Roscoe’s House of Chicken and Waffles is so famous for its signature dish that President Obama visited the eatery when he came to Los Angeles in October.

Now, the local chain of five soul food restaurants has earned a different and unwanted distinction as the music industry ramps up its fight against piracy: copyright scofflaw.

The chain owner and founder, Herb Hudson, faces a $200,000 legal tab after a knockdown fight with the American Society of Composers, Authors & Publishers, which collects royalties for song copyright holders.

Hudson’ s offense? He refused to pay royalties for eight jazz songs played at his Long Beach outlet one night in May 2008 – a violation discovered by an Ascap investigator.

“The music industry isn’t doing nearly as well as it was five years ago. Everyone is scurrying around trying to increase revenue,” said Jeff Kravitz, managing partner at the Century City office of Fox Rothschild LLP, who specializes in entertainment industry copyright law. “It may seem like they are targeting picayune establishments, but they see it as getting people who are taking away their dollars.”

Ascap and other performance rights organizations, including BMI, have been around for decades. They ensure that songwriters, record labels and other copyright holders are compensated when songs are played on broadcast media, performed on stage and heard at other public venues.

That task has notoriously involved going after even small businesses, such as restaurants, which may not know they are subject to paying royalties for background music played while customers eat.

However, as digital piracy has drained an estimated $12.5 billion annually from the music industry, performing rights organizations are getting more aggressive in demanding royalties from shops, restaurants and other businesses. Those fees can vary from as little as $25 a month to as much as several thousand dollars a year, depending on the size of the business, how often music is played and other factors.

Ascap even started targeting funeral homes, something it hadn’t done before, according to the National Funeral Directors’ Association, which has warned its members to comply with the law.

The Boston Globe newspaper highlighted complaints in 2009 by church coffee houses, library cafes, and other small and non-profit organizations that were being hit with royalty demands of several hundred dollars a year.

Ascap, however, makes no apologies for its stance or legal battle with Roscoe’s, thought it wouldn’t say whether it has increased enforcement over the last several years.

“If you use copyrighted music, you need permission,” said Richard Reimer, senior vice president of legal services of the New York-based performing rights organization.

“If you choose to resist to the point where we have to sue, and if in so doing you run up the costs of litigation, you may wind up paying an extraordinary amount. That’s exactly how the situation with Roscoe’s evolved,” said Reimer.

Long-standing conflict
Hudson did not respond to numerous attempts to contact him. Michael DiNardo, an attorney at Woodland Hills-based Kelly Lowry & Kelley that represents Roscoe’s, declined to comment, referring the Business Journal to court documents.
But Reimer said the conflict stems from the time the chain’s Long Beach location opened in 2001, which prompted Ascap to contact Hudson and request that he pay a few hundred dollars in annual royalty fees for the outlet.
Ascap claims that Hudson refused to pay even after the organization demanded payment numerous times. It eventually sent an investigator to the restaurant in May 2008 to document any copyright infringements.
According to a lawsuit Ascap filed that year in U.S. District Court, the investigator found a jazz band played four John Coltrane tunes, including the standard “My Favorite Things,” and four jazz fusion songs by the group Hiroshima were played from a CD.
The lawsuit, brought by Ascap on behalf of Universal Music Group and other record labels, alleged Roscoe’s parent East Coast Foods Inc. and Hudson personally owed royalties, but did not specify an amount.
Hudson fought the lawsuit. The federal judge in the case, without a trial, summarily ruled the chain and Hudson had violated copyright law. She also ordered payment of one-time damages of $4,500 for each song, or $36,000 for all eight songs. She also ruled Ascap had to be compensated for its $162,728 in legal fees.
Hudson appealed that judgment, but a three-judge panel of the Ninth Circuit Court of Appeals upheld the decision Feb. 16. Since then, Reimer said, Hudson’s legal team has asked the same three-judge panel or the entire Ninth Circuit Appeals Court to reconsider his appeal

Revenue pressures

It’s hard to know if Ascap is being more aggressive. The organization won’t disclose the number of enforcement actions taken each year, and public records are unclear on the matter because most cases are settled before they ever get to court.

However, Ronald Sittler, a partner in entertainment litigation at the firm Blank Rome in Century City who reviewed the case for the Business Journal, believes that this case is unusual and driven by Hudson’s intransigence.

As a student intern, Sittler said he worked at Sony Music with its team of undercover investigators and Ascap. Based on his experience, enforcement usually focuses on big chains, and larger restaurants and clubs. (In addition to Long Beach and an eatery at its Hollywood headquarters, Roscoe’s only has two other locations in Los Angeles and one in Pasadena. Obama ate at its Pico Boulevard site.)

“There are so many violations going on that if Ascap thinks you are making a good-faith effort to comply, they will work with you,” he said. “Enforcement cases are really about large places or those with a cavalier attitude.”

Still, Sittler believes the digital revolution may be spurring tougher copyright enforcement. In addition to piracy through illegal downloads, Internet distribution has crippled the sale of CDs, formerly the mainstay product of the record companies.

“A lot of the revenue streams in years past are gone,” he said. “In the music industry, the attitude is: ‘We’ve got to maximize what we have left.’”

Part of the problem with small businesses, such as restaurants, is that many do not even know they are subject to copyright laws. A recent study by Target Research in New York reported that more than 90 percent of businesses play music, and more than half of those are unaware that playing tunes from an MP3 player or the Internet requires a license fee.

Chris Harrison, an adjunct professor of music law at the University of Texas in Austin, said many small restaurateurs and bakery owners mistakenly think that if they buy a CD at a store, they have the right to play the music on their premises.

“A substantial number of businesses are actively, openly and in most cases unknowingly engaging in music piracy,” Harrison said. “As the crackdown on piracy intensifies, businesses are facing large fees ranging into the thousands for playing nonlicensed music.”

But businesses have a number of options for compliance, including subscribing to commercial music services or Sirius-XM Radio that charge small monthly fees and handle copyright payments for them.

“It’s easier to pay $25 a month than $200,000 in legal fees all at once,” said Harrison.

If Hudson’s request for reconsideration by the Ninth Circuit is denied, Roscoe’s could appeal to the U.S. Supreme Court, an even longer shot. However, Reimer expects the case will be resolved before the end of the year.

“If their goal is to buy additional time, then Ascap will get compensation for the additional attorney’s fees with the appeal process,” said Reimer, who noted that despite the appeals, the Long Beach Roscoe’s diner recently purchased an Ascap license.