Facts of the case

This dispute between the European Communities and the United States originated when the United States amended its copyright law in a way that nullified and impaired certain benefits promised to the European Communities under the Agreement on Trade Related Aspects of Intellectual Property (TRIPs). Article 9.1 of TRIPs requires all WTO members to comply with Articles 1 through 21 of the Berne Convention of 1971. Among the provisions of the Berne Convention thus incorporated into the TRIPs Agreement is one that grants to authors of literary and artistic works the exclusive right to authorize “the public communication by loudspeaker or any analogous instrument transmitting, by signs, sounds or images, the broadcast of the work,” and another that grants to authors of dramatic and musical works the exclusive right to authorize “any communication to the public of the performance of these works.”

In 1998, the United States amended its Copyright Act of 1976 to expand substantially the exemption enjoyed by certain establishments from the obligation to pay royalties on some copyrighted music. Subparagraph (A) of amended Section 110(5) of the US Copyright Act exempts eating, drinking, and retail establishments that transmit music on a single receiving apparatus of the kind commonly used in private homes (this part of Section 110(5) remains essentially unchanged from its previous version).