail giving due weight to Berne 11bis(2):
- hence, the test established under TRIPS Article 13, applied to this right,
should be coloured by the specific requirement for equitable remuneration;
- by setting conditions on the exercise of this right, and establishing a
minimum standard involving equitable remuneration, 11 bis(2) prescribes
how rights and obligations are balanced, and exceptions and limitations are

set, that is a specific instance of the general balance of interests that is
required in TRIPS Article 7 and also expressed in Article 13;
- Article 9(2) of Berne, by contrast, has only limited and indirect relevance to
the determination of the scope of allowable exceptions and limitations to this
right.
• Equitable remuneration in relation to the right of public communication of broadcast
works should entail recognition of any specific commercial benefits that are intended
to result from public communication made for commercial objectives:
- the confinement of this right to an entitlement to equitable remuneration
represents a significant constraint on the exercise of the right, allowing
exclusion of the right to prohibit public communication and to seek
inordinate remuneration, and allowing for it to be implemented through
compulsory licensing;
- equitable remuneration in this context maintains the balance of rights and
objectives called for in TRIPS Article 7;
- it also clarifies the nature of "unreasonable prejudice" in the application of
TRIPS Article 13 to the right of public communication of broadcast works.

I. POLICY BACKGROUND
1.1 Historically, at a national level, copyright and related rights have been developed, enforced,
and subject to limitations and exceptions with the overall goal of serving the broader public interest
through the provision of effective and appropriate private rights. The WTO Agreement on Trade-
Related Aspect of Intellectual Property Rights ("TRIPS") articulates this balance, already present in
the established copyright norms of the Berne Convention for the Protection of Literary and Artistic
Works ("Berne"),
1 sets it explicitly into an international trade context, and obliges WTO Members to
observe it in a number of specific contexts in their implementation of intellectual property law.
TRIPS is founded on the understanding that distortions and impediments to trade, and other forms of
detriment to legitimate interests, are the consequence of disturbances to this balance.
1.2 Hence TRIPS affirms that a "balance of rights and obligations" is a key objective of the
"protection and enforcement of intellectual property rights" (Article 7), and it provides for exceptions
and limitations to be imposed on intellectual property rights, including copyright and related rights
(Article 13). Any exceptions to the basic framework established by TRIPS should be aimed at
sustaining this mutually beneficial balance, and should also be consistent with the specific provisions
of TRIPS (including those provisions of other instruments incorporated within TRIPS by reference).
1.3 The present case concerns an exemption from the requirement to pay royalties to music
composers and songwriters for the playing of radio and television broadcasts of their compositions in
certain public places – exceptions to the right of communication to the public of broadcast copyright
works, a right which has, in the Berne Convention, been clearly distinguished from the broadcast
right itself. On the basis of the two first submissions, there appears to be no issue as to the initial
scope of the rights, and the present case is more concerned with the legitimate scope of certain
statutory exceptions to that right: hence it has less to do with the underlying nature of the right than
with the degree to which that right can be limited or qualified, with reference to the questions of
normal exploitation of a copyright work, unreasonable prejudice to the right holder's interests, and
the right holder's entitlement to equitable remuneration.
1.4 The case therefore raises questions about the interaction of private intellectual property rights
(IPR) and broader public policy goals, the way in which the broad objectives of TRIPS are to be
reflected in national intellectual property systems, and how certain key provisions are to be
implemented in individual jurisdictions. Since the case relates to key provisions of Berne, it also
raises the question of how the diplomatic and interpretative history of relevant provisions of that
Convention should be taken into account when interpreting obligations under TRIPS.
1.5 The General Report of the Rome Conference, in discussing the introduction of the new right
of communication to the public through broadcasting (the "most important result" of that
Conference
2), notes that the text adopted by the Conference "had the characteristic of a compromise
between two opposing tendencies": that of "entirely assimilating the broadcasting right into the other
exclusive rights of the author", and that of considering the right "as the subject for intervention by the
public authorities to protect the cultural and social interests linked to this new and special form of
popular dissemination of intellectual works, especially musical works".' 3 This is a clear instance of
the broader "balance of interests" noted in TRIPS 7, with specific bearing on the particular right at
issue in the present case. The Report of the Sub-committee on Broadcasting at Rome notes that this
provision reconciles "the general public interest of the State with the interests of authors",
4 the public

1 For convenience and brevity, this submission generally cites provisions of TRIPS in the format
"TRIPS 13", for "Article 13 of TRIPS", and "Berne 11bis(2)", for "paragraph 11bis(2) of Berne".
2 Proceedings of the Conference Convened at Rome, BIRPI, Berne, 1929, p. 210.
3 loc. cit.
4 op. cit. p.184.

interests under consideration being the potential use of the new medium of broadcasting for the
dissemination of cultural works.
1.6 Australia's involvement as a third party in this case reflects:
• an immediate trade interest in ensuring that Australian composers and songwriters
can obtain equitable remuneration in relation to the public communication of
broadcasts of their musical works in the important US market;
5 and
• the need to preserve the integrity of the rule s relating to trade-related IPRs: that is,
ensuring that TRIPS (and, in this case, specifically the Berne provisions it
incorporates) is interpreted and applied in national law in a manner that ensures that
the common standards are fully respected, while maintaining a legitimate scope for
public policy exceptions to IPRs, in a way that preserves the balance of interests
enshrined in TRIPS and promotes its objectives.
Australia's approach is accordingly governed by the concern that there should be no unreasonable
diminution of the legitimate interests of copyright owners, including the right to equitable
remuneration where this is explicitly provided for; and that governments should have sufficient
latitude to maintain the underlying balance of rights and obligations while giving full effect to
specific TRIPS obligations.
1.7 In June 1998, the Australian House of Representatives Standing Committee on Legal and
Constitutional Affairs tabled a report on the public performance and broadcast rights in relation to
small business.6 A key issue considered by the Committee was the international legal obligations
concerning public performance and broadcast rights set out in TRIPS and Berne. As elements of this
Committee's work may be of use in the present Panel's deliberations, a synopsis of this report is
attached (Annex A). Australia continues to plac e strong emphasis on the continuing consistency of
its own domestic intellectual property system with international obligations, and welcomes the
opportunity that the present case provides to clarify and confirm those obligations as they apply to
the right of public communication of broadcast works.
II. LEGAL ISSUES
2.1 The question before the Panel is whether the recently amended S.110(5) of the US Copyright
Act ("S.110(5)") is in breach of TRIPS 9(1), which requires WTO Members to comply with Berne
Articles 1 through 21 (save for 6bis), and the Berne Appendix. This obligation is potentially affected
by TRIPS Article 13 which sets bounds within which any limitations and exceptions to copyright and
related rights under TRIPS must be confined. This submission sets out an approach to dealing with
the legal issues of this case in a manner that should preserve both the legitimate interests of copyright
holders and the public interest, as well as mainta ining the integrity of th e composite TRIPS-Berne
system. Given that this is the first case before the WTO DSB to consider substantive TRIPS
provisions on copyright, and in particular the linkages between specific Berne provisions and broader
TRIPS provisions, this submission offers some considerations on interpretative questions.

5 According to one industry estimate, the potential annual loss from the introduction of S.110(5) of the
US Copyright Act would exceed AUD 1 million, a sum likely to rise given current market trends.
6 Don't Stop the Music, http://www.aph.gov.au/house/committee/laca/Inquiryincopy.htm.

The scope and objective of Berne Article 11bis: the right of public communication of broadcast
works, and conditions on that right
2.2 S.110(5) provides that certain forms of public communication of broadcast works shall not
infringe copyright. This creates a clear excep tion to the right established in accordance with
Berne 11bis(1) which provides to authors of literary and artistic works (including musical works) the
exclusive right of authorizing inter alia "the public communication by loudspeaker or any other
analogous instrument transmitting, by signs, sounds or images, the broadcast of the work". 7 This is
subject to the provision (Article 11 bis(2)) that it "shall be a matter for legislation in the countries of
the [Berne] Union to determine the conditions under which [this right] may be exercised… [These
conditions] shall not in any circumstances be prejudicial to the moral rights of the author, nor to his
right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by
competent authority". This last provision bears the facilitative heading "Compulsory Licences". The
context of the 11 bis(2) suggests that it is intended in part icular to ensure that arrangements for
compulsory licensing of broadcast works do not deprive the right holder of equitable remuneration.
This particular focus was confirmed at the Stockholm Conference. In addition, the scope of
Berne 11bis is potentially affected by the so-called "minor reservations", discussed below (from 3.4),
that form part of its negotiating history.
The scope and objective of TRIPS Article 13: general limitations and exceptions on copyright
2.3 TRIPS 13 covers limitations and exceptions to exclusive rights pertaining to copyright works
in general. Its immediate objective is to "confine" such limitations or exceptions. It has some
important differences from parallel provisions in relation to trade marks (Article 17), designs
(Article 26.2) and patents (Article 30) - these only cover exceptions, and not limitations, to exclusive
rights. The need to confine limitations in TRIPS 13 as well as exceptions may be a consequence of
the different nature of copyright compared with industrial property rights, entailing the broader range
of legitimate non-commercial usages of copyright material, and the widespread use of compulsory
and mechanical licensing in the exploitation of copyright works. Such measures limit the operation
of the right rather than necessarily create exceptions. TRIPS 13 recognises the need to govern the
way in which legislative restrictions on such rights operate, so as to maintain an appropriate balance
of interests.
2.4 The notion of "limitation", in contrast to an "exception", accords with the operation of
Berne 11bis(2), which sets bounds on the "conditions" which national legislation may set for the
exercise of the specific rights provided in Berne 11bis(1).
Berne Convention obligations in a TRIPS context
2.5 How, and to what extent, do the history and accumulated interpretative material concerning
the Berne Convention apply to Berne provisions within TRIPS when considered under the WTO
DSU? This is not raised specifically as an issue by either party, but is implicit in the use made of
background material about Berne in both first submissions. In interpreting the provisions at issue,
the EC submission has drawn on the diplomatic history of Berne; the US submission (para 22) refers
to the objective of TRIPS (Article 7), draws on scholarly commentary on Berne 9(2) in its detailed
elucidation of TRIPS 13, and invokes the Berne doctrine of "minor reservations" that is not a specific
Berne provision but was established in diplomatic conferences on Berne (para 18).
2.6 On the face of it, the Berne provisions at issue should be assessed as obligations arising
through the effect of TRIPS, and not as Berne obligations in their own right. TRIPS binds WTO
Members to certain provisions of a distinct international instrument, the Berne Convention.

7 Berne 11 is also relevant, in that it covers any public communication of the work, but Berne 11 bis
provides more specific guidance on the context at issue in this case.

TRIPS 2.2 provides that TRIPS does not derogate from existing obligations under Berne: this
suggests that any rights or exceptions permitted under TRIPS should be consistent with Berne in its
own right. TRIPS was negotiated with a background understanding of the scope of the provisions of
Berne, and, while there is not necessarily a direct linkage with the interpretative history of Berne, it is
unquestionable that the Berne negotiations form part of customary international law in this area.
Moreover, the inclusion of Berne provisions in TRIPS indicates that the object and purpose of TRIPS
extend to the promotion of the full and effective implementation of those provisions.
2.7 It is submitted that both the interpretative history of Berne and the specific objectives of
TRIPS are relevant to the application of overlapping TRIPS and Berne provisions, in the absence of
any contradiction between the two. There are in fact certain instances where the background of
Berne helps elucidate the way interests are balanced in TRIPS. In dealing with the complex issues at
stake in this case, it would be useful to articulate more clearly how this linkage should operate.
Berne Article 11bis(2) and TRIPS Article 13: reconciling the general and specific provisions
2.8 There are compelling policy and legal reasons to maintain consistency between Berne 11 bis
and TRIPS 13 when they are applied to the same right. This question has not been explicitly raised
by either party, but is implicit in the interpretations made in their submissions. There is a need for
clarity and consistency of application, particularly given that overlapping Berne and TRIPS
provisions have not before been considered in a WTO DSU context.
2.9 The first question relates to their respective scope - does TRIPS 13 encompass
Berne 11bis(2), or are they co-extensive in relation to broadcast works? A WIPO commentary on the
relationship between TRIPS 13 and exceptions and limitations in Berne remarks that:
None of the limitations and exceptions permitted by the Berne
Convention should, if correctly applied, conflict with the normal
exploitation of the work and none of them should, if correctly
applied, prejudice unreasonably the legitimate interests of the right
holder. Thus, generally and normally, there is no conflict between
the Berne Convention and TRIPS Agreement as far as exceptions
and limitations to the exclusive rights are concerned.
8
2.10 This suggests that no fundamental conflict need exist, and that all limitations and exceptions
already allowed under Berne would also comply with TRIPS 13; but that does not mean that the
exceptions or limitations ("conditions") afforded by one are coextensive with those allowed under the
other. Ricketson9 has suggested that TRIPS 13 is broader in scope than specific exceptions allowable
under Berne. However, even if an exception to the right of public communication of broadcast works
were found to be consistent with TRIPS 13, then the more specific Berne 11 bis(2) would still apply
and maintain the requirement for equitable remuneration. In effect, this would either add an
additional step to the "three step" test of Article 13 when it is applied to public communication of
broadcast works, or would more precisely determine the way that test is applied in this context.
2.11 There is no hierarchy of authority between TRIPS 13 and Berne 11 bis(2). In the context of
the conclusion of TRIPS, both provisions were adopted at once and have simultaneous effect as
TRIPS obligations. However, Berne 11bis(2) has not been addressed so far in the submissions put to
the panel, and the focus appears to be on TRIPS 13 only.10

8 Implications of the TRIPS Agreement on Treaties Administered by WIPO (1996) Geneva,
page 22-23.
9 Ricketson, Staniforth, The Law of Intellectual Property, LBC, Sydney, 1999, 16.560.
10 See for instance paragraph 17 of the first submission of the US.

2.12 Further, TRIPS 13, as a general provision, cannot override the more specific Berne 11 bis(2):
it is more likely that the latter provision indicates how the parties considered the general principle
would apply in these circumstances, and there is no evidence to suggest that the general was intended
to override the specific in this particular case; hence the specific provision should prevail in the
event of any unclarity. This legal principle - generalia specialibus non derogant – is well established
in common law and can be drawn on in the international context.
11 Further, TRIPS 13 provides that
limitations and exceptions are to be confined in a certain way: this does not rule out further, more
focussed constraints, based on specific Berne provisions. Since the two provisions are equally
binding on WTO Members, and can be interpreted without conflict between them, an exception or
limitation to the right of public performance of broadcast works should comply with both TRIPS 13
and Berne 11bis(2).
2.13 The incorporation of Berne 11 bis establishes this right under TRIPS; it would follow that
any provision allowing limitations to that right (such as 11 bis(2)) would also be significant in
determining related TRIPS obligations. The General Report of the Brussels Conference states that
Berne 11bis(1), "with its three separate items, is inseparable from paragraph 2".12
2.14 It is submitted that the preferable approach would be to acknowledge that Berne 11 bis(2)
influences the application of TRIPS 13 to rights established under Berne 11bis (but not its application
to other rights). This would promote consistency of interpretation between the key provisions of
TRIPS and of Berne incorporated within TRIPS. Berne 11 bis(2) provides the clearest, most
authoritative guidance as to how acceptable limita tions and exceptions under TRIPS 13 apply to the
right of public communication of broadcast works; at the same time, it establishes a direct test for
TRIPS-consistency of any exception or limitation on that right.
III. ANALYSIS OF BERNE ARTICLE 11 BIS
Scope of the specific limitations in Berne Article 11bis: interpretative background
3.1 The right of public communication of broadcast works was incorporated into the Berne
Convention at the Brussels Conference (1948) with no significant opposition, 13 confirming that a
distinct right existed over and above the broadcast right itself.
The rationale for this is that the author thinks of his licence to
broadcast as covering only the direct audience receiving the signal
within the family circle. Once this reception is done in order to
entertain a wider circle, often for profit, an additional section of the
public is enabled to enjoy the work and it ceases to be merely a
matter of broadcasting.
14
3.2 The Brussels Conference considered the limitations that national legislation may place on
this right, leading to the adoption of Article 11bis(2). Three delegations had made drafting proposals
seeking to clarify that the right did not apply when the communication to the public was not in a

11 The authority for relying on the principle of generalias specialibus non derogant is Article 38 of
the Statute of the International Court of Justice which is generally regarded as a complete statement of the
sources of international law. Article 38(1)(c) indicates that a valid source of international law is "the general
principles of law recognised by civilized nations".
12 Records of the Conferen ce Convened in Brussels , quoted in Berne Convention Centenary, WIPO,
Geneva, 1986, p. 181.
13 Ricketson, Staniforth (1987), The Berne Convention for the pr otection of literary and artistic
works: 1886-1986, London: Eastern Press Ltd, page 453.
14 WIPO Guide, Para. 11bis .12.

commercial context, was made in a family or domestic circle, or was in a scholastic context. 15 These
were withdrawn on the understanding that such reservations could be accommodated within the
proposed text of Article 11 bis(2), but subject to the understanding in the Broadcasting Sub-
committee's report that exercise of the prerogative "will in no circumstances be prejudicial to the
author's … right to receive equitable remuneration".
3.3 Inasmuch as this provides guidance as to the nature of the TRIPS (and Berne within TRIPS)
obligation, it is clear that no exception was co ntemplated that would allow public communication of
broadcast works in the pursuit of commercial objectives without the possibility of securing equitable
remuneration. The Brussels Conference General Report mentioned "free-of-charge exceptions made
for religious, patriotic or cultural purposes"
16 as related to allowable conditions. The Stockholm
Conference17 clarified that this provision referred to "the compulsory licence which national
legislations may impose, subject to just remuneration". The provision does not appear to extend to
the effective extinguishment of the right in circumstances when equitable remuneration could be
expected. As Ricketson notes, "the power to impose conditions on the exercise of rights set out in
Article 11bis(1) does not carry with it the power to deny those rights".18
Minor reservations under Berne Article 11bis
3.4 Since the first submissions by both parties refer to "minor reservations" under Berne, 19 it may
be useful to clarify how such "reservations" would apply in a TRIPS context. It was in relation to
Berne 11 - Right of Public Performance - that the issue of minor reservations first arose. During the
Brussels Conference (1948) it was proposed that a general provision be inserted into the Berne
Convention under which it would be permissible for State Parties to retain minor reservations that
already existed in their national laws (e.g. religious ceremonies and performances by military bands
at public fetes). The drafters of the Brussels Revision rejected this proposal on the basis that the
adoption of such a general provision would encourage those nations which had not recognised such
exceptions to incorporate them into their laws.
20 It was agreed that rather than dealing with this
matter in the Convention itself, it would be dealt with in the General Report of the meeting as
follows:
Your rapporteur general has been entrusted with making an express
mention of the possibility available to national legislation to make
what are commonly called minor reservations. The Delegates of
Norway, Sweden, Denmark, and Finland, the Delegate of
Switzerland and the Delegate of Hungary, have all mentioned these
limited exceptions allowed for religious ceremonies, military bands
and the needs of the child and adult education. These exceptional
measures apply to articles 11 bis, 11 ter, 13 and 14. You will
understand that these references are just lightly pencilled in here, in
order to avoid damaging the principles of the right.
21

15 Records of the Conference Convened in Brussels, BIRPI, Berne, 1951: proposal of the Netherlands
on p.279; proposal of Monaco, p.278; proposal of Hungary, p. 278.
16 Records of the Conferen ce Convened in Brussels , quoted in Berne Convention Centenary, WIPO,
Geneva, 1986, p. 181.
17 Records of the Stockholm Conference, WIPO, Geneva, 1971, Main Committee I Report, p.1167.
18 Ricketson (1987), page 525.
20 Ricketson (1987), page 533.
21 The Berne Convention for the Protection of Literary and Artistic Works from 1886 to 1986 ,WIPO,
Geneva, 1986, page 181.

The last sentence underscores the de minimis nature of the types of exceptions that could fall under
the minor reservations doctrine in relation to this particular right.
3.5 At the Stockholm Conference (1967) it was ag ain agreed that the Berne Convention did not
prevent State Parties from maintaining existing exceptions in their law on the basis that they qualified
as minor reservations.22 The Nordic countries proposed inserting into the General Report a sentence
to the effect that the possibility allowed for in the Brussels Conference General Report for the
making of minor reservations was still valid. The Record of the Stockholm Conference accordingly
reads:
In the General Report of the Brussels Conference, the Rapporteur
was instructed to refer explicitly, in connection with Article 11, to
the possibility of what it had been agreed to call 'the minor
reservations' of national legislation. Some delegates had referred to
the exceptions permitted in respect of religious ceremonies,
performances by military bands, and the requirements of education
and popularization. The exceptions also apply to articles 11 bis,
11ter, 13 and 14. The Rapporteur ended by saying that these
allusions were given lightly without invalidating the principle in the
right.
It seems that it was not the intention of the Committee to prevent
States from maintaining in their national legislation provisions based
on the declaration contained in the General Report of the Brussels
Conference.
23
3.6 Both the Brussels and Stockholm Conferences considered the minor reservation doctrine as
applying to Article 11 bis among other provisions. The legal status of the minor reservations is not
entirely clear: are they strictly "reservations" to the application of the treaty to the countries
expressing them, or are they implicit interpretations of the treaty language? Given that TRIPS does
not permit formal reservations (Article 72), it is possible that TRIPS 13 was intended to provide the
same degree of latitude that these minor reservations permitted under Berne; alternatively, the minor
reservations could be seen as casting light on the practical interpretation of Berne 11 bis(2). For
instance, a "reserved" use could be deemed to be one for which the appropriate remuneration can be
deemed equitably to be nil - given their non-commercial nature, and their private setting or their use
in relation to a common public interest, it coul d be deemed inequitable to charge for such
communications.
"Equitable remuneration" under Article 11bis(2)
3.7 Article 11 bis(2) provides that, whatever conditions are imposed on the exercise of the right
of public communication of broadcast works, "in any circumstances" two clear entitlements should
be preserved - moral rights (which appear not to apply in the TRIPS context, owing to their exclusion
from TRIPS 9(1)), and the right to obtain equitable remuneration. Neither first submission directly
addresses the question of equitable remuneration. It merits consideration, firstly because exceptions
and limitations to the right of public communication of broadcast works need to be assessed against
Article 11bis(2), and secondly because Article 11bis(2) should inform the application of TRIPS 13 to
that right.

22 WIPO Guide to the Berne Convention. (1978) WIPO, Geneva, page 65.
23 Records of the Intellectual Property Conference of Stockholm WIPO, Geneva, 1971, page 1166.

3.8 The distinct nature of the public communication of a broadcast work creates an expectation
of a distinct reward for the creator of the work. This was summarised in a submission to the recent
Australian Parliamentary inquiry as follows:
[the law gives] recognition that there are two levels of benefit. The
radio station is gaining a benefit from broadcasting into people's
homes. If someone at the point of reception chooses to gain a second
commercial benefit by playing the music through the use of
reception, then that is something th at should attract some return for
the author or composer
.24
Hence the notion of 'equitable remuneration' should be informed by this expectation of a separate
reward. The same inquiry report observed:
Many composers emphasised the importance of their public
performance royalties in allowing them to continue to compose
music. … There was a strong feeling that the value of the royalty
was not just in its quantum, but in the knowledge that they were
receiving some sort of financial reward for their work. In many
cases, the principle of reward was considered to be as important as
the money
.25
3.9 Given the clear direction of Berne 11 bis(2), equitable remuneration, either by agreement or
the determination of an appropriate authority, is required for the public communication of broadcasts
even in connection with relatively modest commercial objectives. The appropriate fee may also be
very modest for individual small businesses seeking to secure commercial benefits from the
broadcast works.
26 The level of equitable remuneration may be linked in a general way to the
commercial benefits achieved by the business user - for instance, in attracting and retaining
additional clientele, in creating a particular ambience, and in drawing on the popular appeal of a
musical work. Representing a major group of users of copyright works, the US National Licensed
Beverage Association (NBLA) has acknowledged the commercial benefits of music:
The use of music in your business establishment is one way you can
enhance your business, influence your customers' eating and
drinking habits, and increase your profits.27
3.10 Equitable remuneration is not simply the level of return that the right holder (or its agent)
wants - Berne 11bis(2) notes that a competent authority can adjudicate on this point in the absence of
agreement, and the right holder is not in a monopolistic bargaining position. Some objective
assessment of the value of the use of the work to the business enterprise may be called for. At the
same time, it is well recognised that enforcemen t of intellectual property rights should not be
burdensome. The need for administrative efficiency has accordingly led to the creation of collective
or "blanket" licensing arrangements.
3.11 It is inconsistent with the requirement for equitable remuneration to remove any legal
possibility for securing appropriate returns for the public communication of broadcast works in

24 Submission of APRA, cited in Don't Stop the Music, pp 67-68.
25 Don't Stop the Music, p.68.
26 The license fee charged by the collecting society ASCAP in the US for the small business exempted
by the recent revision to S.110(5) was $30, for instance (see Annex US-7 to the First Submission of the US, 26
October).
27 NLBA News, April 1997, p.2, supplied as Annex US-6 to the First Submission of the US, 26
October 1999.

contexts which are clearly and substantially commercial in nature, and when commercial benefits
arise from use of the music, often as a conscious commercial judgement (such as the contexts noted
by the NBLA, 3.9 above). For example, broadcas t musical works are communicated to members of
the public for their entertainment and for commercial gain, such as through increased patronage
(even if no direct or distinct charge is levied for the communication of the broadcast as such), as an
alternative to commercial music services or licenses for other forms of commercially-motivated
public communication of works.
3.12 It would be consistent with the notion of "equitable remuneration" for the revenue to be
scaled, within practical bounds, according to the overall commercial interests engaged. As discussed
in para 3.6, equitable remuneration may even be determined to be nil for certain public-interest or de
minimis public communications (such as those cited at the Brussels Conference). The matter is less
clear in relation to incidental use of broadcast works, and in particular in the context of so-called
"homestyle" reception of broadcasts on the premises of small businesses, especially when the public
communication is incidental or unintended, and is not specifically directed at clientele in the course
of pursuing commercial activities. In certain such limited contexts, "equitable remuneration" may
also be effectively nil.
28 Nonetheless, the situation is clearer for significant and unambiguous
commercial use of the copyright work. It would be difficult to maintain that, in the present case, the
effective elimination of the public communication of broadcast right in a wide range of commercial
settings amounts to a determination by the author ities, in the absence of agreement, that nil
remuneration is the most equitable outcome in all those commercial settings. There was no consent
to the removal of the public communication right or the entitlement to obtain equitable remuneration
on the part of the right holders' representatives in the present case:
ASCAP is totally committed to overturning the "Music Licensing
Amendment" which allows for-profit restaurants, bars, grills and
retailers to avoid paying for music performed over radio and
television speakers. Very simply, it is not fair that any of us should
be forced to work for free.
29
3.13 The right in question is "to obtain" remuneration, and does not entail an obligation on the
part of the user to pay remuneration when it is not as a matter of fact sought in any way (including
through collective mechanisms) by the right holder. The first submission of the US points to
situations in which right holders, or the collecting societies representing them, elect not, for practical
or other reasons, to pursue their entitlement to equitable remuneration; but that should be
distinguished from an outright abrogation of that right through legislation. The practical possibilities
for collecting revenues, and the consequent degree to which right holders may choose to seek
remuneration, are contingent matters which may change in the light of technological and commercial
developments. The fact that it may be inconvenient to exercise a right in a particular commercial
context does not in itself justify the removal of that right. Such exceptions need to be justified on
public policy grounds in line with established principles.
3.14 In addition, there is a question as to how national treatment is observed in the situation where
the right to obtain remuneration is denied in a foreign market, especially given the voluntary nature
of collecting societies as a means of exercising the right of public communication of broadcast
works.

28 For instance, the Australian collecting society AP RA has agreed to issue complimentary licenses in
relation to small businesses when broadcasts are received on standard receivers and are not intended to be heard
by the public.
29 Marilyn Bergman, ASCAP President and Chairman of the Board, http://www.ascap.com/meeting99/
audiobackup.html.

The nature of public communication
3.15 Article 11 bis provides no further definition of the nature of "public communication": it is a
matter that is still determined according to national legislation and judicial interpretation. Some of
the "minor reservations" cited at the Brussels Conference in the context of 11 bis (especially those
relating to use in the family or domestic circle) may in fact have bearing on the way "public
communication" is defined. This matter is apparently not at issue (paragraph 17 of the US
submission), but Annex B of this submission sets out some background considerations on this issue
should it be considered by the Panel.
IV. TRIPS ARTICLE 13 AND THE PUBLIC COMMUNICATION OF BROADCASTS
4.1 TRIPS 13 applies in general to limitations and exceptions to rights under Section 1 of Part II
of TRIPS, and accordingly provides a test for the TRIPS consistency of limitations and exceptions to
the right of public performance of broadcast works. When TRIPS 13 was drafted, the terms used
closely followed Berne 9(2). Because of this textual linkage, the two provisions are often compared,
and, on the face of it, the test established in TRIPS 13 does not appear to differ materially from the
three-step test contained in Berne 9(2).
30 For instance, the first submission of the US draws on
material relating to Berne Article 9(2) in its interpretation of TRIPS Article 13.
4.2 There are nonetheless clear differences between the two provisions, especially when
TRIPS 13 is applied to the right of public performance of broadcast works. In this context, therefore,
Berne 9(2) refers to a different right, a different form of exploitation of a work and a different set of
interests; it also refers to outright exceptions to the reproduction right, rather than to conditions or
limitations on the right. The nature of the normal exploitation of works and of unreasonable
prejudice to legitimate interests may significantly differ between the reproduction right and the right
of public communication of broadcast works. The matter would be different if the case concerned an
exception to the reproduction right.
4.3 Berne 9(2) may nonetheless give general or indirect guidance as to the application of
TRIPS 13 to the public communication of broadcasts, especially in any endeavour to interpret the
exact terms used. As far as the legal effect of TRIPS 13 and its object and purpose are concerned in
relation to the right of public communication of broadcast works, then Berne 11 bis(2) provides more
direct and authoritative guidance. Berne 11 bis(2) governs this specific right directly, and a coherent
application of TRIPS would require consistency between TRIPS 13 and Berne 11bis(2).
4.4 In adopting Berne 9(2), the Stockholm Conference commented:
If it is considered that reproduction conflicts with the normal
exploitation of the work, reproduction is not permitted at all. If it is
considered that reproduction does not conflict with the normal
exploitation of the work, the next step would be to consider whether
it does not unreasonably prejudice the legitimate interests of the
author. Only if such is not the case would it be possible in certain
special cases to introduce a compulsory license, or to provide for use
without payment. A practical example might be photocopying for
various purposes. If it consists of producing a very large number of
copies, it may not be permitted, as it conflicts with a normal
exploitation of the work. If it implies a rather large number of
copies for use in industrial undertakings, it may not conflict with a
normal exploitation of the work, but it may not unreasonably

30 Blakeney, Michael (1996) Trade-Related Aspects of Intellectual Property Rights: A Concise Guide
to the TRIPS Agreement. London: Sweet and Maxwell, page 49.

prejudice the legitimate interests of the author, provided that ,
according to national legislation, an equitable remuneration is paid.
If a small number of copies is made, photocopying may be permitted
without payment, particularly for individual or scientific use.
31
In relation to the first criterion of a "special case" in the three-step test, Ricketson notes:
The words 'in certain special cases' embody a general criterion, and
this can be seen as possessing two distinct aspects. First, the use in
question must be for a quite specific purpose: a broad kind of
exemption would not be justified. Secondly, there must be
something special about this purpose, 'special' here meaning that it is
justified by some clear reason of public policy or some other
exceptional circumstance.
32
4.5 The second and third criteria were placed in that order to aid in the application of the rule. In
other words, it is first necessary to decide whether there is a "conflict with a normal exploitation of
the work". Only if this is answered in the nega tive is it necessary to consider whether there is
"unreasonable prejudice to the legitimate interests of the author".
33
4.6 Little guidance is provided on the meaning of the expression "normal exploitation of the
work", although the Stockholm Conference records ci ted above in 4.4 indicate that making a very
large number of copies may conflict with the "normal exploitation of a work".
34 In relation to this
second criterion, Ricketson makes the following useful comment:
Common sense would indicate that the expression normal
exploitation refers simply to the ways in which an author might
reasonably be expected to exploit his work in the normal course of
events. Accordingly, there will be certain kinds of use which do not
form part of his normal mode of exploiting his work - that is, uses
for which he would not ordinarily expect to receive a fee - even
though they fall strictly within the scope of his reproduction rights.
35
4.7 Turning to the last criterion of "unreasonable prejudice", the question is not whether there is
prejudice or not. It is a question of degree as to whether the use in the particular circumstances, is
reasonable or not. The WIPO Guide on the Berne Convention provides the following examples:
All copying is damaging in some degree: a single photocopy may
mean one copy of the journal remaining unsold and, if the author
had a share in the proceeds of publication he lost it. But was this
prejudice unreasonable? Here scarcely. It might be otherwise if a
monograph, printed in limited numbers, were copied by a large firm
and the copies distributed in their thousands to its correspondents
throughout the world. Another example is that of a lecturer who, to
support his theme, photocopies a short article from a specialist
journal and reads it to his audience: clearly this scarcely prejudices
the circulation of the review. It would be different if he had run off

31 Records of the Intellectual Property Conference of Stockholm, Report on the Work of Main
Committee I, WIPO, Geneva, 1971, p.1145.
32 Ricketson (1987), page 482.
33 WIPO Guide to the Berne Convention. WIPO, Geneva, 1978, page 55.
34 Records of the Intellectual Property Conference of Stockholm (1971) Geneva, page 1146.
35 Ricketson (1987), page 483.

large number of copies and handed them out, for this might seriously
cut in on its sales.
Berne Article 11bis(2) as a guide to the application of TRIPS Article 13
4.8 As discussed above (2.14, 4.3), Berne 11 bis(2) has more direct bearing on how TRIPS 13
should be applied in the present case. It stipulates that "conditions" applying to the public
communication of broadcast works "shall not be prejudicial to the moral rights of the author, nor to
his right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by
competent authority". This sheds light on how "normal exploitation", "unreasonable prejudice" and
"legitimate interests" should be interpreted in rela tion to this particular right. For instance, it
suggests that compulsory licenses may be consistent with normal exploitation. It lays emphasis on
the author's moral rights and right to obtain equitable remuneration as legitimate interests in this
context, and it implies that "unreasonable prejudice" would occur if those interests were impaired
through the legislative application of any condition on the exercise of an Article 11bis(1) right.
TRIPS Article 13 in relation to the objectives of TRIPS
4.9 Ultimately, the interpretation of TRIPS Article 13 must be consistent with the objectives of
TRIPS itself, as the first submission of the US notes (para 22). The key provisions in this context are
Article 7 ("Objectives") and Article 8 ("Principles"); elements of the preamble may also be relevant.
Article 7 focusses particularly on technological innovation, the transfer and dissemination of
technology, and the interests of producers and users of technological knowledge, which are not
directly at issue in this case. It also points to the need for protection and enforcement of intellectual
property rights to be "conducive to social and economic welfare, and to a balance of rights and
obligations". Concerns were expressed at the Rome Conference that the development of the then
new technology of radiodiffusion as a means of promoting social and cultural welfare should not be
impaired by a restrictive application of the new broadcasting right.
4.10 While not in the foreground of the TRIPS negotiations, the history of Berne suggests that the
specific balance of interests involved in rela tion to the public performance of broadcast works
appears to be between the right of the author to remuneration,
36 and the need for broadcasting media
to develop and contribute to social and economic well-being. What factors should be considered in
maintaining this balance? Clearly, it was not intended to give the author the right to prohibit the
public communication of the broadcast of the work, as this would be an unreasonable constraint on
the use of broadcast material. Some de minimis or public interest exceptions to the right were also
entertained in relation to some jurisdictions at least – use within the family or domestic circle, in
religious or educational contexts. The author, also, did not have an unlimited right to obtain
remuneration – in effect, the author was not given monopoly bargaining power, and it was
acknowledged that an independent authority may establish the level of remuneration that would be
equitable.
4.11 Hence the balance struck was for an undiminished right of equitable remuneration in relation
to use of works that did not fall within the "minor exception" or de minimis category. When, at the
Rome Conference, Article 11 bis was introduced in its initial form, the Sub-Committee on
Broadcasting reported that the Article was intended "to bring the author's rights into harmony with
the general public interests of the State, the only ones to which specific interests are subordinate,'
37
while it 'emphatically confirms the author's right".

36 As well as the author's moral rights, if they are not excluded in this context - however, the reference
to moral rights in Berne 11bis(2) is likely caught by the exclusion of "rights derived" from Berne Article 6bis in
TRIPS Article 9(2).
37 Proceedings of the Conference Convened at Rome, BIRPI, Berne, 1929, p.183.

4.12 It is submitted that this approach is wholly consistent with the broader objectives of the
TRIPS agreement, and is in fact an exemplary application of the "balance" required by Article 7.
V. S.110(5) OF THE US COPYRIGHT ACT IN RELATION TO TRIPS
5.1 General considerations are now offered in relation to the TRIPS consistency of the legislative
provision at issue. As suggested earlier, S.110(5) needs to be assessed against Berne 11bis(2) as well
as TRIPS 13, and in particular against a reading of TRIPS 13 that gives full weight to the equal
authority of Berne 11bis(2). If an exception to the right of public performance of broadcast works is
considered inconsistent with Berne 11 bis(2), then it would be ineffectual to claim that it was
nonetheless consistent with TRIPS 13.
S.110(5) and Berne 11bis(2): the need to maintain equitable remuneration
5.2 The detailed commentary already provided suggests that it would be inconsistent with
Berne 11bis(2) effectively to remove the right of authorising public communication of broadcast
works when this is for specifically commercial objectives, given that no condition or reservation to
this right has been contemplated which would amount to the denial of equitable remuneration in such
a context. This may hinge on how "equitable remuneration" is to be determined, but it is difficult to
envisage how no entitlement to remuneration for the author can be reconciled with intentional and
direct use of copyright works for specifically commercial purposes.
Application of the minor reservations doctrine
5.3 The present case relates to an exception to the Berne 11 bis(1)(iii) right which precludes right
holders from seeking equitable remuneration in connection with public communication of the
broadcast musical work in a wide range of commercial settings – according to the US Congressional
Research Service, some 70% of bars and restaurants in the United States.
38 Whatever the precise
proportion, this exception clearly covers a substantial portion of the market for communication to the
public of broadcast musical works; nor does it relate to communications essentially unrelated to
commercial objectives. The "minor reservations" cited in the development of the Berne Convention
(discussed from para 3.4) are distinct from this fo rm of commercial usage in a portion of the market
which is neither commercially negligible nor legally de minimis.
S.110(5) and the three-step test of TRIPS 13
5.4 If it is considered relevant or necessary to consider consistency with TRIPS 13, the following
analysis seeks to apply the above interpretation of that Article to the present case.
Special Case
5.5 S.110(5) provides an outright exemption for a wide range of establishments including food
service, drinking and other establishments. There is no indication that the criteria chosen to define
this exception were driven by public policy objectives, comparable to use in a research, educational
or religious context. Equally, S.110(5) appears to provide a blanket exemption for such
establishments rather than dealing with certain special cases: no special quality is conferred upon an
establishment, and the nature of the use of a copyright work is not rendered less directly commercial,
by the floorspace of the establishment. There does not appear to be any identification of "special
use" or "exceptional circumstances" behind the S.110(5) exemption as is called for in the analysis
above (4.4). Rather, the threshold applied is justified by contingent considerations about the
practicalities of collecting royalties.

38 Cited at www.ascap.com/legislative/legis_qa.html.

Conflict with a normal exploitation of the work
5.6 S. 110(5) allows food service, drinking and other establishments to communicate broadcasts
of musical work to the public in the direct pursuit of commercial gain. Broadcasts of musical work
are often used by such establishments to attract, entertain and create an ambience for patrons. The
right to equitable remuneration from the public communication of broadcasts in such commercial
settings is a normal exploitation of musical work, distinct form other forms of exploitation. It is
possible that right holders may, for practical reasons, elect not to seek such remuneration in certain
commercial circumstances, but it is consistent with normal exploitation for them to have that choice,
provided the principle of equitable remuneration is not denied. The US submission (para. 34)
suggests that licensing fees for the establishmen ts excluded under s.110(5)(A) "would likely be the
lowest in the range"; this is arguably more consistent with equitable remuneration in the context of
normal exploitation than there being no right to obtain fees at all. "Equitable remuneration" may be
at an appropriately low level, but should also recognise the direct commercial gain made from public
communication of broadcast works when this is applicable.
5.7 S.110(5) only conflicts with the rightholder's right to authorise the public communication of
a broadcast of musical work and derive equitable remuneration from public communications, and
does not interfere with the rightholder's other exclusive rights such as the right to reproduce, publish,
broadcast or make an adaptation of the work. In this regard s.110(5) could be said to interfere only in
a limited way with the rightholder's overall ability to exploit the work. However, Article 13(2) refers
to conflict with a (in the sense of 'any') normal exploitation of the work – rather than to conflict with
the overall commercialisation of the work. The right of public communication of a broadcast work
has been explicitly recognised in the Berne Convention as a distinct right, giving rise to a distinct
right of remuneration which forms one of the normal exploitations of the work.
Unreasonable prejudice to the legitimate interest
5.8 We have suggested that in this context, Berne 11 bis(2) clearly sets out considerations that
apply to determination of unreasonable prejudice to the legitimate interests of right holders. A
compulsory licensing system, a denial of monopolistic bargaining power, a de minimis or public
interest educational exception are all forms of prejudice to legitimate interests that would be
reasonable: Berne 11bis(2) suggests that denial of the right of equitable remuneration and of moral
rights would be unreasonable.
5.9 It may be argued that any prejudice to rightholders is only minimal because they would
receive royalties from broadcasting stations. S.110(5) allows many food service, drinking and other
establishments to obtain commercial benefit through the broadcast of musical works by attracting and
entertaining their patrons without any compensation to the right holders form whom they derive this
commercial benefit. There is a strong argument that, just as for other inputs into a business, such as
electricity and water, establishments should pay for the public communication of broadcasts of
musical work when that communication is for comme rcial purposes, consistent with the principle of
equitable remuneration. In this context, a "reasonable prejudice" to the interests of the rightholder
would be a denial of the rightholders capacity to prohibit, or charge excessive fees for, public
communication of their broadcast works. Given these more limited forms of conditions on this right,
and for the reasons cited above, Article 11 bis(2) suggests that the denial of equitable remuneration
for such public communication is a more serious prejudice to legitimate interests.
5.10 If a provision entitles a wide range of establishments to communicate the broadcast of
musical work to the public for immediate commercial objectives without paying any royalties to the
authors, then some form of unreasonable prejudice could be established. The "unreasonableness" of
s.110(5) may hinge on the magnitude of the directly commercial usage of copyright works to which
the US hospitality and retail industry would be able to apply this exemption. Since this provision

provides an absolute exemption for copyright infringement in a wide range of commercial contexts, it
rules out any possibility for obtaining the equitable remuneration consistent with reasonable
prejudice to their interests.

ANNEX A
"Don't stop the music!"
A report of the inquiry into copyright, music and small business
In June 1998 the Australian House of Representatives Standing Committee on Legal and
Constitutional Matters tabled a report on the public performance and broadcast rights in relation to
small business. This report was titled "Don't Stop the Music". The Committee's role was to inquire
into and report on the collection of copyright royalties for licensing the playing of music in public by
small business. Apart from considering the role played by copyright collection societies, the
Committee considered the desirability of amending the Australian Copyright Act in relation to public
performance and broadcast rights in a small business context. The Committee made a number of
recommendations the following of which are of relevance to the matters before this Panel.
The Committee considered a number of submissions on the royalty scheme for the use of
background music. The Committee noted that many small businesses felt that they should be exempt
from having to pay a fee for the playing of mu sic in their business. While the Committee was
sympathetic to some of their arguments, the Committee did not consider that small businesses should
be exempt from paying copyright royalty fee for the public performance of music.
The Committee noted that in some circumstances the use of music in a small business was
only intended to be heard by one member of staff and there was a strong case in favour of exempting
such businesses from paying licence fees. In this regard, the Committee recommended that the
relevant collecting society consider granting a complimentary licence when:
- the means of performance is by the use of a radio or television set; and
- the business employs fewer than 20 people; and
- the music is not intended to be heard by customers or the business or by the general public.
That is, neither the radio or television set nor any speakers are located in an area that is
accessible to customers or the general public and any performance inadvertently heard by
customers or the general public is manifestly unintentional.
However, the Committee found that for most small businesses, music is used to attract,
entertain and create ambience for customers. Cr eating a blanket exemption for small businesses
would mean that those businesses using music in a manifestly commercial manner would be exempt
from paying licence fees. The Committee considered that this would not be an inequitable outcome
and recommended against this course of action.

ANNEX B
Definition of "in public"
The rights contained in article 11 bis(1)(iii) of the Berne Convention refer to the public
communication of a broadcast of work . The question arises as to whether the circumstances
envisaged by s.110(5) would amount to a public communication of a broadcast of work.
The Berne Convention does not provide a definition as to what is meant by the term public
communication. The Brussels Conference (1948) provided some guidance in defining the public for
broadcasting and communication rights:
above all, where people meet: in the cinema, in restaurants, in tea
rooms, railway carriages....It also appears from the programme that
perhaps the most important of these "public places" were those
where people worked and conducted their business, such as
factories, shops and offices.39
On this point the WIPO Guide to the Berne Convention notes:
In places where people gather (cafes, restaurants, tea-rooms, hotels,
large shops, trains, aircraft etc) the practice is growing of providing
broadcast programmes.... The question is whether the licence given
by the author to the broadcasting station covers, in addition, all the
use made of the broadcast, which may or may not be for commercial
ends.
The Convention's answer is "no". Just as in the case of a relay of a
broadcast by wire, an additional audience is created (paragraph (10
(ii)) so, in this case too, the work is made perceptible to listeners
(and perhaps viewers) other than those contemplated by the author
when his permission was given. Although, by definition, the number
of people receiving a broadcast cannot be ascertained with any
certainty, the author thinks of his licence to broadcast as covering
only the direct audience receiving the signal within the family circle.
Once this reception is done in order to entertain a wider circle, often
for profit, an additional section of the public is enabled to enjoy the
work and it ceases to be merely a matter of broadcasting. The author
is given control over this new public performance of his work.
40
The Australian Copyright Act, like the Berne Convention, does not provide a definition of the term in
public. However, the expression has been considered by the Australian courts over many years. 41

39 Ricketson (1987), page 453.
40 WIPO Guide to the Berne Convention, WIPO, Geneva, 1978, page 68.
41 The most recent judicial comment on the meaning of their term 'in public' has been by the High
Court in the 1997 case of APRA v Telstra. Justices Dawson and Gaudron in their joint judgement concluded:
"Lying behind the concept of the copyright owner's pu blic is recognition of the fact that where a work is
performed in a commercial setting, the occasion is unlikely to be private or domestic and the audience is more
appropriately to be seen as a section of the public . It is in a commercial setting that an unauthorised
performance will ordinarily be to the financial disadvantage of the owner's copyright in a work because it is in
such a setting that that owner is entitled to expect payment for the work's authorised performance."

Under existing Australian case law, it is clear that the Australian courts will take into account the
following factors in determining whether a performance is in public:
• First, a performance is "public" unless it takes place in a "domestic and private"
setting;
• Secondly, where the performance occurs as an adjunct to a commercial activity, it
will be in public;
• Thirdly, the audience in question clearly forms part of the copyright owner's public.

3.1.2 ORAL STATEMENT BY AUSTRALIA AT THE THIRD PARTY HEARING
(9 November 1999)
Australia welcomes the opportunity to put its views on this case to the panel and the two
parties.
Our submission is motivated by the direct trade interests related to equitable remuneration
for public communication of broadcast musical works of Australian composers and songwriters. It is
also intended to promote the integrity of the TRI PS Agreement, including the balance of rights and
obligations that should serve the interests of producers and users of intellectual property.
Exceptions or limitations to the right of authorising public communication of broadcast
works should conform with the general conditions set by TRIPS Article 13, and the specific
conditions set by Article 11 bis of the Berne Convention. They should also be consistent with the
general objectives and principles of TRIPS, in particular Article 7.
We submit that it would be valuable to clarify the relationship between TRIPS and Berne as
they apply to this specific right. There is no hierarchy of authority between TRIPS Article 13 and
Berne Article 11 bis, as the two provisions are on an equal footing as TRIPS obligations and both
apply to this case. However, Berne 11 bis does provide more direct guidance on the present case,
which relates to a right which is defined and regulated distinctly from other rights such as the general
reproduction right. 11 bis(2) specifies that conditions on this right shall in no circumstances be
prejudicial to the author's entitlement to equitable remuneration.
The diplomatic history of the Berne Conventi on provides further guidance as to how the
"conditions" allowable under Berne 11 bis(2) should be interpreted. The undiminished right of
equitable remuneration has been strongly emphasised, and the only apparent exceptions considered
were "minor reservations" relating to use of the wo rk in a private setting or associated with public
interest objectives, such as in educational or religious contexts.
The two tests - TRIPS 13 and Berne 11 bis(2) - could be applied in parallel to the right of
public communication of broadcast works. However, the most consistent and systemically sound
approach would be to give due weight to Berne 11 bis(2) in applying TRIPS 13 in this specific
context. Accordingly, the TRIPS 13 test, applied to this right, should be subject to the specific
requirement for equitable remuneration. Berne 11 bis(2) also suggests how the objectives of
TRIPS 7 can be maintained in this context.
• By setting conditions on the exercise of this right, and establishing a minimum
standard involving equitable remuneration, 11 bis(2) prescribes how rights and
obligations are balanced, and exceptions and limitations are set. This is a specific
instance of the general balance of interests that is required in TRIPS 7 and expressed
in TRIPS 13;
• Article 9(2) of Berne, by contrast, has only limited and indirect relevance to the
determination of the scope of allowable exceptions and limitations to this right.
Equitable remuneration in relation to the right of public communication of broadcast works
should entail recognition of any specific commercial benefits that are intended to result from public
communication made for commercial objectives
• equitable remuneration in this context is consistent with the balancing of rights and
obligations called for in TRIPS 7;

• it also clarifies the nature of "unreasonable prejudice" in the application of
TRIPS Article 13 to the right of public communication of broadcast works.

3.1.3 RESPONSES OF AUSTRALIA TO WRITTEN QUESTIONS FROM THE PANEL
(19 November 1999)
Australia welcomes the opportunity to provide further background information on this case
in response to the Panel's questions. It notes, however, that the copyright law and practice in
Australia and in countries other than the US are not at issue in this case, and submits that TRIPS
obligations should not be determined by the approach taken in any one national system, practice or
tradition.
Q.1 Please give examples of exceptions in the copyright laws of your country or of other
countries based on the "minor reservations" doctrine.
It is not evident in general which exceptions within copyright laws are based expressly on the
minor reservations doctrine, as exceptions may be implicit in the definition of the right or may be
justified in other ways. The clearest examples of the application of this doctrine can be found in the
diplomatic records which acknowledge and confirm the existence of minor reservations, for instance:
The Delegates of Norway, Sweden, Denmark and Finland, the
Delegate of Switzerland and the Delegate of Hungary have all
mentioned these limited exemptions allowed for religious
ceremonies, military bands and the needs of child and adult
education. These exceptional measures apply to Articles 11 bis,
11ter, 13 and 14
.42
Q.2. Is the communication to the public of mu sic contained in broadcasts or played from
sound recordings or live subject to exclusive rights or right of remuneration in your legislation,
and are the rights in respect of such uses of music exercised by the right holders or by their
collective management organizations?
This response is limited to this question as it relates to the communication to the public of
musical works contained in broadcasts (as this is the subject matter of the case directly before the
Panel), and does not consider the separate instances of playing music live or from sound recordings
(which may be subject to different considerations.)
2(i) Existence of the right
The communication to the public of music contained in broadcasts is subject to exclusive
rights in Australia, essentially through the operation of Sections 27 and 31 of the Copyright Act
(1968). Section 27 provides, in part:
(1) Subject to this section, a reference in this Act to
performance shall:
(a) be read as including a reference to any mode of visual or
aural presentation, whether the presentation is by the operation of
wireless telegraphy apparatus, by the exhibition of a cinematograph
film, by the use of a record or by any other means …
…

42 General Report, Conference in Brussels, 1948, in The Berne Convention for the Protection of
Literary and Artistic Works from 1886 to 1986, WIPO, 1986, page 181.

(3) Where visual images or sounds are displayed or emitted by
any receiving apparatus to which they are conveyed by the
transmission of electromagnetic signals (whether over paths
provided by a material substance or not), the operation of any
apparatus by which the signals are transmitted, directly or indirectly,
to the receiving apparatus shall be deemed not to constitute
performance or to constitute causing visual images to be seen or
sounds to be heard but, in so far as the display or emission of the
images or sounds constitutes a performance, or causes the images to
be seen or the sounds to be heard, the performance, or the causing of
the images to be seen or sounds to be heard, as the case may be,
shall be deemed to be effected by the operation of the r0eceiving
apparatus.
(4) Without prejudice to the last two preceding subsections,
where a work or an adaptation of a work is performed or visual
images are caused to be seen or sounds to be heard by the operation
of any apparatus referred to in the last preceding subsection or of
any apparatus for reproducing sounds by the use of a record, being
apparatus provided by or with the consent of the occupier of the
premises where the apparatus is situated, the occupier of those
premises shall, for the purposes of this Act, be deemed to be the
person giving the performance or causing the images to be seen or
the sounds to be heard, whether he or she is the person operating the
apparatus or not.
Section 31 of the same Act provides, in part:
(1) For the purposes of this Act, unless the contrary intention
appears, copyright, in relation to a work, is the exclusive right:
(a) in the case of a literary, dramatic or musical work, to do all
or any of the following acts:
(i) to reproduce the work in a material form;
(ii) to publish the work;
(iii) to perform the work in public;
(iv) to broadcast the work;
(v) to cause the work to be transmitted to subscribers to a diffusion
service;
(vi) to make an adaptation of the work;
(vii) to do, in relation to a work that is an adaptation of the first-
mentioned work, any of the acts specified in relation to the first-
mentioned work in subparagraphs (i) to (v), inclusive; …

2(ii) Exercise of the right
The current domestic arrangement in Australia is that the rights in respect of public
performance of broadcast musical works are exercised by a collective management organization.
The right to authorise public performance of broadcast musical works is in practice exercised by the
Australasian Performing Right Association Limited (APRA). 43 In exercising these rights, APRA
provides for licenses for broadcast musical works on a scale linked with the extent of the public
performance, as determined by the number of TV or radio sets and additional loudspeakers. To
authorise musical performances at the premises by radio or TV sets, including TV sets used to show
videos, free to air TV, satellite TV broadcasts and cable TV, for background and listening purposes
only, the annual license fee for each radio set is $37.62 (and each additional speaker $0.94); and for
each television set $37.62 (and each additional speaker $0.94). A distinct license is available to
authorise performances of music in the workplace for the benefit of employees, at the annual rate of
56 cents per full-time employee, with a minimum annual fee of $37.62.
APRA issues a complimentary licence in instances where:
(a) the means of performance is by the use of a radio or television set; and
(b) the business employs fewer than 20 people; and
(c) the music is not intended to be heard by customers of the business or by the general
public. That is, neither the radio or television set nor any speakers are located in an
area that is accessible to customers or the general public and any performance
inadvertently heard by customers or the general public is manifestly unintentional.
The following are illustrative examples of situations in which APRA would grant a
complimentary licence in the exercise of this right
:44
• A family run milk bar or corner store which has a radio or television behind the
counter or in the back room of a composite shop/dwelling. The volume is such that
customers may hear some music in the public access areas but the intention is to
entertain staff during quiet trading periods.
• A chemist employing five staff with a radio located in the secure dispensing area for
the benefit of the pharmacist. Some sound may be audible to customers.
• A service station with 12 employees playin g the radio in a workshop and/or with a
television behind the counter near the cash register. Customers fuelling cars, leaving
vehicles for repair or paying for purchases may overhear music.
• A small hairdresser with a radio in the backroom of the salon which may at times be
overheard by clients. The location of the radio shows that this is unintentional.
• A real estate agent where the receptionist has a radio on the desk. While the
performance is audible to customers, the radio is for the receptionist's own
enjoyment.

43 The following information is drawn from the APRA website, www.apra.com.au.
44 Quoted from the 1998 report of the Australian House of Representatives Standing Committee on
Legal and Constitutional Affairs Don't Stop the Music , http://www.aph.gov.au/house/committee/laca/
Inquiryincopy.htm.

• A café playing a radio in the staff-only food preparation areas. The location of the
radio and the volume indicate that, while music may sometimes be overheard by
customers, it is not played for their benefit.
• A small hardware store with three employees where a radio is located in the
storage/supply area behind the counter for the benefit of employees.
• A laundromat with five staff playing a radio in an open work area behind the
counter. There are no additional speakers and the performance is intended for the
benefit of employees.
• An owner/operator tailor with a television in the working area behind the counter.
Performance is for the benefit of the owner.
• A doctor's surgery. The receptionist plays a radio at low volume. Music is not
clearly audible to patients in the waiting room.
Q.3. Please explain which individual exclusiv e rights under which specific provisions of
Articles 11(1) and 11 bis(1) of the Berne Convention are a ffected to what extent by which
specific provision of Subsection (A) and/or (B) or Section 110(5).
Section 110(5) creates exceptions to the right of communication to the public of certain
broadcast musical works, by providing that certai n use made of the works is not infringement of
copyright. It is apparently not in contention that this use is communication to the public.
Communication to the public is covered in general terms under Article 11(1) of Berne, and
this would, on the face of it, include the forms of communication excepted under Section 110(5).
Broadcasting itself could be viewed as a particular form of public communication of a work.
Article 11 bis was introduced at the 1928 Rome Conference to provide international rules
governing the broadcasting of literary and artistic works. It is therefore submitted that this is the
more directly relevant provision. The WIPO Guide to the Berne Convention (p.65) comments:
The second leg of this right [Article 11(1)] is the communication to
the public of a performance of the work. It covers all public
communication except broadcasting which is dealt with in Article
11bis. For example, a broadcasting organisation broadcasts a
chamber concert. Article 11bis applies. But if it or some other body
diffuses the music by landline to subscribers, this is a matter for
Article 11.
Subsections A and B relate to the public communication of broadcast musical works, so that
Article 11 bis applies to both subsections. In particular, while Subsection A relates to potentially
more limited forms of public communication, it was explicitly intended to cover intentional and
direct communication to the public, and in partic ular to allow business proprietors to communicate
broadcasts "for their customers' enjoyment"
45
Q.4. In your view, what is the relationship between Article 13 of the TRIPS Agreement and
Article 11bis(2) of the Berne Convention?

45 Report of the House Committee on the Judiciary, H.R. Rep. No. 94-1476, 94 th Cong., 2d Sess. 87
(1976), cited.

Please see section 2 of the Australian submission, in particular paras 2.11-2.12.
Does Article 13 of the TRIPS Agreement prevail over the exception in Article 11 bis(2) with
respect to the exclusive rights conferred by Article 11bis(1)(i-iii) of the Berne Convention in the
sense that when the three conditions of Article 13 are met, no requirement to pay equitable
remuneration arises?
No. There is no basis for ascribing greater authority to TRIPS Article 13 and for overruling
or nullifying the effect of Berne Article 11 bis(2), which was adopted upon the conclusion of the
TRIPS Agreement in parallel with TRIPS Article 13.
Do the requirements of Article 11 bis(2) of the Berne Convention prevail as a lex specialis over
the requirements of Article 13 of the TRIPS Agreement, in the sense that if equitable
remuneration is paid, there is no need to comply with the three-conditions test under
Article 13?
This interpretation is possible, given that the two provisions appear to overlap and that
Article 11bis(2) applies more specifically to the situation at issue (see paragraph 2.12 of Australia's
third party submission). However, such an interpretation would only be necessary if it were
concluded that there is conflict or contradiction be tween the two provisions. It is submitted that the
test established by Article 11 bis(2) could be viewed as a special application of the broader factors
under consideration in the Article 13 test: in effect, the requirement for equitable remuneration (as
opposed to unlimited or unconditional exercise of the right) provides a safeguard that limitations on
the right are in accordance with the general requirements of Article 13.
Do the requirements of Article 13 and Article 11 bis(2) apply on a cumulative basis in the sense
that, on the one hand, even if the three-condition test of Article 13 is fulfilled, there is an
additional, fourth requirement to pay equitabl e remuneration, and on the other hand, even if
equitable remuneration is paid consistently with Article 11 bis(2), it is necessary to comply in
addition with the three conditions of Article 13? Please explain.
The preferred interpretation of the two provisions operating in conjunction should be that:
• both tests need to be fulfilled, independently if necessary; but that, if at all possible;
• Berne 11bis(2) should be seen as defining, in relation to the rights provided under
11bis(1), those limitations or exceptions that would - in the terms of TRIPS 13 - not
be an unreasonable prejudice to the legitimate interests of the right holder in this
context; that is, that the denial of equitable remuneration would automatically
amount to an unreasonable prejudice to those interests in relation to this form of
exploitation of the right to public communication of a broadcast musical work.
Q.5. In your view, to what extent has the B erne Convention become part of customary
international law, and, if so, in particular which part of the Articles 1-21 of the Berne
Convention?
No direct answer to this question is provided in this response. The rights and obligations
currently at issue, including the relevant paragraphs of Berne, are direct treaty obligations, namely
Article 9 of the TRIPS, and by reference Article 11 bis(iii), Article 11bis(2) of the Berne Convention
and Article 13 of TRIPS.
Q.6. Has the "minor exceptions" doctrine under the Berne Convention, and especially in the
context of Article 11bis(1) and 11(1), acquired the status of customary international law? What
is the legal significance of the "minor exceptions" doctrine under the Berne Convention in the

light of subparagraphs (3)(a-c) or paragraph (4) of Article 31 of the VCLT or in the light of
Article 32 of the VCLT? Has the "minor exceptions" doctrine or any other implied exception
been incorporated, by virtue of Article 9.1 of the TRIPS Agreement, together with Articles 1-21
of the Berne Convention into the TRIPS Agreement? Please explain.
This response does not venture a conclusion on whether the minor reservations doctrine is
part of customary international law. On the facts of this case, S. 110(5) of the US Copyright Act is
unlikely to come within the scope of what was intended to be covered by the minor reservations
doctrine. A clear sense of the limited scope of the minor reservations principle is provided by the
General Report of the Conference in Brussels thus:
Your Rapporteur-General has been entrusted with making an
express mention of the possibility available to national legislation to
make what are commonly called minor reservations. The Delegates
of Norway, Sweden, Denmark and Finland, the Delegate of
Switzerland and the Delegate of Hungary have all mentioned these
limited exemptions allowed for religious ceremonies, military bands
and the needs of child and adult education. These exceptional
measures apply to Articles 11 bis, 11ter, 13 and 14. You will
understand that these references are just lightly pencilled in here, in
order to avoid damaging the principle of the right.
46
This was confirmed at the Stockholm Conference in the following terms:
In the General Report of the Brussels Conference, the Rapporteur
was instructed to refer explicitly, in connection with Article 11, to
the possibility of what it had been agreed to call 'the minor
reservations' of national legislation. Some delegates had referred to
the exceptions permitted in respect of religious ceremonies,
performances by military bands, and the requirements of education
and popularization. The exceptions also apply to articles 11 bis,
11ter, 13 and 14. The Rapporteur ended by saying that these
allusions were given lightly without invalidating the principle in the
right.
It seems that it was not the intention of the Committee to prevent
States from maintaining in their national legislation provisions based
on the declaration contained in the General Report of the Brussels
Conference
.47

46 General Report, Conference in Brussels, 1948.
47 Records of the Intellectual Property Conference of Stockholm WIPO, Geneva, 1971, page 1166.

3.2 BRAZIL
3.2.1 ORAL STATEMENT AT THE THIRD PARTY HEARING
(9 November 1999)
On behalf of the Government of Brazil I thank you for your attention to this matter. Brazil
welcomes the opportunity to participate in this Panel as a third party. What motivates Brazil to
intervene in this dispute is essentially a systemic interest on the implications to the interpretation on
the scope of exceptions contained in the WTO Agreement on Trade-Related Aspects of Intellectual
Property Rights (the TRIPS Agreement). At the same time, our participation stems from concrete
interests, since the portion of the market in the United States for Brazilian music has increased
substantially over the last few years. Brazilian composers have complained that the US "Fairness in
Music Licensing Act" is hurting their legitimate interests in that market.
As argued by the European Communities / Member States (EC/MS) in its first submission,
the exemptions for commercial establishments provid ed by Section 110(5) of the US Copyright Act
are, in Brazil's view, incompatible with multil ateral obligations that stem from the TRIPS
Agreement, insofar as this Agreement incorporates articles 1 through 21 of the Berne Convention for
the Protection for the Literary and Artistic Works (1971).
By means of Article 9 (1) of TRIPS, these obligations have become an integral part of WTO
rules, being fully subject to the dispute settlement mechanism of the Organization.
Article 11bis(1)(iii) of the Berne Convention states that "authors of literary and artistic works shall
enjoy the exclusive right of authorizing (…) the public communication by loudspeaker or any other
analogous instrument transmitting, by signs, sounds or images, the broadcast of the work ".
Article 11(1)(ii) of the Berne Convention provides that " Authors of dramatic, dramatico-musical
and musical works shall enjoy the exclusive right of authorizing any communication to the public of
the performance of their works". Finally, Article 11bis(2) of the Berne Convention establishes that
"it shall be a matter of legislation in the countries of the Union to determine the conditions under
which the rights mentioned in the preceeding paragraph may be exercised, but these conditions shall
apply only in the countries where they have been prescribed. They shall not in any circumstances be
prejudicial to the moral rights of the author, nor to his right to obtain equitable remuneration which,
in the absence of agreement, shall be fixed by competent authority."
The United States claims that the point in question here is that Section 110(5) of the US
Copyright Act creates a "minor" exception to the exclusive right over public performance. In this
context, the US submission attempts to justify that those exceptions would be covered by Article 13
of the TRIPS Agreement on limitations and exceptions to copyrights and related rights. Brazil,
however, is of the opinion that this panel should consider Sect ion 110(5) in light of the most
specific provisions, which are those covered by Articles 11bis(1)(iii), 11(1)(ii) and 11bis(2) of the
Berne Convention. The US submission fails to explain how Section 110 (5) could be compatible
with its commitments under those specific provisions.
The submissions by the European Communities and Australia provide some valuable
contribution for this panel to understand the conflict between the exceptions to copyrights in the US
legislation and the existing provisions under TRIPS and the Berne Convention.
Brazil concurs with the European Communities that the situations covered by Section 110 (5)
refer (explicitly, in the case of Subsection (A), or implicitly, in the case of Subsection 7(B)) to
"public communication" in the sense of Article 11 bis(1)(iii) and Article 11(1)(ii) of the Berne
Convention. Consequently, by denying protection under those provisions, the US is violating its
commitments related to TRIPS Article 9 (1).

Most importantly, Brazil endorses the legal argumentation provided by the Australian
submission that Article 11bis(2) of the Bern Convention provides more specific guidance to the panel
on the application of Section 110(5). Bearing the burden of proof to invoke the exception, the US
fails to explains the consistency (if any) between Section 110(5) and that provision.
Section 110(5) is admittedly a circumstance that is prejudicial to the author's right to obtain
equitable remuneration. The denial of that right is recognized in paragraph 29 of the US submission.1
When the US Copyright Act, as amended by the "Fairness in Music Licensing Act", permits the
broadcasting of radio and television music in public places without the payment of a royalty fee, it is
actually exempting owners from the application of a mandatory rule whose exceptions are not
applicable to this case. Article 11 bis(2) of the Berne Convention, however, defines that "in any
circumstances" the conditions to the right of public communication should be prejudicial to the
author's right to obtain equitable remuneration. In doing so, the US is violating of a mandatory rule
on clear prerogatives of right holders.
As noted in the Australian submission, the scope of the exception provided by Section 110(5)
is much larger than envisaged in the negotiating history of the Berne Convention. The Brussels
Conference of 1948 emphasized the limitations of the concept of "minor reservations" as exceptional
measures. Such reservations, later confirmed by the Stockholm Conference of 1967, aimed at
situations such as, for instance, religious ceremonies, performances by military bands and the
requirements of education and popularization - mostly characterized by their non-commercial nature.
Such is not the case of Section 110(5), where establishments that benefit from the "homestyle
exemption" are essentially commercial. The size of the establishment or the number of loudspeakers
in a limited area, as defined by Section 110(5), does not characterize the nature of the use of the
broadcasted work as non-commercial. To the contrary, such use is admittedly aimed at attracting
customers and consequently improving the profits of the owners of the establishment.
The EC also notes that Since Section 110(5) entitles 70% of all drinking and eating
establishments and 45% of all retail establishments in the US to play music from the radio and TV
for the enjoyment of their customers without any limitation of any kind, it is more than reasonable to
argue that the normal exploitation of the works is at risk and that the legitimate interests of the right
holders can be prejudiced. In its submission, the US were unable to produce statistics that prove that
the impact on right holder's revenues of the "Fairness in Music Licensing Act" is negligible. Brazil
considers, however, that even if such statistics were available, the task of examining Section 110 (5)
would still be unrelated to quantitative limitations on the size of the area of the establishments or the
number of loudspeakers. Brazil considers that the most important task of this panel is to judge the
legitimacy of the exception provided by Section 110 (5) in light of its essentially commercial nature.

1 "Section 110(5) does not affect a copyright owner's right to be compensated for these types of
exploitation [i.e., primary performance]. Rather, it affect s only secondary uses of broadcasts. Moreover, it does
not exempt all secondary performance, but only those in establishments that use homestyle receiving
equipment, or meet the square footage and other criteria in the statute".

3.2.2 RESPONSES OF BRAZIL TO WRITTEN QUESTIONS FROM THE PANEL
(17 November 1999)
Q.1 Please give examples of exceptions in the copyright laws of your country or of other
countries based on the "minor reservations" doctrine.
In the Brazilian legislation there are a few examples of exceptions in the sense of the "minor
reservations" doctrine mentioned in this question. Those are cases where there would be no violation
of copyright, such as: (a) the reproduction in the daily or periodical press of news or informative
articles, from newspapers or magazines, with a mention of the name of the author, if they are signed,
and of the publication from which they have been taken; (b) the reproduction in newspapers or
magazines of speeches given at public meetings of any kind; (c) the reproduction of literary, artistic
or scientific works for the exclusive use of the visually challenged, provided that the reproduction is
done without gainful intent, either in braille or by means of other process using a medium designed
for such users; (d) the use of literary, artistic or scientific works, phonograms and radio and
television broadcasts in commercial establishments for the sole purpose of demonstration to
customers, provided that the said establishments market the materials or equipment that make such
use possible.
Q.2 Is the communication to the public cont ained in broadcasts or played from sound
recordings or live subject to exclusive rights or right of remuneration in your legislation, and
are the rights in respect of such uses of mu sic exercised by the right holders or by their
collective management organizations?
According to the new Brazilian Law on Copyri ghts and Related Rights (Law 9.610, dated
19 February 1999), authors have the exclusive right to use their literary, artistic and scientific works,
to derive benefit from them and to dispose of them. Authors and the owners of related rights may
form non-profit-making associations for the exercise and defense of their rights. These associations
of authors and of the owners of related rights shall jointly maintain a single central office ("Escritório
Nacional de Arrecadação de Direitos - ECAD") for the collection and distribution of the royalties
generated by the public performance of musical works with or without words and phonograms,
including performance by broadcasting and transmissions by any means and by the presentation of
audiovisual works. This central office shall not have any profit-making purpose and shall be directed
and managed by the associations of which it is composed.

3.3 CANADA
3.3.1 WRITTEN SUBMISSION
(1 November 1999)
This dispute raises important issues of copyright protection, including the role of limited
exceptions. Canada remains highly interested in these issues and looks forward to the outcome of the
panel's deliberations.

3.4 JAPAN
3.4.1 WRITTEN SUBMISSION
(1 November 1999)
1. The European Communities and their member States claim that Section 110(5) of the United
States Copyright Act is not in conformity with the US' obligations under the TRIPS Agreement,
particularly with its Article 9(1), under which WTO Members must comply with
Articles 11bis(1)(iii) and 11(1)(ii) of the Berne Convention.
2. Japan hereby submits its views on compatibility of Subsection (A) of Section 110(5) of the
US Copyright Act with the US' obligations stemming from Article 9(1) of the TRIPS Agreement.
3. In considering the compatibility, it is necessary to examine relevant provisions of the Berne
Convention and the TRIPS Agreement.
(i) Articles 11 bis and 11 of the Berne Convention
As is stated in the "Guide to the Berne Convention for the Protection of Literary and Artistic
Works (Paris Act, 1971)" published by the World Intellectual Property Organization (WIPO)
in 1978, it has been agreed that the Berne Convention did not stop member countries from
preserving their law on exceptions which come under the heading of "minor reservations"
with regard to Articles 11 bis and 11 of the Convention. However, to examine the relevant
provision of the TRIPS Agreement will be helpful to clarify the meaning of "minor
reservations".
(ii) Article 13 of the TRIPS Agreement
Article 13 of the TRIPS Agreement (Limitations and Exceptions) stipulates that WTO
members can contain in their legislation limitations or exceptions to exclusive rights,
provided that these limitations or exceptions are confined to certain special cases which do
not conflict with a normal exploitation of the work and do not unreasonably prejudice the
legitimate interests of the right holder (three-step test).
4. Although relationship between "minor reservations" and Article 13 of the TRIPS Agreement
is not perfectly clear, there is persuasive authority that three-step test can be used in determining
whether particular exception is in the boundary of "minor reservations." For example, Chairman
Liedes of the Committee of Experts of WIPO once stated to the effect that all limitations and
exceptions which were permissible under the Berne Convention would survive if they were in
conformity with Article 13 of the TRIPS Agreement (Diplomatic Conference on Certain Copyright
and Neighboring Rights Questions on December 10, 1996). Japan, therefore, considers that if
Subsection A of Section 110(5) US Copyright Act covers only certain special cases which do not
conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate
interests of the right holder, the Subsection in question can be regarded as compatible with
Article 13, and thus with Article 9(1), of the TRIPS Agreement.
5. In applying three-step test to the Subsection in question, Japan concurs with the United
States on the conclusion that it is in conformity with Article 13 of the TRIPS Agreement.
6. For the reasons stated, Japan is convinced that Subsection (A) of Section 110(5) US
Copyright Act is fully consistent with Article 9(1) of the TRIPS Agreement.

3.4.2 RESPONSES BY JAPAN TO WRITTEN QUESTIONS FROM THE PANEL
(19 November 1999)
Q.1 Please give examples of exceptions in the copyright laws of your country or of other
countries based on the "minor reservations" doctrine.
In general, various conditions are complicated ly combined in provisions for limitations of
and exceptions to copyright, and how copyrighted works are used under such provisions considerably
differs from nation to nation. This makes it difficult to determine applicability of "minor
reservations" doctrine to the related provisions of each domestic law and requires careful
consideration thereupon.
Under these circumstances, Japan has so far examined only Subsection A of Section 110(5)
of the United States Copyright Act which is under discussion in this Panel, and has no further
adequate examples to present.
Q.2 Is the communication to the public of mu sic contained in broadcasts or played from
sound recordings or live subject to exclusive rights or right of remuneration in your legislation,
and are the rights in respect of such uses of music exercised by the right holders or by their
collective management organizations?
In Copyright Law of Japan, such uses of music are subject to exclusive rights, and such
rights are exercised either by the right holders or by their collective management organizations. The
latter generally exercise such rights as trustees of the former under trust agreements.

3.5 SWITZERLAND
3.5.1 ORAL STATEMENT AT THE THIRD PARTY HEARING
(9 November 1999)
I. INTRODUCTION
1. The complaint brought by the European Communities and their member States against the
United States of America is based on the consideration that certain aspects of the US legislation
relating to the protection of copyrighted works are incompatible with the WTO Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The provision which is
the subject matter of contention is Section 110(5) of Title 17 of the US Copyright Act, as amended
by the "Fairness in Music Licensing Act of 1998". The contended provisions allow for the so-called
"homestyle exemption", lately extended to use in wider public places without the authorization of the
copyright owner, an exception sometimes also referred to as the "business exemption". Both types of
exemptions are summarized in the first submi ssion made by the European Communities and their
member States on 5 October 1999 in a very comprehensive manner. Instead of citing the contended
provisions, I refer to the summary made by the European Communities and their Member States to
avoid repetition. Under the Sections of the US Copyright Act subject matter of this panel procedure,
the copyright owner cannot exercise his exclusive right of public communication of broadcast works
in the case of establishments which are open to the public and play radio or TV on their premises for
the enjoyment of their customers in accordance with certain conditions set out by the Law. In other
words, if these conditions are met, the rightholder cannot claim royalty fees.
2. Switzerland has notified under Article 10(2) of the Dispute Settlement Understanding (DSU)
its interests in the matter before the panel requested by the European Communities and their member
States as established on 26 May 1999. Switzerland holds the view that the above-mentioned
measures are in violation of US's obligations under Article 9(1) of WTO TRIPS Agreement in
conjunction with Articles 11(1) and 11 bis of the Berne Convention and cannot be justified under
Article 13 of the TRIPS Agreement. Switzerland takes great interest in this case, not only desiring to
safeguard the claims of Swiss rightholders of musical works to obtain equitable remuneration for the
communication of their works to the public in the im portant US market, but also to ensure that the
TRIPS provisions, and by reference and incorporation also the relevant provisions of the Berne
Convention, are construed and implemented in nati onal laws consistently with the international
obligations as agreed in the multilateral framework of WTO.
II. GENERAL REMARKS ON THE CASE BEFORE THE PANEL AND ON THE
SUBMISSION OF THE EUROPEAN COMMUNITIES AND THEIR MEMBER STATES
3. Switzerland concurs with the content of the comprehensive submission made by the
European Communities and their member States regarding the historical background, case law
developments, legal and economic analysis regarding Section 110(5) A and B of the US Copyright
Act.
4. The WTO Members agreed in the negotiations of the Uruguay Round to incorporate the
Berne Convention (Articles 1 to 21) into the TRIPS Agreement by way of reference. Therefore,
protection must be provided in accordance with the Berne Convention, unless the TRIPS Agreement
provides explicitly for a different level of protection. The whole TRIPS Agreement has been, and is,
commonly referred to as a "major advance" in the field of intellectual property law at the
international level. The Berne Convention - compar ed to other international treaties in the field of
copyright - was deemed at that time to be the international treaty which offered a relatively
satisfactory level of protection. The only "Berne Minus" provision in the TRIPS Agreement is
Article 9.1, sentence 2, which excludes expressis verbis Article 6 bis (moral rights) of the Berne

Convention. All other TRIPS provisions on Copyright were introduced in the Agreement for
purposes of clarification or improving the corresponding provisions of the Berne Convention, not of
diminishing the level of protection.
III. ARTICLE 13 TRIPS; RELATIONSHIP WITH ARTICLES 9(2) AND 11 BIS BERNE
CONVENTION
5. Article 13 of the TRIPS Agreement has to be understood as a Berne-plus element. It
contains safe-guard-rails for all kind of limitations and exceptions by extending the three-steps
impairment test of Article 9(2) Berne Convention from the reproduction right to all the exclusive
rights covered by Section 1 of Part II of the TRIPS Agreement. Consequently, Article 13 of the
TRIPS Agreement limits also the scope of "minor reservations" with regard to Articles 11 bis and 11
of the Berne Convention. This is also confirme d by the fact that the WIPO Copyright Treaty
explicitly clarifies that the three-step-test applie s to all limitations and exceptions of the Berne
Convention and those under WCT. Therefore in the case submitted to the panel, exceptions are only
permitted:
- in certain special cases,
- if there is no conflict with the normal exploitation, and
- if there is no unreasonable prejudice to the legitimate interests of the right holder.
Referring to the detailed and in-depth analysis of the three-step-test by Australia, the Swiss
delegation submits that none of the steps of the impairment test are fulfilled.
6. Furthermore, limitations and exceptions concerning Article 11bis(1) of the Berne Convention
have to be consistent with Article 11 bis(2) of the Convention. It stipulates that conditions regarding
the exercise of the broadcasting and related rights "shall not be prejudicial to the moral rights of the
author, nor to his right to obtain equitable remuneration...". To be consistent with the protection
guaranteed by Article 9 (1) TRIPS Agreement containing explicitly only one Berne-minus-element in
respect of Article 6 bis of the Berne Convention, Article 13 of the TRIPS Agreement cannot allow
limitations of Article 11 bis(1) of the Berne Convention going beyond the limits fixed in
Article 11bis(2).
7. In other words, limitations as in the case submitted to the panel are prejudicial to the
legitimate interests of the right holders, because they do not respect the authors' right to obtain
equitable remuneration.
IV. OTHER CONSIDERATIONS
8. As far as Article 7 of the TRIPS Agreement (Objectives) is concerned, it would be useful to
remind that this provision is a " lex generalis", Article 13 TRIPS being a " lex specialis ". Careful
balance is already struck in the latter provision. One should first analyze whether the conditions set
out by this Article are fulfilled or not. If they are not, it seems that there would be no need to refer to
Article 7 TRIPS.
9. Furthermore, Switzerland wishes to point out that, after ratification of the WTO Agreement
(and the TRIPS Agreement), the "homestyle exemption", which had previously posed problems,
should not have been further extended in such an unjustifiable way as through Section 110(5) and the
so-called "business exemption".

V. CONCLUDING REMARK
10. Switzerland concurs with the position of the European Communities and their member States
and supports the pertinent arguments put forward by Australia.

3.5.2 RESPONSES OF SWITZERLAND TO WRITTEN QUESTIONS FROM THE PANEL
(19 November 1999)
Q.1 Please give examples of exceptions in the copyright laws of your country or of other
countries based on the "minor reservations" doctrine.
Art. 22 Par. 1 of the Swiss Copyright Law (CRL1) provides an exception with regard to cable
distribution and to communication to the public of broadcast works. These limitations comply with
Art. 11bis(2) of the Berne Convention (BC) in the sense that they do not abolish or diminish the right
of the author to obtain equitable remuneration for the exploitation of his work.
Q.2 Is the communication to the public of music contained in broadcasts or played from
sound recordings or live subject to exclusive rights or right of remuneration in your legislation,
and are the rights in respect of such uses of music exercised by the right holders or by their
collective management organizations?
According to Art. 22 Par. 1 CRL, the right of communication to the public of broadcast
works (all categories of works, not only musical works) is an exclusive right, but it is subject to
compulsory collective management by collecting societies. It should be underlined that this legal
construction is not a legal licence.
The right of communication to the public of music played from sound recordings or live is an
exclusive right as well and is also exercised by the collecting societies. For works other than musical
works, this right of communication is exercised individually by the author.
The collecting societies collect the copyright remuneration based on tariffs, which have to be
approved by the Federal Arbitration Board for th e Exploitation of Authors' Rights and Neighbouring
Rights.
Q.3 Please explain which individual exclusive rights under which specific provisions of
Articles 11(1) and 11 bis(1) of the Berne Convention are a ffected to what extent by which
specific provision of Subsection (A) and/or (B) of Section 110(5)?
Subsection (A) and (B) of Section 110(5) bo th affect the exclusive right of public
communication of broadcast works as provided by Art. 11 bis(1)(iii) BC because both provisions do
not comply with the conditions under which Art. 11bis(2) BC allows exceptions to the exclusive right
of public communication of broadcast works.
Q.4 In your view, what is the relationship between Article 13 of the TRIPS Agreement and
Article 11bis(2) of the Berne Convention? Does Article 13 of the TRIPS Agreement prevail
over the exception in Article 11bis(2) with respect to the exclusive rights conferred by Article
11bis(1)(i-iii) of the Berne Conven tion in the sense that when th e three conditions of Article 13
are met, no requirement to pay equitable remuneration arises? Do the requirements of

1 Text of Art. 22 CRL (Translation by the International Bureau of WIPO):
The right to make broadcast works perceivable simultaneously and unaltered or to
rebroadcast them within the framework of the rebroadcast of a transmitted program may only be
asserted through the approved collecting societies.
The rebroadcasting of works over technical inst allations that are intended to serve a small
number of receivers, such as installations in houses with more than one occupier or in a private
building, shall be permitted.
This Article shall not apply to the rebroadcasting of subscription television programs or of
programs that cannot be received in Switzerland.

Article 11bis(2) of the Berne Convention prevail as a lex specialis over the requirements of
Article 13 of the TRIPS Agreement, in the sense that if equitable remuneration is paid, there is
no need to comply with the three-conditions test under Article 13? Do the requirements of
Article 13 and Article 11bis(2) apply on a cumula tive basis in the sense that, on the one hand,
even if the three-condition test of Article 13 is fulfilled, there is an additional, fourth
requirement to pay equitable remuneration, and on the other hand, even if equitable
remuneration is paid consistently with Article 11bis(2), is it necessary to comply in addition
with the three conditions of Article 13? Please explain.
Switzerland is of the opinion that Art. 13 TRIPS and Art. 11 bis(2) BC apply on a cumulative
basis in the sense that Art. 13 TRIPS makes the limitations that were acceptable under Art. 11 bis(2)
BC even narrower. When a remuneration is paid, it can usually be admitted that the third condition
of the "3 steps-test" is fulfilled (it does not unreasonably prejudice the legitimate interests of the right
holder). Nevertheless one of the two remaining conditions of the "3 steps-test" could not be fulfilled,
in particular the first one providing that the limitations should be confined to "certain special cases".
Q.5 In your view, to what extent has the Berne Convention become part of customary
international law, and if so, in particular which part of the Articles 1–21 of the Berne
Convention?
We think the question whether the Berne Convention has become customary international
law is irrelevant because Art. 1-21
2 of this Convention have been incorporated into the TRIPS
Agreement and, as such, make fully part of the Agreement and are applicable between the Parties to
Q.6 Has the “minor exceptions” doctrine under the Berne Convention, and especially in the
context of Articles 11 bis(1) and 11(1) of the Berne Convention, acquired the status of
customary international law? What is the legal significance of the “minor exceptions” doctrine
under the Berne Convention in the light of subparagraphs (3)(a-c) or paragraph (4) of Article
31 of the VCLT or in the light of Article 32 of the VCLT? Has the “minor exceptions” doctrine
or any other implied exceptions been incorpor ated, by virtue of Article 9.1 of the TRIPS
Agreement, together with Articles 1-21 of th e Berne Convention into the TRIPS Agreement?
Please explain.
Neither the legal status nor the scope of the "minor exceptions doctrine" are very clear. In
the past, this doctrine has served - in the context of the successive revisions of the BC - to justify the
maintaining of exceptions that already existed in national laws and that might have been problematic
with regard to the improvements of the level of protection. Those "minor exceptions" are usually
exceptions justified by a public interest and they are limited to very specific cases, reflecting national
particularisms. However the "minor exceptions doctrine" cannot be based upon in order to justify the
introduction of new exceptions which do not comply with Art. 11 bis(2) BC and 13 TRIPS.

2 Except Art. 6bis BC.

4.1 LETTER FROM THE CHAIR OF THE PANEL TO THE
DIRECTOR GENERAL OF WIPO
(15 November 1999)
At its meeting on 26 May 1999, the WTO Dispute Settlement Body established a panel
pursuant to the request by the European Communities and its member States (please see the attached
document WT/DS160/5), in accordance with Article 6 of the Dispute Settlement Understanding. On
6 August 1999, a Panel was composed to examine this complaint (please see the attached document
WT/DS160/6).
The EC complaint relates to Section 110(5) of the United States Copyright Act, as amended
by the "Fairness in Music Licensing Act" enacted on 27 October 1998, which exempts, under certain
conditions, the communication or 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 (subparagraph A) and, also under certain conditions, communication by an
establishment of a transmission or retransmission embodying a performance or display of a
non-dramatic musical work intended to be received by the general public (subparagraph B) from
obtaining an authorization to do so by the respective right holder. The EC claims that Section 110(5)
of the US Copyright Act appears to be inconsistent with the United States' obligations under the
TRIPS Agreement, including, but not limited to, Article 9.1 of the TRIPS Agreement.
The Parties to the dispute refer to the provisions of the Paris Act 1971 of the Berne
Convention for the Protection of Literary and Artistic Works, the substantive provisions of which
(with the exception of Article 6 bis on moral rights and the rights derived therefrom) have been
incorporated into the TRIPS Agreement by Article 9.1. These provisions include, in particular,
Articles 11 and 11 bis, as well as the limitations applicable thereto. Given that the International
Bureau of WIPO is responsible for the administration of that Convention, the Panel would appreciate
any factual information available to the Intern ational Bureau on the provisions of the Berne
Convention (1971) relevant to the matter, in particular the negotiating history and subsequent
developments and practice concerning those provisions referred to by the Parties to the dispute.
The Parties have also referred to the so-called "minor reservations" doctrine (in particular in
relation to Articles 11 and 11bis). The Panel would be interested in any factual information relevant
to the status of this doctrine within the Berne Convention as reflected in the materials of Diplomatic
Conferences as well as any other documentation relating to the Berne Union or work under the
auspices of WIPO on copyright matters, as well as the state practice of the Berne Union members in
this regard.
Furthermore, the Parties have referred to Article 13 of the TRIPS Agreement, which uses
much of the language of Article 9(2) of the Berne Convention (1971). Even though the latter
provision applies to the reproduction right, which is not at issue in this dispute, given the similarity of
the language used in the two provisions, the Panel would appreciate any background information on
the negotiating history of Article 9(2) and subse quent developments and practice concerning the
provision.
It would facilitate the work of the Panel if such factual information could be made available
by Wednesday 24 November 1999.

4.2 LETTER FROM THE DIRECTOR GENERAL OF WIPO
TO THE CHAIR OF THE PANEL
(22 December 1999)
I have the honour to refer to your letter of November 15, 1999, relating to an ongoing dispute
which is being dealt with by a panel under the Dispute Settlement Body of the World Trade
Organization (WTO).
Please find attached a Note and Annexes, prepared by the International Bureau of the World
Intellectual Property Organization (WIPO) in response to your questions. As indicated in paragraphs
18, 20 and 23 of the Note, the International Bureau of WIPO is prepared to furnish additional
information, at your request.

NOTE
on Certain Questions Regarding the Berne Convention
raised by the World Trade Organization
1. This Note contains the observations of the International Bureau of the World Intellectual
Property Organization (WIPO) in response to a re quest made by H.E. Mrs. Carmen Luz Guarda,
Chair, Panel on United States - Section 110(5) of US Copyright Act, World Trade Organization
(WTO), in a letter of November 15, 1999, addressed to Dr. Kamil Idris, Director General of WIPO.
2. The requested information, related to the dispute in the above-mentioned Panel under the
WTO Dispute Settlement Body, is the following:
(1) regarding Articles 11 and 11bis of the Berne Convention, as
well as the limitations applicable thereon: "any factual information
available to the International Bureau on the provisions of the Berne
Convention (1971) relevant to the matter, in particular the
negotiating history and subsequent developments and practice
concerning those provisions referred to by the Parties to the
dispute;"
(2) regarding the so-called "minor reservations" doctrine (in
particular in relation to Articles 11 and 11bis): "any factual
information relevant to the status of this doctrine within the Berne
Convention as reflected in the materials of Diplomatic Conferences
as well as any other documentation relating to the Berne Union
members in this regard;"
(3) regarding Article 9(2) of the Berne Convention, given the
similarity of the language used in that provision and in Article 13 of
the Agreement on Trade-Related Aspects of Intellectual Property
Rights (the TRIPS Agreement): "any background information on
the negotiation history of Article 9(2) and subsequent developments
and practice concerning the provision."
Question 1: Articles 11 and 11bis and the limitations applicable thereon
3. The origin of Article 11 of the Berne Convention (1971) is, as regards non-dramatic musical
works, Article 9(3) of the Berne Convention (1886) which granted national treatment to authors of
such unpublished works—and published works if a prohibition of performance was indicated on the
title page. The Draft Convention, adopted at a conference organized by the International Literary
Association in Berne in 1883, contained the following provision:
"Article 5: Authors who are nationals of one of the Contracting
States shall, in all the other States of the Union, enjoy the exclusive
right of translation throughout the duration of the rights in their
original works.

"That right shall include the rights of publication or performance."1,2
4. The Program proposed by the Swiss Federal Council for the International Conference for the
Protection of Authors' Rights which was held fr om September 8 to 19, 1884, in Berne, contained in
its Article 7 an identical provision, apart from an added alternative proposal regarding the right of
translation.3 Discussions of that proposal have been identified in the minutes of the Third Meeting of
the Conference, where the Conference discussed a questionnaire of the German Delegation. An
excerpt is attached to this Note as Annex I. 4 The Records of the Conference do not contain minutes
or other records of the work of the Committee to which references are made in the text in Annex I,
other than the report from that Committee which was presented at the fifth Meeting of the
Conference. In the Committee's proposal, the reference to performance in Article 7 of the program
had been taken out of the context of translation and placed separately in the draft Article 11. The
relevant part of the Minutes of that meeting, dealing with that Article and with draft Article 2, to
which reference is made in draft Article 11, are attached to this Note as Annex II.
5 (The reservation
made by a Delegate in relation to draft Article 6 is not included, as it relates only to the question of
formalities for protection.)
5. At the Second International Conference for the Protection of Literary and Artistic Works, in
Berne, from September 7 to 18, 1885, discussions were based on the draft prepared by the 1884
Conference.6 The opening discussion at the Conference of Articles 2 and 11 is attached to this Note
as Annex III.7 Excerpts of the Report of the Committee of the Conference as regards these Articles
(Article 11 of the 1884 draft was renumbered to become Article 9 in the Committee's proposal) and
as regards the Recommended Principles for Subsequent Unification are attached to this Note as
Annex IV. 8 The Conference adopted Articles 2 and 9 without discussion, as proposed by the
Committee.9
6. The Records of the Third International Conference for the Protection of Literary and Artistic
Works, in Berne, from September 6 to 9, 1886, reflect that the Conference discussed a declaration
from France regarding, inter alia, Article 9 of the Convention. An excerpt of the minutes of the
Conference rendering the declaration and the discussion is attached to this Note as Annex V.
10
7. The official Records of the Berne Conferences do not contain indexes, and the preceding
selection of negotiation history is based on a review of the records. As regards the following
Conferences, the selections are partly based on the indexes of the official Records, partly on a review
of the Records. As regards the 1967 Stockholm Conference, the selection is solely based on the
indexes.
8. The Diplomatic Conference in Paris, from April 15 to May 4, 1896, adopted the Paris
Additional Act and Interpretative Declaration, 1896. That Act and Declaration did not amend
Article 9 of the Berne Act, but it amended Article 2, to which Article 9 refers, and it discussed certain
amendments of Article 9 which were not adopted, and a proposal for a new Article 4bis which would
have ruled out non-voluntary licenses for public performances. Annex VI to this Note contains

1 The English translations used in the following, except for the Records of the 1967 Stockholm
Conference which were published in English, are WIPO translations from: "1886—Berne Convention
Centenary—1986," WIPO Publication No. 877 (E), in the following referred to as "Berne Centenary"
2 Berne Centenary, pp. 83f.
3 Berne Centenary, p. 85.
4 Source: Berne Centenary, p. 91.
5 Source: Berne Centenary, pp. 94f and 100.
6 Rule 2, Rules of Procedure, Berne Centenary, p. 110.
7 Source: Berne Centenary, pp. 111, 113 and 116.
8 Source: Berne Centenary, pp. 118f, 121 and 125.
9 Berne Centenary, p. 127.
10 Source: Berne Centenary, p. 132.

excerpts of the Report on the work of the Committee of the Diplomatic Conference, prepared by Mr.
Louis Renault, dealing with those Articles and proposal. 11 Annex VII to this Note contains the
following excerpts of the Records of the Conf erence relevant to the proposed amendments of
Article 9 and the proposed new Article 4bis:12
(1) proposals made by the French authorities and the International Bureau, regarding
Articles 5 and 9;13
(2) wishes (vœux) expressed by various congresses and meetings since the adoption of
the Convention;14
(3) the proposal for a new Article 4 bis made by the Delegate of Germany;15
(4) summary minutes of the general discussion, regarding Article 9; 16
(5) analytic table of the proposals, made at the Conference, regarding Article 9; 17
(6) discussion and adaptation of the wishes of the Conference. 18
9. The Berlin Act of the Convention, adopted at a Diplomatic Conference from October 14 to
November 14, 1908, included a partial renumbering of the Articles, whereby the previous Article 9
became Article 11, in which paragraphs (1) and (3) related to performance of musical works. Those
paragraphs had the following wording:
"(1) The provisions of this Convention shall apply to the public
performance of dramatic or dramatico-musical works, and of
musical works, whether such works are published or not.
"(3) In order to enjoy the protection of this Article, authors shall
not be bound in publishing their works to forbid the public
performance thereof."
10. Annex VIII to this Note contains excerpts from the General Report Presented to the
Conference on Behalf of its Committee by Mr. Louis Renault dealing with this Article.
19 Annex IX
to this Note contains the following excerpts from the Records of the Conference relevant to
Article 11 of the 1908 Berlin Act of the Convention:
(1) proposal by the Government of Germany and the International Bureau, with notes 20
and Annex regarding the "vœux" expressed by the 1896 Paris Conference;21

11 Source: Berne Centenary, pp. 136ff, 140, and 142.
12 Excerpts of the Records regarding the discussions on Article 2 are not included here, but can be
provided at request.
13 Source: Actes de la conférence réunie à Paris du 15 avril au 4 mai 1896 (in the following referred to
as "Actes 1896"), pp. 39f and 42f.
14 Source: Actes 1896, pp. 60ff.
15 Source: Actes 1896, p. 114.
16 Source: Actes 1896, p. 116.
17 Source: Actes 1896, p. 124.
18 Source: Actes 1896, p. 145.
19 Source: Berne Centenary, pp. 154f.
20 Source: Actes de la conference féunie à Berlin du 14 octobre au 14 novembre 1908 (in the following
referred to as "Actes 1908"), p. 46.
21 Source: Actes 1908, p. 53.

(2) wishes (vœux) expressed by various congresses and meetings since the adoption of
the 1896 Act of the Convention;22
(3) excerpts of the Minutes of the Conference regarding a presentation of the proposal of
the Government of Germany, made by Professor, Dr. Osterrieth;23
(4) excerpts of the Minutes of the Conference regarding an oral proposal by the
Delegation of Switzerland;24
(5) excerpts of the Minutes of the Conference containing an observation by the
Delegation of Great Britain in connection with the adoption of Article 11, as
proposed by the Commission.25
11. The 1914 Additional Protocol to the Convention was signed in Berne without a conference of
revision. It did not amend Article 11 of the Convention.
12. The Rome Act of the Convention, adopted at a Diplomatic Conference from May 7 to June 2,
1928, did not amend Article 11, but it added Article 11 bis, dealing with the right of broadcasting,
which had the following wording:
"(1) Authors of literary and artistic works shall enjoy the
exclusive right of authorizing the communication of their works to
the public by radio-diffusion.
"(2) The legislations of the countries of the Union shall
determine the conditions under which the right mentioned in the
preceding paragraph may be exercised, but the effect of those
conditions shall apply only in the countries where they have been
prescribed. This shall not in any circumstances be prejudicial to the
moral rights of the author, nor to his right to obtain an equitable
remuneration which, in the absence of agreement, shall be fixed by
the competent authority."
13. Annex X to this Note contains the Report of the Sub-committee on Broadcasting
26 and
excerpts of the General Report of the Drafting Committee (Rapporteur Mr. Edoardo Piola Caselli)
relating to Article 11bis27. Annex XI to this Note contains the following excerpts from the Records
of the Conference relevant to Article 11bis of the 1928 Rome Act of the Convention:
(1) excerpts from the Program of the Conference, containing the proposal of the
Government of Italy and the International Bureau, regarding Articles 11 (for which
no amendment was proposed) and 11bis;28
(2) observations of the Government of Germany; 29

22 Source: Actes 1908, pp. 88f.
23 Source: Actes 1908, pp. 162 and 167.
24 Source: Actes 1908, p. 180.
25 Source: Actes 1908, p. 216.
26 Source: Berne Centenary, p. 165.
27 Source: Berne Centenary, pp. 173f.
28 Source: Actes de la conférence réunie à Rome du 7 mai au 2 juin 1928 (in the following referred to
as "Actes 1928"), pp. 75 and 76f.
29 Source: Actes 1928, p. 88.

(3) proposed Article 11 bis of the Government of Austria;30
(4) proposal for amendment of Article 11 of the Government of Great Britain;31
(5) proposed Article 11 bis of the Government of France;32
(6) proposal for amendment of Article 11 bis of the Government of Hungary33
(7) general observations and observations regarding Articles 11 and 11 bis of the
Government of the Netherlands;34
(8) proposal for amendment of Article 11 bis of the Government of Norway;35
(9) observations of the Government of Sweden; 36
(10) excerpts of the summary of the proposals and the discussion, prepared by the Berne
Bureau, relating to Articles 11 and 11bis;37
(11) excerpts of the Minutes of the Conference regarding discussion and adoption of
Articles 11 and 11bis.38
14. The Brussels Act of the Convention, adopted at a Diplomatic Conference from June 5 to 26,
1948, amended Article 11 in which paragraphs (1) and (3) related to performance of musical works.
Those paragraphs had the following wording:
"(1) Authors of dramatic, drama tico-musical and musical works
shall enjoy the exclusive right of authorizing: (i) the public
performance of their works; (ii) any communication to the public of
the performance of their works. The application of the provisions of
Articles 11bis and 13 is, however, reserved.
"(3) In order to enjoy the protection of this Article, authors shall
not be bound, when publishing their works, to forbid the public
performance thereof."
The Brussels Act also amended Article 11bis of the Convention. Paragraphs (1) and (2) which relate
to the right of broadcasting, were given the following wording:
"(1) Authors of literary and artistic works shall have the
exclusive right of authorizing: (i) the broadcasting of their works or
the communication thereof to the public by any other means of
wireless diffusion of signs, sounds or images; (ii) any
communication to the public, by wire or by rebroadcasting of the
broadcast of the work, when this communication is made by an

30 Source: Actes 1928, p. 89.
31 Source: Actes 1928, p. 93.
32 Source: Actes 1928, p. 100.
33 Source: Actes 1928, p. 105.
34 Source: Actes 1928, pp. 108 and 109.
35 Source: Actes 1928, pp. 111f.
36 Source: Actes 1928, pp. 123f.
37 Source: Actes 1928, pp. 254ff.
38 Source: Actes 1928, p. 294.

organization other than the original one; (iii) the public
communication by loudspeaker or any other analogous instrument
transmitting, by signs, sounds or images, the broadcast of the work.
"(2) It shall be a matter for legislation in the countries of the
Union to determine the conditions under which the rights mentioned
in the preceding paragraph may be exercised, but these conditions
shall apply only in the countries where they have been prescribed.
They shall not in any circumstances be prejudicial to the moral
rights of the author, nor to his right to obtain equitable remuneration
which, in the absence of agreement, shall be fixed by competent
authority."
15. Annex XII to this Note contains:
(1) excerpts from the General Report on the Work of the Brussels Diplomatic
Conference for the Revision of the Berne Convention, presented by Mr. Marcel
Plaisant, Rapporteur-General, relating to Articles 11 and 11bis, and discussing in this
connection also the so-called "minor reserves";
39
(2) Report by the Sub-Committee on Broadcasting and Mechanical Instruments; 40
(3) Report by the Sub-Committee on Articles 11 and 11 ter.41
Annex XIII to this Note contains the following excerpts from the Records of the Conference relevant
to Articles 11 and 11 bis of the 1948 Brussels Act of the Convention, including the discussions
regarding the so-called "minor reserves":
(1) excerpts from the Minutes of the Conference containing statements made at the
adoption of Articles 11 and 11bis;42
(2) excerpts from the Records of the Conference, containing, under A, the proposals of
the Government of Belgium and the Berne Bureau, under B, proposals,
counter-proposals and observations made by Governments of countries, member of
the Berne Union, and, under C, summary of the discussions and the outcome of the
Conference, relating to Articles 11, including the so-called "minor reserves," and
Article 11bis of the Convention;
43
(3) wishes (vœux) expressed by various congresses and meetings between 1927 and
1935, relating to the right of public performance and the right of broadcasting;44
(4) wishes expressed by various congresses and meetings between 1936 and 1948; 45
(5) Memorandum of "l'Organisation internationale de radiodiffusion". 46

39 Source: Berne Centenary, p. 181.
40 Source: Berne Centenary, pp. 185ff.
41 Source: Berne Centenary, p. 191.
42 Source: Documents de la conférence réunie à Bruxelles du 5 au 26 juin 1948 (in the following
referred to as "Documents 1948"), p. 82.
43 Source: Documents 1948, pp. 252 to 304.
44 Source: Documents 1948, pp. 448 to 454.
45 Source: Documents 1948, pp. 492f.
46 Source: Documents 1948, pp. 522 to 527.

16. The Stockholm Act of the Convention, adopted at the Intellectual Property Conference of
Stockholm, June 11 to July 14, 1967, adopted Articles 11 and 11 bis in the same wording as that
which appears in the Paris Act (1971). Annex XIV to this Note contains the following excerpts from
the Records of that Conference (references relating solely to Article 11bis(3) have been omitted):
(1) excerpts from Proposals for Revision of the Substantive Copyright Provisions
(Articles 1 to 20), Proposal by the Gove rnment of Sweden with the Assistance of
BIRPI (the Basic Proposal), relating to Articles 11 and 11bis;47
(2) comments from the Government of the Federal Republic of Germany concerning
Article 11 of the Basic Proposal;48
(3) comments from the Government of Israel concerning Article 11 and 11 bis of the
Basic Proposal;49
(4) comments from the Government of Portugal concerning Article 11 of the Basic
Proposal;50
(5) comments from the Government of th e United Kingdom concerning Article 11bis of
the Basic Proposal;51
(6) comments from the Government of Switzerland concerning Article 11 ter of the
Basic Proposal, containing a reference to Article 11;52
(7) excerpts of summary of observations of governments, prepared by the BIRPI
Bureau, as regards Articles 11 and 11bis;53
(8) proposal from the Government of Greece concerning Article 11(1); 54
(9) comments from the Government of India concerning Article 11 bis of the Basic
Proposal;55
(10) proposal regarding the regime of cinematographic works, submitted by the Working
Group of Main Committee I to Main Committee I;56
(11) proposals from the Government of Brazil concerning Article 11 bis of the Basic
Proposal;57
(12) proposals from the Secretariat to the Drafting Committee, concerning Articles 11
and 11bis;58

47 Source: Records of the Intellectual Property Conference of Stockholm, June 11 to July 14, 1967 (in
the following referred to as "Records 1967"), pp. 120 to 122.
48 Source: Records 1967, p. 618.
49 Source: Records 1967, p. 622.
50 Source: Records 1967, pp. 627f.
51 Source: Records 1967, p. 630.
52 Source: Records 1967, p. 664.
53 Source: Records 1967, pp. 670f.
54 Source: Records 1967, p. 689.
55 Source: Records 1967, pp. 690f.
56 Source: Records 1967, p. 710.
57 Source: Records 1967, p. 715.
58 Source: Records 1967, pp. 721f.

(13) Report of the Drafting Committee to Main Committee I; 59
(14) Additional Report of the Drafting Committee to Main Committee I; 60
(15) Draft Report of the Rapporteur of Main Committee II to the Committee with
addendum, revision and a correction of the revision, relating to preferential rules for
developing countries, and Draft Report (final version);
61
(16) excerpts from the Report of the Work of Main Committee I (Rapporteur Svante
Bergström) relating to Articles 11 and 11 bis, including the general Introduction, 62
and excerpts from the Records showing the corrections made in the Draft Report of
the Committee;63
(17) excerpts of the Summary Minutes of Main Committee I; 64
(18) excerpts of the Summary Minutes of the Plenary of the Berne Union.65
17. The Diplomatic Conference for the Revision of the Berne Convention which took place in
Paris from July 5 to 24, 1971, did not amend the Articles discussed above, and the Records of that
Conference have therefore not been analyzed for this Note. Such an analysis can be provided if
requested.
18. The request made by H.E. Mrs. Carmen Luz Guarda regarding Articles 11 and 11 bis of the
Berne Convention, as well as the limitations applicable thereon, concerns also other "factual
information available to the International Bureau," and "subsequent developments and practice
concerning those provisions referred to by the Parties to the dispute." This request covers a vast
amount of material which is not available in a systematic and detailed indexed form. Any selection
of material considered relevant for the dispute will invariably imply risks of interpretations of the
material which would be incompatible with the neutra l status of WIPO in relation to the dispute. In
order to fulfill the request neutrally, it would be necessary to carry through a complete review of
major parts of the copyright and related rights activities of WIPO during the period of so-called

59 Source: Records 1967, p. 726.
60 Source: Records 1967, p. 735.
61 Source: Records 1967, pp. 735 to 739 and 760 to 762.
62 Source: Records 1967, pp. 1131 to 1134, 1146, 1165 to 1168 and 1181f.
63 Source: Records 1967, pp. 739, 740, 742f and 744.
64 Source: Records 1967, pp. 851f (in the context of discussions regarding the right of reproduction,
reference to Article 11bis(2) is made in paragraph 653.2), 856 (in the context of discussions regarding the right
of reproduction, reference to Article 11 is made in paragraph 711.4), 865f (in the context of discussions
regarding cinematographic works), 883 to 885 (in the context of discussions regarding the right of
reproduction, reference to Article 11(3) is made in paragraph 1069.1 and to Article 11 bis in paragraph 1063.1),
893, 902, 902 to 904, 904 to 905 (in the context of discussions regarding the right of public recitation, reference
to Article 11 is made in paragraphs 1323.3, 1332, 1335 and 1336), 916 to 917 (in the context of discussions
regarding reproduction of lectures, addresses and similar works, references to Article 11 bis are made in
paragraphs 1498.2, 1499.3 to 1500 and 1501.2), 921f (in the context of discussions on exceptions to translation
rights, references to Article 11 bis are made in paragraphs 1565.3 to 1567.3), 923 to 924 (in the context of
discussions regarding the principle of equivalent protection in regard to the right of translation, reference to
Article 11 is made in paragraph 1607), 926f (in the context of discussions regarding exceptions to the exclusive
right of translation, references to Article 11 bis is made in paragraphs 1652.1 to 1652.2, 1653.2 and 1658.1 to
1658.2), 928, 930 (in the context of the adoption of the Report of the Work of Main Committee I, reference to
Article 11 is made in paragraph 1749), 936f (in the context of the adoption of the adoption of the Report of
Main Committee I).
65 Source: Records 1967, p. 805.

"guided development"66 from 1967 to 1991 and a general review of the implementation of the treaty
provisions in all national laws of Berne Union Member States. Such research would take a long
time, and it has therefore not been undertaken. The International Bureau is, however, prepared to
furnish any non-confidential material in its possession which is specified in such a way that it can be
identified without the need for the International Bureau to make any interpretations of the substantive
provisions of the Berne Convention.
Question 2: The so-called "minor reservations" doctrine
19. The discussions regarding the so-called "minor reservations" doctrine apparently all took
place in the context of the discussions regarding Article 11 of the Berne Convention. As regards this
question reference can therefore be made to the materials referred to under Question 1.
20. The request made by H.E. Mrs. Carmen Luz Guarda regarding the "minor reservations"
doctrine pertains to "any factual information relevant to the status of this doctrine within the Berne
Convention as reflected in the materials of Diplomatic Conferences as well as any other
documentation relating to the Berne Union members in this regard." As regards material other than
what is referred to in the preceding paragraph, reference is made to the remarks made in
paragraph 18, above.
Question 3: Article 9(2) of the Berne Convention
21. Article 9 of the Paris Act of the Berne Convention, granting the right of reproduction and
regulating exceptions and limitations to that right was introduced at the Stockholm Conference.
Annex XV to this Note contains the following excerpts from the Records of that Conference:
(1) excerpts from Proposals for Revision of the Substantive Copyright Provisions
(Articles 1 to 20), Proposal by the Gove rnment of Sweden with the Assistance of
BIRPI (the Basic Proposal);
67
(2) comments from the Government of Austria to the Basic Proposal; 68
(3) comments from the Government of Belgium to the Basic Proposal; 69
(4) comments from the Government of Czechoslovakia to the Basic Proposal; 70
(5) comments from the Government of Denmark to the Basic Proposal; 71
(6) comments from the Government of France to the Basic Proposal; 72
(7) comments from the Government of the Federal Republic of Germany to the Basic
Proposal;73
(8) comments from the Government of Ireland to the Basic Proposal; 74

66 A term used by Sam Ricketson in: "The Berne Convention, for the Protection of Literary and
Artistic Works, Centre for Commercial Law Studies, Kluwer, 1987, p. 919.
67 Source: Records 1967, pp. 111 to 116.
68 Source: Records 1967, p. 611.
69 Source: Records 1967, p. 612.
70 Source: Records 1967, p. 613.
71 Source: Records 1967, p. 615.
72 Source: Records 1967, p. 615.
73 Source: Records 1967, p. 618.

(9) comments from the Government of Israel to the Basic Proposal; 75
(10) comments from the Government of Italy to the Basic Proposal; 76
(11) comments from the Government of Japan to the Basic Proposal; 77
(12) comments from the Government of Portugal to the Basic Proposal; 78
(13) comments from the Government of South Africa to the Basic Proposal; 79
(14) comments from the Government of United Kingdom to the Basic Proposal; 80
(15) comments from the Government of Luxembourg to the Basic Proposal; 81
(16) excerpts of summary of observations of governments, prepared by the BIRPI
Bureau, as regards Article 9;82
(17) amendment to the Basic Proposal, proposed by the Government of Austria; 83
(18) amendment to the Basic Proposal, proposed by the Government of the United
Kingdom;84
(19) amendment to the Basic Proposal, proposed by the Governments of Czechoslovakia,
Hungary and Poland;85
(20) amendment to the Basic Proposal, proposed by the Government of Greece; 86
(21) amendment to the Basic Proposal, proposed by the Government of Monaco; 87
(22) amendment to the Basic Proposal, proposed by the Government of the Federal
Republic of Germany;88
(23) amendment to the Basic Proposal, proposed by the Government of France; 89
(24) amendment to the Basic Proposal, proposed by the Governments of Austria, Italy
and Morocco;90

74 Source: Records 1967, p. 620.
75 Source: Records 1967, p. 622.
76 Source: Records 1967, p. 623.
77 Source: Records 1967, p. 624.
78 Source: Records 1967, p. 627.
79 Source: Records 1967, p. 629.
80 Source: Records 1967, p. 630.
81 Source: Records 1967, p. 663.
82 Source: Records 1967, pp. 669f.
83 Source: Records 1967, p. 683.
84 Source: Records 1967, p. 687.
85 Source: Records 1967, p. 688.
86 Source: Records 1967, p. 689.
87 Source: Records 1967, p. 690.
88 Source: Records 1967, p. 690.
89 Source: Records 1967, p. 690.
90 Source: Records 1967, p. 690.

(25) amendment to the Basic Proposal, proposed by the Government of India; 91
(26) amendment to the Basic Proposal, proposed by the Government of Rumania; 92
(27) amendment to the Basic Proposal, proposed by the Government of Japan; 93
(28) amendment to the Basic Proposal, proposed by the Government of the Netherlands; 94
(29) amendment to the Basic Proposal, proposed by the Government of India; 95
(30) amendment to the Basic Proposal, proposed by the Working Group of Main
Committee I;96
(31) text given to the Drafting Committee; 97
(32) new text prepared for the Drafting Committee by the Secretariat; 98
(33) Report of the Drafting Committee to Main Committee I; 99
(34) final text submitted by the Drafting Committee to Main Committee I; 100
(35) Additional Report of the Drafting Committee to Main Committee I; 101
(36) additional text proposed by the Secretariat to the Drafting Committee; 102
(37) additional text submitted by the Drafting Committee to Main Committee I; 103
(38) excerpts from the Report of the Work of Main Committee I (Rapporteur Svante
Bergström) relating to Article 9, including the general introduction, 104 and excerpts
from the Records showing the corrections made in the Draft Report of the
Committee;
105
(39) excerpts of the Summary Minutes of Main Committee I; 106

91 Source: Records 1967, pp. 690f.
92 Source: Records 1967, p. 691.
93 Source: Records 1967, p. 691.
94 Source: Records 1967, p. 691.
95 Source: Records 1967, p. 692.
96 Source: Records 1967, p. 696.
97 Source: Records 1967, p. 709.
98 Source: Records 1967, p. 720.
99 Source: Records 1967, p. 726.
100 Source: Records 1967, p. 734.
101 Source: Records 1967, p. 735.
102 Source: Records 1967, p. 757.
103 Source: Records 1967, p. 758.
104 Source: Records 1967, pp. 1131 to 1134, 1142 to 1146, 1147 to 1149, 1164f.
105 Source: Records 1967, pp. 739, 740, 740f, 742f.
106 Source: Records 1967, pp. 837f, 851 to 855, 856 to 860, 860f (in the context of discussions
regarding lawful quotations, reference is made to Article 9 in paragraph 776), 862, 881f (in the context of
discussions regarding protection of official texts, reference is made to Article 9 in paragraph 1031), 883 to 885,
892 (in the context of discussions regarding reproduction of lectures, sermons, etc., reference is made to
Article 9 in paragraphs 1145 and 1152.1), 901f (in the context of discussions regarding the right of translation,
reference is made to Article 9 in paragraph 1275), 905 to 907 (in the context of discussions regarding

(40) excerpts of the Summary Minutes of the Plenary of the Berne Union.107
22. The Diplomatic Conference for the Revision of the Berne Convention which took place in
Paris from July 5 to 24, 1971, did not amend Article 9, and the Records of that Conference have
therefore not been analyzed for this Note. Such an analysis can be provided if requested.
23. The request made by H.E. Mrs. Carmen Luz Guarda regarding Article 9(2) of the Berne
Convention pertains to "any background information on the negotiation history of Article 9(2) and
subsequent developments and practice concerning the provision." As regards material other than
what is referred to in the preceding paragraphs, reference is made to the remarks made in
paragraph 18, above.

mechanical reproduction rights, several references are made to Article 9), 922f (discussion of Article 9 in the
context of its application on translations), 926 to 928, 931.
107 Source: Records 1967, pp. 804f.