A recent landmark decision by the Supreme Court of Japan, issued on October 24, 2022 (Reiwa 4), has brought significant clarity—and raised new discussions—regarding the scope of public performance rights for musical works, particularly in educational settings. The case, which pitted a major Japanese copyright collecting society against numerous music schools, revolved around whether copyright royalties were due for music played by teachers and students during lessons. For U.S. businesses operating in Japan, especially those in the creative, educational, or entertainment sectors, the ruling offers vital insights into how Japanese copyright law interprets "performance," who is considered the responsible "performing entity," and the evolving application of long-standing legal doctrines.

Background: Performance Rights in Japanese Copyright Law

Under Japan's Copyright Act (著作権法 - Chosakuken Hō), Article 22 grants authors the exclusive right to perform their work "publicly" (公に - ōyake ni). This "right of public performance" (演奏権 - ensōken) means that if a musical work is performed for the purpose of being heard directly by the "public" (公衆 - kōshū), a license from the copyright holder (or their representative, such as a collecting society) is generally required. The Copyright Act defines "public" to include "specified and many persons." A performance typically includes not only live renditions like singing or playing an instrument but also the playing of recorded music.

Copyright collecting societies play a central role in managing these rights for musical works in Japan, licensing public performances and distributing royalties to songwriters and music publishers. The dispute with the music schools arose when a prominent collecting society sought to implement a new royalty scheme specifically for music used in lessons.

The Music School Dispute: A Legal Saga Unfolds

The core of the dispute was whether the performances of copyrighted music during lessons at music schools—both by teachers demonstrating pieces and by students practicing them—constituted "public performances" for which the schools, as business operators, were liable to pay royalties.

The music schools argued, among other points, that such performances were not "public" as they were primarily for educational purposes within a closed teacher-student relationship, and that the students, in particular, were performing for their own skill development, not to entertain an audience. The copyright collecting society contended that the schools commercially benefited from these performances, which occurred as part of their business operations and often in the presence of multiple students (in group lessons) or a teacher, thus falling under the scope of public performance rights.

Journey Through the Japanese Courts: Three Key Decisions

The case progressed through three levels of the Japanese judicial system, each offering a distinct perspective:

1. Tokyo District Court (February 28, 2020; Reiwa 2)

The first instance court largely sided with the copyright collecting society. It ruled that the music school operators were the "utilizing entities" (利用主体 - riyō shutai) for performances by both teachers and students. The court's reasoning drew upon the so-called "Karaoke doctrine" (カラオケ法理 - karaoke hōri), a principle established in an earlier Supreme Court case (the Club Cat's Eye case, March 15, 1988). This doctrine had held karaoke bar operators liable for copyright infringement for songs sung by their customers, based on the operator's management and control over the infringing activity and the commercial benefit derived from it. Applying this, the District Court found that music schools managed the environment where performances occurred and profited from them, making them liable for all lesson-related performances.

2. Intellectual Property (IP) High Court (March 18, 2021; Reiwa 3)

The IP High Court introduced a crucial distinction. It partially overturned the District Court's decision, ruling that while music schools were indeed the "performing entity" (演奏主体 - ensō shutai) for performances by their teachers, they were not the performing entity for performances by their students.

• Teacher Performances: The court reasoned that teachers perform as part of their employment or contractual obligations to the school, under the school's direction and for the school's educational business purposes. Thus, the school was the responsible entity.
• Student Performances: For students, however, the IP High Court found that they perform voluntarily and primarily for their own technical skill development and mastery. The court deemed the students themselves to be the performing entities for their own playing, and their audience (typically just the teacher, or a small group in a lesson) did not necessarily constitute the "public" in a way that would trigger the school's liability for a public performance.

This nuanced approach moved away from a blanket application of the Karaoke doctrine's criteria for student performances.

3. Supreme Court (October 24, 2022; Reiwa 4)

The Supreme Court ultimately upheld the IP High Court's decision, affirming the distinction between teacher and student performances. The key aspects of the Supreme Court's reasoning were:

• It agreed that music schools are liable for copyright royalties for music performed by teachers during lessons. These performances are part of the service provided by the school.
• Crucially, it also agreed that music schools are not liable for royalties for music performed by students during their lessons. The Supreme Court emphasized that the purpose of the students' playing is their own education and skill acquisition, not to entertain a public audience on behalf of the school.
• The Court focused on factors such as the "purpose and manner of performance, content and degree of involvement" by the school in the students' performances. It found that while teachers select pieces and instruct, students perform "voluntarily and autonomously," and the lesson fees are for instruction, not for the act of student performance itself as a public presentation by the school.

Significantly, like the IP High Court, the Supreme Court did not heavily rely on the traditional two prongs of the Karaoke doctrine (management/control and profit) to determine liability for student performances. Instead, it undertook a more contextual analysis of who was truly "performing" in a copyright-relevant sense.

The "Performing Entity" and the Evolving "Karaoke Doctrine"

This case has reignited debate about who constitutes the legally responsible "performing entity" or "operator" of a performance under Japanese copyright law. For decades, the Karaoke doctrine, stemming from the 1988 Club Cat's Eye Supreme Court decision, has been a significant, if sometimes controversial, point of reference. In Club Cat's Eye, a karaoke bar operator was held liable for infringements by customers singing copyrighted songs using the bar's equipment. The court focused on the operator's (1) management and control over the karaoke equipment and the environment where the singing occurred, and (2) the commercial profit derived from attracting customers through the availability of karaoke.

Legal commentators had long debated the appropriate scope and application of this doctrine, especially as new technologies and business models emerged. The Music School Supreme Court decision is seen by many as a pivotal moment in this debate. By not explicitly applying the "management and profit" criteria of the Karaoke doctrine to absolve schools of liability for student performances, and instead focusing on the purpose and autonomy of the students' actions, the Supreme Court appears to have signaled a more nuanced approach. It suggests that simply providing a venue and deriving some indirect commercial benefit from an activity involving copyrighted works does not automatically make an establishment the "performing entity" for all acts that occur within its premises, especially when those acts are primarily for the individual benefit and skill development of the participants (like students).

This could indicate a narrowing of the broad application of the Karaoke doctrine, requiring a more direct link between the establishment's business purpose and the specific performance in question to attribute liability.

Key Lessons for U.S. Businesses Operating in Japan

The Music School saga offers several important takeaways for U.S. businesses whose operations in Japan might involve the use or performance of copyrighted works:

1. Determining the "User" or "Performing Entity" is Crucial: The primary lesson is that liability for copyright infringement, particularly for public performance, hinges on correctly identifying who the law considers the "performing entity" or "user." This is not always the individual who physically plays the music or sings the song. Businesses that facilitate or manage environments where performances occur need to carefully assess their role.
2. Context and Purpose of Use Matter: The Supreme Court's emphasis on the purpose of the students' performances (skill acquisition) being distinct from the teachers' performances (instruction as part of the school's service) highlights that the context of use is a critical factor. A blanket approach to copyright liability is often insufficient.
3. Copyright Liability Can Be Nuanced: The differing outcomes for teacher versus student performances demonstrate that Japanese courts are willing to engage in detailed factual analysis and make fine distinctions. This means businesses should not assume straightforward answers to copyright questions.
4. Implications Extend Beyond Music Education: While the case was specific to music schools, its principles regarding the "performing entity" and the purpose of use could have broader implications:
   • Corporate Training: If copyrighted music, videos, or other materials are used in corporate training sessions, who is deemed the "user" or "performer"? Is it the company providing the training, or the employees interacting with the material for their own learning?
   • Retail and Hospitality: Businesses playing background music are generally considered public performances requiring licenses. However, interactive uses or performances by customers might warrant a fresh look in light of this ruling's nuanced approach to who "operates" the performance.
   • Fitness Centers and Event Organizers: Classes involving music or events featuring performances need to carefully consider who is responsible for securing rights, especially if third-party instructors or performers are involved, or if participant performances are a component.
5. The "Karaoke Doctrine" May Be Less Expansive: Businesses that might have previously been concerned about broad liability under an expansive interpretation of the Karaoke doctrine may find that this ruling offers a more constrained view, focusing on a more direct connection between the business's operation and the specific performance in question.
6. Continued Importance of Licensing and Due Diligence: Despite the nuances, the fundamental obligation to respect copyright and obtain necessary licenses for clear public performances integral to a business's service offering remains unchanged. This case underscores the need for careful due diligence regarding all uses of copyrighted material.

Conclusion

The Japanese Supreme Court's decision in the music school copyright dispute is a significant development in the interpretation of performance rights and the determination of the liable "performing entity." It signals a move towards a more contextual analysis, particularly where the direct "performers" are engaged in activities primarily for their own benefit (like education) rather than as direct agents or instruments of the business establishment's public offering.

For U.S. businesses, this ruling serves as a reminder that Japanese copyright law, while robust in protecting rights holders, also involves careful judicial scrutiny of the specific facts and relationships involved. Staying informed about such developments and seeking expert Japanese legal counsel is crucial for navigating copyright obligations and mitigating risks when copyrighted works are part of business activities in Japan. The "clash in the classroom" has provided valuable lessons for the entire business stage.