Text: H.R.6052 — 109th Congress (2005-2006)All Bill Information (Except Text)

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Introduced in House (09/12/2006)


109th CONGRESS
2d Session
H. R. 6052

To amend title 17, United States Code, to provide for licensing of digital delivery of musical works and to provide for limitation of remedies in cases in which the copyright owner cannot be located, and for other purposes.


IN THE HOUSE OF REPRESENTATIVES
September 12, 2006

Mr. Smith of Texas introduced the following bill; which was referred to the Committee on the Judiciary


A BILL

To amend title 17, United States Code, to provide for licensing of digital delivery of musical works and to provide for limitation of remedies in cases in which the copyright owner cannot be located, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title; table of contents.

(a) Short title.—This Act may be cited as the “Copyright Modernization Act of 2006”.

(b) Table of contents.—The table of contents of this Act is the following:


Sec. 1. Short title; table of contents

Sec. 101. Short title

Sec. 102. Statutory Licenses for digital delivery of musical works

Sec. 103. Performance right preserved

Sec. 104. Interim rate process

Sec. 105. Technical amendments

Sec. 106. Effective date

Sec. 107. Savings clauses

Sec. 108. Staying of infringement actions

Sec. 201. Short title

Sec. 202. Limitation on remedies in cases involving orphan works

Sec. 203. Report to Congress on amendments

Sec. 204. Inquiry on remedies for small copyright claims

Sec. 301. Short title

Sec. 302. Registration in civil infringement actions

Sec. 303. Statutory damages

Sec. 304. Improved investigative and forensic resources for enforcement of laws related to intellectual property crimes

SEC. 101. Short title.

This title may be cited as the “Section 115 Reform Act of 2006”.

SEC. 102. Statutory Licenses for digital delivery of musical works.

Section 115 of title 17, United States Code, is amended by adding at the end the following new subsection:

“(e) Licenses for digital uses of musical works.—

“(1) IN GENERAL.—The compulsory license for digital phonorecord deliveries and hybrid offerings shall be governed by this subsection, in addition to subsections (a), (c), and (d). The license under this subsection covers—

“(A) the making and distribution of general and incidental digital phonorecord deliveries in the form of full downloads, limited downloads, interactive streams, and any other form constituting a digital phonorecord delivery or hybrid offering; and

“(B) all reproduction and distribution rights necessary to engage in activities described in subparagraph (A), solely for the purpose of engaging in such activities under the license, including—

“(i) the making of reproductions by and for end users;

“(ii) reproductions made on servers under the authority of the licensee; and

“(iii) incidental reproductions made under the authority of the licensee in the normal course of engaging in activities described in subparagraph (A), including cached, network, and RAM buffer reproductions.

“(2) BLANKET LICENSES.—A person may obtain a compulsory license to engage in activities subject to this subsection only from a designated agent under paragraph (4) and only if the person is a digital music provider. Except as provided in paragraph (9)(E)(v), a person may engage in activities subject to this subsection under authority of a compulsory license only—

“(A) if the license was obtained by a digital music provider; and

“(B) with respect to end users with which the digital music provider meets the requirements of paragraph (14)(C).

“(3) EXEMPTION FOR NONINTERACTIVE SERVER AND INCIDENTAL REPRODUCTIONS.—

“(A) IN GENERAL.—Notwithstanding section 106, it shall not be an infringement of the exclusive right of reproduction or distribution in a copyrighted musical work, as described in section 106(1) and (3), for a digital music provider or a transmitting entity to make server and incidental reproductions to facilitate noninteractive streaming or terrestrial radio analog broadcasts of that musical work, subject to the following:

“(i) The exemption under this subparagraph is limited to reproductions on servers and incidental reproductions made under authority of the digital music provider or transmitting entity and incident to noninteractive streaming or terrestrial radio analog broadcasting, including cached, network, and RAM buffer reproductions, to the extent reasonably necessary for, and only to the extent that such reporductions are used for the purpose of, engaging in noninteractive streaming or terrestrial radio analog broadcasting.

“(ii) The exemption under this subparagraph does not apply to any server or incidental reproductions made to facilitate noninteractive streaming or terrestrial radio analog broadcasts by a digital music provider or a transmitting entity that takes affirmative steps to intentionally induce, cause, or promote the making of reproductions of musical works by or for end users that are accessible by those end users for future listening, unless valid license authority for reproduction and distribution rights otherwise exists permitting the service to use such server or incidental reproductions for that activity. For purposes of this clause, none of the following shall in itself be considered an affirmative step to intentionally induce, cause, or promote the making of reproductions of musical works:

“(I) The transmission of metadata to identify sound recordings.

“(II) The transmission of unencrypted streams.

“(III) A transmitting entity’s announcement of a particular song to be broadcast.

“(B) RETROACTIVE EFFECT.—The exemption from liability provided under subparagraph (A) shall apply to actions taken on or after January 1, 2001.

“(C) SAVINGS CLAUSE REGARDING INFRINGEMENT.—Neither the exemption provided under subparagraph (A), nor the limitations on such exemption set forth in subparagraph (A)(ii), shall be construed to imply that the making of server or incidental reproductions not covered by the exemption does or does not constitute copyright infringement. In evaluating a claim of infringement based on the making by a service of server or incidental reproductions in a case in which the use of such server or incidental reproductions is not within the scope of the exemption set forth in subparagraph (A), a court shall not take into account the exemption, or the activities that are excluded from the scope of the exemption under subparagraph (A)(ii).

“(D) RIGHTS WITH RESPECT TO SOUND RECORDINGS.—The exemption under this paragraph does not limit or otherwise affect any rights with respect to sound recordings under this title.

“(4) APPLICATIONS FOR LICENSES.—Any digital music provider seeking a license under this subsection may apply to a designated agent for the license, identifying in the application each type of qualifying activity for which the license is sought. Any digital music provider that has a license under this subsection and seeks to engage in any activity covered by this subsection that is not identified in the license may engage in that activity only upon filing a new application identifying the additional activity.

“(5) LICENSE SCOPE AND EFFECTIVE DATE.—All activities specified in an application filed under paragraph (4) for which a license is available under this subsection shall be licensed by the designated agent. The license shall be effective, upon the filing of the application, for all copyrighted nondramatic musical works (or shares of such musical works) represented by the designated agent.

“(6) RETROACTIVE ROYALTY PAYMENTS.—

“(A) RETROACTIVE PAYMENTS.—A digital music provider that has obtained a license from a designated agent under this subsection for—

“(i) the making and distribution of limited downloads, or

“(ii) the making or distribution of interactive streams,

may report to the designated agent activity authorized by the license that the digital music provider engaged in during the period beginning on January 1, 2001, and ending on January 1, 2008, and pay to the designated agent royalties applicable to that activity. Such reporting and payments shall be made not later than March 1, 2008, in accordance with the regulations issued under paragraph (10) regarding reporting and payments.

“(B) LIMITATION ON LIABILITY.—A digital music provider that reports activity and makes payments under this paragraph for an activity under this paragraph shall not be subject to an action for copyright infringement alleging violation of reproduction or distribution rights to the extent such action is based on activity so reported for which all payments due have been made.

“(7) LICENSE NOT TRANSFERABLE.—A license granted to a digital music provider under this subsection may not be transferred to any other person or entity.

“(8) ROYALTY RATES AND TERMS.—

“(A) RATES AND TERMS IN EFFECT.—Rates and terms in effect under subsection (c) on the effective date of the Section 115 Reform Act of 2006 for any activity for which a license is available under this section shall continue to apply to that activity on and after that date until a new rate is determined under subsection (c) and chapter 8.

“(B) PAYMENT.—Licensees under this subsection shall make payments of royalties to the designated agents at rates and terms as directed by the Copyright Royalty Judges.

“(C) RATES AND TERMS FOR NEW LICENSE ACTIVITIES.—

“(i) IN GENERAL.—Not later than July 1, 2007, the Copyright Royalty Judges shall initiate a ratemaking proceeding, pursuant to the procedures set forth in chapter 8, to determine a final rate and terms for any activity for which a license is available under this subsection if—

“(I) a final rate and terms have not been established for the activity as of that date; or

“(II) the activity is not the subject of a proceeding to set a final rate and terms under subsection (c) that is pending before the Copyright Royalty Judges on that date.

“(ii) PENDING PROCEEDINGS.—In any case in which a proceeding is pending before the Copyright Royalty Judges, on July 1, 2007, to determine final rates and terms under subsection (c) for any activity for which a license is available under this subsection, the Copyright Royalty Judges may expand and adjust the schedule of the proceeding to cover rates and terms for any activity described in clause (i), in lieu of initiating a proceeding under clause (i) with respect to that activity, if so expanding and adjusting the schedule of the proceeding will not unduly prejudice any party to the proceeding and will not delay the final determination of rates and terms by the Copyright Royalty Judges by more than 90 days.

“(iii) PARTICIPATION OF DESIGNATED AGENTS.—All designated agents, and any other parties who have a significant interest, within the meaning of section 804(a), in the applicable royalty rate, are entitled to participate in a proceeding under this subparagraph relating to activities licensed under this subsection.

“(D) INTERIM RATES.—

“(i) IN GENERAL.—For any activity for which a license is available under this subsection and for which a rate and terms have not been determined under subsection (c), a digital music provider shall, upon filing a valid application with the relevant designated agent, have a license under this subsection to engage in the activity, subject to clause (ii).

“(ii) INTERIM RATES AND TERMS.—Upon the filing of an application under clause (i)—

“(I) the digital music provider and the designated agent may negotiate an interim rate and terms that will apply to the activity under the license; or

“(II) the digital music provider or the designated agent, or both, may apply to the Copyright Royalty Judges for an interim rate and terms, in which case—

“(aa) the Copyright Royalty Judges shall, not later than 15 days after the application is made, publish notice of an expedited proceeding to determine the interim rate and terms; and

“(bb) the Judges shall determine the interim rate and terms not less than 30 days and not more than 60 days after publishing the notice, through the expedited proceeding.

“(iii) APPLICABILITY OF INTERIM RATES AND TERMS.—(I) An interim rate and terms negotiated under clause (ii)(I) or established under clause (ii)(II) shall apply to the activity under the license concerned, retroactive to the inception of the activity, until a final rate and terms for the activity are determined under subparagraph (C), or as otherwise agreed by the parties.

“(II) An interim rate and terms described in clause (ii) with respect to an activity by a digital music provider shall not be treated as precedent in a final ratemaking proceeding. If the Copyright Royalty Judges have established an interim rate and terms under clause (ii)(II), subject to clause (iv), that rate and those terms shall apply to the same activity engaged in by any digital music provider, except as otherwise agreed to by the parties.

“(iv) SINGLE PROCEEDING FOR EACH ACTIVITY.—Unless the Copyright Royalty Judges determine that there is good cause to review an interim rate and terms established under clause (ii)(II), the Judges may conduct only 1 proceeding to determine an interim rate and terms for an activity for which a license is available under this subsection.

“(v) ADJUSTMENT OF INTERIM RATES.—After a determination of a final rate and terms that will apply to an activity for which a license is available under this subsection has been made under subparagraph (C), the final rate and terms shall be retroactive to the inception of the activity under all licenses to which such rate and terms apply, unless an agreement between the parties to a license provides otherwise. Not later than 60 days after the determination of the final rate becomes effective—

“(I) the digital music provider shall pay to the designated agent any amounts due from underpayment of fees by the digital music provider because the final rate exceeds the interim rate; or

“(II) the designated agent shall refund to the digital music provider the amounts of any overpayment of fees by the digital music provider because the interim rate exceeds the final rate, or, at the election of the digital music provider, the designated agent shall credit such overpayment against future payments by the digital music provider to the designated agent under this subsection.

“(9) DESIGNATED AGENTS.—

“(A) IN GENERAL.—Designated agents under this subsection are the General Designated Agent and additional designated agents.

“(B) GENERAL DESIGNATED AGENT.—

“(i) DESIGNATION AND PURPOSE.—(I) Not later than March 1, 2007, the Register of Copyrights shall designate a mechanical licensing and collection agency representing music publishing entities that represent the greatest share of the music publishing market, as measured by the amount of royalties collected during the preceding 3 full calendar years with respect to the use of copyrighted musical works pursuant to this section, to establish and operate the General Designated Agent.

“(II) The General Designated Agent shall grant and administer licenses and collect and distribute royalties payable for the use of musical works licensed under this subsection, but only for copyright owners who do not choose to be represented by an additional designated agent, and to the extent provided in subparagraphs (E)(ii)(II) and (G)(ii).

“(III)(aa) The General Designated Agent shall be governed by a board of directors consisting of 5 members, 2 of whom shall be professional songwriters.

“(bb) The mechanical licensing and collection agency described in subclause (I) shall select the representatives of music publishing entities that will serve on the board of directors of the General Designated Agent.

“(cc) The Register of Copyrights shall select the 2 songwriter directors, after consulting with the songwriter community. Each of the 2 songwriter directors shall have—

“(AA) significant artistic experience in the songwriting profession, including by deriving the major portion of his or her income from songwriter activities such as mechanical, performance, and synchronization rights, whether online or terrestrial; and

“(BB) significant business experience in the songwriting profession so that he or she can fully understand and participate in the deliberations of the board of directors.

The 2 songwriter directors shall serve staggered 3-year terms.

“(dd) All members of the board of directors of the General Designated Agent have a fiduciary duty to the publishing entities and songwriters that the board represents.

“(ii) DECERTIFICATION.—Upon a showing that the General Designated Agent fails to meet the qualifications under this subparagraph or otherwise fails to meet the requirements under this paragraph, the Register of Copyrights may, after providing the General Designated Agent a reasonable opportunity to respond, disqualify the General Designated Agent. In such a case, the Register of Copyrights shall designate another General Designated Agent.

“(C) ADDITIONAL DESIGNATED AGENTS.—

“(i) CERTIFICATION.—The Register of Copyrights shall certify as an additional designated agent to represent copyright owners for purposes of licenses under this subsection any entity that demonstrates that—

“(I) upon certification, it will represent 1 or more music publishing entities that represent at least a 15 percent share of the music publishing market, as measured by the amount of royalties collected during the preceding 3 full calendar years with respect to the use of copyrighted musical works pursuant to this section; and

“(II) it has the capability to perform the required functions of a designated agent under this subsection.

“(ii) DUTIES.—(I) Upon certification under clause (i), an additional designated agent shall represent any copyright owners of musical works who elect to have the additional designated agent represent them and the musical works (or shares of musical works) owned or controlled by such copyright owners for purposes of the licenses under this subsection.

“(II) Each additional designated agent shall notify the General Designated Agent and any other additional designated agent of each copyright owner, and the musical works (or shares of musical works) owned or controlled by the copyright owner, that the additional designated agent represents pursuant to subclause (I).

“(III) Any election under subclause (I) is effective only if it is made in writing. The additional designated agent elected shall make a copy of the election available to any other designated agent upon a reasonable request for such a copy.

“(iii) DECERTIFICATION.—Upon a showing that an additional designated agent fails to meet the qualifications under this subparagraph or otherwise fails to meet the requirements under this paragraph, the Register of Copyrights may, after providing the additional designated agent a reasonable opportunity to respond, remove the certification of the additional designated agent.

“(D) AUTHORITIES OF DESIGNATED AGENTS.—A designated agent may—

“(i) engage in activities pursuant to this subsection;

“(ii) engage in such additional activities in the interest of music publishers and songwriters as the designated agent considers appropriate, including industry negotiations, ratesetting proceedings, litigation, and legislative efforts; and

“(iii) apply any administrative fees or other funds it collects to support the activities described in clauses (i) and (ii).

“(E) ELECTIONS BY COPYRIGHT OWNERS.—

“(i) REPRESENTATION BY SINGLE DESIGNATED AGENT.—Each copyright owner, and the musical works (or shares of musical works) that the copyright owner owns or controls, may choose an additional designated agent to represent the owner, except that a copyright owner may be represented by only 1 designated agent during any calendar year.

“(ii) ANNUAL ENROLLMENT PERIOD.—

“(I) IN GENERAL.—Each copyright owner may, during the month of September of each year, elect to change the designated agent to represent the owner and the musical works (or shares of musical works) referred to in clause (i), beginning on January 1 of the succeeding calendar year.

“(II) SELECTION.— If the additional designated agent chosen by a copyright owner is not certified pursuant to subparagraph (C)(i) or is decertified pursuant to subparagraph (C)(iii), the copyright owner and the musical works (or shares) referred to in clause (i) shall be represented by the General Designated Agent for the succeeding calendar year.

“(iii) EFFECT ON LICENSES.—A designated agent’s representation of the musical works (and shares of musical works) of any copyright owner who elects to change designated agents under clause (ii) shall terminate on December 31 of the year in which the election is made, after which the musical works (and shares of musical works) of the copyright owner will become subject to the licenses in effect with the new designated agent, as provided in clause (ii).

“(iv) VOLUNTARY AGREEMENTS.—A copyright owner and a digital music provider may enter into a voluntary license agreement to cover activities licensed under this subsection. Any such agreement shall apply in lieu of a blanket license under this subsection, to the extent permissible under subsection (c)(3)(E), with respect to those musical works (or shares of musical works) and activities covered by the agreement during the period that the agreement is in effect. The royalty fees due for usage of musical works (or shares of musical works) under a blanket license under this subsection shall be reduced in proportion to the usage covered under such a voluntary license agreement. Each designated agent shall establish procedures by which copyright owners and licensees shall be required to notify the designated agent of the existence of voluntary license agreements upon which they are relying in lieu of the blanket license. Such procedures shall include appropriate measures to protect confidential information of licensees.

“(F) NOTICE OF DESIGNATED AGENTS.—At least 90 days before beginning operations, any interested party wishing to serve as an additional designated agent shall file with the Copyright Office a notice of intent to operate as a designated agent under this subsection. The notice shall contain such contact information, and such information concerning applications for licenses under this subsection and access to the electronic database of the additional designated agent (described in subparagraph (H)(i)) identifying musical works (or shares of musical works) represented by the additional designated agent, as required in regulations issued to carry out this subsection. The Copyright Office shall make each notice filed under this subparagraph available to the public on the Internet.

“(G) TERMINATION OF DESIGNATED AGENT.—

“(i) NOTICE AND TRANSFER OF RECORDS.—At least 180 days before terminating operations, a designated agent shall—

“(I) notify the Copyright Office, all of its licensees under this subsection, all of the copyright owners represented by the designated agent for the purposes of this subsection, and all other designated agents of its intent to terminate operations; and

“(II) transfer to the existing General Designated Agent or, in the case of the termination of the General Designated Agent, to the successor General Designated Agent, electronic and other copies of all records that are necessary to determine copyright ownership and payment of royalties.

“(ii) ASSUMPTION OF DUTIES BY GENERAL DESIGNATED AGENT.—Upon the termination of operations of a designated agent, the General Designated Agent or successor General Designated Agent, as the case may be, shall assume the administration of the musical works and rights previously administered by the terminated designated agent, regardless of whether the terminated agent has complied with clause (i).

“(H) MUSICAL WORKS DATABASE.—

“(i) AVAILABILITY.—The General Designated Agent and each additional designated agent shall maintain and make available to licensees, free of charge, a searchable electronic database of information from which licensees can determine which musical works (or shares of musical works) are available for licensing under this subsection through that designated agent. Any musical work (or shares of a musical work) not identified as being represented by the General Designated Agent or any additional designated agent in any such database may be presumed by licensees to be represented by the General Designated Agent.

“(ii) USE OF DATABASE BY DESIGNATED AGENTS AND LICENSEES.—Subject to the public access described under clause (iii), the database required by clause (i) may be used by designated agents and licensees only for purposes of determining the identity and availability of musical works for licenses under this subsection, obtaining such licenses, reporting of use of musical works, payment of royalties, and otherwise to comply with licenses under this subsection, except that a designated agent may use or make the database it maintains available for other purposes relating to musical works or music publishers. The Copyright Royalty Judges shall, in establishing cost-sharing amounts pursuant to paragraph (12), consider the value and benefit of any such other purposes to the designated agent and the copyright owners it represents. The use of any such database shall be subject to reasonable confidentiality and security standards prescribed in regulations to carry out this subsection.

“(iii) PUBLIC ACCESS TO DATABASE.—The General Designated Agent and each additional designated agent shall make relevant portions of the database required by clause (i) available free of charge to the general public to access information concerning specific musical works that are represented by the designated agent, subject to reasonable terms and conditions of use as may be prescribed by the Register of Copyrights, taking into account reasonable protection of proprietary data.

“(I) LETTERS OF DIRECTION.—

“(i) RECOUPMENT OF ADVANCE.—

“(I) LETTER OF DIRECTION.—Subject to subclauses (II), (III), (IV), and (V), a copyright owner may submit a letter of direction to a designated agent instructing the designated agent to pay royalties otherwise payable to the copyright owner to the sound recording company in order to allow the sound recording company to recoup an advance payment made to the copyright owner under a contract entered into between the copyright owner and the sound recording company.

“(II) CONTRACTS ENTERED INTO BEFORE OCTOBER 1, 2006.—In the case of a contract described in subclause (I) that is entered into before October 1, 2006, a letter of direction is valid only if it is submitted to the General Designated Agent by March 30, 2008.

“(III) CONTRACTS ENTERED INTO AFTER SEPTEMBER 30, 2006.—In the case of a contract described in subclause (I) that is entered into before on or after October 1, 2006, a letter of direction is valid only if it uses the terms ‘letter of direction’ and ‘designated agent’ within the meaning of this subsection.

“(IV) VALIDITY OF LETTERS OF DIRECTION.—A letter of direction that complies with subclauses (II) and (III) is valid (subject to the resolution of any dispute with respect to the letter that is resolved under subclause (VI)) with respect to any designated agent who is or may become responsible for payment of royalties that are the subject of the contract between the copyright owner and the sound recording company.

“(V) EXCEPTION.—A copyright owner may not submit a letter of direction under subclause (I) if another person who is not a party to the contract described in subclause (I) owns a share of the copyright in the musical work covered by the contract and is due royalties for that musical work.

“(VI) DISPUTES.—If the copyright owner and the sound recording company disagree on whether the contract described in subclause (I) requires the artist to allow recoupment, either party may bring an action to resolve the dispute only in the court specified in the contract. If the contract does not specify such a court, either party may bring an action to resolve the dispute only in the United States district court for the judicial district in which the General Designated Agent is located.

“(ii) IN GENERAL.—A designated agent shall comply with a valid letter of direction submitted under clause (i)(I) that instructs the designated agent to pay all or part of the royalties otherwise payable to the copyright owner to another person.

“(10) ROYALTY REPORTING AND COMPLIANCE.—

“(A) REQUIREMENTS.—

“(i) IN GENERAL.—Each licensee under this subsection shall, not later than 30 days after the end of each calendar quarter, report to the applicable designated agent, in electronic format, the licensee’s usage of musical works under the license, and make royalty payments by reason of such usage,.

“(ii) LIMITATION ON DISCLOSURE.—

“(I) IN GENERAL.—A designated agent may disclose information received under clause (i) to a recipient of royalty payments made by a licensee only with respect to musical works owned or controlled by the recipient. The designated agent may not disclose such information to any other person in a form that can be readily associated with a licensee except to the extent permitted by written agreement of the licensee.

“(II) EXCEPTION.—Subclause (I) does not prevent a designated agent from providing information with respect to a licensee—

“(aa) to the legal and financial advisors of the designated agent or to an accountant or auditor rendering services relating to this subsection; or

“(bb) to the extent necessary in connection with a bona fide dispute or legal claim or proceeding, in which case the designated agent shall make reasonable efforts to obtain confidential treatment of such information and, unless precluded by operation of law, shall provide written notice to the licensee of any impending disclosure of the information.

“(iii) INTEREST.—

“(I) IN GENERAL.—A licensee who has failed to make a payment required under this subsection by the due date to a designated agent (including as specified in a notice of payment deficiency or default, as determined in a royalty compliance examination under subparagraph (B), or as required by a determination of the Copyright Royalty Judges), shall pay to the designated agent interest on the overdue amount, at an annual rate of the Federal funds rate plus 5 percent, such interest to accrue monthly from the date payment was due until the date payment is received by the designated agent.

“(II) DEFINITION.—In this clause, the term ‘Federal funds rate’ means the interest rate established by the Federal Reserve at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. The Federal funds rate for any 1-month period during which interest accrues under clause (i) is the Federal funds rate in effect on the first day of that 1-month period.

“(iv) PROMOTIONAL USE EXEMPTIONS.—

“(I) FREE PROMOTIONAL USES BY DIGITAL MUSIC PROVIDERS.—A digital music provider shall not be required to pay royalties under this subsection for a free promotional use of a musical work in the form of an interactive stream or limited download, if the digital music provider is authorized to do so by the owner or licensee of the applicable sound recording, and reports to all appropriate designated agents such use as a free promotional use in its quarterly reports under subparagraph (A)(i).

“(II) OTHER FREE PROMOTIONAL USES BY SOUND RECORDING OWNERS.—

“(aa) AUTHORITY.—The owner or licensee of a sound recording who seeks to offer free promotional uses of the sound recording in the form of an interactive stream or limited download through a third party not licensed as a digital music provider under this subsection may offer such free promotional uses if the owner or licensee (as the case may be)—

“(AA) files a notice of such free promotional use, at the same time that a report under subparagraph (A)(i) is filed for each quarterly reporting period in which such free promotional use is provided, with the designated agent that represents the musical work (or share thereof) embodied in the sound recording;

“(BB) includes in the notice the identity of the work in question, the date or dates of the free promotional uses, the types of uses being offered, the third party that is distributing the uses to end users, the street and internet addresses of the third party, and such other information as the Register of Copyrights may prescribe by regulation.

“(bb) REQUEST FOR DOCUMENTATION.—By written notice, a designated agent may request the owner or licensee of the sound recording to provide documentation demonstrating that a use of a musical work qualifies as a free promotional use under this clause. If the owner or licensee fails to provide such documentation within 30 days after the date of such notice, the free promotional use shall be considered not to have been authorized under this subclause.

“(III) 30-SECOND PROMOTIONAL STREAMS.—

“(aa) IN GENERAL.—Notwithstanding subsection (a) or any other provision of this section, but subject to subsection (f), a digital music provider licensed under this subsection to distribute a full download of a sound recording, or authorized to distribute a physical phonorecord of a sound recording, shall, if the digital music provider is authorized to do so by the owner or licensee of the sound recording, has the right to create, reproduce, and transmit, including the making of all server and incidental reproductions that are necessary, an excerpt of the sound recording of up to 30 seconds in length to be made available directly to end users in the form of an interactive stream—

“(AA) solely for purposes of promoting the lawful sale or paid use of the sound recording, or the paid use of a subscription service offering the sound recording; and

“(BB) only if such stream is a free promotional use.

“(bb) REPORTING NOT REQUIRED.—A digital music provider is not required to report to the designated agent free promotional uses of 30-second excerpts authorized under this subclause.

“(cc) CONSTRUCTION.—(AA) The authority granted under this subclause does not include or extend to any other right to create, reproduce, or distribute an excerpt of a musical work for any purpose other than that expressly authorized under this subclause, including for use as, or to promote, a ringtone or mastertone.

“(BB) Nothing in this subclause shall be cited, relied upon, interpreted, or construed for purposes of evaluating or determining whether the creation or use of an excerpt of a musical work other than as expressly authorized under this subclause does or does not qualify for a compulsory license under this section.

“(IV) REGULATIONS.—The Register of Copyrights shall promulgate regulations detailing reporting and recordkeeping requirements for free promotional uses.

“(B) ROYALTY COMPLIANCE EXAMINATIONS.—A designated agent may, upon providing written notice to its licensee under this subsection, conduct a royalty compliance examination of the licensee, subject to the following:

“(i) A designated agent may conduct only 1 examination of any licensee in a calendar year, and may conduct an examination of a licensee with respect to a reporting period only once. A designated agent may conduct an examination jointly with 1 or more other designated agents.

“(ii) The examination may begin only within 18 months after the end of the period being examined and may only cover a period of not less than 2 and not more than 4 consecutive years, except that an examination may cover a period of—

“(I) more than 4 years if the examination includes activities subject to retroactive payments under paragraph (6);

“(II) less than 2 years if—

“(aa) the licensee's license has been terminated;

“(bb) the licensee has defaulted in its reporting or payments under this paragraph; or

“(cc) the licensee has terminated or is about to terminate operations, has filed or indicated an intent to file for bankruptcy, or has transferred or indicated an intent to transfer its assets to a third party; or

“(III) less than 2 years or more than 4 years if, for other good cause, the examination cannot reasonably cover a period of 2 to 4 years.

“(iii) At the conclusion of the examination, the designated agent shall, after considering any written rebuttal provided by the licensee during the examination, provide a written notice to the licensee setting forth the designated agent’s final claim, if any, resulting from the examination.

“(iv) The designated agent shall bear the costs of the examination, except that, if the licensee underpaid royalty fees by 10 percent or more, the licensee shall bear the reasonable costs of the examination.

“(v) A licensee may not assert section 507 of this title or any other Federal or State statute of limitations, doctrine of laches or estoppel, or similar provision to avoid a royalty examination under this subparagraph, or as a defense to a legal action arising from such a royalty examination, if the legal action is commenced within 18 months after the final claim of the designated agent (as stated in the written notice under clause (iii)) resulting from the examination that is the basis for such action.

“(C) FAILURE TO REPORT OR PAY ROYALTIES.—

“(i) SUBSTANTIAL FAILURE.—If a licensee under this subsection—

“(I) fails to provide a quarterly report when due or fails to provide a quarterly report in compliance with the error tolerance standard, or

“(II) fails to make all quarterly royalty payments when due or fails to pay royalties due for reported usage,

the designated agent may provide written notice to the licensee describing the default under subclause (I) or (II) and providing that if the default is not remedied within 30 days after receipt of the notice, the license will automatically terminate upon the expiration of that 30-day period. If the default is not remedied within that 30-day period, the license terminates upon the expiration of that 30-day period. Such termination makes the uses of the musical works that are the subject of the default actionable as acts of infringement under section 501 and fully subject to the remedies provided by sections 502 through 506 and 509.

“(ii) FAILURE WITH RESPECT TO INDIVIDUAL WORK.—

“(I) EXCLUSION FROM LICENSE.—If a licensee with an otherwise valid license under this subsection—

“(aa) has not made the required reports or royalty payments under subparagraph (A)(i) for a musical work covered by the license, or

“(bb) upon being sent written notice from the designated agent of a valid reporting or payment deficiency with respect to the use of a musical work, fails to remedy that deficiency within the specified cure period,

that work is excluded from the scope of the license until such time as the licensee provides all the reports that are past due, and makes all royalty payments that are past due, to the designated agent for that work, or the designated agent otherwise identifies the work, determines the usage of the work, and has received from the licensee all royalty payments for the work that are past due.

“(II) SPECIFIED CURE PERIOD.—For purposes of subclause (I)(bb), the “specified cure period” means, with respect to a licensee—

“(aa) 90 days, during the first 12 month-period in which the licensee engages in activities under a license under this subsection;

“(bb) 60 days, during the succeeding 12-month period in which a licensee engages in activities under a license under this subsection; and

“(cc) 30 days, during any period thereafter.

“(III) EXCEPTION.—If the licensee demonstrates to the designated agent with respect to a musical work that is the subject of a notice of deficiency described in subclause (I)(bb) that the deficiency cannot be remedied because it is due to missing information that, notwithstanding a diligent search by the licensee, is actually and objectively unobtainable by the licensee from any known source, then the license shall not be invalidated with respect to that work, if all royalties due for that work have been paid.

“(iii) OBTAINING SUBSEQUENT LICENSES.—A licensee whose license is terminated by a designated agent under clause (i) and who fully remedies the default within 60 days after the date on which the license terminates, may apply for and obtain a new license from that designated agent, if, during the 5-year period ending on the date of such termination, the licensee has not previously had a license terminated by the designated agent. In any other case in which a license is validly terminated by a designated agent, the designated agent may require the licensee to meet reasonable credit or advance requirements or to demonstrate the capability to report and make royalty payments in compliance with this subsection before obtaining a new license.

“(D) INFORMATION PROVIDED TO COPYRIGHT OWNERS.—Each designated agent shall, on an annual basis, provide to copyright owners, free of charge, the information, regarding the musical works of those copyright owners, that the designated agent receives from digital music providers in the quarterly reports under subparagraph (A). A copyright owner may request such information more frequently, but in such a case the designated agent may charge the copyright owner the costs borne by the designated agent in providing the information. Designated agents may provide the information under this subparagraph in electronic or paper format.

“(11) DISTRIBUTION OF ROYALTIES, UNCLAIMED FUNDS, AND DISPUTE RESOLUTION.—

“(A) DISTRIBUTION OF ROYALTIES.—Each designated agent shall be responsible for distributing, on a quarterly basis, royalties collected from licensees under this subsection to any copyright owner whom the designated agent represents and who has provided the designated agent with sufficient information to identify and pay that copyright owner (or the copyright owner’s designee). Distributions under the preceding sentence shall be made not later than 60 days after the end of each calendar quarter.

“(B) UNCLAIMED FUNDS.—

“(i) IN GENERAL.—If a designated agent is unable, after a reasonably diligent search, to identify or locate a copyright owner entitled to receive royalties under subparagraph (A), the designated agent may deposit the undistributed royalties (in this subparagraph referred to as ‘unclaimed funds’) into an unclaimed funds account that earns interest, accrued monthly, at the Federal short term rate determined under section 1274(d)(1)(C)(i) of the Internal Revenue Code of 1986. Interest accrued on unclaimed funds shall be payable to a copyright owner upon distribution of the unclaimed funds to such copyright owner.

“(ii) HOLDING AND DISTRIBUTION.—

“(I) HOLDING.—A designated agent with unclaimed funds shall hold the funds for a period of at least 3 years after the date on which the licensee paid the funds. The designated agent shall make reasonably diligent efforts to publicize the existence of the unclaimed funds and the procedures by which copyright owners may claim such funds from the designated agent.

“(II) LICENSING ADMINISTRATIVE COSTS.—At the end of the period in which funds are held under subclause (I), the designated agent may apply the funds to offset licensing administrative costs.

“(III) DISTRIBUTION OF REMAINDER.—Any unclaimed funds not applied to offset licensing administrative costs under subclause (II) shall be distributed as follows:

“(aa) The designated agent shall pay to every other designated agent its pro rata share of the unclaimed funds as determined on the basis of the proportionate distribution of royalties by each designated agent to copyright owners for the reporting periods during which the funds were collected.

“(bb) Each designated agent shall distribute, on an equitable basis, its pro rata share of the unclaimed funds to the copyright owners that the designated agent represents under this subsection (other than those that cannot be identified or located).

“(iii) PREEMPTION.—This subparagraph preempts any State claim to unclaimed funds.

“(C) DISPUTES.—

“(i) DISPUTE RESOLUTION COMMITTEE.—Each designated agent shall establish a dispute resolution committee consisting of—

“(I) at least 6 representatives of different music publishing entities represented by the designated agent, and

“(II) an equal number of songwriters who are legally and financially independent of the designated agent,

who shall be appointed under clause (iii).

“(ii) PURPOSE.—The purpose of each dispute resolution committee is to address any disputes raised by a copyright owner or songwriter whose works are represented by the designated agent relating to license rates or terms, the expenditure of fees and other funds by the designated agent, and the allocation and payment by the designated agent of royalties among individual copyright owners under licenses granted by the designated agent under this subsection.

“(iii) APPOINTMENT.—The Register of Copyrights shall appoint the members of each dispute resolution committee based upon nominees provided by music publishers and songwriters. Of the music publishing representatives, at least 2 shall be appointed from among large music publishing companies, and at least 2 shall be appointed from among small music publishing companies. Of the songwriter representatives, at least 3 shall be representatives, affiliates, or members of each of the performing rights organizations. The members of the dispute resolution committee shall serve staggered 3-year terms. In making appointments under this clause, the Register shall give preference to the nominees that have the greatest support among the interested parties.

“(iv) PROCEDURES.— The Register of Copyrights shall establish procedures to govern the conduct of meetings by the dispute resolution committees to assure that the proceedings are fair and that decisions are reached in a timely manner. The Register shall include in such procedures a mechanism to resolve cases in which an equal number of members of the dispute resolution committee vote for and against a proposed solution to a dispute. The dispute resolution process shall not affect any other legal or equitable rights or remedies available to any copyright owner, songwriter, or designated agent.

“(D) PROCEDURES FOR HOLDING FUNDS AND ROYALTIES SUBJECT TO LEGAL PROCEEDINGS.—The Register of Copyrights shall establish by regulation the procedures for the holding by a designated agent of unclaimed funds and royalties paid under this subsection that are attributable to musical works that are the subject of a legal dispute or proceeding. A designated agent that complies with the requirements of this paragraph and such regulations shall not be subject to a legal claim based upon or arising from unclaimed funds or funds that are the subject of an ownership dispute or legal proceeding, nor shall a copyright owner be subject to a legal claim based upon or arising from a designated agent’s compliance with this paragraph.

“(E) SONGWRITER ACCESS TO INFORMATION.—

“(i) IN GENERAL.—Subject to clause (ii), a songwriter whose musical works (or shares thereof) are administered by a music publisher for licensing under this subsection (including those music publishers represented through default representation pursuant to paragraph (9)(E)(iv)) may request from a designated agent a copy of the relevant portions of any royalty statement that the designated agent provided, within the preceding 4 calendar years, to that publisher, and that shows all data provided by the designated agent to the publisher regarding the use and royalties distributed to the publisher in connection with those works (or shares thereof). A designated agent shall provide the information requested by the songwriter within a reasonable time after receiving the request. A songwriter may make such a request of a particular designated agent not more than once each calendar year.

“(ii) EXCEPTION.—If a designated agent, on an annual basis or more frequently, provides to all songwriters whose works the designated agent represents information on royalty statements provided to music publishers, the designated agent is not required to provide such information pursuant to a request under clause (i).

“(F) WITHHOLDING OF INTERIM ROYALTIES.—Each designated agent may withhold reasonable reserves from the distribution of interim royalties collected under this subsection to allow for the possibility of a lower final statutory rate. Upon final determination of the statutory rate, to the extent such reserves are not required to be returned or credited to the licensee, the designated agent shall distribute to copyright owners such reserves with interest.

“(12) COST SHARING FEES.—

“(A) IN GENERAL.—The Copyright Royalty Judges shall determine, under such procedures as they may establish, an appropriate cost-sharing mechanism and cost-sharing amounts to be paid by licensees under this subsection to designated agents. Not later than March 1, 2007, the Copyright Royalty Judges shall initiate a proceeding to determine, not later than June 1, 2007, appropriate interim cost-sharing amounts to apply pending the establishment of final cost-sharing amounts. Any cost-sharing mechanism or cost-sharing amounts shall be equitably applied to all designated agents. In determining a cost-sharing mechanism or cost-sharing amount under this paragraph, the Copyright Royalty Judges shall consider—

“(i)(I) the actual, reasonable costs of creating and maintaining an infrastructure for activities of designated agents under this subsection;

“(II) any nonmonetary contributions by the parties to such infrastructures, including contributions of data and services;

“(III) the actual, reasonable costs to designated agents specifically associated with the administration of licenses under this subsection;

“(IV) the nature and value of any collateral benefits that any party may realize from the blanket license and blanket license system created by this subsection; and

“(V) any other factors deemed relevant by the Copyright Royalty Judges.

“(B) COST-SHARING NOT A FACTOR IN ROYALTY RATES.—The Copyright Royalty Judges, in establishing royalty rates for statutory licenses, may not take into account the cost-sharing mechanism or cost-sharing amounts under subparagraph (A).

“(13) EXCEPTION UNDER BLANKET LICENSES.—

“(A) IN GENERAL.—

“(i) ELECTION TO RETAIN RIGHT TO BE PAID BY LICENSEE.—A sound recording company may elect to retain the right to be paid, by any licensee under this subsection with which the sound recording company has a contract for the distribution of digital phonorecord deliveries or hybrid offerings, the applicable royalties under a compulsory license under paragraph (2) for the use a musical work as embodied in a particular sound recording in the form of such digital phonorecord deliveries or hybrid offerings, and to distribute such royalties as appropriate to copyright owners, if the following conditions are met:

“(I) The sound recording company notifies the appropriate designated agent and each such licensee in writing of the election.

“(II) The use of the musical work as embodied in the sound recording—

“(aa) is a digital phonorecord delivery that is subject to a contract to which the second sentence of subsection (c)(3)(E)(i) is inapplicable by operation of subsection (c)(3)(E)(ii); or

“(bb) is not a digital phonorecord delivery and is subject to a contract to which subsection (c)(3)(E)(i) applies.

“(ii) REQUIREMENTS OF NOTICE.—The notice required by clause (i)(I) may be provided electronically at any time and shall be effective beginning with payment for the reporting quarter following the quarter during which the notice is provided. The notice shall include sufficient data to identify the applicable sound recording, the musical work embodied in the sound recording and relevant shares thereof, and the digital music provider and specific activities that are the subject of the election under clause (i).

“(iii) ACTIONS BY DESIGNATED AGENT.—A designated agent receiving a notice of an election under clause (i)(I) shall indicate that election in its database maintained under paragraph (9)(H) and shall take such other steps as may be required, in view of its payment arrangements with digital music providers, to implement the election.

“(iv) PAYMENTS.—For any musical work or share thereof that with respect to which a sound recording company makes an election under this subparagraph, the digital music provider shall make the appropriate payments to the sound recording company in accordance with the contracts between the digital music provider and the sound recording company, and the sound recording company shall make the appropriate payments to copyright owners in accordance with its contracts for use of the musical work.

“(B) ERRORS.—

“(i) BY DESIGNATED AGENTS.—In any case in which a designated agent accepts in error payments for a use of a musical work with respect to which a sound recording company makes an election under subparagraph (A), the sound recording company may provide written notice of the error to the designated agent. If the designated agent fails to remedy the error by sending to the sound recording company, within 30 days after the date of the notice, the erroneously accepted funds, with interest calculated as provided in paragraph (10)(A)(iii), the designated agent shall be liable to the sound recording company in a civil action for the payment of the erroneously accepted funds, with interest calculated as provided in paragraph (10)(A)(iii). The United States district courts shall have exclusive jurisdiction of such a civil action. The remedy provided in section 505 shall be available in such an action only if the designated agent did not act in good faith.

“(ii) BY SOUND RECORDING COMPANIES.—In any case in which a sound recording company makes an election under subparagraph (A) with respect to the use of a musical work in error, the copyright owner of the work may provide written notice of the error to the sound recording company. If the sound recording company fails to remedy the error by correcting the erroneous notice and sending to the copyright owner the difference between the royalties that the copyright owner should have received from the designated agent and the royalties paid by the sound recording company based upon the erroneous election, with interest calculated as provided in paragraph (10)(A)(iii), the sound recording company shall be liable to the copyright owner in a civil action for the payment of the difference in royalties, with interest calculated as provided in paragraph (10)(A)(iii). The United States district courts shall have exclusive jurisdiction of such a civil action. The remedy provided in section 505 shall be available in such an action only if the sound recording company did not act in good faith.

“(iii) DESIGNATED AGENTS PROTECTED.—A designated agent that acts in accordance with a notice provided under subparagraph (A)(i)(I), even if the notice was erroneously provided, shall not be subject to a legal claim by a copyright owner based upon or arising out of the actions of the designated agent with respect to the notice.

“(iv) CONSEQUENCES FOR DIGITAL MUSIC PROVIDERS AND SOUND RECORDING COMPANIES.—Any digital music provider that has a valid license under this subsection with the appropriate designated agent, that acts in good faith with respect to an election under subparagraph (A) by a sound recording company, and that reports activity and makes payments under this subsection to the designated agent or sound recording company in accordance with the notice of the election under subparagraph (A)(i)(I), shall not be subject to any liability, including any action for copyright infringement of musical works alleging the violation of reproduction or distribution rights, to the extent such action is based on activity so reported for which all payments due have been made. In any case in which a digital music provider or a sound recording company does not make the required payments for the use of a musical work, this paragraph neither expands nor limits the rights of any person under the applicable contracts, this title, or other applicable law.

“(C) EXCLUSION ERRORS.—

“(i) NOT EXCLUDED.—In any case in which a musical work could have been excluded pursuant to subparagraph (A) but was not due to uncertainty concerning ownership of the copyright of the musical work or the application of a contract described in subsection (c)(3)(E)(ii), or in any case in which a digital music provider makes payments to a designated agent for use of a musical work excluded under subparagraph (A), the designated agent shall make payments to the appropriate person as if the exclusion under subparagraph (A) had applied on the date of the enactment of the Section 115 Reform Act of 2006, unless an agreement between the designated agent and the appropriate person provides otherwise.

“(ii) EXCLUDED.—In any case in which a musical work was excluded pursuant to subparagraph (A) in error—

“(I) a sound recording company acting in good faith with regard to the exclusion shall only be liable for the payment of amounts that otherwise would have been payable under this subsection, plus interest as described in paragraph (10)(A)(iii)(II); and

“(II) a licensee acting in good faith with regard to the exclusion shall not be liable because of such error.

“(14) DEFINITIONS.—In this subsection:

“(A) ADMINISTRATIVE FEES.—The term ‘administrative fees’ means any fees that are collected or deducted by a designated agent to cover licensing administrative costs or other administrative costs.

“(B) COPYRIGHT OWNER.—The term ‘copyright owner’ means a copyright owner, as defined in section 101, that is a natural person or legally recognized entity that owns or controls an interest or share in 1 or more copyrighted nondramatic musical works subject to licensing under this section.

“(C) DIGITAL MUSIC PROVIDER.—The term ‘digital music provider’ means a person that—

“(i) with respect to a service engaging in activities licensed under this subsection—

“(I) contracts with or has a direct relationship with the end users of the service, and controls what, if any, consideration is received from end users or others for the service;

“(II) controls how musical content is bundled with other musical or nonmusical content and offered through the service;

“(III) is able to fully report on all revenues and consideration received by or credited to the service; and

“(IV) is able to fully report on all elements of music usage by the service (or procure such reporting); or

“(ii) with respect to hybrid offerings only, makes and distributes a hybrid offering, and—

“(I) controls how musical content is bundled with other musical and nonmusical content in the hybrid offering;

“(II) is able to fully report on all revenues and consideration received by or credited to such person with respect to the hybrid offering; and

“(III) is able to fully report on all elements of music usage in the hybrid offering (or procure such reporting).

“(D) ERROR TOLERANCE STANDARD.—The term ‘error tolerance standard’ means the maximum percentage, of all data that a licensee is required to report under this subsection under its license in any statutory reporting period, that is permitted to be inaccurate, unreadable, or missing, or any combination thereof, as determined under regulations issued to carry out this subsection.

“(E) FREE PROMOTIONAL USE.—The term ‘free promotional use’ means the audio-only use of a musical work if—

“(i) with respect to the owner or exclusive licensee of the sound recording that is authorizing the use, or, as applicable, the digital music provider making the use, the primary purpose of the use is to promote either the lawful sale or paid use of a sound recording embodying the musical work or other sound recordings by the same featured recording artist, or the paid use of a subscription service offering the sound recording, but the primary purpose is not to promote any other product, offering, or entity;

“(ii) the sound recording is made available to end users free of charge;

“(iii) (I) no cash or non-cash consideration of any kind is received by the owner or exclusive licensee of the sound recording, a digital music provider, third party distributor, or any other person, in connection with such use of the musical work or sound recording, except for—

“(aa) the promotion of the lawful sale or paid use of the sound recording or paid use of a subscription service offering the sound recording; or

“(bb) the lawful collection of contact information from end users to access the work, either directly or through the third party user, solely for the purposes permitted by clause (i); and

“(II) the limited consideration permitted under items (aa) and (bb) of subclause (I) is not received in connection with, or used to support, any other product, offering, or entity.

“(F) FULL DOWNLOAD.—The term ‘full download’ means a digital phonorecord delivery of a sound recording of a musical work that is not limited in availability for listening by the end user either to a period of time or a number of times the sound recording can be played.

“(G) HYBRID OFFERING.—The term ‘hybrid offering’ means—

“(i) a reproduction or distribution of a phonorecord in physical form subject to a compulsory license under this section if a digital transmission of data by or under the authority of the licensee is required to render the sound recording embodied on the phonorecord audible to the end user, or to enable the continued rendering of the sound recording audible after a finite period of time or a specified number of times rendered; or

“(ii) a reproduction or distribution of a phonorecord subject to a compulsory license under this section that is custom-made by or under the authority of the licensee—

“(I) using a device located at a physical retail establishment based upon the specific request of an end user for distribution as a digital phonorecord delivery or in physical form to that end user at such retail establishment; or

“(II) based upon the specific request of an end user for distribution in physical form to that end user (or the end user's designee) through a mail order or private delivery service.

“(H) INTERACTIVE STREAM.—

“(i) IN GENERAL.—The term ‘interactive stream’ means an audio-only stream of a sound recording of a musical work that—

“(I) is made by an interactive service;

“(II) is made by a service if more than 7 percent of the programming of the service, on a per channel basis, as measured over a period of 168 hours of broadcasting, consists of—

“(aa) selections of sound recordings from any single commercially released phonorecord; or

“(bb) selections of sound recordings by the same featured recording artist, that are either played consecutively or constitute more than 50 percent of the programming in any given hour, except in unique and isolated circumstances such as a memorial tribute program for a particular artist lasting no more than 24 hours that is broadcast within a week of the honoree's death or upon the anniversary of the honoree’s death; or

“(III) is made by a service that publishes or publicizes, in advance, the titles of sound recordings to be transmitted at specified times or during specific blocks of time in the future, other than a schedule of classical music programming, except that this subclause does not include the announcement by a transmitting entity of a particular song to be broadcast.

If an entity offers both interactive and noninteractive services (either concurrently, through different channels or offerings, or at different times), the noninteractive component shall not be treated as part of an interactive service.

“(ii) INTERACTIVE SERVICE.—In this subparagraph, the term ‘interactive service’ means a service that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient; except that the ability of individuals to request that particular sound recordings be performed for reception by the public at large, or in the case of a subscription service, by all subscribers of the service, does not make a service interactive, if the programming on each channel of the service does not substantially consist of sound recordings that are performed within 1 hour of the request or at a time designated by either the transmitting entity or the individual making the request.

“(I) LICENSING ADMINISTRATIVE COSTS.—The term ‘licensing administrative costs’ means the actual costs to a designated agent that are attributable to the issuance and administration of licenses under this subsection, including—

“(i) costs in connection with the collection and distribution of royalties under this subsection;

“(ii) the costs of identifying and locating copyright owners and administering a claims system for unidentified copyright owners;

“(iii) the costs of royalty examinations and other royalty compliance efforts; and

“(iv) the costs of creating and maintaining an infrastructure for the activities described in clauses (i), (ii), and (iii).

“(J) LIMITED DOWNLOAD.—The term ‘limited download’ means a digital phonorecord delivery to an end user of a sound recording of a musical work that is only available for listening for—

“(i) a definite period of time (including a period of time defined by ongoing subscription payments made by an end user); or

“(ii) a specified number of times.

“(K) NONINTERACTIVE STREAMING.—The term ‘noninteractive streaming’ means the making of any audio-only stream of a sound recordings of musical work—

“(i) that is not an interactive stream;

“(ii) that, except as may otherwise be authorized by the copyright owner, consists of a transmission of a musical work that—

“(I) has previously been distributed to the public in the United States under authority of the copyright owner or pre-released under authority of the sound recording owner for promotional purposes; and

“(II) is embodied in a lawfully made sound recording;

“(iii) that does not violate the conditions that apply to compulsory licensing of musical works set forth in subsection (a)(2); and

“(iv) for which all necessary licenses have been obtained to perform the musical work publicly.

“(L) OTHER ADMINISTRATIVE COSTS.—The term ‘other administrative costs’ means all expenses, expenditures, retained earnings, and reserves of a designated agent, other than licensing administrative costs, that are authorized by the board of directors of the designated agent.

“(M) SONGWRITER.—The term ‘songwriter’ means the author of a musical work.

“(N) SOUND RECORDING COMPANY.—The term ‘sound recording company’ means a person who—

“(i) is a copyright owner of a sound recording of a musical work;

“(ii) in the case of a sound recording of a musical fixed before February 15, 1972, has rights to the sound recording, under the common law or statutes of any State, that are similar to the rights under this title of a copyright owner of a sound recording of a musical work;

“(iii) is an exclusive licensee of a sound recording of a musical work; or

“(iv) performs the functions of marketing and authorizing the distribution of a sound recording of a musical work under its own label, under the authority of the copyright owner of the sound recording.

“(O) STREAM.—(i) The term ‘stream’ means the digital transmission of a sound recording embodying a musical work for one-time listening by the end user using technology such that the transmission is not intended or designed to result in a substantially complete reproduction of the sound recording, other than an incidental reproduction made in the normal course of such activity, including a cached, network, or RAM buffer reproduction, to permit such one-time listening.

“(ii) The term ‘streaming’ means the process of making and distributing streams.

“(15) REGULATIONS.—

“(A) IN GENERAL.—The Register of Copyrights shall issue such regulations as are necessary to carry out this subsection, including—

“(i) specifying the requirements and procedures for reporting and making payments, and conducting royalty compliance examinations, under paragraph (10), including provisions for the protection of confidential information and the effect of settlements with respect to royalty compliance examinations;

“(ii) specifying the procedures for expedited proceedings under paragraph (8)(E)(ii)(II)(bb) and subsection (c)(7)(B)(ii)(II);

“(iii) specifying the form of a letter of direction under paragraph (9)(I)(i); and

“(iv) facilitating exclusions from the blanket license under paragraph (13).

“(B) RESOLUTION OF DISPUTES.—If a copyright owner or user of nondramatic musical works wishes to have the Register of Copyrights resolve a dispute concerning whether an activity or offering subject to compulsory licensing under this section is licensable under this subsection or under subsection (b), the copyright owner or user may petition the Register for such a determination. If it appears to the Register from the petition that the issue presented is likely to be material to multiple copyright owners or users, then the Register shall decide the issue by rulemaking within 6 months after the date of the petition.

“(16) APPLICATION OF SUBSECTION TO PRE-EXISTING LICENSES.—This subsection shall apply to digital phonorecord deliveries and hybrid offerings in lieu of any compulsory license under this section that applied to such digital phonorecord deliveries and hybrid offerings before the enactment of the Section 115 Reform Act of 2006.”.

SEC. 103. Performance right preserved.

Section 115 of title 17, United States Code, is amended by adding at the end the following new subsection:

“(f) Performance right preserved.—The rights, exemptions, and licenses granted under, and the definitions contained in, subsection (e) shall not include, limit, or otherwise affect any right of public performance of a musical work. The third sentence of subsection (e)(9)(E)(iv) and the definitions contained in paragraph (14) of subsection (e) shall not be taken into account in any administrative, judicial, or other governmental proceeding to set or adjust the royalties payable to copyright owners of musical works for, the right of public performance of their works.”.

SEC. 104. Interim rate process.

Section 115(c) of title 17, United States Code, is amended by adding at the end the following new paragraph:

“(7) INTERIM RATES.—

“(A) IN GENERAL.—For any new type of phonorecord configuration for which a license is available under this section (other than an activity for which a license is available under subsection (e)) for which a rate and terms have not been determined, any person shall, upon serving notice in accordance with subsection (b)(1), have a license to make and distribute such phonorecords, subject to subparagraph (B).

“(B) INTERIM RATES.—Upon serving notice as described in subparagraph (A) with respect to a phonorecord configuration—

“(i) the parties may negotiate an interim rate and terms that will apply to the configuration under the license; or

“(ii) either party or both parties may apply to the Copyright Royalty Judges for an interim rate and terms, in which case—

“(I) the Copyright Royalty Judges shall, not later than 15 days after the application is made, publish notice of an expedited proceeding to determine the interim rate and terms; and

“(II) the Judges shall conduct the expedited proceeding and determine the interim rate and terms not less than 30 days and not more than 60 days after publishing the notice.

“(C) APPLICABILITY OF INTERIM RATES.—(i) Interim rates and terms negotiated under subparagraph (B)(i) or established under subparagraph (B)(ii) shall be retroactive to the inception of the activity under the license concerned and shall apply until a rate and terms for the phonorecord configuration are determined under paragraph (3)(C) and chapter 8, or as otherwise agreed by the parties.

“(ii) Interim rates and terms described in subparagraph (B) with respect to a configuration shall not be treated as precedent in a final ratemaking proceeding. If the Copyright Royalty Judges have established an interim rate and terms under subparagraph (B)(ii), that rate and those terms shall apply to the same activity engaged in by any person, except as otherwise agreed to by the parties.

“(D) SINGLE PROCEEDING FOR EACH ACTIVITY.—Unless the Copyright Royalty Judges determine that there is good cause to review an interim rate or terms established under subparagraph (B)(ii), the Copyright Royalty Judges may conduct only 1 proceeding to determine an interim rate and terms for a configuration for which a license is available under this subsection.

“(E) ADJUSTMENT OF INTERIM RATES.—After a final determination of rates and terms that will apply to a configuration for which a license is available under this subsection has been made under paragraph (3)(C) and chapter 8, the final rate and terms shall be retroactive to the inception of the making and distribution of phonorecords under all licenses to which such rate and terms apply, unless an agreement between the parties to a license provides otherwise. Not later than 60 days after the determination of the final rate and terms becomes effective—

“(i) the licensee shall pay to the copyright owner any amounts due from underpayment of fees by the licensee because the final rate exceeds the interim rate; or

“(ii) the copyright owner shall refund to the licensee the amounts of any overpayment of fees by the licensee because the interim rate exceeds the final rate, or, at the election of the licensee, the copyright owner shall credit such overpayment against future payments by the licensee to the copyright owner under this subsection.”.

SEC. 105. Technical amendments.

(a) Definition.—Section 115(d) of title 17, United States Code, is amended—

(1) in the first sentence, by striking “As used” and inserting by adding at the end the following: “.”

“(1) IN GENERAL.—As used”;

(2) by moving the remaining text 2 ems to the right; and

(3) by adding at the end the following:

“(2) INTERACTIVE STREAMS.—The term ‘digital phonorecord delivery’ includes an interactive stream (as such term is defined in subsection (e)(14)(H)) of nondramatic musical works, on the following terms:

“(A) An interactive stream is an incidental digital phonorecord delivery as described in subsection (c)(3)(C)(i) and (D)(i). An interactive stream is not a general digital phonorecord delivery as described in subsection (c)(3)(C)(ii) and (D)(ii).

“(B) The Copyright Royalty Judges, in establishing royalty rates or terms for digital phonorecord deliveries, shall not consider the characterization, in this section or regulations issued under this section, of a digital phonorecord delivery as general or incidental. The preceding sentence does not limit the ability of the Copyright Royalty Judges to refer to the actual nature or functionality of the particular type of digital phonorecord delivery in a ratemaking proceeding.”.

(b) Conforming amendments.—Section 115(c) of title 17, United States Code, is amended—

(1) in paragraph (3)—

(A) in the first sentence of subparagraph (A), by striking “or authorize the distribution of”;

(B) in subparagraph (C), by striking “Such terms and rates shall distinguish” and all that follows through the end of the sentence;

(C) in subparagraph (D), by striking “Such terms and rates shall distinguish” and all that follows through the end of the sentence; and

(D) in subparagraph (E)(i), by inserting after “License agreements,” the following: “to make and distribute phonorecords other than digital phonorecord deliveries and hybrid offerings” ; and

(2) in paragraph (5)—

(A) by striking “(5) Royalty payments” and inserting “(5)(A) Subject to subparagraph (B), royalty payments”; and

(B) by adding at the end the following:

“(B) Payments under the license provided for under subsection (e) shall be governed by that subsection in lieu of subparagraph (A).”.

SEC. 106. Effective date.

(a) In general.—Subject to subsection (b), this title and the amendments made by this title take effect on the date of the enactment of this Act.

(b) Delay of licenses.—No license under subsection (e) of section 115 of title 17, United States Code, may take effect before January 1, 2008.

SEC. 107. Savings clauses.

(a) Scope of rights covered.—This title and the amendments made by this title are limited to the exclusive rights to reproduce and distribute musical works as provided by paragraphs (1) and (3) of section 106 of title 17, United States Code, and do not create any new exclusive rights under section 106 of title 17, United Stats Code.

(b) Fair use.—Nothing in this title shall affect any right, limitation, or defense to copyright infringement, including fair use, under title 17, United States Code.

(c) Protections of service providers.—This title and the amendments made by this title shall not be construed to limit in any manner the protections afforded to service providers under section 512 of title 17, United States Code.

SEC. 108. Staying of infringement actions.

If an action for infringement is brought against a digital music provider (as defined in section 115(e)(14) of title 17, United States Code) for activities engaged in before January 1, 2008, that may be covered by a license under section 115(e) of title 17, United States Code, the court may stay the action until not later than March 1, 2008, if the digital music provider makes the payments required under section 115(e)(6) of such title, for such activities.

SEC. 201. Short title.

This title may be cited as the “Orphan Works Act of 2006”

SEC. 202. Limitation on remedies in cases involving orphan works.

(a) Limitation on remedies.—Chapter 5 of title 17, United States Code, is amended by adding at the end the following new section:

§ 514. Limitation on remedies in cases involving orphan works

“(a) Conditions for eligibility.—

“(1) CONDITIONS.—Notwithstanding sections 502 through 505, in an action brought under this title for infringement of copyright in a work, the remedies for infringement shall be limited under subsection (b) if the infringer sustains the burden of proving, and the court finds, that—

“(A) before the infringing use of the work began, the infringer, a person acting on behalf of the infringer, or any person jointly and severally liable with the infringer for the infringement of the work—

“(i) performed and documented a reasonably diligent search in good faith to identify and locate the owner of the infringed copyright; but

“(ii) was unable to locate the owner; and

“(B) the infringing use of the work provided attribution, in a manner reasonable under the circumstances, to the author and owner of the copyright, if known with a reasonable degree of certainty based on information obtained in performing the reasonably diligent search.

“(2) DEFINITIONS; REQUIREMENTS FOR SEARCHES.—

“(A) OWNER OF INFRINGED COPYRIGHT.—For purposes of paragraph (1)(A), the ‘owner’ of an infringed copyright in a work is the legal or beneficial owner of, or any party with authority to grant or license, an exclusive right under section 106 applicable to the infringement.

“(B) REQUIREMENTS FOR REASONABLY DILIGENT SEARCH.—(i) For purposes of paragraph (1), a search to locate the owner of an infringed copyright in a work—

“(I) is ‘reasonably diligent’ only if it includes such steps that are reasonable under the circumstances to locate that owner in order to obtain permission for the use of the work; and

“(II) is not ‘reasonably diligent’ solely by reference to the lack of identifying information with respect to the copyright on the copy or phonorecord of the work.

“(ii) The steps referred to in clause (i)(I) shall ordinarily include, at a minimum, review of the information maintained by the Register of Copyrights under subparagraph (C).

“(iii) A reasonably diligent search includes the use of such expertise and technology as are reasonably available and appropriate under the circumstances, and may include, if reasonable under the circumstances, resources for which a charge or subscription fee is imposed.

“(C) INFORMATION TO GUIDE SEARCHES.—The Register of Copyrights shall receive, maintain, and make available to the public, including through the Internet, information from authoritative sources, such as industry guidelines, statements of best practices, and other relevant documents, that is designed to assist users in conducting and documenting a reasonably diligent search under this subsection. Such information may include—

“(i) the records of the Copyright Office that are relevant to identifying and locating copyright owners;

“(ii) other sources of copyright ownership information reasonably available to users;

“(iii) methods to identify copyright ownership information associated with a work;

“(iv) sources of reasonably available technology tools and reasonably available expert assistance; and

“(v) best practices for documenting a reasonably diligent search.

“(b) Limitations on remedies.—The limitations on remedies in a case to which subsection (a) applies are the following:

“(1) MONETARY RELIEF.—

“(A) GENERAL RULE.—Subject to subparagraph (B), an award for monetary relief (including actual damages, statutory damages, costs, and attorney’s fees) may not be made, other than an order requiring the infringer to pay reasonable compensation for the use of the infringed work.

“(B) EXCEPTIONS.—(i) An order requiring the infringer to pay reasonable compensation for the use of the infringed work may not be made under subparagraph (A) if—

“(I) the infringement is performed without any purpose of direct or indirect commercial advantage and primarily for a charitable, religious, scholarly, or educational purpose, and

“(II) the infringer ceases the infringement expeditiously after receiving notice of the claim for infringement,

unless the copyright owner proves, and the court finds, that the infringer has earned proceeds directly attributable to the infringement.

“(ii) If, after receiving notice of the claim for infringement, the infringer fails to negotiate in good faith with the owner of the infringed work regarding the amount of reasonable compensation for the use of the infringed work, the court may award full costs, including a reasonable attorney’s fee, against the infringer under section 505, subject to section 412.

“(2) INJUNCTIVE RELIEF.—

“(A) GENERAL RULE.—Subject to subparagraph (B), the court may impose injunctive relief to prevent or restrain the infringing use, except that, if the infringer has met the requirements of subsection (a), the relief shall, to the extent practicable, account for any harm that the relief would cause the infringer due to its reliance on the reasonably diligent search performed under subsection (a).

“(B) SPECIAL RULE FOR NEW WORKS.—In a case in which a new work of authorship recasts, transforms, adapts, or integrates the infringed work with the new work's original expression, any injunctive relief ordered by the court—

“(i) may not restrain the infringer's continued preparation or use of that new work;

“(ii) shall require that the infringer pay reasonable compensation to the owner of the infringed copyright for the use of the infringed work; and

“(iii) shall require that the infringer provide attribution to the owner of the infringed copyright in a manner that the court determines is reasonable under the circumstances.

“(C) TREATMENT OF PARTIES NOT SUBJECT TO SUIT.—The limitations on remedies under this paragraph shall not be available to an infringer that asserts in an action under section 501(b) that neither it nor its representative acting in an official capacity is subject to suit in Federal court for an award of damages to the copyright owner under section 504, unless the court finds that the infringer—        

“(i) has complied with the requirements of subsection (a) of this section; and

“(ii) pays reasonable compensation to the copyright owner as defined under paragraph (3).

“(D) CONSTRUCTION.—Nothing in subparagraph (C) shall be deemed to authorize or require, and no action taken pursuant to subparagraph (C) shall be deemed to constitute, an award of damages by the court against the infringer.

“(E) RIGHTS AND PRIVILEGES NOT WAIVED.—No action taken by an infringer pursuant to subparagraph (C) shall be deemed to waive any right or privilege that, as a matter of law, protects the infringer from being subject to suit in Federal court for an award of damages to the copyright owner under section 504.

“(3) REASONABLE COMPENSATION.—In establishing reasonable compensation under paragraph (1) or (2), the owner of the infringed copyright has the burden of establishing the amount on which a reasonable willing buyer and a reasonable willing seller in the positions of the owner and the infringer would have agreed with respect to the infringing use of the work immediately before the infringement began.

“(c) Preservation of other rights, limitations, and defenses.—This section does not affect any right, limitation, or defense to copyright infringement, including fair use, under this title. If another provision of this title provides for a statutory license when the copyright owner cannot be located, that provision applies in lieu of this section.

“(d) Copyright for derivative works and compilations.—Notwithstanding section 103(a), the infringing use of a work in accordance with this section shall not limit or affect the copyright protection for a work that employs the infringed work.”.

(b) Conforming amendment.—The table of sections for chapter 5 of title 17, United States Code, is amended by adding at the end the following new item:


“514. Limitation on remedies in cases involving orphan works.”.

(c) Effective date.—The amendments made by this section shall apply only to infringing uses that commence on or after June 1, 2008.

SEC. 203. Report to Congress on amendments.

The Register of Copyrights shall, not later than December 12, 2014, report to the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate on the implementation and effects of the amendments made by section 202, including any recommendations for legislative changes that the Register considers appropriate.

SEC. 204. Inquiry on remedies for small copyright claims.

(a) In general.—The Register of Copyrights shall conduct an inquiry with respect to remedies for copyright infringement claims by an individual copyright owner or a related group of copyright owners seeking limited amounts of monetary relief, including consideration of alternative means of resolving disputes currently heard in the United States district courts. The inquiry shall cover infringement claims to which section 514 of title 17, United States Code (as added by section 202 of this Act), apply, and other infringement claims under title 17, United States Code.

(b) Procedures.—The Register of Copyrights shall publish notice of the inquiry under subsection (a), providing a period during which interested persons may submit comments on the inquiry, and an opportunity for interested persons to participate in public roundtables on the inquiry. The Register shall hold the public roundtables at such times as the Register considers appropriate.

(c) Report to Congress.—The Register of Copyrights shall, not later than 1 year after the date of the enactment of this Act, prepare and submit to the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate a report on the inquiry conducted under this section, including such recommendations that the Register considers appropriate.

SEC. 301. Short title.

This title may be cited as the “Copyright Protection Resources Authorization Act of 2006”.

SEC. 302. Registration in civil infringement actions.

(a) Limitation to civil actions; protection of copyright claim with pending application; harmless error.—Section 411 of title 17, United States Code, is amended by inserting after subsection (a) the following new subsection:

“(b)(1) A certificate of registration satisfies the requirements of this section and section 412, regardless of whether the certificate contains any inaccurate information, unless—

“(A) the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate; and

“(B) the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.

“(2) In any case in which inaccurate information described under paragraph (1) is alleged, the court shall request the Register of Copyrights to advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.’’;”.

(b) Conforming amendment.—Section 412 of title 17, United States Code, is amended by striking “411(b)” and inserting “411(c)”.

SEC. 303. Statutory damages.

Section 504(c)(1) of title 17, United States Code, is amended in the second sentence by inserting before the period “, except that the court in its discretion may determine that such parts are separate works if the court concludes that they are distinct works having independent economic value”.

SEC. 304. Improved investigative and forensic resources for enforcement of laws related to intellectual property crimes.

(a) In general.—The Attorney General, in consultation with the Director of the Federal Bureau of Investigation, shall, with respect to crimes related to the theft of intellectual property—

(1) create an operational unit of the Federal Bureau of Investigation—

(A) to work with the Computer Crime and Intellectual Property section of the Department of Justice on the investigation and coordination of intellectual property crimes that are complex, committed in more than one judicial district, or international;

(B) that consists of at least 10 agents of the Bureau; and

(C) that is located at the headquarters of the Bureau;

(2) ensure that any unit in the Department of Justice responsible for investigating computer hacking or intellectual property crimes is assigned at least 2 agents of the Federal Bureau of Investigation (in addition to any agent assigned, or authorized to be assigned, to such unit as of the date of the enactment of this Act) to support such unit for the purpose of investigating or prosecuting intellectual property crimes; and

(3) implement a comprehensive program—

(A) the purpose of which is to train agents of the Federal Bureau of Investigation in the investigation and prosecution of such crimes and the enforcement of laws related to intellectual property crimes;

(B) that includes relevant forensic training related to investigating and prosecuting intellectual property crimes; and

(C) that requires such agents who investigate or prosecute intellectual property crimes to attend the program annually.

(b) Intellectual property law enforcement coordinators.—Not later than 120 days after the date of the enactment of this Act, the Attorney General shall assign one Federal prosecutor to the appropriate office of the Department of Justice located in Hong Kong and one Federal prosecutor to such an office located in Budapest, Hungary, to assist in the coordination of the enforcement of intellectual property laws between the United States and foreign nations.

(c) Organized crime task force.—Not later than 120 days after the date of the enactment of this Act, the Attorney General, through the United States Attorneys’ Offices, the Computer Crime and Intellectual Property section, and the Organized Crime and Racketeering section of the Department of Justice, and in consultation with the Federal Bureau of Investigation and other Federal law enforcement agencies, shall create a Task Force to develop and implement a comprehensive, long-range plan to investigate and prosecute international organized crime syndicates engaging in or supporting crimes relating to the theft of intellectual property.

(d) Authorization.—There are authorized to be appropriated to carry out this section $12,000,000 for each of fiscal years 2007 through 2011.