April 19, 2014 Updated: April 21, 2014 at 8:55 am
In 2012, the boys were just back in Colorado Springs from Afghanistan and celebrating at the Carey-On Saloon with a night of karaoke.
One grabbed the straw hat covered with signatures wishing him well that hangs on a hook at the bar, and he wore it proudly as he took the stage with three friends. Backed by the karaoke machine, the four men belted "Courtesy of the Red, White & Blue" and other Toby Keith songs meant to honor the military.
The crowd cheered.
The men raised their drinks in a thank-you salute.
And a few weeks later, bar owner LeShawn Carey was fined $21,000 for not having permission to play Keith's music in her establishment.
"All of a sudden, I was served with a summons and complaint for playing seven songs used for karaoke, and five of the infringements were for Toby Keith songs," Carey said.
It's an expensive lesson that hundreds of U.S. businesses learn the hard way each year and serves as a reminder to anyone who plays music in a commercial setting to know the rules: If you own a bar, restaurant, cafe or other business and play music to enhance your operations or entertain patrons, you'd be smart to pay a licensing fee to three performing rights organizations that enforce the music industry's copyright laws.
Not registering a business that falls under their jurisdiction could lead to thousands in fines and penalties, as Carey's case illustrates. She was registered with ASCAP and SESAC but not with BMI.
Federal copyright laws provide songwriters with exclusive rights to their music, ASCAP's Vincent Candilora said. Songwriters sign agreements with one of the three organizations to enforce those copyright laws. That includes music played at live concerts, one-time special events, fairs and carnivals. Publishers and songwriters receive royalties based on how often their songs are played, regardless of whether the music is blaring from a karaoke machine in a bar, a band in a lounge or a CD in a restaurant.
"A song is created by someone and used by someone," he said, "and when someone else uses it, they need to ask for permission and pay for it."
Looking for infringement
BMI, ASCAP and SESAC use several methods to find businesses that aren't registered with them.
Johnny Nolan, owner of Southside Johnny's and Johnny's Navajo Hogan in Colorado Springs, said representatives from the companies sometimes call businesses and act like prospective customers to glean information about if, and how, music is played.
"And you will promote your business and you will tell them you have TVs and a blues band, and then they call you back, and it's too late to hide it," he said.
The organizations also use field representatives to visit establishments to determine if a copyright infringement has occurred. Candilora said ASCAP has about 120 field agents throughout the U.S. and ends up fining nearly 250 people each year.
Carey said an undercover BMI representative reported her bar's violation to the company. The owner and operator of the karaoke machine who played music in Carey's bar that night told her the machine's software was registered with ASCAP. Whether it was or not made no difference, however, because it is business owners' responsibility to license their establishments with the three enforcement organizations.
Part of the problem that bar and other business owners have is not knowing which of the three copyright enforcement companies the songwriters are registered with. Even though Carey was registered with ASCAP and SESAC, Keith is represented by BMI.
The prudent path is for business owners to register with all three organizations to avoid the risk of being fined. That includes businesses that hold amateur nights where people sing songs they have not written.
"Let's say if you hire a band, and you have registered with BMI, and that band plays only, say, Sheryl Crow songs, who is registered with BMI, then you are OK," Candilora said. "But once they play, say, a (Bruce) Springsteen song, who is registered with ASCAP, you are in violation of the (copyright) law if you don't have an ASCAP license."
BMI public relations director Leah Lupo said her organization "makes extensive efforts to attempt to license a business" and works with restaurant associations nationwide to get the word out, even offering discounts to businesses affiliated with the associations. Even when a business is found to be in violation, she said, BMI goes out of its way to bring it into compliance.
"It is often the case that we will reach out dozens of times over extended and lengthy periods to offer establishments ample time to respond," said Lupo, who added that she couldn't comment on Carey's situation because of customer privacy. "Filing an infringement action is our last resort."
She said food service or drinking establishments that are 3,750 square feet or larger, or any other establishment that is 2,000 square feet or larger, must secure public performance rights with BMI, even if they use TVs or radios to entertain their customers.
Candilora said annual fees to the three companies are based on several factors, such as the number of patrons a business can hold; whether there's a live band or cover charge; or if the business uses karaoke, a DJ or other "enhancements."
ASCAP's annual licensing fees for most bars average $850, Candilora said, which might sound like a lot to a small-business owner - but not paying it can lead to a fine that's significantly more.
Nolan said he pays about $4,500 annually to register his bar with all three copyright rights organizations. It's an annual cost he must pay before he opens his doors.
"It doesn't sound like a lot," Nolan said, "but over 10 years, it's enough to put at least one of my kids through college."
Penalties for copyright violations are set by federal law, Candilora said. The penalties range from "not less than $750 to no more than $30,000 as the court considers just."
Candilora made it clear that the biggest mistake a business owner can make is to not pay the license fees once they are contacted by ASCAP or the other companies.
"Let's say someone finally contacts you, and you haven't paid us for two years, and you ignore us," he said. "That would be a bad decision because once we contact an establishment, we don't go away."
Nolan warned fellow business owners to heed Candilora's statement.
"They will go through the diplomatic process for a while, but then they threaten you - not like someone coming to the door to hurt you, but they let you know they are there," Nolan said.
There are some exceptions to having to register with the three organizations. Anyone playing music at an event held strictly for family members and close friends, such as birthday parties, do not need to register. When it comes to weddings at events centers and other commercial enterprises, it's the business owner's responsibility for registering, Lupo wrote.
Candilora said the main question that business owners should ask themselves when wondering if they should register with ASCAP, BMI and SESAC is: Does the music enhance their customers' experience?
"Does music make a difference where a woman will get her hair colored or cut? Likely not," he said. "But that is what the music does for a bar or restaurant or other entertainment place."
Besides any damages owed for not registering with one of the rights organizations, businesses can incur penalties and other fees that can turn a small judgment into a crippling payment.
For Carey, her situation has gotten her to a point where she worries about keeping her business alive.
She opened her Carey-On Saloon in 2008 near North Chestnut and West Fillmore streets and registered with all three organizations. But in 2011, she had to close because the property where she was leasing space was sold. At the time, she thought she owed BMI $1,200 for her license, but she didn't pay because her bar was closed and she did not have the money.
When Carey opened at her new location at 6829 Space Village Ave., she registered with ASCAP and SESAC, but BMI would not let her register, saying she now owed $8,693. That debt was turned over to a collection agency, which told her she owed $11,598 as of April 14. Carey said she has not received an explanation as to how that debt has grown so high.
When combined with the fines she received for that night of karaoke, Carey owes BMI and the collections agency $32,598.
BMI let Carey register with the company in early April, allowing her to play music and continue with karaoke nights. She paid about $1,400 and is trying to work out a payment plan to settle the rest of her debt.
"I know you have to pay for the licenses, and I believe in everyone getting their fair share," Carey said, "but if they said, 'You pay the $32,598 right now out of your pocket,' I'd be done."
She said she's sharing her story to warn budding businesses about the need to register because that information is not often passed along on the way to starting up.
"You go through all the processes to register a business, and no one says that you have to do this to play music," she said. "The only reason I knew was I have a family full of musicians."