Can Charlotte restaurants and breweries be sued for playing background music from Spotify and Pandora?

The Charlotte Observer reported that popular bar, restaurant, and Carolina Panthers tailgating spot Draught received some unwelcomed news this week: they were being sued for playing five songs as background music on Spotify and Pandora.

How much could five songs potentially cost the Charlotte business? $150,000, plus attorneys fees, even when using a paid music streaming account. Restaurants, breweries, bars, and clubs run into this problem very often, according to the Observer.

Last year, BMI, the nation’s largest music rights organization, filed similar lawsuits against Libretto’s Pizzeria in Ballantyne, Machu Picchu Peruvian Cuisine & Bar in Pineville and The Evening Muse venue in Charlotte’s NoDa neighborhood.

Can these small, local businesses be sued for playing the wrong background music? Yes, and we will explain how it happens and what these businesses can do.

Public Performance Rights

An overlooked section of the Copyright Act gives artists a public performance right in their songs. The artist can decide where their songs can be played in public, and yes, they can sue your cover band even if you bring new life to a Taylor Swift song. More frequently, they decide if their song can be used everywhere from commercials, movies, and television shows, all the way down to restaurants with only one location.

Performance Rights Organizations

Artists join organizations referred to as licensing groups or performance rights organizations, or collecting societies, but are usually one of Broadcast Music Inc. (BMI), the American Society of Composers, Authors and Publishers (ASCAP), Society of European Stage Authors and Composers (SESAC) and Global Music Rights (GMR). They are the middleman between the person who owns a song and the person who wants to play the song. These groups are responsible for ensuring artists are being paid when their songs are played in public. They will typically send a warning or demand letter to establishments without licensing agreements. If ignored, they may send someone to listen for unlicensed music in preparation for a lawsuit.

ASCAP alleged in the lawsuit that Draught played five songs without a proper copyright license. Each infringement has a maximum of $30,000 in statutory damages, along with attorney’s fees. These damages can get out of control very quickly.

Exceptions to Licensing

Fear not, for 17 U.S. Code § 110 provides some exceptions to these crippling copyright lawsuits. Restaurants and drinking establishments are excluded if, among other things, you have under 3,750 gross square feet (excluding parking spaces). This includes the kitchen and every interior or exterior place used to serve customers. Larger establishments may still be excluded if they do not require a cover charge and have six or fewer speakers with no more than four speakers in a single room.

Using Spotify and Pandora

That might feel a little specific and arbitrary just to be able to play music, which is why Spotify and Pandora offer business accounts for background music. Your personal account does not pay the necessary licensing fees. These more expensive accounts pay the performance rights organizations directly. Many restaurant and brewery owners mistakenly plug their phone or laptop into some speakers without realizing it could cost them hundreds of thousands of dollars.

Legal Help

Contact our attorneys below to review your intellectual property policies to prevent a lawsuit like this. Spengler & Agans offers a flat-rate legal checkup for startups and business needing a broad, overall legal review of their business and business practices.

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