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                                                       Calendar No. 165
104th Congress                                                   Report
                                 SENATE

 1st Session                                                    104-128
_______________________________________________________________________


 
       DIGITAL PERFORMANCE RIGHT IN SOUND RECORDINGS ACT OF 1995

                                _______


   August 4 (legislative day, July 10), 1995.--Ordered to be printed

_______________________________________________________________________


Mr. Hatch, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                         [To accompany S. 227]
    The Committee on the Judiciary, to which was referred the 
bill (S. 227) to provide an exclusive right to perform sound 
recordings publicly by means of digital transmissions, having 
considered the same, reports favorably thereon, with an 
amendment in the nature of a substitute, and recommends that 
the bill, as amended, do pass.
                                CONTENTS

                                                                   Page
  I. Purpose.........................................................10
 II. Legislative history.............................................10
III. Discussion......................................................13
 IV. Vote of the committee...........................................17
  V. Section-by-section analysis.....................................18
 VI. Cost estimate...................................................45
VII. Regulatory impact statement.....................................47
VIII.
     Changes in existing law.........................................47

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:
SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Digital Performance Right in Sound 
Recordings Act of 1995''.

SEC. 2. EXCLUSIVE RIGHTS IN COPYRIGHTED WORKS.

  Section 106 of title 17, United States Code, is amended--
          (1) in paragraph (4) by striking ``and'' after the semicolon;
          (2) in paragraph (5) by striking the period and inserting ``; 
        and''; and
          (3) by adding at the end the following:
          ``(6) in the case of sound recordings, to perform the 
        copyrighted work publicly by means of a digital audio 
        transmission.''.

SEC. 3. SCOPE OF EXCLUSIVE RIGHTS IN SOUND RECORDINGS.

  Section 114 of title 17, United States Code, is amended--
          (1) in subsection (a) by striking ``and (3)'' and inserting 
        ``(3) and (6)'';
          (2) in subsection (b) in the first sentence by striking 
        ``phonorecords, or of copies of motion pictures and other 
        audiovisual works,'' and inserting ``phonorecords or copies'';
          (3) by striking subsection (d) and inserting:
  ``(d) Limitations on Exclusive Right.--Notwithstanding the provisions 
of section 106(6)--
          ``(1) Exempt transmissions and retransmissions.--The 
        performance of a sound recording publicly by means of a digital 
        audio transmission or retransmission, other than as a part of 
        an interactive service, is not an infringement of section 
        106(6) if the performance is part of--
                  ``(A) a nonsubscription transmission, such as a 
                nonsubscription broadcast transmission;
                  ``(B) a retransmission of a nonsubscription broadcast 
                transmission: Provided, That, in the case of a 
                retransmission of a radio station's broadcast 
                transmission--
                          ``(i) the radio station's broadcast 
                        transmission is not willfully or repeatedly 
                        retransmitted more than a radius of 150 miles 
                        from the site of the radio broadcast 
                        transmitter, however--
                                  ``(I) the 150 mile limitation under 
                                this clause shall not apply when a 
                                nonsubscription broadcast transmission 
                                by a radio station licensed by the 
                                Federal Communications Commission is 
                                retransmitted on a nonsubscription 
                                basis by a terrestrial broadcast 
                                station, terrestrial translator, or 
                                terrestrial repeater licensed by the 
                                Federal Communications Commission; and
                                  ``(II) in the case of a subscription 
                                retransmission of a nonsubscription 
                                broadcast retransmission covered by 
                                subclause (I), the 150 mile radius 
                                shall be measured from the transmitter 
                                site of such broadcast retransmitter;
                          ``(ii) the retransmission is of radio station 
                        broadcast transmissions that are--
                                  ``(I) obtained by the retransmitter 
                                over the air;
                                  ``(II) not electronically processed 
                                by the retransmitter to deliver 
                                separate and discrete signals; and
                                  ``(III) retransmitted only within the 
                                local communities served by the 
                                retransmitter;
                          ``(iii) the radio station's broadcast 
                        transmission was being retransmitted to cable 
                        systems (as defined in section 111(f)) by a 
                        satellite carrier on January 1, 1995, and that 
                        retransmission was being retransmitted by cable 
                        systems as a separate and discrete signal, and 
                        the satellite carrier obtains the radio 
                        station's broadcast transmission in an analog 
                        format: Provided, That the broadcast 
                        transmission being retransmitted may embody the 
                        programming of no more than one radio station; 
                        or
                          ``(iv) the radio station's broadcast 
                        transmission is made by a noncommercial 
                        educational broadcast station funded on or 
                        after January 1, 1995, under section 396(k) of 
                        the Communications Act of 1934 (47 U.S.C. 
                        396(k)), consists solely of noncommercial 
                        educational and cultural radio programs, and 
                        the retransmission, whether or not 
                        simultaneous, is a nonsubscription terrestrial 
                        broadcast retransmission; or
                  ``(C) a transmission or retransmission that comes 
                within any of the following categories:
                          ``(i) a prior or simultaneous transmission or 
                        retransmission incidental to an exempt 
                        transmission or retransmission, such as a feed 
                        received by and then retransmitted by an exempt 
                        transmitter: Provided, That such incidental 
                        transmissions or retransmissions do not include 
                        any subscription transmission or retransmission 
                        directly for reception by members of the 
                        public;
                          ``(ii) a transmission or retransmission 
                        within a business establishment, confined to 
                        its premises or the immediately surrounding 
                        vicinity;
                          ``(iii) a retransmission by any 
                        retransmitter, including a multichannel video 
                        programming distributor as defined in section 
                        522(12) of the Communications Act of 1934 (47 
                        U.S.C. 522(12)), of a transmission by a 
                        transmitter licensed to publicly perform the 
                        sound recording as a part of that transmission, 
                        if the retransmission is simultaneous with the 
                        licensed transmission and authorized by the 
                        transmitter; or
                          ``(iv) a transmission or retransmission to a 
                        business establishment for use in the ordinary 
                        course of its business: Provided, That the 
                        business recipient does not retransmit the 
                        transmission outside of its premises or the 
                        immediately surrounding vicinity, and that the 
                        transmission does not exceed the sound 
                        recording performance complement. Nothing in 
                        this clause shall limit the scope of the 
                        exemption in clause (ii).
          ``(2) Subscription transmissions.--In the case of a 
        subscription transmission not exempt under subsection (d)(1), 
        the performance of a sound recording publicly by means of a 
        digital audio transmission shall be subject to statutory 
        licensing, in accordance with subsection (f) of this section, 
        if--
                  ``(A) the transmission is not part of an interactive 
                service;
                  ``(B) the transmission does not exceed the sound 
                recording performance complement;
                  ``(C) the transmitting entity does not cause to be 
                published by means of an advance program schedule or 
                prior announcement the titles of the specific sound 
                recordings or phonorecords embodying such sound 
                recordings to be transmitted;
                  ``(D) except in the case of transmission to a 
                business establishment, the transmitting entity does 
                not automatically and intentionally cause any device 
                receiving the transmission to switch from one program 
                channel to another; and
                  ``(E) except as provided in section 1002(e) of this 
                title, the transmission of the sound recording is 
                accompanied by the information encoded in that sound 
                recording, if any, by or under the authority of the 
                copyright owner of that sound recording, that 
                identifies the title of the sound recording, the 
                featured recording artist who performs on the sound 
                recording, and related information, including 
                information concerning the underlying musical work and 
                its writer.
          ``(3) Licenses for transmissions by interactive services.--
                  ``(A) No interactive service shall be granted an 
                exclusive license under section 106(6) for the 
                performance of a sound recording publicly by means of 
                digital audio transmission for a period in excess of 12 
                months, except that with respect to an exclusive 
                license granted to an interactive service by a licensor 
                that holds the copyright to 1,000 or fewer sound 
                recordings, the period of such license shall not exceed 
                24 months: Provided, however, That the grantee of such 
                exclusive license shall be ineligible to receive 
                another exclusive license for the performance of that 
                sound recording for a period of 13 months from the 
                expiration of the prior exclusive license.
                  ``(B) The limitation set forth in subparagraph (A) of 
                this paragraph shall not apply if--
                          ``(i) the licensor has granted and there 
                        remain in effect licenses under section 106(6) 
                        for the public performance of sound recordings 
                        by means of digital audio transmission by at 
                        least 5 different interactive services: 
                        Provided, however, That each such license must 
                        be for a minimum of 10 percent of the 
                        copyrighted sound recordings owned by the 
                        licensor that have been licensed on an 
                        exclusive basis to interactive services, but in 
                        no event less than 50 sound recordings; or
                          ``(ii) the exclusive license is granted to 
                        perform publicly up to 45 seconds of a sound 
                        recording and the sole purpose of the 
                        performance is to promote the distribution or 
                        performance of that sound recording.
                  ``(C) Notwithstanding the grant of an exclusive or 
                nonexclusive license of the right of public performance 
                under section 106(6), an interactive service may not 
                publicly perform a sound recording unless a license has 
                been granted for the public performance of any 
                copyrighted musical work contained in the sound 
                recording, Provided, That such license to publicly 
                perform the copyrighted musical work may be granted 
                either by a performing rights society representing the 
                copyright owner or by the copyright owner.
                  ``(D) The performance of a sound recording by means 
                of a digital audio retransmission is not an 
                infringement of section 106(6) if--
                          ``(i) the retransmission is of a transmission 
                        by an interactive service licensed to publicly 
                        perform the sound recording to a particular 
                        member of the public as part of that 
                        transmission; and
                          ``(ii) the retransmission is simultaneous 
                        with the licensed transmission, authorized by 
                        the transmitter, and limited to that particular 
                        member of the public intended by the 
                        interactive service to be the recipient of the 
                        transmission.
                  ``(E) For the purposes of this paragraph--
                          ``(i) a `licensor' shall include the 
                        licensing entity and any other entity under any 
                        material degree of common ownership, 
                        management, or control that owns copyrights in 
                        sound recordings; and
                          ``(ii) a `performing rights society' is an 
                        association or corporation that licenses the 
                        public performance of nondramatic musical works 
                        on behalf of the copyright owner, such as the 
                        American Society of Composers, Authors and 
                        Publishers, Broadcast Music, Inc., and SESAC, 
                        Inc.
          ``(4) Rights not otherwise limited.--
                  ``(A) Except as expressly provided in this section, 
                this section does not limit or impair the exclusive 
                right to perform a sound recording publicly by means of 
                a digital audio transmission under section 106(6).
                  ``(B) Nothing in this section annuls or limits in any 
                way--
                          ``(i) the exclusive right to publicly perform 
                        a musical work, including by means of a digital 
                        audio transmission, under section 106(4);
                          ``(ii) the exclusive rights to reproduce and 
                        distribute a sound recording or the musical 
                        work embodied therein under sections 106(1) and 
                        106(3); or
                          ``(iii) any other rights under any other 
                        clause of section 106, or remedies available 
                        under this title, as such rights or remedies 
                        exist either before or after the date of 
                        enactment of the Digital Performance Right in 
                        Sound Recordings Act of 1995.
                  ``(C) Any limitations in this section on the 
                exclusive right under section 106(6) apply only to the 
                exclusive right under section 106(6) and not to any 
                other exclusive rights under section 106. Nothing in 
                this section shall be construed to annul, limit, impair 
                or otherwise affect in any way the ability of the owner 
                of a copyright in a sound recording to exercise the 
                rights under sections 106(1), 106(2) and 106(3), or to 
                obtain the remedies available under this title pursuant 
                to such rights, as such rights and remedies exist 
                either before or after the date of enactment of the 
                Digital Performance Right in Sound Recordings Act of 
                1995.''; and
          (4) by adding after subsection (d) the following:
  ``(e) Authority for Negotiations.--
          ``(1) Notwithstanding any provision of the antitrust laws, in 
        negotiating statutory licenses in accordance with subsection 
        (f), any copyright owners of sound recordings and any entities 
        performing sound recordings affected by this section may 
        negotiate and agree upon the royalty rates and license terms 
        and conditions for the performance of such sound recordings and 
        the proportionate division of fees paid among copyright owners, 
        and may designate common agents on a nonexclusive basis to 
        negotiate, agree to, pay, or receive payments.
          ``(2) For licenses granted under section 106(6), other than 
        statutory licenses, such as for performances by interactive 
        services or performances that exceed the sound recording 
        performance complement--
                  ``(A) copyright owners of sound recordings affected 
                by this section may designate common agents to act on 
                their behalf to grant licenses and receive and remit 
                royalty payments, Provided, That each copyright owner 
                shall establish the royalty rates and material license 
                terms and conditions unilaterally, that is, not in 
                agreement, combination, or concert with other copyright 
                owners of sound recordings; and
                  ``(B) entities performing sound recordings affected 
                by this section may designate common agents to act on 
                their behalf to obtain licenses and collect and pay 
                royalty fees, Provided, That each entity performing 
                sound recordings shall determine the royalty rates and 
                material license terms and conditions unilaterally, 
                that is, not in agreement, combination, or concert with 
                other entities performing sound recordings.
  ``(f) Licenses for Nonexempt Subscription Transmissions.--
          ``(1) No later than 30 days after the enactment of the 
        Digital Performance Right in Sound Recordings Act of 1995, the 
        Librarian of Congress shall cause notice to be published in the 
        Federal Register of the initiation of voluntary negotiation 
        proceedings for the purpose of determining reasonable terms and 
        rates of royalty payments for the activities specified by 
        subsection (d)(2) of this section during the period beginning 
        on the effective date of such Act and ending on December 31, 
        2000. Such terms and rates shall distinguish among the 
        different types of digital audio transmission services then in 
        operation. Any copyright owners of sound recordings or any 
        entities performing sound recordings affected by this section 
        may submit to the Librarian of Congress licenses covering such 
        activities with respect to such sound recordings. The parties 
        to each negotiation proceeding shall bear their own costs.
          ``(2) In the absence of license agreements negotiated under 
        paragraph (1), the Librarian of Congress shall, pursuant to 
        chapter 8, convene a copyright arbitration royalty panel to 
        determine and publish in the Federal Register a schedule of 
        rates and terms which, subject to paragraph (3), shall be 
        binding on all copyright owners of sound recordings and 
        entities performing sound recordings. In establishing such 
        rates and terms the copyright arbitration royalty panel may 
        consider the rates for comparable types of digital audio 
        transmission services and comparable circumstances under 
        voluntary license agreements negotiated as provided in 
        paragraph (1). The parties to the proceeding shall bear the 
        entire cost of the proceeding in such manner and proportion as 
        the arbitration panels shall direct. The Librarian of Congress 
        shall also establish requirements by which copyright owners may 
        receive reasonable notice of the use of their sound recordings 
        under this section, and under which records of such use shall 
        be kept by entities performing sound recordings.
          ``(3) License agreements voluntarily negotiated at any time 
        between one or more copyright owners of sound recordings and 
        one or more entities performing sound recordings shall be given 
        effect in lieu of any determination by a copyright arbitration 
        royalty panel or decision by the Librarian of Congress.
          ``(4) The procedures specified in paragraphs (1) and (2) 
        shall be repeated and concluded, in accordance with regulations 
        that the Librarian of Congress shall prescribe--
                  ``(A) within a 6-month period each time that a 
                petition is filed by any copyright owners of sound 
                recordings or any entities performing sound recordings 
                affected by this section indicating that a new type of 
                digital audio transmission service on which sound 
                recordings are performed is or is about to become 
                operational, and
                  ``(B) between June 30 and December 31, 2000 and at 5-
                year intervals thereafter.
          ``(5)(A) Any person who wishes to perform a sound recording 
        publicly by means of a nonexempt subscription transmission 
        under this subsection may do so without infringing the 
        exclusive right of the copyright owner of the sound recording--
                  ``(i) by complying with such notice requirements as 
                the Register of Copyrights shall prescribe by 
                regulation and by paying royalty fees in accordance 
                with this subsection; or
                  ``(ii) if such royalty fees have not been set, by 
                agreeing to pay such royalty fees as shall be 
                determined in accordance with this subsection.
          ``(B) Any royalty payments in arrears shall be made on or 
        before the twentieth day of the month next succeeding the month 
        in which the royalty fees are set.
  ``(g) Proceeds From Licensing of Subscription Transmissions.--
          ``(1) Except in the case of a subscription transmission 
        licensed in accordance with subsection (f) of this section--
                  ``(A) a featured recording artist who performs on a 
                sound recording that has been licensed for a 
                subscription transmission shall be entitled to receive 
                payments from the copyright owner of the sound 
                recording in accordance with the terms of the artist's 
                contract; and
                  ``(B) a nonfeatured recording artist who performs on 
                a sound recording that has been licensed for a 
                subscription transmission shall be entitled to receive 
                payments from the copyright owner of the sound 
                recording in accordance with the terms of the 
                nonfeatured recording artist's applicable contract or 
                other applicable agreement.
          ``(2) The copyright owner of the exclusive right under 
        section 106(6) of this title to publicly perform a sound 
        recording by means of a digital audio transmission shall 
        allocate to recording artists in the following manner its 
        receipts from the statutory licensing of subscription 
        transmission performances of the sound recording in accordance 
        with subsection (f) of this section:
                  ``(A) 2\1/2\ percent of the receipts shall be 
                deposited in an escrow account managed by an 
                independent administrator jointly appointed by 
                copyright owners of sound recordings and the American 
                Federation of Musicians (or any successor entity) to be 
                distributed to nonfeatured musicians (whether or not 
                members of the American Federation of Musicians) who 
                have performed on sound recordings.
                  ``(B) 2\1/2\ percent of the receipts shall be 
                deposited in an escrow account managed by an 
                independent administrator jointly appointed by 
                copyright owners of sound recordings and the American 
                Federation of Television and Radio Artists (or any 
                successor entity) to be distributed to nonfeatured 
                vocalists (whether or not members of the American 
                Federation of Television and Radio Artists) who have 
                performed on sound recordings.
                  ``(C) 45 percent of the receipts shall be allocated, 
                on a per sound recording basis, to the recording artist 
                or artists featured on such sound recording (or the 
                persons conveying rights in the artists' performance in 
                the sound recordings).
  ``(h) Licensing to Affiliates.--
          ``(1) If the copyright owner of a sound recording licenses an 
        affiliated entity the right to publicly perform a sound 
        recording by means of a digital audio transmission under 
        section 106(6), the copyright owner shall make the licensed 
        sound recording available under section 106(6) on no less 
        favorable terms and conditions to all bona fide entities that 
        offer similar services, except that, if there are material 
        differences in the scope of the requested license with respect 
        to the type of service, the particular sound recordings 
        licensed, the frequency of use, the number of subscribers 
        served, or the duration, then the copyright owner may establish 
        different terms and conditions for such other services.
          ``(2) The limitation set forth in paragraph (1) of this 
        subsection shall not apply in the case where the copyright 
        owner of a sound recording licenses--
                  ``(A) an interactive service; or
                  ``(B) an entity to perform publicly up to 45 seconds 
                of the sound recording and the sole purpose of the 
                performance is to promote the distribution or 
                performance of that sound recording.
  ``(i) No Effect on Royalties for Underlying Works.--License fees 
payable for the public performance of sound recordings under clause (6) 
of section 106 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 public 
performance of their works. It is the intent of Congress that royalties 
payable to copyright owners of musical works for the public performance 
of their works shall not be diminished in any respect as a result of 
the rights granted by section 106(6).
  ``(j) Definitions.--As used in this section, the following terms have 
the following meanings:
          ``(1) An `affiliated entity' is an entity engaging in digital 
        audio transmissions covered by section 106(6), other than an 
        interactive service, in which the licensor has any direct or 
        indirect partnership or any ownership interest amounting to 5 
        percent or more of the outstanding voting or non-voting stock.
          ``(2) A `broadcast transmission' is a transmission made by a 
        broadcast station licensed as such by the Federal 
        Communications Commission.
          ``(3) A `digital audio transmission' is a digital 
        transmission as defined in section 101, that embodies the 
        transmission of a sound recording. This term does not include 
        the transmission of any audiovisual work.
          ``(4) An `interactive service' is one that enables a member 
        of the public to receive, on request, a transmission of a 
        particular sound recording chosen by or on behalf of the 
        recipient. The ability of individuals to request that 
        particular sound recordings be performed for reception by the 
        public at large does not make a service interactive. If an 
        entity offers both interactive and non-interactive services 
        (either concurrently or at different times), the non-
        interactive component shall not be treated as part of an 
        interactive service.
          ``(5) A `nonsubscription transmission', `nonsubscription 
        retransmission', or a `nonsubscription broadcast transmission' 
        is any transmission or retransmission that is not a 
        subscription transmission or retransmission.
          ``(6) A `retransmission' includes any further simultaneous 
        retransmission of the same transmission. Nothing in this 
        definition shall be construed to exempt a transmission that 
        fails to satisfy a separate element required to qualify for an 
        exemption under section 114(d)(1).
          ``(7) The `sound recording performance complement' is the 
        transmission during any 3-hour period, on a particular channel 
        used by a transmitting entity, of no more than--
                  ``(A) 3 different selections of sound recordings from 
                any one phonorecord lawfully distributed for public 
                performance or sale in the United States, if no more 
                than 2 such selections are transmitted consecutively; 
                or
                  ``(B) 4 different selections of sound recordings
                          ``(i) by the same featured recording artist; 
                        or
                          ``(ii) from any set or compilation of 
                        phonorecords lawfully distributed together as a 
                        unit for public performance or sale in the 
                        United States,
                if no more than three such selections are transmitted 
                consecutively:
        Provided, That the transmission of selections in excess of the 
        numerical limits provided for in clauses (A) and (B) from 
        multiple phonorecords shall nonetheless qualify as a sound 
        recording performance complement if the programming of the 
        multiple phonorecords was not willfully intended to avoid the 
        numerical limitations prescribed in such clauses.
          ``(8) A `subscription transmission' is a transmission that is 
        controlled and limited to particular recipients, and for which 
        consideration is required to be paid or otherwise given by or 
        on behalf of the recipient to receive the transmission or a 
        package of transmissions including the transmission.''.

SEC. 4. MECHANICAL ROYALTIES IN DIGITAL PHONORECORD DELIVERIES.

  Section 115 of title 17, United States Code, is amended--
          (1) in subsection (a)(1)--
                  (A) in the first sentence by striking out ``any other 
                person'' and inserting in lieu thereof ``any other 
                person, including those who make phonorecords or 
                digital phonorecord deliveries by means of a digital 
                audio transmission,''; and
                  (B) in the second sentence by inserting before the 
                period ``, including by means of a digital phonorecord 
                delivery'';
          (2) in subsection (c)(2) in the second sentence by inserting 
        ``and other than as provided in paragraph (3),'' after ``For 
        this purpose,'';
          (3) by redesignating paragraphs (3), (4), and (5) of 
        subsection (c) as paragraphs (4), (5), and (6), respectively, 
        and by inserting after paragraph (2) the following new 
        paragraph:
          ``(3)(A) A compulsory license under this section includes the 
        right of the compulsory licensee to distribute or authorize the 
        distribution of a phonorecord of a nondramatic musical work by 
        means of a digital transmission which constitutes a digital 
        phonorecord delivery, regardless of whether the digital 
        transmission is also a public performance of the sound 
        recording under section 106(6) of this title or of any 
        nondramatic musical work embodied therein under section 106(4) 
        of this title. For every digital phonorecord delivery by or 
        under the authority of the compulsory licensee--
                  ``(i) on or before December 31, 1997, the royalty 
                payable by the compulsory licensee shall be the royalty 
                prescribed under paragraph (2) and chapter 8 of this 
                title; and
                  ``(ii) on or after January 1, 1998, the royalty 
                payable by the compulsory licensee shall be the royalty 
                prescribed under subparagraphs (B) through (F) and 
                chapter 8 of this title.
          ``(B) Notwithstanding any provision of the antitrust laws, 
        for the purpose of this subparagraph, any copyright owners of 
        nondramatic musical works and any persons entitled to obtain a 
        compulsory license under subsection (a)(1) may negotiate and 
        agree upon the terms and rates of royalty payments under this 
        paragraph and the proportionate division of fees paid among 
        copyright owners, and may designate common agents to negotiate, 
        agree to, pay or receive such royalty payments. Such authority 
        to negotiate the terms and rates of royalty payments includes, 
        but is not limited to, the authority to negotiate the year 
        during which the royalty rates prescribed under subparagraphs 
        (B) through (F) and chapter 8 of this title shall next be 
        determined.
          ``(C) During the period of June 30, 1996, through December 
        31, 1996, Librarian of Congress shall cause notice to be 
        published in the Federal Register of the initiation of 
        voluntary negotiation proceedings for the purpose of 
        determining reasonable terms and rates of royalty payments for 
        the activities specified by subparagraph (A) during the period 
        beginning January 1, 1998, and ending on December 31, 2007, or 
        such earlier date (regarding digital transmissions) as the 
        parties may agree. Such terms and rates shall distinguish 
        between (i) digital phonorecord deliveries where the 
        reproduction or distribution of a phonorecord is incidental to 
        the transmission which constitutes the digital phonorecord 
        delivery, and (ii) digital phonorecord deliveries in general. 
        Any copyright owners of nondramatic musical works and any 
        persons entitled to obtain a compulsory license under 
        subsection (a)(1) may submit to the Librarian of Congress 
        licenses covering such activities. The parties to each 
        negotiation proceeding shall bear their own costs.
          ``(D) In the absence of license agreements negotiated under 
        subparagraph (C), the Librarian of Congress shall, pursuant to 
        chapter 8, convene a copyright arbitration royalty panel to 
        determine and publish in the Federal Register a schedule of 
        rates and terms which, subject to subparagraph (E), shall be 
        binding on all copyright owners of nondramatic musical works 
        and persons entitled to obtain a compulsory license under 
        subsection (a)(1) during the period beginning January 1, 1998, 
        and ending on December 31, 2007, or such earlier date 
        (regarding digital transmissions) as may be determined pursuant 
        to subparagraph (C) or chapter 8. Such terms and rates shall 
        distinguish between (i) digital phonorecord deliveries where 
        the reproduction or distribution of a phonorecord is incidental 
        to the transmission which constitutes the digital phonorecord 
        delivery, and (ii) digital phonorecord deliveries in general. 
        In addition to the objectives set forth in section 801(b)(1), 
        in establishing such rates and terms, the copyright arbitration 
        royalty panel may consider rates under voluntary license 
        agreements negotiated as provided in subparagraph (C). The 
        royalty rates payable for a compulsory license for a digital 
        phonorecord delivery under this section shall be established de 
        novo and no precedential effect shall be given to the amount of 
        the royalty payable by a compulsory licensee for digital 
        phonorecord deliveries on or before December 31, 1997. The 
        parties to the proceeding shall bear the entire cost thereof in 
        such manner and proportion as the arbitration panels shall 
        direct. The Librarian of Congress shall also establish 
        requirements by which copyright owners may receive reasonable 
        notice of the use of their works under this section, and under 
        which records of such use shall be kept and made available by 
        persons making digital phonorecord deliveries.
          ``(E)(i) License agreements voluntarily negotiated at any 
        time between one or more copyright owners of nondramatic 
        musical works and one or more persons entitled to obtain a 
        compulsory license under subsection (a)(1) shall be given 
        effect in lieu of any determination by the Librarian of 
        Congress. Subject to clause (ii), the royalty rates determined 
        pursuant to subparagraph (C) or (D) shall be given effect in 
        lieu of any contrary royalty rates specified in a contract 
        pursuant to which a recording artist who is the author of a 
        nondramatic musical work grants a license under that person's 
        exclusive rights in the musical work under section 106(1) or 
        (3) to a person desiring to fix in a tangible medium of 
        expression a sound recording embodying the musical work.
          ``(ii) Clause (i) shall not apply to--
                  ``(I) a contract entered into on or before June 22, 
                1995, and not modified thereafter for the purpose of 
                reducing such rates or of increasing the number of 
                musical works within the scope of the contract covered 
                by the reduced rates, except if a contract entered into 
                on or before June 22, 1995, is modified thereafter for 
                the purpose of increasing the number of musical works 
                within the scope of the contract, any contrary royalty 
                rates specified in the contract shall be given effect 
                in lieu of royalty rates determined pursuant to 
                subparagraph (C) or (D) for the number of musical works 
                within the scope of the contract as of June 22, 1995; 
                and
                  ``(II) a contract entered into after the date that 
                the sound recording is fixed in a tangible medium of 
                expression substantially in a form intended for 
                commercial release, if at the time the contract is 
                entered into, the recording artist retains the right to 
                grant licenses under sections 106(1) and 106(3).
          ``(F) The procedures specified in subparagraphs (C) and (D) 
        shall be repeated and concluded, in accordance with regulations 
        that the Librarian of Congress shall prescribe, as provided in 
        section 803(a)(3), except to the extent that different times 
        for the repeating and concluding of such proceedings may be 
        determined in accordance with subparagraph (C) or (D).
          ``(G) Except as provided in section 1002(e) of this title, a 
        digital phonorecord delivery licensed under this paragraph 
        shall be accompanied by the information encoded in the sound 
        recording, if any, by or under the authority of the copyright 
        owner of that sound recording, that identifies the title of the 
        sound recording, the featured recording artist who performs on 
        the sound recording, and related information, including 
        information concerning the underlying musical work and its 
        writer.
          ``(H)(i) A digital phonorecord delivery of a sound recording 
        is actionable as an act of infringement under section 501, and 
        is fully subject to the remedies provided by sections 502 
        through 506 and sections 509 and 510, unless--
                  ``(I) the digital phonorecord delivery has been 
                authorized by the copyright owner of the sound 
                recording; and
                  ``(II) the owner of the copyright in the sound 
                recording or the entity making the digital phonorecord 
                delivery has obtained a compulsory license under this 
                section or has otherwise been authorized to distribute 
                or authorize the distribution, by means of a digital 
                phonorecord delivery, of each nondramatic musical work 
                embodied in the sound recording.
          ``(ii) Any cause of action under this subparagraph shall be 
        in addition to those available to the owner of the copyright in 
        the nondramatic musical work under subsection (c)(5) and 
        section 106(4) and the owner of the copyright in the sound 
        recording under section 106(6).
          ``(I) The liability of the copyright owner of a sound 
        recording for infringement of the copyright in a musical work 
        embodied in the sound recording shall be determined in 
        accordance with applicable law, except that the owner of a 
        copyright in a sound recording shall not be liable for a 
        digital phonorecord delivery by a third party if the owner of 
        the copyright in the sound recording does not license the 
        distribution of a phonorecord of the musical work.
          ``(J) Nothing in section 1008 shall be construed to prevent 
        the exercise of the rights and remedies allowed by this 
        paragraph, paragraph (7), and chapter 5 in the event of a 
        digital phonorecord delivery, except that no action alleging 
        infringement of copyright may be brought under this title 
        against a manufacturer, importer or distributor of a digital 
        audio recording device, a digital audio recording medium, an 
        analog recording device, or an analog recording medium, or 
        against a consumer, based on the actions described in such 
        section.
          ``(K) Nothing in this section annuls or limits (i) the 
        exclusive right to publicly perform a sound recording or the 
        musical work embodied therein, including by means of a digital 
        transmission, under sections 106(4) and 106(6), (ii) except for 
        compulsory licensing under the conditions specified by this 
        section, the exclusive rights to reproduce and distribute the 
        sound recording and the musical work embodied therein under 
        sections 106(1) and 106(3), including by means of a digital 
        phonorecord delivery, or (iii) any other rights under any other 
        provision of section 106, or remedies available under this 
        title, as such rights or remedies exist either before or after 
        the date of enactment of the Digital Performance Right in Sound 
        Recordings Act of 1995.
          ``(L) The provisions of this section concerning digital 
        phonorecord deliveries shall not apply to any exempt 
        transmissions or retransmissions under section 114(d)(1). The 
        exemptions created in section 114(d)(1) do not expand or reduce 
        the rights of copyright owners under section 106 (1) through 
        (5) with respect to such transmissions and retransmissions.''; 
        and
          (5) by adding after subsection (c) the following:
  ``(d) Definition.--As used in this section, the following term has 
the following meaning: A `digital phonorecord delivery' is each 
individual delivery of a phonorecord by digital transmission of a sound 
recording which results in a specifically identifiable reproduction by 
or for any transmission recipient of a phonorecord of that sound 
recording, regardless of whether the digital transmission is also a 
public performance of the sound recording or any nondramatic musical 
work embodied therein. A digital phonorecord delivery does not result 
from a real-time, noninteractive subscription transmission of a sound 
recording where no reproduction of the sound recording or the musical 
work embodied therein is made from the inception of the transmission 
through to its receipt by the transmission recipient in order to make 
the sound recording audible.''.

SEC. 5. CONFORMING AMENDMENTS.

  (a) Definitions.--Section 101 of title 17, United States Code, is 
amended by inserting after the definition of ``device'', ``machine'', 
or ``process'' the following:
          ``A `digital transmission' is a transmission in whole or in 
        part in a digital or other non-analog format.''.
  (b) Limitations on Exclusive Rights: Secondary Transmissions.--
Section 111(c)(1) of title 17, United States Code, is amended in the 
first sentence by inserting ``and section 114(d)'' after ``of this 
subsection''.
  (c) Limitations on Exclusive Rights: Secondary Transmissions of 
Superstations and Network Stations for Private Home Viewing.--
          (1) Section 119(a)(1) of title 17, United States Code, is 
        amended in the first sentence by inserting ``and section 
        114(d)'' after ``of this subsection''.
          (2) Section 119(a)(2)(A) of title 17, United States Code, is 
        amended in the first sentence by inserting ``and section 
        114(d)'' after ``of this subsection''.
  (d) Copyright Arbitration Royalty Panels.--
          (1) Section 801(b)(1) of title 17, United States Code, is 
        amended in the first and second sentences by striking ``115'' 
        each place it appears and inserting ``114, 115,''.
          (2) Section 802(c) of title 17, United States Code, is 
        amended in the third sentence by striking ``section 111, 116, 
        or 119,'' and inserting ``section 111, 114, 116, or 119, any 
        person entitled to a compulsory license under section 114(d), 
        any person entitled to a compulsory license under section 
        115,''.
          (3) Section 802(g) of title 17, United States Code, is 
        amended in the third sentence by inserting ``114,'' after 
        ``111,''.
          (4) Section 802(h)(2) of title 17, United States Code, is 
        amended by inserting ``114,'' after ``111,''.

SEC. 6. EFFECTIVE DATE.

  This Act and the amendments made by this Act shall take effect 3 
months after the date of enactment of this Act, except that the 
provisions of sections 114(e) and 114(f) of title 17, United States 
Code (as added by section 3 of this Act) shall take effect immediately 
upon the date of enactment of this Act.
                               I. Purpose

    The purpose of S. 227 is to ensure that performing artists, 
record companies and others whose livelihood depends upon 
effective copyright protection for sound recordings, will be 
protected as new technologies affect the ways in which their 
creative works are used. S. 227 does this by granting a limited 
right to copyright owners of sound recordings which are 
publicly performed by means of a digital transmission. In 
addition, the bill clarifies the application of the existing 
reproduction and distribution rights of musical work and sound 
recording copyright owners in the context of certain digital 
transmissions.

                        II. Legislative History

    Sound recordings were first granted Federal copyright 
protection by amendment to the Copyright Act in 1971. The 
``Sound Recording Act of 1971'' \1\ (SRA) had a narrow purpose: 
to prevent phonorecord piracy due to advances in duplicating 
technology. Accordingly, to fulfill this specific objective, 
and to provide balance among the parties affected by the 
legislation, Congress did not grant sound recording copyright 
owners the full ``bundle'' of rights usually afforded by a 
copyright. Specifically, they were granted only reproduction, 
distribution, and adaptation rights; they were not granted the 
right of public performance,\2\ on the presumption that the 
granted rights would suffice to protect against record piracy. 
The Federal courts quickly upheld the validity of the SRA 
against constitutional challenge,\3\ and sound recording 
copyright owners began to enjoy limited copyright protection.
    \1\ Sound Recording Act of 1971, Public Law 92-140, 85 Stat. 391 
(1971). This Act was amended and made permanent by Public Law 93-573, 
88 Stat. 1873 (1974) (codified in the Copyright Act of 1976, 17 U.S.C. 
102 (1990).
    \2\ 17 U.S.C. 114(a): ``The exclusive rights of the owner of 
copyright in sound recordings are limited to the rights specified by 
clauses (1), (2), and (3) of section 106, and do not include any right 
of performance under Sec. 106(4).''
    \3\ Shaab v. Kleindienst, 345 F. Supp. 589 (D.D.C. 1972); See also 
Goldstein v. California, 412 U.S. 546 (1973).
---------------------------------------------------------------------------
    Congress did not include a sound recording performance 
right in the 1971 Sound Recording Act. In its subsequent 
deliberations over copyright reform that culminated in the 
Copyright Act of 1976, Congress heard extensive testimony from 
the Register of Copyrights and others favoring adoption of a 
broad performance right for sound recordings, and testimony 
from broadcasters and others opposing the adoption of such a 
right. The Senate's version of the 1976 Act expressly declined 
to create an exclusive performance right for sound recordings, 
while the House version called for a Copyright Office study on 
the issue. The 1976 Act adopted the House version mandating a 
Copyright Office study. In 1978, after holding hearings, 
researching the matter, and examining comments made by 
interested parties, the Copyright Office issued a report which 
unequivocally recommended that a performance right for sound 
recordings be written into law.\4\ In essence, the Register 
concluded that a sound recording performance right, applicable 
to all public performances, would be ``entirely consonant with 
the basic principles of copyright law generally, and with those 
of the 1976 Copyright Act specifically.'' \5\ The Register's 
findings included her recommendation and prediction that:
    \4\ Register of Copyrights, Report on Performance Right in Sound 
Recordings, H.R. Doc. No. 15, 95th Cong., 2d sess. (1978).
    \5\ Id. at 177.

          Congress, in its deliberations on performance rights, 
        should not be unmindful of the possibility that 
        technological developments could well cause substantial 
        changes in existing systems for public delivery of 
        sound recordings. In that event, it is equally possible 
        that a performance right would become the major source 
        of income from, and incentive to, the creation of such 
        works.\6\
    \6\ Id. at 174.

    Notwithstanding the Register's report, initial efforts to 
legislate a sound recording performance right were repeated, 
but unsuccessful.\7\ It was difficult to craft a bill that 
adequately protected the interests of the parties affected by 
the legislation, while striking a necessary balance between 
economic incentives for recording artists and public access to 
recordings.
    \7\ See, e.g., H.R. 6063, 95th Cong., 1st sess. (1977); H.R. 977, 
96th Cong., 1st sess. (1980); S. 1552, 96th Cong., 1st sess. (1980); 
H.R. 1805, 97th Cong., 1st sess. (1981).
    However, just as duplicating technology was the impetus 
behind the act which afforded sound recordings limited 
copyright protection in the first instance, digital technology 
gave new life to the performance rights initiative. In 1990, 
Senator Dennis DeConcini, chairman of the Senate Subcommittee 
on Patents, Copyrights, and Trademarks asked the Copyright 
Office for a report on the copyright implications of digital 
audio broadcasts and cable services.
    In 1991, the Office issued its report.\8\ First, addressing 
the future of sound recording, it concluded that ``[d]igital 
represents such a technological advance in sound delivery that 
it is certain to be the audio transmission medium of the 
future.'' \9\ Moreover, the Copyright Office again recommended, 
as it did in 1978, that the 1976 Copyright Act be amended to 
extend a public performance right to sound recordings.
    \8\ Register of Copyright, Report on Copyright Implications of 
Digital Audio Transmission Services (October 1991).
    \9\ Id. at ii.
---------------------------------------------------------------------------
    By 1991, the technological changes which the Register 
predicted in 1978 had come to fruition. Accordingly, the Office 
indicated, in its 1991 report, that the amendment was overdue:

          Thirteen years have passed since the Copyright Office 
        formally recommended to the Congress the enactment of a 
        public performance right in sound recordings. 
        Technological changes have occurred that facilitate 
        transmission of sound recordings to huge audiences. 
        Satellite and digital technologies make possible the 
        celestial jukebox, music on demand, and pay-per-listen 
        services. * * * Sound recording authors and proprietors 
        are harmed by the lack of a performance right in their 
        works.\10\
    \10\ Id. at 154-155.

    In the wake of the 1991 Copyright Office study on digital 
audio transmission services, the House of Representatives held 
an Oversight hearing during the first session of the 103d 
Congress regarding sound recording performance rights.\11\ In 
the second session, Senators Orrin Hatch and Dianne Feinstein 
introduced S. 1421, which provided for an exclusive right to 
perform sound recordings publicly by means of digital 
transmissions.\12\ A companion bill was introduced in the House 
of Representatives by Representative William Hughes.\13\
    \11\ Performers and Performance Rights in Sound Recordings: Hearing 
before the Subcommittee on Intellectual Property and Judicial 
Administration of the House Committee on the Judiciary, 103d Cong., 1st 
sess. (1993).
    \12\ S. 1421, 103d Cong., 1st sess. (1993).
    \13\ H.R. 2576, 103d Cong., 1st sess. (1993).
---------------------------------------------------------------------------
    Neither the House of Representatives nor the Senate held 
hearings on the bills, but Representative Hughes, chairman of 
the House Judiciary Subcommittee on Courts and Intellectual 
Property, hosted ``roundtable'' discussions in an effort to 
forge a consensus on appropriate legislation. Several groups 
were represented at the discussions, including, among others: 
the broadcast industry, cable and satellite digital audio 
service providers, restaurant owners, and copyright owners of 
both sound recordings and musical works.
    After extensive further discussions among the interested 
parties at the urging of the new chairman of the Judiciary 
Committee, Senator Hatch, and Senator Feinstein, those Senators 
introduced S. 227, in the 104th Congress, on January 13, 
1995.\14\ The Senate Judiciary Committee held hearings on the 
bill on March 9, 1995,\15\ at which testimony was given by 
Bruce A. Lehman, Assistant Secretary of Commerce and 
Commissioner of Patents and Trademarks, on behalf of the 
Administration; Marybeth Peters, Register of Copyrights; Don 
Henley, an individual recording artist; and representatives 
from the Recording Industry Association of America (RIAA), the 
American Society of Composers, Authors and Publishers (ASCAP), 
Broadcast Music, Inc. (BMI), the National Music Publishers 
Association (NMPA), the American Federation of Musicians (AFM), 
International Cablecasting Technologies (ICT), and Mountain 
West Audio, a Muzak affiliate. In addition, the National 
Association of Broadcasters (NAB), the National Cable 
Television Association (NCTA) and Compuserve Inc. submitted 
written statements for the record.
    \14\ S. 227, 104th Cong., 1st sess. (1995). Senators Alan Simpson, 
Mike DeWine, Trent Lott, and Max Baucus joined as cosponsors of the 
bill.
    \15\ The Digital Performance Right in Sound Recordings Act of 1995: 
Hearings before the Senate Committee on the Judiciary, 104th Cong., 1st 
sess. (1995).
---------------------------------------------------------------------------
    On June 29, 1995, after further discussion and 
consultation, the Committee gave unanimous approval to an 
amendment in the nature of a substitute to S. 227 proposed by 
Chairman Hatch, and cosponsored by Senators Feinstein, 
Thurmond, and Leahy.
    Among the changes to the bill were revisions to certain 
competition-related provisions. In a letter to the Committee on 
June 20, the Department of Justice expressed competition 
concerns with certain provisions of the bill. In response, 
Senator Thurmond, chairman of the Antitrust Subcommittee, and 
Senator Leahy, Ranking Democrat on the Antitrust Sucommittee, 
proposed revisions to subsections 114 (e) and (h) of the 
Copyright Act, as added by this bill. Those revisions were 
incorporated into the amendment in the nature of a substitute 
proposed on June 29. The Department expressed satisfaction with 
the revisions in a letter dated July 21.
                            III. Discussion

                               background

    As the foregoing discussion on the legislative history of 
this bill makes clear, the historic lack of a performance right 
for sound recordings under U.S. copyright law has been a source 
of controversy for decades. The first efforts to amend the 
copyright laws to provide protection for sound recordings date 
from the 1920's. Through much of the 1960's and 1970's, both 
Houses of Congress studied and debated the arguments for and 
against establishing a performance right in sound recordings. 
In the 103d Congress, this issue again came to the fore, again 
without resolution.
    Although this issue is not a new one, the Committee 
believes that the time has come to act. The Committee is not 
alone in that judgment. Bruce A. Lehman, the Assistant 
Secretary of Commerce and Commissioner of Patents and 
Trademarks, expressed the Administration's agreement at the 
Committee's hearing on S. 227, stating that ``[W]e believe that 
the time has come to bring protection for performers and 
producers of sound recordings into line with the protection 
afforded to the creators of other works.'' \16\ Similarly, 
Register of Copyrights Marybeth Peters testified, ``[J]ustice 
requires that performers and producers of sound recordings be 
accorded a public performance right. As a world leader in the 
creation of sound recordings, the United States, should no 
longer delay in giving its creators of sound recordings the 
minimum rights many countries give their performers and 
producers.'' \17\
    \16\ Statement of Bruce A. Lehman on S. 227 at 1 (Mar. 9, 1995).
    \17\ Statement of Marybeth Peters on S. 227 at 25 (Mar. 9, 1995).
---------------------------------------------------------------------------
    Notwithstanding the views of the Copyright Office and the 
Patent and Trademark Office that it is appropriate to create a 
comprehensive performance right for sound recordings, the 
Committee has sought to address the concerns of record 
producers and performers regarding the effects that new digital 
technology and distribution systems might have on their core 
business without upsetting the longstanding business and 
contractual relationships among record producers and 
performers, music composers and publishers and broadcasters 
that have served all of these industries well for decades. 
Accordingly, the Committee has chosen to create a carefully 
crafted and narrow performance right, applicable only to 
certain digital transmissions of sound recordings.

                 new digital transmission technologies

    In a comparatively few years, compact discs (CD's), which 
embody digital recordings, have edged out analog recording 
media such as cassette tapes and vinyl records to become the 
dominant physical medium for the distribution of copyrighted 
sound recordings. Consumers have embraced digital recordings 
because of their superior sound quality.
    Even more recently, a small number of services have begun 
to make digital transmissions of recordings to subscribers. 
Trends within the music industry, as well as the 
telecommunications and information services industries, suggest 
that digital transmission of sound recordings is likely to 
become a very important outlet for the performance of recorded 
music in the near future. Some digital transmission services, 
such as so-called ``celestial jukebox,'' ``pay-per-listen'' or 
``audio-on-demand'' services, will be interactive services that 
enable a member of the public to receive, on request, a digital 
transmission of the particular recording that person wants to 
hear.
    These new digital transmission technologies may permit 
consumers to enjoy performances of a broader range of higher-
quality recordings than has ever before been possible. These 
new technologies also may lead to new systems for the 
electronic distribution of phonorecords with the authorization 
of the affected copyright owners. Such systems could increase 
the selection of recordings available to consumers, and make it 
more convenient for consumers to acquire authorized 
phonorecords.
    However, in the absence of appropriate copyright protection 
in the digital environment, the creation of new sound 
recordings and musical works could be discouraged, ultimately 
denying the public some of the potential benefits of the new 
digital transmission technologies. The Committee believes that 
current copyright law is inadequate to address all of the 
issues raised by these new technologies dealing with the 
digital transmission of sound recordings and musical works and, 
thus, to protect the livelihoods of the recording artists, 
songwriters, record companies, music publishers and others who 
depend upon revenues derived from traditional record sales.
    In particular, the Committee believes that recording 
artists and record companies cannot be effectively protected 
unless copyright law recognizes at least a limited performance 
right in sound recordings. Thus, S. 227 grants such a 
performance right, subject to various limitations intended to 
strike a balance among all of the interests affected thereby.
    The Committee anticipates that the relevant technologies 
will continue to advance. The bill has been carefully drafted 
to accommodate foreseeable technological changes. However, to 
the extent that the language of the bill does not precisely 
anticipate particular technological changes, it is the 
Committee's intention that both the rights and the exemptions 
and limitations created by the bill be interpreted in order to 
achieve their intended purposes.

     S. 227 Responds To Issues Raised By New Digital Transmission 
                              Technologies

    An important rationale for enactment of this legislation is 
to address the potential impact on the prerecorded music 
industry of digital subscription and interactive services. The 
Committee, in reviewing the record before it and the goals of 
this legislation, recognizes that the sale of many sound 
recordings and the careers of many performers have benefitted 
considerably from airplay and other promotional activities 
provided by both noncommercial and advertiser-supported, free 
over-the-air broadcasting. The Committee also recognizes that 
the radio industry has grown and prospered with the 
availability and use of prerecorded music. This legislation 
should do nothing to change or jeopardize the mutually 
beneficial economic relationship between the recording and 
traditional broadcasting industries.
    This legislation is a narrowly crafted response to one of 
the concerns expressed by representatives of the music 
community, namely that certain types of subscription and 
interactive audio services might adversely affect sales of 
sound recordings and erode copyright owners' ability to control 
and be paid for use of their work. Subscription and interactive 
audio services can provide multichannel offerings of various 
music formats in CD-quality recordings, commercial free and 24 
hours a day. Jerold Rubinstein, chairman of the Digital Music 
Express subscription audio service, testified before this 
Committee that even though he believes that certain digital 
subscription services effectively promote sales of sound 
recordings through the adoption of new identification 
technologies as well as by the exposure afforded to the 
performers and sound recordings, he also believes that sound 
recording copyright owners and recording artists deserve 
compensation for this use. The future holds the promise of pay-
per-listen, audio-on-demand, or ``dial-up'' services for a 
particular recording or artist. The Committee believes that 
copyright owners of sound recordings should enjoy protection 
with respect to digital subscription, interactive and certain 
other such performances. By contrast, free over-the-air 
broadcasts are available without subscription, do not rely on 
interactive delivery, and provide a mix of entertainment and 
non-entertainment programming and other public interest 
activities to local communities to fulfill a condition of the 
broadcasters' license. The Committee has considered these 
factors in concluding not to include free over-the-air 
broadcast services in this legislation. The Committee, however, 
does not overlook the fact that other media, such as cable 
television, also undertake public interest activities, but 
notes that they provide subscription or interactive services 
which establish the basis for subjecting them to the 
requirements of this legislation.
    The limited right created by this legislation reflects 
changed circumstances: the commercial exploitation of new 
technologies in ways that may change the way prerecorded music 
is distributed to the consuming public. It is the Committee's 
intent to provide copyright holders of sound recordings with 
the ability to control the distribution of their product by 
digital transmissions, without hampering the arrival of new 
technologies, and without imposing new and unreasonable burdens 
on radio and television broadcasters, which often promote, and 
appear to pose no threat to, the distribution of sound 
recordings.

                Limitations On The New Performance Right

    In deciding to grant a new exclusive right to perform 
copyrighted sound recordings publicly by means of digital audio 
transmission, the Committee was mindful of the need to strike a 
balance among all of the interests affected thereby. That 
balance is reflected in various limitations on the new 
performance right that are set forth in the bill's amendments 
to section 114 of title 17 and described in detail later in 
this report.
    Two of the concerns that motivated certain of the 
limitations on exclusive rights are deserving of particular 
mention. First, concern was expressed that granting a 
performance right in sound recordings would make it 
economically infeasible for some transmitters to continue 
certain current uses of sound recordings. This concern is 
addressed by various limitations on the exclusive right:
          S. 227 applies only to digital audio transmissions. 
        Purely analog transmissions are not covered, and 
        neither are digital transmissions of audiovisual works.
          S. 227 contains a number of exemptions from the 
        exclusive right that are directed toward specific uses 
        of sound recordings. Probably most important, 
        nonsubscription transmissions (i.e., transmissions not 
        controlled or limited to particular recipients or for 
        which no consideration is required to be paid), such as 
        nonsubscription broadcast transmissions by radio and 
        television stations, are exempted unless they are part 
        of an interactive service.
          Nonexempt, noninteractive subscription transmissions 
        are eligible for statutory licensing.
    Concern also was expressed that granting sound recording 
copyright owners an exclusive performance right could limit 
opportunities for the performance of musical works. That 
concern is addressed by the limitations described above and 
also by the provisions of new section 114(d)(3), which impose 
certain limitations on the granting of exclusive licenses under 
the new performance right in order not to hinder the growth of 
interactive services.
    It is important to recognize that these limitations on the 
new performance right (other than the limitation on exclusive 
licensing of interactive services contained in new section 
114(d)(3)) do not apply to interactive digital transmission 
services. Of all the new forms of digital transmission 
services, interactive services are most likely to have a 
significant impact on traditional record sales, and therefore 
pose the greatest threat to the livelihoods of those whose 
income depends upon revenues derived from traditional record 
sales. The Committee believes that sound recording copyright 
owners should have the exclusive right to control the 
performance of their works as part of an interactive service, 
and so has excluded interactive services from these limitations 
on the performance right.
    The Committee was particularly concerned that this bill 
could be construed as affecting existing rights of musical work 
or sound recording copyright owners. The purpose of S. 227 is 
to recognize a new limited performance right in sound 
recordings. As set forth in the various savings clauses of new 
section 114(d)(4), the Committee has no intention to limit any 
existing right of a sound recording or musical work copyright 
owner. Indeed, to the extent, if any, that a limitation on the 
new right of public performance is inconsistent with the rights 
of a musical work or sound recording copyright owner under 
sections 106(1) through 106(5), the copyright owner may fully 
exercise its exclusive rights under sections 106(1) through 
106(5), and obtain the remedies provided by title 17 pursuant 
to such rights, notwithstanding any limitations on the new 
right of public performance. Of course, the limitations on 
exclusive rights contained in sections 107 through 113, in 
sections 116 through 120, and in the unamended portions of 
sections 114 and 115 are likewise unchanged by this bill.

         mechanical royalties in digital phonorecord deliveries

    The Working Group on Intellectual Property Rights of the 
Information Infrastructure Task Force has preliminarily 
concluded that ``[i]t is not clear under current law that a 
transmission can constitute a distribution of copies or 
phonorecords of a work.'' \18\ Music copyright owners believe 
that current law gives them the ability to enforce their 
reproduction and distribution rights relating to digital 
transmissions, but recommend that these rights be clarified and 
confirmed in the digital environment. The Committee expresses 
no view on current law in this regard, but the Committee is 
concerned that even a perception of uncertainty raises 
questions concerning the respective rights and obligations of 
musical work copyright owners, record companies, and 
transmission services as to digital transmissions of recorded 
music.
    \18\ A Preliminary Draft of The Report of the Working Group on 
Intellectual Property Rights, Information Infrastructure Task Force at 
120-21 (July 1994).
---------------------------------------------------------------------------
    In connection with efforts to develop a National 
Information Infrastructure or Global Information 
Infrastructure, the Committee may be called upon to consider 
legislation to address this uncertainty as to all types of 
copyrighted works. However, the Committee believes it 
appropriate in the context of this bill to address the rights 
of musical work and sound recording copyright owners as to 
certain types of digital transmissions described in the bill as 
``digital phonorecord deliveries.'' This is the purpose of 
section 4 of the bill, which is described in detail later in 
this report.

                          international issues

    The Committee is well aware of ongoing discussions and 
attempts at greater international harmonization of copyright 
and neighboring rights at the World Intellectual Property 
Organization (WIPO), in discussions within the G-7, and other 
forums. This legislation reflects a careful balancing of 
interests, reflecting the statutory and regulatory requirements 
imposed on U.S. broadcasters, recording interests, composers, 
and publishers, and the recognition of the potential impact of 
new technologies on the recording industry. The purpose and 
scope of this new right are clearly laid out in the bill and 
this report. The underlying rationale for creation of this 
limited right is grounded in the way the market for prerecorded 
music has developed, and the potential impact on that market 
posed by subscription and interactive services--but not by 
broadcasting and related transmissions.

                       IV. Vote of the Committee
    On June 29, 1995, with a quorum present, by a voice vote, 
the Committee on the Judiciary ordered the bill as an amendment 
in the nature of a substitute favorably reported.

                     V. Section-by-Section Analysis

                         section 1. short title

    This section sets forth the title of the Act, the ``Digital 
Performance Right in Sound Recordings Act of 1995.''

            section 2. exclusive rights in copyrighted works

    This section amends section 106 of title 17 to add a new 
paragraph (6) to provide an exclusive right to perform a 
copyrighted sound recording publicly by means of a digital 
audio transmission.

        section 3. scope of exclusive rights in sound recordings

    This section amends section 114(a) by adding a reference to 
new section 106(6) in the list of exclusive rights granted to 
the owner of a copyright in a sound recording.
    This section also amends the language of section 114(b) 
relating to the tangible medium of expression in which sound 
recordings can be duplicated. Instead of referring only to 
phonorecords or ``copies of motion pictures and other 
audiovisual works,'' the new language recognizes that sound 
recordings can be reproduced in copies of any kind. As 
multimedia technologies begin to blur the lines between 
different categories of works capable of being embodied in 
copies, the Committee deemed it important to confirm that, 
subject to the specific limitations in section 114(b), sound 
recordings enjoy the full scope of protection afforded by the 
reproduction right under section 106(1).
    This section also strikes section 114(d) of title 17, an 
obsolete provision that directed the Register of Copyrights to 
submit a report on performance rights to Congress on January 3, 
1978, and replaces it with new subsections (d) through (i), as 
described below.

Section 114(d).  Limitations on exclusive right

Section 114(d)(1).  Exempt transmissions and retransmissions

    Section 114(d)(1) is designed to ensure that the new right 
provided to owners of copyright in sound recordings with 
respect to certain digital public performances of those 
recordings will not affect nonsubscription transmissions (such 
as radio or television broadcasts), most retransmissions of 
those transmissions, and certain other transmissions or 
retransmissions that the Committee believes should not be 
subject to the new right.
    To take advantage of the section 114(d)(1) exemptions, a 
transmission or retransmission must not be part of an 
``interactive service'' as defined in section 114(j)(4). The 
Committee anticipates that this requirement will not present 
any difficulty for the types of services covered by the section 
114(d)(1) exemption. The term ``interactive service'' is 
intended to cover only services in which an individual can 
arrange for the transmission or retransmission of a specific 
sound recording to that person or another, individually.
    Under section 114(d)(1), a transmission or retransmission 
will be exempt from the new right under section 106(6) if it 
falls into at least one of the following categories:

Section 114(d)(1)(A) (nonsubscription transmissions)

    Under this provision, any transmission to members of the 
public that is neither a subscription transmission (as defined 
in section 114(j)(8)) nor part of an interactive service is 
exempt from the new digital performance right. The classic 
example of such an exempt transmission is a transmission to the 
general public by a free over-the-air broadcast station, such 
as a traditional radio or television station, and the Committee 
intends that such transmissions be exempt regardless of whether 
they are in a digital or nondigital format, in whole or in 
part.

Section 114(d)(1)(B) (retransmissions of nonsubscription broadcast 
        transmissions)

    In general, this provision exempts all retransmissions of 
nonsubscription broadcast transmissions, whether the retrans-
missions are offered on a subscription or a nonsubscription 
basis. Retransmissions of radio station broadcast 
transmissions, however, are exempt only if they are not part of 
an interactive service and fall within certain specified 
categories, which are discussed in detail below.
    The Committee has created the section 114(d)(1)(B) 
exemption because it is aware that cable systems and other 
multichannel programming distributors often offer 
retransmissions of non-subscription broadcast transmissions to 
their customers. At present, copyright liability for these 
retransmissions ordinarily is covered pursuant to sections 111 
and 119 of the Act. The Committee intends, subject to the 
limitations discussed below concerning retransmissions of radio 
broadcasts, that all noninteractive retransmissions of 
noninteractive nonsubscription broadcast transmissions be 
exempt from the new digital sound recording performance right. 
These retransmissions will be exempt even if the cable system 
(or other retransmission service) limits the delivery of the 
retransmission to its customers and charges a fee to receive 
the retransmission. In other words, retransmissions of 
broadcast stations' signals will be exempt even if the 
retransmissions are themselves ``subscription'' retransmissions 
under the Act. A cable system's delivery of a retransmitted 
radio broadcast signal within 150 miles of the transmitter, for 
example, will be exempt under section 114(d)(1)(B)(i), even if 
the cable system charges a monthly fee to subscribers to 
receive the signal.
    Retransmissions of the broadcast transmissions of radio 
stations are exempt pursuant to section 114(d)(1)(B) only if 
they fall within one of the categories listed in paragraphs 
114(d)(1) (B)(i) through (B)(iv).
Section 114(d)(1)(B)(i) (retransmission of radio signals within 150-
        mile radius of transmitter)

    Under this provision, retransmissions of a radio station 
within a 150-mile radius of the site of that station's 
transmitter are exempt, whether retransmitted on a subscription 
or a nonsubscription basis, provided that they are not part of 
an interactive service.
    This provision does not, however, exempt the willful or 
repeated retransmission of a radio station's broadcast 
transmission more than a 150-mile radius from the radio 
station's transmitter. The Committee recognizes that the 150-
mile limit could serve as a dangerous trap for the uninitiated 
or inattentive. To ensure against that possibility, section 
114(d)(1)(B)(i) provides that a re-transmission beyond the 150-
mile radius will fall outside the exemption only if the 
retransmission is willful or repeated. The Committee intends 
the phrase ``willful or repeated'' to be understood in the same 
way that phrase was used in section 111 of the Act, as 
explained in the House Report on the 1976 Act, H. Rept. 1476, 
94th Cong., 2d sess. 93 (1976).
    Pursuant to section 114(d)(1)(B)(i)(I), the 150-mile 
limitation does not apply when a nonsubscription broadcast 
transmission by an FCC-licensed station is retransmitted on a 
nonsubscription basis by an FCC-licensed terrestrial broadcast 
station, terrestrial translator, or terrestrial repeater. In 
other words, a radio station's broadcast transmission may be 
retransmitted by another FCC-licensed broadcast station (or 
translator or repeater) on a nonsubscription basis without 
regard to the 150-mile restriction.
    Under section 114(d)(1)(B)(i)(II), when a retransmission 
covered by section 114(d)(1)(B)(i)(I) is itself retransmitted 
on a subscription basis, the 150-mile radius is measured from 
the transmitter site of the broadcast retransmitter (whether a 
station, translator, or repeater). This means that a cable 
system (or other subscription retransmitter) can, without 
incurring liability under section 106(6), retransmit a 
broadcast retransmission within 150 miles of the transmitter 
site of the station, translator, or repeater that is making the 
retransmission.
    Section 106(6) is not intended to apply to the transmission 
of a local radio station's programming free of charge to local 
or long-distance callers who are put ``on hold'' during a 
telephone call with a business, nor is the bill intended to 
change current law as it applies to such performances of 
copyrighted musical works under section 106(4).

Section 114(d)(1)(B)(ii) (all-band retransmissions of radio 
        transmissions received over the air)

    This provision is intended to permit retransmitters (such 
as cable systems) to offer retransmissions to their local 
subscribers of all radio stations that the retransmitter is 
able to pick up using an over-the-air antenna. (These are 
sometimes called ``all-band'' retransmissions.) There are three 
requirements for this exemption: (1) the retransmitter (such as 
a cable system) must obtain the radio broadcast transmission 
over the air; (2) the broadcast transmission must not be 
electronically processed by the retransmitter as separate and 
discrete signals (as that term is used in 37 CFR 201.17(b)(4)); 
and (3) the transmissions must be retransmitted only within the 
local communities served by the retransmitter. Since some radio 
station broadcast transmissions can be picked up over the air 
beyond 150 miles, this provision is intended to ensure that the 
150-mile limitation in section 114(d)(1)(B)(i) will not create 
unintended liability for all-band retransmissions.

Section 114(d)(1)(B)(iii) (grandfathering)

    This provision exempts certain other retransmissions of 
radio broadcast transmissions, again without regard to the 150-
mile limit in section 114(d)(1)(B)(i)). The requirements for 
this exemption are as follows: (1) the radio station's 
transmission was being retransmitted by a satellite carrier on 
January 1, 1995 (as, for example, Chicago radio station WFMT); 
(2) that retransmission was being retransmitted by cable 
systems (as defined in section 111(f) of the Act) as a separate 
and discrete signal; (3) the satellite carrier receives the 
radio station's transmission in analog form; and (4) the 
broadcast transmission being retransmitted embodies the 
programming of no more than one radio station (i.e., the 
station must not be multiplexed).

Section 114(d)(1)(B)(iv) (nonsubscription broadcast retransmissions of 
        public radio station broadcast transmissions)

    The Committee recognizes that noncommercial educational 
radio stations rely on a variety of types of broadcast 
retransmissions to deliver their programming to the public. 
This provision establishes an exemption for such 
retransmissions. Specifically, this provision exempts both 
simultaneous and nonsimultaneous retransmissions of broadcast 
transmissions originally made by federally funded noncommercial 
educational radio stations, provided that the retransmissions 
are carried out through nonsubscription terrestrial broadcasts. 
To qualify, the noncommercial educational radio station's 
broadcasts must consist of news, informational, cultural, 
public affairs, or other ``educational and cultural'' 
programming to the public. The 150-mile limitation of section 
114(d)(1)(B)(i) does not apply to retransmissions that qualify 
for this exemption.
    Many noncommercial educational stations also use 
intermediate nonbroadcast transmission links to broadcast their 
programming to the public, and those nonbroadcast transmissions 
or retransmissions may be exempt under other provisions of the 
bill.

Section 114(d)(1)(C) (other exempt transmissions and retrans-missions)

    This provision exempts certain other categories of 
transmissions, without regard to whether they are subscription 
transmissions or nonsubscription transmissions. The categories 
exempted under this provision are as follows.
Section 114(d)(1)(C)(i) (incidental transmissions and retrans-missions)

    In the course of arranging for the delivery of an exempt 
transmission or retransmission, many incidental transmissions 
or retransmissions may take place. For example, a radio or 
television station may receive a satellite feed from a network 
or from another station that provides programming to the 
station; a station or network may receive a ``backhaul'' 
transmission from a sports or news event at a remote location; 
or a station may deliver a clean feed of its broadcast 
transmission to a cable system to ensure that the cable 
system's retransmission will be of the highest technical 
quality. Among other things, section 114(d)(1)(C)(i) exempts 
transmissions of a broadcast station that both broadcasts its 
signal to the public and, either immediately or through 
intermediate terrestrial links, transmits or retransmits that 
signal by satellite to other broadcast stations for their 
simultaneous or subsequent broadcast to the public. The 
Committee intends that all such incidental transmissions or 
retransmissions be exempt from the new digital performance 
right under section 106(6) regardless of whether they are made 
on a subscription or a nonsubscription basis, and regardless of 
whether some or all portions of a transmission or 
retransmission are in a digital format. Thus, section 
114(d)(1)(C)(i) also exempts an incidental transmission, as 
described above, by a subscription digital transmission service 
to a cable system to the extent that the cable system is 
engaging in an exempt retransmission of that transmission to a 
business establishment pursuant to section 114(d)(1)(C)(iv). 
The Committee does not intend, however, for any subscription 
transmission or retransmission intended for reception directly 
by members of the public to fall within the category of exempt 
incidental transmissions. To qualify for this ``incidental'' 
exemption, transmissions and retransmissions must be made for 
the purpose of facilitating an exempt transmission or 
retransmission. Thus, a retransmission that is available for 
general reception by the public (for example, through the 
Internet), which is not being used to facilitate an exempt 
transmission or retransmission, would not qualify as an 
``incidental'' retransmission under this section.

Section 114(d)(1)(C)(ii) (transmissions and retransmissions by 
        businesses on and around their premises)

    Businesses often utilize transmissions or retransmissions 
on or around their premises that include prerecorded musical 
works. This activity is sometimes called ``storecasting.'' The 
Committee is aware that there has been extensive litigation 
over the scope of section 110(5) of the Act relating to the 
particular circumstances under which businesses are liable to 
the copyright owners of musical works when they utilize 
transmissions containing such works on and around their 
premises. To leave absolutely no doubt that the new section 
106(6) right is not intended to create any comparable right in 
the owners of copyright in sound recordings regarding 
``storecasts,'' section 114(d)(1)(C)(ii) specifically provides 
that the new right does not reach transmissions or 
retransmissions on or around business premises. In particular, 
section 114(d)(1)(C)(ii) would permit a business to engage in 
transmissions (or retransmissions of any transmission) on its 
premises or the immediately surrounding vicinity without 
incurring liability to the copyright owners of sound recordings 
under section 106(6). This provision is not intended to change 
the rights of copyright owners of musical works regarding 
transmissions or retransmissions under existing law.

Section 114(d)(1)(C)(iii) (authorized retransmissions of licensed 
        transmissions)

    To simplify licensing practices, section 114(d)(1)(C)(iii) 
provides a ``through to the listener'' exemption intended to 
permit retransmitters, including cable systems, direct 
broadcast satellite (DBS) service providers and other 
multichannel video programming distributors (MVPD's) (as 
defined in the 1934 Communications Act, as amended), 
simultaneously to retransmit to the listener noninteractive 
music programming provided by a licensed source. To qualify for 
this exemption, the retransmission must be simultaneous with 
the transmission and authorized by the transmitter; and the 
original transmission must be licensed by the copyright owner 
of the sound recording. For purposes of this exemption, 
retransmissions are deemed to be ``simultaneous'' even if there 
is some momentary time delay resulting from the technology used 
for transmission or retransmission.
    Thus, section 114(d)(1)(C)(iii) exempts retransmissions 
from liability for copyright infringement where a 
noninteractive music programmer transmitter has obtained a 
public performance copyright license from the copyright owner 
of the sound recording, and the retransmitter has not obtained 
such a license but is authorized by the music programmer 
transmitter to retransmit the sound recording. Retransmissions 
of this type are exempt under the provisions of this Act, as 
the sound recordings retransmitted are covered by the licenses 
that the music programmer transmitter obtains from the sound 
recording copyright owners.

Section 114(d)(1)(C)(iv) (certain transmissions or retransmissions to 
        business establishments)

    This provision exempts from liability under new section 
106(6) certain noninteractive transmissions and retransmissions 
made to business establishments for use in the ordinary course 
of their business, such as for background music played in 
offices, retail stores or restaurants.
    To qualify, the transmission or retransmission must meet 
all of the following conditions: (a) the transmission or 
retransmission must be to a business establishment; (b) the 
transmission must be for use by the business establishment in 
the ordinary course of its business; (c) the business 
establishment must not retransmit the transmission outside its 
premises or the immediately surrounding vicinity; and (d) the 
transmission must not exceed the sound recording performance 
complement, as defined in section 114(j).
    If a business establishment retransmits the transmission in 
a manner not otherwise exempted under subparagraph (C)(ii), 
without the authority or prior knowledge of or any inducement 
by any entity that transmitted the service to the business 
establishment, then only the retransmission by the business 
establishment is not exempt pursuant to subparagraph (C)(iv). 
Under such circumstances, the nonexempt status of such a 
retransmission would not affect the exempt status of the 
transmission to that business establishment.
    If the same subscription transmission service programming 
is being transmitted to both business establishments and 
nonbusiness consumers, then only the transmission of that 
service to the business establishments would qualify for an 
exemption pursuant to subparagraph (C)(iv). As the bill makes 
clear, nothing in this exemption is intended to limit the 
breadth of the general exemption in section 114(d)(1)(C)(ii) 
for transmissions or retransmissions by business establishments 
on their premises, or any of the other exemptions in this 
section 114(d)(1).
    Section 106(6) is not intended to apply to the transmission 
of a commercial background music service free of charge to 
local or long distance callers who are put ``on hold'' during a 
telephone call with a business, nor is the bill intended to 
change current law as it applies to such performances of 
copyrighted musical works under section 106(4).

Section 114(d)(2).  Subscription transmissions

    Subsection (d)(2) provides that certain subscription 
transmissions may be subject to statutory licensing if the 
transmissions conform to the criteria set forth in that 
section. ``Subscription transmissions'' are defined in 
subsection (j)(8) as transmissions limited to particular 
recipients for which consideration is required to be paid. 
Transmitters of noninteractive subscription transmissions that 
are not otherwise exempt under subsection (d)(1) may be 
eligible for a statutory license under subsection (f). A 
``statutory license'' guarantees that every noninteractive 
subscription transmission service will receive a license to 
perform the sound recording by means of a digital transmission, 
provided that the transmission service pays the royalty and 
complies with the terms prescribed in accordance with 
subsection (f). The rates and terms will be set by industry or 
individual negotiation, or if necessary, by a copyright 
arbitration royalty panel convened pursuant to chapter 8 of the 
Copyright Act.
    In order to qualify for a statutory license, a performance 
of a sound recording by digital audio transmission must meet 
five conditions, enumerated in subparagraphs (A) through (E):
    First, as already noted, the transmission cannot be part of 
an ``interactive service'', as defined in subsection (j)(4). 
Interactive services, which allow listeners to receive sound 
recordings ``on-demand'', pose the greatest threat to 
traditional record sales, as to which sound recording copyright 
owners currently enjoy full exclusive rights. Thus, in order to 
provide a comparable ability to control distribution of their 
works, copyright owners of sound recordings must have the right 
to negotiate the terms of licenses granted to interactive 
services.
    Second, subparagraph (B) requires that transmissions 
subject to the statutory license cannot exceed the sound 
recording performance complement defined in subsection (j)(7). 
The complement, more fully described below, contains limits on 
the number of selections a subscription transmission service 
can play from any one phonorecord or boxed set, or by the same 
featured recording artist pursuant to the statutory license. 
For purposes of this subparagraph, each channel of a 
multichannel service is a separate ``transmission.''
    Third, subparagraph (C) states that the transmitting entity 
may not avail itself of the statutory license if it publishes 
an advance program schedule or makes prior announcements of the 
titles of specific sound recordings or phonorecords to be 
transmitted. This provision addresses the situation in which an 
entity informs its subscribers in advance as to when particular 
sound recordings will be performed. A preannouncement that does 
not use the title of the upcoming selection would still come 
within this limitation so long as it sufficiently identifies 
the selection through other information, such as the artist's 
name and the song's well-known current chart position. The 
limitation is not intended, however, to prevent a transmitting 
entity from advertising the names of illustrative sound 
recordings or phonorecords that may, at some time, be performed 
by that entity under the statutory license.
    Fourth, the transmitting entity cannot automatically and 
intentionally cause the receiver's equipment to switch from one 
channel to another. This limitation does not apply to 
transmissions made to a business establishment. This 
subparagraph is intended to remedy the situation in which a 
service licensed under the statutory license might 
intentionally attempt to evade the sound recording performance 
complement by switching a nonbusiness subscriber's receiver 
from one channel to another.
    Finally, subparagraph (E) imposes as a condition of 
statutory licensing the obligation of a subscription entity to 
carry within its transmitted signal certain specified types of 
information, if that information has been encoded in the sound 
recording under the authority of the copyright owner of that 
sound recording. This provision does not obligate the copyright 
owner of the sound recording to encode such copyright 
management information in the work, nor does it limit the 
copyright owner's ability to select the types of information 
(e.g., artist, title) to be encoded. In addition, it is not 
intended to require a transmitting entity to generate or encode 
such information in its transmission if the information is not 
encoded in the sound recording. Moreover, the transmitting 
entity is not required to transmit information that may be 
encoded in the sound recording other than the information 
specified in this subparagraph and ``related information'' 
(i.e., information that is specifically related to the 
identification of the works being performed and upon which 
payments are to be made by the transmitting entity under this 
bill). Subparagraph (E) also makes clear that nothing in this 
section affects the provisions of section 1002(e).

Section 114(d)(3).  Licenses for transmissions by interactive services

    This provision places limits on the sound recording 
copyright owner's exclusive right to license interactive 
services. (No limitations are imposed where the sound recording 
copyright owner licenses an interactive service on a 
nonexclusive basis.) As described below, an ``interactive 
service'' includes on-line or other services that offer ``pay-
per-listen,'' ``audio-on-demand,'' or ``celestial jukebox'' 
features, regardless of whether there is a charge to receive 
the service. The Committee is aware of concerns that the 
copyright owners of sound recordings might become 
``gatekeepers'' and limit opportunities for public performances 
of the musical works embodied in the sound recordings. The 
Committee believes that the limits set forth in subsection 
(d)(3) appropriately resolve any such concerns.
    Paragraph (3)(A) provides that the duration of an exclusive 
license granted to an interactive service for the public 
performance of a sound recording by means of digital audio 
transmission cannot exceed 12 months. In the case of a 
copyright owner that holds fewer than 1,000 copyrights in sound 
recordings, an exclusive license to an interactive service can 
last up to 24 months. In either case, after the license 
expires, that interactive service cannot receive another 
exclusive license for the same sound recording for a period of 
13 months.
    The sound recording copyright owner is not subject to these 
limitations in certain circumstances, as enumerated in 
paragraph (3)(B). Subparagraph (B)(i) provides that the 
limitations do not apply where the licensor has granted 
performance licenses to at least 5 different interactive 
services. Each license must be for a significant portion of 
that segment of the licensor's catalog of sound recordings that 
has been licensed to interactive services--specifically, at 
least 10 percent of the sound recordings that have been 
licensed to interactive services, but in no event less than 50 
sound recordings. For example, a record company would not be 
subject to the limitations in paragraph (3)(A) if it has 
granted performance licenses for a total of 10,000 sound 
recordings to five different interactive services, and each 
service received a performance license for at least 1,000 sound 
recordings.
    Subparagraph (B)(ii) provides that the limits on licenses 
to interactive services also do not apply where the performance 
license is granted for promotional purposes. The sole purpose 
of the license must be to promote the distribution or 
performance of the sound recording, and the license can only 
permit a public performance of up to 45 seconds. A qualifying 
public performance is merely exempted from the limitation on 
licensing found in paragraph (3)(A); subparagraph (B)(ii) does 
not provide an exemption from infringement liability for a 
transmission otherwise subject to liability.
    Section 114(d)(3)(C) provides that, whether or not the 
owner of copyright in a sound recording has granted an 
exclusive or nonexclusive license to an interactive service, 
the service must nevertheless obtain a license from a 
performing rights society or from the copyright owner of the 
musical work contained in the sound recording. This provision 
does not affect any existing limitation under sections 107-113, 
sections 116-120, or the unamended portions of sections 114 and 
115.
    To simplify licensing practices, a ``through to the 
listener'' exemption is provided in paragraph (3)(D) for those 
entities that retransmit digital audio transmissions from an 
interactive service. These retransmissions must be of 
transmissions by an interactive service licensed to publicly 
perform the sound recording; the retransmission must be 
authorized by the interactive service; the retransmission must 
be simultaneous with the transmission; and it must be limited 
to the customer intended by the interactive service to receive 
the transmission.
    The definition of ``licensor'' in subparagraph (3)(E)(i) 
makes clear that this term includes certain affiliates of the 
copyright owner in sound recordings that own sound recording 
copyrights--namely, affiliates under a material degree of 
common ownership, management or control. Thus, the number of 
sound recording copyrights held by such affiliates of a record 
company must be included in a calculation to determine whether 
that company has fewer than 1,000 sound recordings for the 
purpose of paragraph (3)(A), and to determine whether the 
record company has licensed a sufficient number of sound 
recordings to satisfy the requirements found in paragraph 
(3)(B)(i) regarding the inapplicability of the exclusive 
licensing limitations.
Section 114(d)(4).  Rights not otherwise limited

    Under existing principles of copyright law, the 
transmission or other communication to the public of a musical 
work constitutes a public performance of that musical work. In 
addition, the digital transmission of a sound recording that 
results in the reproduction by or for the transmission 
recipient of a phonorecord of that sound recording implicates 
the exclusive rights to reproduce and distribute the sound 
recording and the musical work embodied therein. New 
technological uses of copyrighted sound recordings are arising 
which require an affirmation of existing copyright principles 
and application of those principles to the digital transmission 
of sound recordings, to encourage the creation of and protect 
rights in those sound recordings and the musical works they 
contain.
    This subsection makes clear, in paragraph (4)(A), the 
Committee's intent that except as explicitly provided in 
section 114, nothing in that section limits the exclusive right 
to perform a sound recording publicly by means of a digital 
audio transmission. Paragraph (4)(B) also makes clear that 
section 114 does not in any way limit the exclusive right to 
publicly perform a musical work under section 106(4); the 
exclusive rights in sound recordings and musical works under 
sections 106(1) and 106(3); and any other rights and remedies 
available under title 17. Similarly, the bill does not affect 
any existing limitation under sections 107-113, sections 116-
120, or the unamended portions of sections 114 and 115.
    Paragraph (4)(C) ensures that where an activity implicates 
a sound recording copyright owner's rights under both section 
106(6) and some other clause of section 106, the limitations 
contained in section 114 shall not be construed to limit or 
impair in any way any other rights the copyright owner may 
have, or any other exemptions to which users may be entitled, 
with respect to the particular activity. For example, where a 
digital audio transmission is a digital phonorecord delivery as 
well as a public performance of a sound recording, the fact 
that the public performance may be exempt from liability under 
section 114(d)(1) or subject to statutory licensing under 
section 114(f) does not in any way limit or impair the sound 
recording copyright owner's rights and remedies under section 
106(3) against the transmitter for the distribution of a 
phonorecord of the sound recording. As another example, where 
an interactive digital audio transmission constitutes a 
distribution of a phonorecord as well as a public performance 
of a sound recording, the fact that the transmitting entity has 
obtained a license to perform the sound recording does not in 
any way limit or affect the entity's obligation to obtain a 
license to distribute phonorecords of the sound recording. 
Similarly, the bill does not affect any existing limitation 
under sections 107-113, sections 116-120, or the unamended 
portions of sections 114 and 115.

Section 114(e).  Authority for negotiations

    This subsection clarifies the applicability of the 
antitrust laws to the use of common agents in negotiations and 
agreements relating to statutory licenses and other licenses.
    Under subsection (e)(1), copyright owners of sound 
recordings and operators of digital services (which perform 
sound recordings affected by section 114) may collectively 
negotiate statutory licenses for the performance of sound 
recordings ``notwithstanding any provision of the antitrust 
laws.'' This exemption from the antitrust laws extends to 
negotiations and agreements on royalty rates and license terms 
and conditions, the proportionate division of the royalties 
among copyright owners, and the designation of common agents on 
a nonexclusive basis to negotiate, agree to, pay, or receive 
royalty payments.
    Subsection (e)(1) closely follows the language of existing 
antitrust exemptions in copyright law relating to the 
negotiation of statutory licenses, including 17 U.S.C. 
116(b)(1) (jukebox licenses) and 17 U.S.C. 118(b) 
(noncommercial broadcasting). Like those provisions, subsection 
(e)(1) is important to help effectuate the related statutory 
license provision. But unlike those provisions, subsection 
(e)(1) provides that use of a common agent must be 
nonexclusive.
    The requirement of nonexclusivity is intended to preserve 
the possibility of direct licensing negotiations between 
individual copyright owners and operators of digital services, 
rather than merely between their common agents. For example, 
nonexclusivity should help prevent copyright owners from using 
a common agent to demand supracompetitive rates, because such 
demands might be avoided by direct negotiations with individual 
copyright owners. In such negotiations an individual copyright 
owner would exercise independent judgment on whether to 
contract on particular terms.
    A more limited exemption to the antitrust laws is created 
by subsection (e)(2), relating to licenses granted under 
section 106(6), other than statutory licenses, such as 
performances by interactive services or performances that 
exceed the sound recording performance complement. Under 
subsection (e)(2)(A), copyright owners may designate common 
agents to ``grant licenses and receive and remit royalty 
payments,'' while under subsection (e)(2)(B), operators of 
digital services may designate common agents to ``obtain 
licenses and collect and pay royalty fees,'' without violating 
the antitrust laws. Importantly, however, subsection (e)(2) 
does not permit either copyright owners or operators to jointly 
establish royalty rates or competitively important license 
terms and conditions.
    The antitrust protections provided for common agents in 
subsection (e)(2) are important to facilitate the licensing of 
digital sound recording performances (other than through 
statutory licenses) by reducing transaction costs. While this 
use of common agents might be found lawful under existing law, 
the statutory exemption in subsection (e)(2) will ensure that 
the formation of beneficial and procompetitive arrangements to 
facilitate licensing of performances will not be deterred by 
concerns over the possible application of the antitrust laws. 
This is particularly important given that other provisions in 
the copyright law contain antitrust exemptions.
    The exemption in subsection (e)(2) is narrowly tailored to 
make clear that it would be permissible to use common agents, 
such as a clearinghouse, to handle the logistics of licensing, 
payment of royalties, and transmitting royalties to copyright 
owners. Establishment of royalty rates and material license 
terms and conditions do not receive any antitrust protection, 
however, so any common agents or clearinghouse must conform to 
the antitrust laws in these areas. To comply with this 
limitation, the common agent or clearinghouse could either 
relay information about rates and terms to and from the 
copyright owners and the operators of digital services, or 
simply put interested operators in touch with the appropriate 
copyright owners for direct negotiations.

Section 114(f).  Licenses for nonexempt subscription transmissions

    This provision requires the Librarian of Congress to cause 
notice to be published of voluntary negotiation proceedings. 
The purpose of these proceedings is to determine reasonable 
terms and royalty rates for transmissions that qualify for 
statutory licensing under section 114(d)(2). The subsection 
also contains other provisions concerning such proceedings.
    The first such voluntary negotiation proceeding is to 
commence within 30 days after the enactment of this Act upon 
publication by the Librarian of Congress of a notice in the 
Federal Register. The purpose of that proceeding shall be to 
determine reasonable terms and royalty rates for public 
performances of sound recordings by means of nonexempt 
subscription transmissions that qualify, under section 
114(d)(2), for a statutory license. The statutory license 
provided by this subsection covers only the performance of 
sound recordings under section 106(6), and not the reproduction 
or distribution of sound recordings under sections 106(1) or 
106(3).
    The terms and rates established will cover qualified 
transmissions made between the effective date of this Act and 
December 31, 2000. Paragraph (1) requires that terms and rates 
should be established separately for each different type of 
digital audio transmission service then in operation, but does 
not require or suggest that the terms and rates established 
must be different.
    The voluntary negotiation proceeding may result in license 
agreements voluntarily negotiated among individual sound 
recording copyright owners and individual entities that perform 
or authorize the performance of sound recordings by means of 
digital transmissions. It is the Committee's intention that 
negotiations leading to any such agreements be covered by 
section 114(e) and that any such agreements shall be given 
effect in lieu of any determination by a copyright arbitration 
royalty panel or decision by the Librarian of Congress.
    Beyond such individual license agreements, however, the 
Committee hopes that the voluntary negotiation proceeding will 
lead to an industrywide agreement concerning royalty terms and 
rates. If an agreement as to rates and terms is reached and 
there is no controversy as to these matters, it would make no 
sense to subject the interested parties to the needless expense 
of an arbitration proceeding conducted under paragraph (2). 
Thus, it is the Committee's intention that in such a case, as 
under the Copyright Office's current regulations concerning 
rate adjustment proceedings, the Librarian of Congress should 
notify the public of the proposed agreement in a notice-and-
comment proceeding and, if no opposing comment is received from 
a party with a substantial interest and an intent to 
participate in an arbitration proceeding, the Librarian of 
Congress should adopt the rates embodied in the agreement 
without convening an arbitration panel. See 37 CFR 251.63(b); 
see also 59 Fed. Reg. 63,038 (1994).
    As provided in paragraph (4), the procedures for 
negotiation and, if necessary, arbitration set forth in 
paragraphs (1) and (2) of this subsection are to be repeated 
within 6 months of the filing of a petition by copyright owners 
in sound recordings (or entities performing sound recordings 
affected by section 114) that indicates that a new type of 
digital audio transmission service is, or is about to become, 
operational. Such procedures or arbitration should apply only 
with respect to the new type of service or services described 
in the petition. In addition, the procedures will be repeated 
for all types of services between June 30 and December 31, 
2000, and every 5 years thereafter.
    Paragraph (2) provides that if a voluntary negotiation 
proceeding as described in paragraph (1) does not lead to the 
determination of the terms and royalty rates applicable to 
qualified digital performances of sound recordings, those terms 
and rates are to be determined by arbitration under this 
paragraph. The Committee notes that the paragraph specifically 
refers to chapter 8 of title 17, which concerns copyright 
royalty arbitration in general. Accordingly, arbitration under 
this subparagraph should be conducted under the same type of 
procedures that apply in other copyright royalty arbitrations.
    The parties are expected to negotiate, or if necessary 
arbitrate, ``terms'' as well as rates. By terms, the Committee 
means generally such details as how payments are to be made, 
when, and other accounting matters (such as are prescribed in 
section 115). In addition, the Librarian is to establish 
related terms under section 114(f)(2). Should additional terms 
be necessary to effectively implement the statutory license, 
the parties may negotiate such provisions or the CARP's may 
prescribe them.
    Terms and rates determined under paragraph (2), like terms 
and rates determined under paragraph (1), are to be effective 
for a 5-year period or until the date of the next effective 
rate adjustment. In determining terms and rates under paragraph 
(2), a copyright arbitration royalty panel is to consider the 
objectives set forth in section 801(b)(1), and the arbitrators 
may consider rates under voluntarily negotiated license 
agreements. Paragraph (2) specifically authorizes the Librarian 
of Congress to establish requirements by which copyright owners 
may receive reasonable notice of the use of their sound 
recordings under this section, and under which records of such 
use shall be kept by persons performing sound recordings.
    Paragraph (5) sets forth the requirements with which an 
entity must comply in order to obtain a statutory license. The 
performing entity must provide notice of the performance as 
required by regulations prescribed by the Librarian of Congress 
and pay the established royalty fees. If the royalty fees have 
not been set at the time of performance, the performing entity 
must agree to pay the royalty fee to be determined under this 
subsection by the twentieth day of the month following the 
month in which the rates are set. This limited license to 
perform the sound recording until the rate is set applies only 
to performances for which the entity seeks a statutory license. 
The failure to pay royalty rates in arrears makes the 
performing entity subject to full liability for infringement of 
section 106(6) from the inception of the transmissions of sound 
recordings by that transmitter after the effective date of the 
Act, and may disqualify the entity for a statutory license 
under paragraph (5)(A)(i).

Section 114(g).  Proceeds from licensing of subscription transmissions

    This subsection describes how royalties from the licensing 
of the digital performance right in a sound recording are 
distributed to the artists who performed on the sound 
recording.
    Paragraph (1) of this subsection provides that payments to 
both featured and nonfeatured (or background) artists of 
royalties from the licensing of the digital performance of the 
sound recording will be determined by the applicable contract 
with, or collective bargaining agreement pertaining to, the 
artist, unless the performance of the sound recording is 
pursuant to a statutory license under subsection (f).
    Where royalties are received from statutory licensing of a 
sound recording, then under paragraph (2), the sound recording 
copyright owner is required to allocate a total of 50 percent 
of the receipts as provided by subparagraphs (A), (B), and (C). 
Subparagraph (A) requires that 2\1/2\ percent of the receipts 
(as described more specifically below) are to be placed into an 
escrow account managed by an independent administrator 
appointed jointly by record companies and the American 
Federation of Musicians (AFM) (or any successor entity) and 
distributed to nonfeatured musicians (regardless of whether 
they are members of AFM or any successor entity) who have 
performed on sound recordings. Similarly, subparagraph (B) 
requires that 2\1/2\ percent of the receipts are to be placed 
into an escrow account managed by an independent administrator 
appointed jointly by record companies and the American 
Federation of Television and Radio Artists (``AFTRA'') (or any 
successor entity) and distributed to nonfeatured vocalists 
(regardless of whether they are members of AFTRA or any 
successor entity) who have performed on sound recordings. 
Subparagraph (C) requires that 45 percent of the receipts are 
to be paid to the featured artist or artists (or the person(s) 
conveying rights in the performance of the featured artist(s) 
in the sound recording).
    ``Receipts'' means the licensing fees received by the 
copyright owner of the sound recording. Thus, if a collecting 
society or other organization acts on behalf of the copyright 
owner of the sound recording in licensing and/or collecting 
royalties, ``receipts'' shall constitute the moneys the 
copyright owner receives from the collecting agency and, 
therefore, would exclude administrative fees either deducted by 
or paid to the collective.

Section 114(h).  Licensing to affiliates

    In addition to the protections available under antitrust 
law, subsection (h) specifically is intended to ensure 
competitive licensing practices by a licensor that owns an 
interest in an ``affiliated entity'' as defined in subsection 
(j)(1). Subsection (h) makes clear that terms no less favorable 
than those granted to the affiliated entity also must be made 
available to other bona fide entities that offer services 
similar to those covered by the affiliate's performance 
license.
    For example, a licensor that grants to an affiliated entity 
a performance license for a fixed term with separate and 
distinct rates for cable and satellite subscription 
transmission services would be required to offer no less 
favorable terms and conditions to an unrelated entity offering 
the same services. If, as another example, the license to the 
affiliated entity is limited only as to performances via cable, 
then an unrelated entity offering only satellite services 
cannot claim an entitlement to receive a performance license at 
the rate specified for cable services.
    Nothing in this section is intended to prevent a licensor 
from establishing different rate structures, terms and 
conditions based on material differences in the license sought. 
But distinctions drawn among licensees should be applied 
rationally and consistently based on the nature, scope and 
duration of the requested license, and not based on arbitrary 
distinctions for monopolistic, discriminatory or other 
anticompetitive purposes. The factors identified in subsection 
(h), i.e., different types of services, the particular sound 
recordings licensed, the frequency of use of the sound 
recordings, the duration of the requested license and the 
number of subscribers served, are all relevant bases upon which 
a copyright owner may draw rational distinctions.
    The term ``no less favorable'' indicates that the same 
terms and conditions can be offered, but this is not to say 
that the licensor should not offer lower rates or more 
beneficial terms and conditions if it deems it appropriate. For 
example, a licensor might in its business judgment offer an 
unrelated startup entity a more favorable rate for a shorter 
period of time. It is intended, however, that the potential 
licensee under such circumstances could reject the more 
favorable short-term license and instead request the terms and 
conditions granted to the affiliated licensed entity for 
similar services. In that event, the licensor must make a 
performance license available upon the same terms and 
conditions to the potential licensee, with respect to the same 
services proposed to be licensed, as described above.
    The term ``bona fide entities'' is intended to make clear 
that the potential licensee must have a genuine intention and 
reasonable capability to provide the licensed services.
    Paragraph (2) of this subsection makes clear that the 
obligations set forth in paragraph (1) are inapplicable where 
the affiliated entity is offering performances through an 
interactive service, or is granted a performance license for 
the sole purpose of promoting the sound recording. A public 
performance qualifying for the promotional exemption is merely 
exempted from the obligations of paragraph (1); paragraph 
(2)(B) does not provide an exemption for a transmission 
otherwise subject to liability where such a performance is 
unauthorized or unlicensed.

Section 114(i).  No effect on royalties for underlying works

    The Committee intends this provision to ensure that 
licensing fees paid under the new digital performance right 
shall not be taken into account in any administrative, 
judicial, or other governmental proceeding that sets or adjusts 
rates for the royalties to be paid for the public performance 
of musical works. The provision also makes clear Congress' 
intent that the new digital performance right shall not 
diminish in any respect the royalties payable to copyright 
owners of musical works for the public performance of their 
works.

Section 114(j).  Definitions

Section 114(j)(1)--``affiliated entity''

    A digital transmission service is considered affiliated 
with a licensor when the licensor has any direct or indirect 
partnership or any ownership interest of more than 5 percent of 
the outstanding voting or nonvoting stock in the entity 
engaging in digital audio transmissions. An entity engaging in 
interactive services cannot be an affiliated entity under this 
definition; but to the extent that an entity is engaging in 
digital transmissions that are not interactive, it can qualify 
as an affiliated entity for that purpose alone.

Section 114(j)(2)--``broadcast transmission''

    Transmissions made by a broadcast station licensed as such 
by the Federal Communications Commission come within this 
definition.

Section 114(j)(3)--``digital audio transmission''

    This phrase means a transmission in a digital format (or 
any other nonanalog format that might currently exist or be 
developed in the future) that embodies the transmission of a 
sound recording. A transmission that is only partly in a 
digital or nonanalog format satisfies this definition. (See 
section 101 definition of ``digital transmission.'') A 
transmission of an audiovisual work does not come within this 
definition.
    The Committee has amended the bill as originally introduced 
to make clear that the performance right recognized herein 
applies only to digital transmissions of sound recordings and 
that nothing in the bill creates any new copyright liability 
with respect to the transmission of a motion picture or other 
audiovisual work, whether digital or analog, whether 
subscription or nonsubscription, and whether interactive or 
noninteractive.

Section 114(j)(4)--``interactive service''

    The phrase ``interactive service'' is defined, in part, as 
a service that ``enables a member of the public to receive, on 
request, a transmission of a particular sound recording. * * 
*'' This term is intended to reach, for example, a service that 
enables an individual to make a request (by telephone, e-mail, 
or otherwise) to a service that will send a digital 
transmission to that individual or another individual of the 
specific sound recording that had been requested by or on 
behalf of the recipient. Thus, it would include such services 
commonly referred to as ``audio-on-demand,'' ``pay-per-listen'' 
or ``celestial jukebox'' services. The term also would apply to 
an on-line service that transmits recordings on demand, 
regardless of whether there is a charge for the service or for 
any transmission. But as the second sentence of the definition 
makes clear, the term ``interactive service'' is not intended 
to cover traditional practices engaged in by, for example, 
radio broadcast stations, through which individuals can ask the 
station to play a particular sound recording as part of the 
service's general programming available for reception by 
members of the public at large.
    If an entity offering a nonsubscription service (such as a 
radio or television station) chooses to offer an interactive 
service as a separate business, or only during certain hours of 
the day, that decision does not affect the exempt status of any 
component of the entity's business that does not offer an 
interactive service. In other words, each transmission should 
be judged on its own merits with regard to whether it qualifies 
as part of an ``interactive'' service. The third sentence of 
the definition of ``interactive service'' is intended to make 
this clear.

Section 114(j)(5)--``nonsubscription transmission'', ``nonsubscription 
        retransmission'', ``nonsubscription broadcast transmission''

    These terms include any transmission, retransmission or 
broadcast transmission that do not come within the definition 
of ``subscription'' transmission, retransmission or broadcast 
transmission.
Section 114(j)(6)--``retransmission''

    As the definition of ``retransmission'' makes clear, that 
term includes any further simultaneous retransmission of the 
same transmission. That is, the term ``retransmission'' is 
intended to cover both an initial retransmission of a 
transmission (such as by a satellite carrier) and one or more 
simultaneous further transmissions by other parties (such as by 
a cable system). Thus, when the Act provides an exemption for a 
retransmission of a transmission in section 114(d)(1), it is 
intended to function, unless otherwise indicated, on a 
``through to the listener'' basis. Of course, the fact that a 
further simultaneous transmission qualifies as a 
``retransmission'' does not by itself mean that it is exempt 
under any particular paragraph of section 114(d)(1). To qualify 
for the 114(d)(1)(C)(ii) exemption, for example, a 
retransmission would need to be made by a business 
establishment on its premises or the immediately surrounding 
vicinity. The term ``simultaneous'' is used throughout this 
definition (and throughout this bill) to refer to 
retransmissions that are essentially simultaneous. Although 
there may be momentary time delays resulting from the 
technology used for retransmissions, such delays do not affect 
the status of the retransmissions as simultaneous.

Section 114(j)(7)--``sound recording performance complement''

    The ``sound recording performance complement'' defines the 
metes and bounds of programming available to be transmitted 
under the statutory license grant in subsection (f). The 
definition is intended to encompass certain typical programming 
practices such as those used on broadcast radio. It does not 
extend to the performance of albums in their entirety, or the 
performance over a short period of time of a substantial number 
of different selections by a particular artist or from a 
particular phonorecord or compilation of phonorecords. 
Transmissions that exceed the limits of the complement are not 
eligible for a statutory license under subsection (f).
    The definition provides that for a transmission to be 
within the complement, it must not include, on a particular 
channel in any rolling 3-hour period, more than three 
selections from any one phonorecord, and no more than two of 
those selections can be transmitted consecutively. The 
transmission also must not include, on a particular channel in 
any rolling 3-hour period, more than four selections by the 
same featured artist or from any boxed set or compilation of 
phonorecords, and no more than three of those selections can be 
transmitted consecutively. Whether selections are consecutive 
is determined by the sequence of the sound recordings 
transmitted, regardless of whether some tones or other brief 
interlude is transmitted between the sound recordings.
    To avoid imposing liability for programming that 
unintentionally may exceed the complement, the complement is 
limited to the performance of sound recordings ``from'' a 
particular phonorecord. Many phonorecords include sound 
recordings that also appear on other phonorecords or 
compilations, such as the ``greatest hits'' of a particular 
artist, decade or genre of music. Similarly, the same sound 
recordings may appear on separate compilations under the names 
of different featured artists. It is not the intention of this 
legislation to impose liability where selections that are 
performed from separate phonorecords also may be incorporated 
on a different phonorecord or compilation, or also may appear 
on a different phonorecord under the name of another featured 
artist, in the absence of an intention by the performing entity 
to knowingly circumvent the numerical limits of the complement. 
An example of such a case is where the transmitting entity 
plays within a 3-hour period one selection from each of four 
different phonorecords, which four selections also happen to be 
compiled on a soundtrack album. So long as the transmitting 
entity did not willfully intend to replicate selections from 
the soundtrack album, its transmission would be considered 
within the complement. However, where the transmitting entity 
willfully plays within a 3-hour period five selections of a 
single featured recording artist, regardless of whether they 
were played from several different phonorecords, and regardless 
of whether the transmitting entity knew that the transmission 
included more than three songs from a single album, the 
transmission does not come within the complement. The fact that 
the transmitting entity did not willfully intend to violate the 
numerical limits for a single phonorecord under paragraph (A) 
does not excuse the willful violation of the limit in paragraph 
(B)(i).
    The complement is to be evaluated as of the time of ``the 
programming of the multiple phonorecords,'' rather than at the 
time of transmission. This avoids imposing liability for 
programming that occurs such as a week or two in advance of 
transmission that unintentionally exceeds the complement. An 
example is where, between the time of the programming and 
transmission, a phonorecord or set or compilation of 
phonorecords is released that embodies selections previously 
programmed by the transmitting entity from multiple 
phonorecords.
    Certain transmitting entities covered by this legislation 
may provide multiple channels of service and musical formats. 
The bill applies the complement to each particular channel 
separately and not to all channels in the aggregate.
    The requirement of ``different selections'' permits the 
performance of the same selection in excess of the numerical 
limits. This is intended to facilitate under the statutory 
license the programming of music formats that tend to repeat 
the same selections of music, such as ``top 40'' formats.
    The term ``featured recording artist'' means the performing 
group or ensemble or, if not a group or ensemble, the 
individual performer, identified most prominently in print on, 
or otherwise in connection with, the phonorecord actually being 
performed. Except in the case of a sound recording consisting 
of a compilation of sound recordings by more than one performer 
or group or ensemble, there will ordinarily be only one 
``featured recording artist'' per phonorecord. A vocalist or 
soloist performing along with a group or ensemble is not a 
``featured recording artist'' unless that person is identified 
in connection with the phonorecord as the primary performer. 
For example, the Eagles would be the ``featured recording 
artist'' on a track from an Eagles album that does not feature 
Don Henley by name with equal prominence; but if the same sound 
recording were performed from ``Don Henley's Greatest Hits,'' 
then Don Henley and not the Eagles would be the ``featured 
recording artist.'' Where both the vocalist or soloist and the 
group or ensemble are identified as a single entity and with 
equal prominence (such as ``Diana Ross and the Supremes''), 
both the individual and the group qualify as the ``featured 
recording artist.''

Section 114(j)(8)--``subscription transmission''

    A ``subscription transmission'' is defined as a 
transmission of a sound recording in a digital format that is 
``controlled and limited to particular recipients,'' and for 
which consideration is required to be paid or given ``by or on 
behalf of the recipient to receive the transmission or a 
package of transmissions including the transmission.'' It does 
not matter what the mechanism might be for the delivery of the 
transmission; thus, a digital transmission, whether delivered 
by cable, wire, satellite or terrestrial microwave, video 
dialtone, the Internet or any other digital transmission 
mechanism, could be a subscription transmission if the 
requirements cited above are satisfied. This definition 
obviously does not reach traditional over-the-air broadcast 
transmissions, which satisfy neither of these requirements. A 
typical transmission that would qualify as a ``subscription 
transmission'' under this definition is a cable system's 
transmission of a digital audio service, which is available 
only to the paying customers of the cable system. The payments 
required to satisfy the ``consideration'' requirement might 
consist, for example, of an ``a la carte'' fee for a specific 
audio service, or of a fee for an overall package of services 
that includes the digital audio service (e.g., a cable system's 
tier of services for a fee). The reference in the definition to 
payments ``on behalf of'' a recipient is intended to recognize 
that payments for a service may be made by one person on behalf 
of other people, such as a parent making payment for a child 
who lives away from home and receives the subscription service.

   Section 4. Mechanical Royalties in Digital Phonorecord Deliveries

    This section amends section 115 of title 17 to clarify how 
the compulsory license for making and distributing phonorecords 
applies in the context of certain types of digital 
transmissions identified in the bill as ``digital phonorecord 
deliveries.''
    Among other things, this section is intended to confirm and 
clarify the right of musical work and sound recording copyright 
owners to be protected against infringement when phonorecords 
embodying their works are delivered to consumers by means of 
transmissions rather than by means of phonorecord retail sales. 
The intention in extending the mechanical compulsory license to 
digital phonorecord deliveries is to maintain and reaffirm the 
mechanical rights of songwriters and music publishers as new 
technologies permit phonorecords to be delivered by wire or 
over the airwaves rather than by the traditional making and 
distribution of records, cassettes and CD's. The intention is 
not to substitute for or duplicate performance rights in 
musical works, but rather to maintain mechanical royalty income 
and performance rights income for writers and music publishers.
    Changes to sections 115(a)(1) and 115(c)(2) make clear that 
the compulsory license for making and distributing phonorecords 
is not limited to the making and distribution of physical 
phonorecords, but that a compulsory license is also available 
for the making of digital phonorecord deliveries. The Committee 
intends that a compulsory license for digital phonorecord 
deliveries may be obtained, and the required mechanical 
royalties may be paid, either directly by a digital 
transmission service making a digital phonorecord delivery or 
by a record company authorizing a digital phonorecord delivery. 
Thus, the changes to section 115 are designed to minimize the 
burden on transmission services by placing record companies in 
a position to license not only their own rights, but also, if 
they choose to do so, the rights of writers and music 
publishers to authorize digital phonorecord deliveries; and by 
recognizing that transmission services themselves may obtain a 
compulsory license to make digital phonorecord deliveries.
    As between a digital transmission service and a record 
company, allocation of the responsibility for paying mechanical 
royalties could be a subject of negotiation, but copyright 
owners of musical works would only be entitled to receive one 
mechanical royalty payment for each digital phonorecord 
delivery, not multiple payments. Of course, a digital 
transmission service would be liable for any infringing digital 
phonorecord delivery it made in the absence of a compulsory 
license or the authorization of the musical work copyright 
owner. (The liability of sound recording copyright owners in 
such a case is addressed in new section 115(c)(3)(I).)
    Section 4 also redesignates subsections (c) (3), (4) and 
(5) as subsections (c) (4), (5) and (6) and inserts new 
subsections (c)(3) and (d), which are described in detail 
below.

Section 115(c)(3)(A)

    This subparagraph specifically sets forth that a compulsory 
license includes the right of the compulsory licensee to make 
or authorize digital phonorecord deliveries and identifies the 
statutory rate for each digital phonorecord delivery made by or 
under the authority of the compulsory licensee. For all digital 
phonorecord deliveries made or authorized under a compulsory 
license on or before December 31, 1997, the royalty rate is to 
be the statutory rate then in effect under section 115(c)(2) 
for the making and distribution of a physical phonorecord. For 
digital phonorecord deliveries made or authorized under a 
compulsory license on or after January 1, 1998, the statutory 
mechanical royalty rates for digital phonorecord deliveries 
shall be determined in accordance with subparagraphs (B) 
through (F); and the statutory mechanical royalty rate for 
making and distributing physical phonorecords shall be 
determined in accordance with chapter 8.

Section 115(c)(3)(B)

    This subparagraph clarifies that collective negotiations 
and agreements relating to statutory licenses are not 
prohibited by the antitrust laws. This provision is nearly 
identical to the portion of subsection (4) which amends 17 
U.S.C. 114 by adding subsection (e)(1), and is patterned on 
existing antitrust exemptions relating to the negotiations of 
statutory licenses, including 17 U.S.C. 116(b)(1) (jukebox 
licenses) and 17 U.S.C. 118(b) (noncommercial broadcasting). 
Like those provisions, subsection (c)(3)(B) is important to 
help effectuate the related statutory license provision.
    This subparagraph authorizes musical work copyright owners, 
record companies, digital transmission services, and any other 
persons entitled to obtain a compulsory license collectively to 
negotiate and agree upon the terms and statutory royalty rates 
under subsection 115(c)(3) ``notwithstanding any provision of 
the antitrust laws.'' This exemption from the antitrust laws 
extends to negotiations and agreements on terms and rates of 
royalty payments, the proportionate division of royalties among 
copyright owners, the designation of common agents to 
negotiate, agree to, pay, or receive royalty payments, and the 
year during which the royalty rates prescribed under 
subparagraphs (B) through (F) and chapter 8 of title 17 are to 
next be determined.
    The latter authorization allows the affected parties to 
agree when rates and terms should next be determined, in 
addition to the 10-year period otherwise prescribed in section 
803(a)(3). Given the rapid pace at which digital transmission 
technology is developing, and changes in the marketplace, the 
Committee recognizes that the statutory rate for digital 
phonorecord deliveries might need to be considered more than 
once every 10 years, and that the interested parties are in the 
best position to determine how frequently and when this should 
be done.

Section 115(c)(3)(C)

    This subparagraph requires the Librarian of Congress to 
cause notice to be published of voluntary negotiation 
proceedings to determine reasonable terms and statutory royalty 
rates for the making of digital phonorecord deliveries under a 
compulsory license. The subparagraph also contains other 
provisions concerning such proceedings.
    The Librarian is to publish notice of commencement of the 
first such voluntary negotiation proceeding in the Federal 
Register between June 30, 1996, and December 31, 1996. The 
Committee expects that the Librarian will publish this notice 
relatively early in the prescribed period. However, the exact 
date of the notice is of limited importance because 
subparagraph (B) authorizes negotiations that can begin or end 
at any time, as determined by the parties. The purpose of the 
notice is simply to allow persons with a substantial interest 
who might not be represented by the parties engaged in 
negotiations to be aware that negotiations may be taking place 
that could lead to an industrywide agreement concerning 
mechanical royalty rates.
    The purpose of the first voluntary negotiation proceeding 
shall be to determine reasonable terms and statutory royalty 
rates for the making of digital phonorecord deliveries under a 
compulsory license between January 1, 1998, and December 31, 
2007, unless a different period is agreed to by the parties to 
the proceeding.
    The subparagraph states that if any digital phonorecord 
delivery statutory mechanical royalty rates and terms are 
determined as a result of a voluntary negotiation proceeding, 
then such rates and terms shall distinguish between: (1) rates 
and terms for digital phonorecord deliveries where the 
reproduction or distribution of a phonorecord is ``incidental'' 
to the transmission which constitutes the digital phonorecord 
delivery, and (2) rates and terms for digital phonorecord 
deliveries in general. The Committee recognizes that there are 
likely to be different types of digital transmission systems 
that could result in the making of a digital phonorecord 
delivery. In the case of some of these transmission systems, 
delivering a phonorecord to a transmission recipient could be 
incidental to the purpose of a transmission. For example, if a 
transmission system was designed to allow transmission 
recipients to hear sound recordings substantially at the time 
of transmission, but the sound recording was transmitted in a 
high-speed burst of data and stored in a computer memory for 
prompt playback (such storage being technically the making of a 
phonorecord), and the transmission recipient could not retain 
the phonorecord for playback on subsequent occasions (or for 
any other purpose), delivering the phonorecord to the 
transmission recipient would be incidental to the transmission. 
If such a system allowed transmission recipients to retain 
phonorecords for playback on subsequent occasions, but 
transmission recipients did not do so, delivering the 
phonorecords to the transmission recipients could be incidental 
to the transmissions. On and after January 1, 1998, statutory 
mechanical royalty rates shall distinguish between 
``incidental'' digital phonorecord deliveries that take into 
account the different purpose and effect of these transmissions 
and digital phonorecord deliveries in general.
    The voluntary negotiation proceeding may result in license 
agreements voluntarily negotiated among individual musical work 
copyright owners and individual entities that make or authorize 
digital phonorecord deliveries. It is the Committee's intention 
that negotiations leading to any such agreements be covered by 
section 115(c)(3)(B) and that any such agreements have the 
effect set forth in section 115(c)(3)(E).
    Beyond such individual license agreements, however, the 
Committee anticipates that the voluntary negotiation proceeding 
will lead to an industrywide agreement concerning mechanical 
royalty terms and rates and the year when terms and rates next 
will be determined.
    The parties are expected to negotiate, or if necessary 
arbitrate, ``terms'' as well as rates. By ``terms,'' the 
Committee means such details as how payments are to be made, 
when, and other accounting matters. While these details are for 
the most part already prescribed in section 115, and related 
details are to be established by the Librarian under section 
115(c)(3)(D), the bill allows for additional such terms to be 
set by the parties or by CARP's in the event that the foregoing 
provisions or regulations are not readily applicable to the new 
digital transmission environment.
    If an agreement as to rates and terms is reached and there 
is no controversy as to these matters, it would make no sense 
to subject the interested parties to the needless expense of an 
arbitration proceeding conducted under section 115(c)(3)(D). 
Thus, it is the Committee's intention that in such a case, as 
under the Copyright Office's current regulations concerning 
rate adjustment proceedings, the Librarian of Congress should 
notify the public of the proposed agreement in a notice-and-
comment proceeding and, if no opposing comment is received from 
a party with a substantial interest and an intent to 
participate in an arbitration proceeding, the Librarian of 
Congress should adopt the rates embodied in the agreement, and 
any agreed-to year when the mechanical royalty rates for 
digital phonorecord deliveries next will be determined, without 
convening an arbitration panel. See 37 CFR 251.63(b); see also 
59 Fed. Reg. 63,038 (1994).
    As provided in section 115(c)(3)(F), the procedures for 
negotiation and, if necessary, arbitration set forth in this 
subparagraph and in section 115(c)(3)(D) are to be repeated 
every 10 years unless it is determined pursuant to this 
subparagraph or subparagraph (D) that rates and terms should 
next be determined in a different year. The Committee 
recognizes that it may be unusual to allow the interested 
parties to negotiate and agree to a year when the statutory 
mechanical royalty rates for digital phonorecord deliveries 
next will be determined. However, the Committee was concerned 
that rapidly changing technology might justify redetermining 
the terms and royalty rates applicable to digital phonorecord 
deliveries made under a compulsory license on a different 
schedule than once every 10 years. Thus, the Committee chose to 
give the interested parties flexibility in this area.
    The Committee wishes to make clear that nothing in section 
115(c)(3) is intended to affect the schedule prescribed in 
section 803(a)(3) for determining the mechanical royalty rate 
for the making and distribution of physical phonorecords. 
Proceedings to establish mechanical royalty rates for the 
making and distribution of physical phonorecords are expected 
to be conducted in 1997 and every 10 years thereafter, and are 
not subject to contrary agreement or arbitration.

Section 115(c)(3)(D)

    If a voluntary negotiation proceeding as described in 
section 115(c)(3)(C) does not lead to the determination of the 
terms and statutory royalty rates applicable to digital 
phonorecord deliveries made under a compulsory license, those 
terms and rates are to be determined by arbitration under this 
subparagraph. The Committee notes that the subparagraph 
specifically refers to chapter 8 of title 17, which concerns 
copyright royalty arbitration in general. Accordingly, 
arbitration under this subparagraph should be conducted under 
the same type of procedures that apply in other copyright 
royalty arbitrations.
    Like terms and rates determined under section 115(c)(3)(C), 
terms and rates determined under this subparagraph are to 
distinguish between digital phonorecord deliveries where the 
reproduction or distribution of a phonorecord is incidental to 
the transmission which constitutes the digital phonorecord 
delivery, and digital phonorecord deliveries in general.
    In determining terms and rates under this subparagraph, a 
copyright arbitration royalty panel is to consider the 
objectives set forth in section 801(b)(1), and the arbitrators 
may consider rates under voluntarily negotiated license 
agreements. However, the statutory mechanical royalty payable 
for digital phonorecord deliveries made on or before December 
31, 1997, shall be given no precedential effect in determining 
the statutory mechanical royalty payable for digital 
phonorecord deliveries made on or after January 1, 1998. The 
Committee specifically chooses to remain neutral on the 
question whether the mechanical royalty rates for any category 
of digital phonorecord delivery made on or after January 1, 
1998, should be the same as, lower than, or higher than the 
mechanical royalty rate for the making and distribution of 
physical phonorecords.
    The subparagraph specifically authorizes the Librarian of 
Congress to establish requirements by which copyright owners 
may receive reasonable notice of the use of their works under 
this section, and under which records of such use shall be kept 
and made available by persons making digital phonorecord 
deliveries.

Section 115(c)(3)(E)

    This subparagraph provides that in general, the provisions 
of voluntarily negotiated agreements for the licensing of 
nondramatic musical works shall be given effect in lieu of any 
statutory rates and terms determined by the Librarian of 
Congress. For example, the Committee understands that 
individual record companies and music publishers have 
negotiated license agreements for specific albums prescribing a 
royalty rate less than the statutory mechanical royalty rate. 
The Committee does not intend to prevent negotiation of 
voluntary license agreements, for either physical phonorecords 
or digital phonorecord deliveries, prescribing royalties at 
less than the statutory rates, except in the situation 
described below.
    There is a situation in which the provisions of voluntarily 
negotiated license agreements should not be given effect in 
lieu of any mechanical royalty rates determined by the 
Librarian of Congress. For some time, music publishers have 
expressed concerns about so-called ``controlled composition'' 
clauses in recording contracts. Generally speaking, controlled 
composition clauses are provisions whereby a recording artist 
who is the author of a nondramatic musical work agrees to 
reduce the mechanical royalty rate payable when a record 
company makes and distributes phonorecords which include 
recordings of such artist's compositions. Subject to the 
exceptions set forth in subparagraph (E)(ii), the second 
sentence of subparagraph (E)(i) is intended to make these 
controlled composition clauses inapplicable to digital 
phonorecord deliveries.
    Specifically, unless the requirements of one or both of the 
exceptions of subparagraph (E)(ii) are satisfied, the royalty 
rates determined through negotiation or arbitration pursuant to 
subparagraph (C) or (D) are to be given effect in lieu of any 
contrary rates specified in a contract pursuant to which a 
recording artist who is the author of a nondramatic musical 
work grants a mechanical license in that work to a record 
company.
    Subparagraph (E)(ii) specifies two types of contracts where 
the negotiated royalty rates set forth in the contracts are to 
be given effect notwithstanding the second sentence of 
subparagraph (E)(i). The first of these is a ``grandfather 
clause'' giving effect to contracts and rates agreed to in a 
contract with a recording artist on or before June 22, 1995, 
except to the extent that they are modified after that date for 
the purpose of reducing the royalty prescribed therein to less 
than the statutory rates or to add new compositions at less 
than the statutory rates. Thus, if a recording contract entered 
into on or before June 22, 1995, was modified after that date 
to cover a larger number of musical works, the royalty rates 
specified in the contract would apply to the number of works 
within the scope of the contract as of June 22, 1995, and the 
statutory rates would apply to the number of works added 
thereafter. The Committee also notes that recording artist 
contracts entered into on or before June 22, 1995, and not 
modified thereafter, or modified thereafter to extend the date 
by which an artist must complete a recording, are examples of 
contracts to be given effect notwithstanding the second 
sentence of subparagraph (E)(i).
    The second of the exceptions provided in subparagraph 
(E)(ii) is intended to allow a recording artist-author who 
chooses to act as his or her own music publisher to agree to 
accept mechanical royalties at less than the statutory rates, 
provided that the contract containing such lower rates is 
entered into after the sound recording has been fixed in a 
tangible medium of expression substantially in a form intended 
for commercial release.
    It should be emphasized that subparagraph (E) applies only 
to the making of digital phonorecord deliveries and not to the 
making and distribution of physical phonorecords. Nothing in 
the bill is intended to interfere with the application of 
controlled composition clauses to the making and distribution 
of physical phonorecords or to digital phonorecord deliveries 
where the agreements are not covered by the terms of subsection 
(c)(3)(E).

Section 115(c)(3)(F)

    This subparagraph provides that the procedures specified in 
subparagraphs (C) and (D) for negotiation or arbitration of 
mechanical compulsory license rates and terms for digital 
phonorecord deliveries are to be repeated every 10 years, as 
provided in section 803(a)(3), unless different years for 
repeating such proceedings are determined in accordance with 
subparagraphs (C) or (D). Nothing in section 115(c)(3) is 
intended to affect the schedule prescribed for determining the 
mechanical royalty rate for the making and distribution of 
physical phonorecords. Proceedings to establish mechanical 
royalty rates for the making and distribution of physical 
phonorecords are to be conducted in 1997 and every 10 years 
thereafter, and are not subject to contrary agreement or 
arbitration.
    The reference in subparagraph (F) to the procedures 
specified in subparagraphs (C) and (D) is to the publication of 
notice, initiation of voluntary negotiations, and convening of 
CARP's if necessary. The reference is not to the dates within 
the year as described in subparagraph (C). Indeed, the 
Committee encourages the Librarian to publish a notice of 
initiation of voluntary negotiation proceedings as early in the 
year as practicable, to allow the maximum amount of time for 
voluntary negotiations, or if necessary arbitration.

Section 115(c)(3)(G)

    This subparagraph imposes as a condition of compulsory 
licensing the obligation that digital phonorecord deliveries be 
accompanied by certain specified types of information, if that 
information has been encoded in the sound recording being 
transmitted under the sound recording copyright owner's 
authority. This provision does not obligate the copyright owner 
of the sound recording to encode copyright management 
information in the work. In addition, it is not intended to 
require a transmitting entity to generate or encode such 
information in its transmission if the information is not 
encoded in the sound recording. Moreover, the transmitting 
entity is not required to transmit information that may be 
encoded in the sound recording other than the information 
specified in this subparagraph and ``related information'' 
(i.e., information that is specifically related to the 
identification of the works being performed and upon which 
payments are to be made by the transmitting entity under this 
bill). The subparagraph also makes clear that nothing in this 
section affects the provisions of section 1002(e).
Section 115(c)(3)(H)

    This subparagraph confirms that musical work copyright 
owners and sound recording copyright owners both have the same 
rights to be protected against infringement with respect to 
digital phonorecord deliveries as they have with respect to 
distributions of physical phonorecords of their respective 
works. Thus, subject to the limitations contained in existing 
law, a digital phonorecord delivery infringes the rights of the 
sound recording copyright owner unless authorized by the sound 
recording copyright owner (or his or her agent), and a digital 
phonorecord delivery infringes the rights of the musical work 
copyright owner unless covered by a compulsory license or 
authorized by the musical work copyright owner (or his or her 
agent). The subparagraph makes clear that any cause of action 
under this subparagraph is in addition to other remedies 
available under title 17.

Section 115(c)(3)(I)

    This subparagraph clarifies the circumstances under which a 
sound recording copyright owner may be held liable for digital 
phonorecord deliveries by third parties. The changes to section 
115 made by S. 227 are intended to allow record companies to 
license not only their own rights, but also, if they choose to 
do so, the rights of writers and music publishers to authorize 
digital phonorecord deliveries. If a record company grants a 
digital transmission service a license under both the record 
company's rights in a sound recording and the musical work 
copyright owner's rights, the record company may be liable, to 
an extent determined in accordance with applicable law, for the 
applicable mechanical royalty for every digital phonorecord 
delivery made under the record company's authority. However, if 
a record company grants a license under its rights in a sound 
recording only, and does not grant a mechanical license under 
the copyright in the musical work embodied in the sound 
recording, it is the transmission service's responsibility to 
obtain a license under the musical work copyright, and the 
record company cannot be held liable for infringement of the 
copyright in the musical work by the record company's licensee.

Section 115(c)(3)(J)

    This subparagraph makes clear that nothing in section 1008 
shall be construed to prevent the exercise of the rights and 
remedies allowed by paragraphs (3) and (6) and chapter 5 in the 
event of a digital phonorecord delivery. However, no action 
alleging infringement of copyright may be brought under title 
17 against a manufacturer, importer or distributor of a digital 
audio recording device, a digital audio recording medium, an 
analog recording device, or an analog recording medium, or 
against a consumer, based on the actions described in section 
1008.

Section 115(c)(3)(K)

    This subsection makes clear that section 115, as amended by 
the bill, is not intended to annul or limit any existing or 
future right or remedy of a sound recording copyright owner or 
musical work copyright owner, except to the extent that a 
musical work copyright owner's exclusive rights are limited by 
compulsory licensing under the conditions specified by section 
115 as amended.

Section 115(c)(3)(L)

    This subparagraph makes clear that the changes made to 
section 115 by the bill with regard to liability for digital 
phonorecord deliveries do not apply to transmissions or 
retransmissions that are exempt under section 114(d)(1). At the 
same time, the exemptions set forth in section 114(d)(1) are 
not intended either to enlarge or to diminish in any way the 
rights of copyright owners under existing law with respect to 
such transmissions or retransmissions.

Section 115(d)

    This subsection defines the term ``digital phonorecord 
delivery.'' A ``digital phonorecord delivery'' is each 
individual delivery of a phonorecord by digital transmission of 
a sound recording which results in a specifically identifiable 
reproduction by or for any transmission recipient of a 
phonorecord of that sound recording. The Committee notes that 
the phrase ``specifically identifiable reproduction,'' as used 
in the definition, should be understood to mean a reproduction 
specifically identifiable to the transmission service. Of 
course, a transmission recipient making a reproduction from a 
transmission is able to identify that reproduction, but the 
mere fact that a transmission recipient can make and identify a 
reproduction should not in itself cause a transmission to be 
considered a digital phonorecord delivery.
    The final sentence of this definition provides that a 
digital phonorecord delivery does not result from a real-time, 
noninteractive subscription transmission of a sound recording 
where no reproduction of the sound recording or the musical 
work embodied therein is made from the inception of the 
transmission through to its receipt by the transmission 
recipient in order to make the sound recording audible. For 
example, a transmission by a noninteractive subscription 
transmission service that transmits in real time a continuous 
program of music selections chosen by the transmitting entity, 
for which a consumer pays a flat monthly fee, would not be a 
``digital phonorecord delivery'' so long as there was no 
reproduction at any point in the transmission in order to make 
the sound recording audible. Moreover, such a transmission 
would not be a ``digital phonorecord delivery'' even if 
subscribers, through actions taken on their own part, may 
record all or part of the programming from that service. The 
final sentence of the definition of ``digital phonorecord 
delivery'' is not intended to change current law with respect 
to rights under section 106, or the limitations on those rights 
under sections 107-113, sections 116-120, and the unamended 
portions of sections 114 and 115.

                    Section 5. Conforming Amendments

    This section makes certain technical amendments to other 
sections of title 17.
    Among other things, it adds to section 101 a definition of 
``digital transmission,'' which is any transmission in whole or 
in part in a digital or other nonanalog format. Although the 
Committee is not presently aware of any nonanalog formats that 
are not digital, the Committee wants to make clear that all 
nonanalog formats now known or later developed are covered by 
the bill. For purposes of section 115, a transmission of a 
motion picture or other audiovisual work does not come within 
the definition of ``digital transmission.''

                       Section 6. Effective date

    This section provides that new sections 114(e) and 114(f) 
of title 17, which concern negotiation of licenses under the 
new performance right, take effect immediately upon the date of 
enactment. The effective date of other provisions of the Act is 
3 months after the date of enactment.

                           VI. Cost Estimate

    In accordance with paragraph 11(a), rule XXVI, of the 
Standing Rules of the Senate, the Committee offers the report 
of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 21, 1995.
Hon. Orrin G. Hatch,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 227, the Digital 
Performance Right in Sound Recordings Act of 1995.
    Enacting S. 227 would affect direct spending and receipts. 
Therefore, pay-as-you-go procedures would apply to the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                                   June E. O'Neill.

               Congressional Budget Office Cost Estimate

    1. Bill number: S. 227.
    2. Bill title: Digital Performance Right in Sound 
Recordings Act of 1995.
    3. Bill status: As ordered reported by the Senate Committee 
on the Judiciary on June 29, 1995.
    4. Bill purpose: S. 227 would create a system to ensure 
that recording artists and companies are compensated for public 
performances of their works by means of certain types of 
digital audio transmissions. The bill would require most 
subscription users of sound recordings to obtain a statutory 
license in order to broadcast these creative works, and would 
guarantee a license to subscription users so long as they pay 
royalties to the copyright owners.
    The bill would require the Library of Congress to announce 
the initiation of voluntary negotiations between copyright 
owners and users of digital sound recordings. If the parties 
could not agree on a rate, the Librarian of Congress would 
convene a copyright arbitration panel to establish rates. The 
parties to the arbitration would bear the entire cost of the 
proceeding. S. 227 would require copyright owners to deposit a 
portion of their receipts from royalty payments into certain 
escrow accounts. An independent manager jointly appointed by 
the copyright owners and recording artists or their 
representatives would then distribute the proceeds to the 
designated recipients.
    5. Estimated cost to the Federal Government: The Copyright 
Office within the Library of Congress currently administers 
several funds similar to the escrow accounts that would be 
established under S. 227. CBO expects that the Copyright Office 
would be asked to manage these escrow accounts as well. CBO 
estimates that the Copyright Office would incur no significant 
additional cost to manage these funds. If the Copyright Office 
or any other federal agency administers arbitration 
proceedings, no additional costs would be incurred because the 
bill requires the parties to the dispute to pay the costs of 
arbitration.
    Because S. 227 would require certain parties to make 
payments to other parties as a result of the exercise of the 
sovereign power of the government, CBO believes that the 
payments into the escrow accounts should be included in the 
federal budget as governmental receipts, and the payments from 
the escrow accounts should be included as direct spending.
    CBO expects a lag of several months between the receipt of 
the royalties and the distribution to the recipients. Because 
of this lag, CBO estimates that the net payments to the 
accounts will exceed the net distributions by an amount less 
than $500,000 in the first year. In following years, CBO 
expects the net annual impact of such payments on the federal 
deficit to be close to zero because outlays from the escrow 
accounts would be roughly equal to the receipts.
    The costs of this bill fall within budget function 370.
    6. Comparison with spending under current law: There is no 
current system of royalty transfers for public performances 
covered by S. 227; hence, all receipts and spending under the 
bill would be new.
    7. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts through 1998. Enacting S. 227 would affect 
both direct spending and receipts; therefore the bill would be 
subject to pay-as-you-go procedures. However, CBO estimates 
that the impact on both outlays and receipts would be less than 
$500,000 in each year. The following table summarizes the 
estimated pay-as-you-go impact of this bill.

------------------------------------------------------------------------
                                1995--     1996--     1997--      1998  
------------------------------------------------------------------------
Change in outlays...........          0          0          0          0
Change in receipts..........          0          0          0          0
------------------------------------------------------------------------

    8. Estimated cost to State and local governments: None.
    9. Estimate comparison: None.
    10. Previous CBO estimate: None.
    11. Estimate prepared by: Rachel Forward.
    12. Estimate approved by: Robert A. Sunshine, for Paul N. 
Van de Water, Assistant Director for Budget Analysis.

                    VII. Regulatory Impact Statement

    In compliance with paragraph 11(b)(1), rule XXVI of the 
Standing Rules of the Senate, it is hereby stated that the 
Committee finds that the bill will have no additional direct 
regulatory impact.
                     VIII. Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
S. 227, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                           UNITED STATES CODE

          * * * * * * *

                          TITLE 17. COPYRIGHTS

            CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT

          * * * * * * *

Sec. 101. Definitions

    As used in this title, the following terms and their 
variant forms mean the following:
          * * * * * * *
    A ``device'', ``machine'', or ``process'' is one now known 
or later developed.
    A ``digital transmission'' is a transmission in whole or in 
part in a digital or other non-analog format.
          * * * * * * *

Sec. 106. Exclusive rights in copyrighted works

    Subject to sections 107 through 118, the owner of copyright 
under this title has the exclusive rights to do and to 
authorize any of the following:
          (1) to reproduce the copyrighted work in copies or 
        phonorecords;
          * * * * * * *
          (4) in the case of literary, musical, dramatic, and 
        choreographic works, pantomimes, and motion pictures 
        and other audiovisual works, to perform the copyrighted 
        work publicly; [and]
          (5) in the case of literary, musical, dramatic, and 
        choreographic works, pantomimes, and pictorial, 
        graphic, or sculptural works, including the individual 
        images of a motion picture or other audiovisual work, 
        to display the copyrighted work publicly[.]; and
          (6) in the case of sound recordings, to perform the 
        copyrighted work publicly by means of a digital audio 
        transmission.
          * * * * * * *

Sec. 111. Limitations on exclusive rights: Secondary transmissions

    (a) Certain Secondary Transmissions Exempted.--The 
secondary transmission of a primary transmission embodying a 
performance or display of a work is not an infringement of 
copyright if--
          * * * * * * *
    (c) Secondary Transmissions by Cable Systems.--
          (1) Subject to the provisions of clauses (2), (3), 
        and (4) of this subsection and section 114(d), 
        secondary transmissions to the public by a cable system 
        of a primary transmission made by a broadcast station 
        licensed by the Federal Communications Commission or by 
        an appropriate governmental authority of Canada or 
        Mexico and embodying a performance or display of a work 
        shall be subject to compulsory licensing upon 
        compliance with the requirements of subsection (d) 
        where the carriage of the signals comprising the 
        secondary transmission is permissible under the rules, 
        regulations, or authorizations of the Federal 
        Communications Commission.
          * * * * * * *
Sec. 114. Scope of exclusive rights in sound recordings

    (a) The exclusive rights of the owner of copyright in a 
sound recording are limited to the rights specified by clauses 
(1), (2), [and (3)] (3) and (6) of section 106, and do not 
include any right of performance under section 106(4).
    (b) The exclusive right of the owner of copyright in a 
sound recording under clause (1) of section 106 is limited to 
the right to duplicate the sound recording in the form of 
[phonorecords, or of copies of motion pictures and other 
audiovisual works,] phonorecords or copies that directly or 
indirectly recapture the actual sounds fixed in the recording. 
The exclusive right of the owner of copyright in a sound 
recording under clause (2) of section 106 is limited to the 
right to prepare a derivative work in which the actual sounds 
fixed in the sound recording are rearranged, remixed, or 
otherwise altered in sequence or quality. The exclusive rights 
of the owner of copyright in a sound recording under clauses 
(1) and (2) of section 106 do not extend to the making or 
duplication of another sound recording that consists entirely 
of an independent fixation of other sounds, even though such 
sounds imitate or simulate those in the copyrighted sound 
recording. The exclusive rights of the owner of copyright in a 
sound recording under clauses (1), (2), and (3) of section 106 
do not apply to sound recordings included in educational 
television and radio programs (as defined in section 397 of 
title 47) distributed or transmitted by or through public 
broadcasting entities (as defined by section 118(g)): Provided, 
That copies or phonorecords of said programs are not 
commercially distributed by or through public broadcasting 
entities to the general public.
    (c) This section does not limit or impair the exclusive 
right to perform publicly, by means of a phonorecord, any of 
the works specified by section 106(4).
    [(d) On January 3, 1978, the Register of Copyrights, after 
consulting with representatives of owners of copyrighted 
materials, representatives of the broadcasting, recording, 
motion picture, entertainment industries, and arts 
organizations, representatives of organized labor and 
performers of copyrighted materials, shall submit to the 
Congress a report setting forth recommendations as to whether 
this section should be amended to provide for performers and 
copyright owners of copyrighted material any performance rights 
in such material. The report should describe the status of such 
rights in foreign countries, the views of major interested 
parties, and specific legislative or other recommendations, if 
any.]
    (d) Limitations on Exclusive Right.--Notwithstanding the 
provisions of section 106(6)--
          (1) Exempt transmissions and retransmissions.--The 
        performance of a sound recording publicly by means of a 
        digital audio transmission or retransmission, other 
        than as a part of an interactive service, is not an 
        infringement of section 106(6) if the performance is 
        part of--
                  (A) a nonsubscription transmission, such as a 
                nonsubscription broadcast transmission;
                  (B) a retransmission of a nonsubscription 
                broadcast transmission: Provided, That, in the 
                case of a retransmission of a radio station's 
                broadcast transmission--
                          (i) the radio station's broadcast 
                        transmission is not willfully or 
                        repeatedly retransmitted more than a 
                        radius of 150 miles from the site of 
                        the radio broadcast transmitter, 
                        however--
                                  (I) the 150 mile limitation 
                                under this clause shall not 
                                apply when a nonsubscription 
                                broadcast transmission by a 
                                radio station licensed by the 
                                Federal Communications 
                                Commission is retransmitted on 
                                a nonsubscription basis by a 
                                terrestrial broadcast station, 
                                terrestrial translator, or 
                                terrestrial repeater licensed 
                                by the Federal Communications 
                                Commission; and
                                  (II) in the case of a 
                                subscription retransmission of 
                                a nonsubscription broadcast 
                                retransmission covered by 
                                subclause (I), the 150 mile 
                                radius shall be measured from 
                                the transmitter site of such 
                                broadcast retransmitter;
                          (ii) the retransmission is of radio 
                        station broadcast transmissions that 
                        are--
                                  (I) obtained by the 
                                retransmitter over the air;
                                  (II) not electronically 
                                processed by the retransmitter 
                                to deliver separate and 
                                discrete signals; and
                                  (III) retransmitted only 
                                within the local communities 
                                served by the retransmitter;
                          (iii) the radio station's broadcast 
                        transmission was being retransmitted to 
                        cable systems (as defined in section 
                        111(f)) by a satellite carrier on 
                        January 1, 1995, and that 
                        retransmission was being retransmitted 
                        by cable systems as a separate and 
                        discrete signal, and the satellite 
                        carrier obtains the radio station's 
                        broadcast transmission in an analog 
                        format: Provided, That the broadcast 
                        transmission being retransmitted may 
                        embody the programming of no more than 
                        one radio station; or
                          (iv) the radio station's broadcast 
                        transmission is made by a noncommercial 
                        educational broadcast station funded on 
                        or after January 1, 1995, under section 
                        396(k) of the Communications Act of 
                        1934 (47 U.S.C. 396(k)), consists 
                        solely of noncommercial educational and 
                        cultural radio programs, and the 
                        retransmission, whether or not 
                        simultaneous, is a nonsubscription 
                        terrestrial broadcast retransmission; 
                        or
                  (C) a transmission or retransmission that 
                comes within any of the following categories:
                          (i) a prior or simultaneous 
                        transmission or retransmission 
                        incidental to an exempt transmission or 
                        retransmission, such as a feed received 
                        by and then retransmitted by an exempt 
                        transmitter: Provided, That such 
                        incidental transmissions or 
                        retransmissions do not include any 
                        subscription transmission or 
                        retransmission directly for reception 
                        by members of the public;
                          (ii) a transmission or retransmission 
                        within a business establishment, 
                        confined to its premises or the 
                        immediately surrounding vicinity;
                          (iii) a retransmission by any 
                        retransmitter, including a multichannel 
                        video programming distributor as 
                        defined in section 522(12) of the 
                        Communications Act of 1934 (47 U.S.C. 
                        522(12)), of a transmission by a 
                        transmitter licensed to publicly 
                        perform the sound recording as a part 
                        of that transmission, if the 
                        retransmission is simultaneous with the 
                        licensed transmission and authorized by 
                        the transmitter; or
                          (iv) a transmission or retransmission 
                        to a business establishment for use in 
                        the ordinary course of its business: 
                        Provided, That the business recipient 
                        does not retransmit the transmission 
                        outside of its premises or the 
                        immediately surrounding vicinity, and 
                        that the transmission does not exceed 
                        the sound recording performance 
                        complement. Nothing in this clause 
                        shall limit the scope of the exemption 
                        in clause (ii).
          (2) Subscription transmissions.--In the case of a 
        subscription transmission not exempt under subsection 
        (d)(1), the performance of a sound recording publicly 
        by means of a digital audio transmission shall be 
        subject to statutory licensing, in accordance with 
        subsection (f) of this section, if--
                  (A) the transmission is not part of an 
                interactive service;
                  (B) the transmission does not exceed the 
                sound recording performance complement;
                  (C) the transmitting entity does not cause to 
                be published by means of an advance program 
                schedule or prior announcement the titles of 
                the specific sound recordings or phonorecords 
                embodying such sound recordings to be 
                transmitted;
                  (D) except in the case of transmission to a 
                business establishment, the transmitting entity 
                does not automatically and intentionally cause 
                any device receiving the transmission to switch 
                from one program channel to another; and
                  (E) except as provided in section 1002(e) of 
                this title, the transmission of the sound 
                recording is accompanied by the information 
                encoded in that sound recording, if any, by or 
                under the authority of the copyright owner of 
                that sound recording, that identifies the title 
                of the sound recording, the featured recording 
                artist who performs on the sound recording, and 
                related information, including information 
                concerning the underlying musical work and its 
                writer.
          (3) Licenses for transmissions by interactive 
        services.--
                  (A) No interactive service shall be granted 
                an exclusive license under section 106(6) for 
                the performance of a sound recording publicly 
                by means of digital audio transmission for a 
                period in excess of 12 months, except that with 
                respect to an exclusive license granted to an 
                interactive service by a licensor that holds 
                the copyright to 1,000 or fewer sound 
                recordings, the period of such license shall 
                not exceed 24 months: Provided, however, That 
                the grantee of such exclusive license shall be 
                ineligible to receive another exclusive license 
                for the performance of that sound recording for 
                a period of 13 months from the expiration of 
                the prior exclusive license.
                  (B) The limitation set forth in subparagraph 
                (A) of this paragraph shall not apply if--
                          (i) the licensor has granted and 
                        there remain in effect licenses under 
                        section 106(6) for the public 
                        performance of sound recordings by 
                        means of digital audio transmission by 
                        at least 5 different interactive 
                        services: Provided, however, That each 
                        such license must be for a minimum of 
                        10 percent of the copyrighted sound 
                        recordings owned by the licensor that 
                        have been licensed on an exclusive 
                        basis to interactive services, but in 
                        no event less than 50 sound recordings; 
                        or
                          (ii) the exclusive license is granted 
                        to perform publicly up to 45 seconds of 
                        a sound recording and the sole purpose 
                        of the performance is to promote the 
                        distribution or performance of that 
                        sound recording.
                  (C) Notwithstanding the grant of an exclusive 
                or nonexclusive license of the right of public 
                performance under section 106(6), an 
                interactive service may not publicly perform a 
                sound recording unless a license has been 
                granted for the public performance of any 
                copyrighted musical work contained in the sound 
                recording, Provided, That such license to 
                publicly perform the copyrighted musical work 
                may be granted either by a performing rights 
                society representing the copyright owner or by 
                the copyright owner.
                  (D) The performance of a sound recording by 
                means of a digital audio retransmission is not 
                an infringement of section 106(6) if--
                          (i) the retransmission is of a 
                        transmission by an interactive service 
                        licensed to publicly perform the sound 
                        recording to a particular member of the 
                        public as part of that transmission; 
                        and
                          (ii) the retransmission is 
                        simultaneous with the licensed 
                        transmission, authorized by the 
                        transmitter, and limited to that 
                        particular member of the public 
                        intended by the interactive service to 
                        be the recipient of the transmission.
                  (E) For the purposes of this paragraph--
                          (i) a ``licensor'' shall include the 
                        licensing entity and any other entity 
                        under any material degree of common 
                        ownership, management, or control that 
                        owns copyrights in sound recordings; 
                        and
                          (ii) a ``performing rights society'' 
                        is an association or corporation that 
                        licenses the public performance of 
                        nondramatic musical works on behalf of 
                        the copyright owner, such as the 
                        American Society of Composers, Authors 
                        and Publishers, Broadcast Music, Inc., 
                        and SESAC, Inc.
          (4) Rights not otherwise limited.--
                  (A) Except as expressly provided in this 
                section, this section does not limit or impair 
                the exclusive right to perform a sound 
                recording publicly by means of a digital audio 
                transmission under section 106(6).
                  (B) Nothing in this section annuls or limits 
                in any way--
                          (i) the exclusive right to publicly 
                        perform a musical work, including by 
                        means of a digital audio transmission, 
                        under section 106(4);
                          (ii) the exclusive rights to 
                        reproduce and distribute a sound 
                        recording or the musical work embodied 
                        therein under sections 106(1) and 
                        106(3); or
                          (iii) any other rights under any 
                        other clause of section 106, or 
                        remedies available under this title, as 
                        such rights or remedies exist either 
                        before or after the date of enactment 
                        of the Digital Performance Right in 
                        Sound Recordings Act of 1995.
                  (C) Any limitations in this section on the 
                exclusive right under section 106(6) apply only 
                to the exclusive right under section 106(6) and 
                not to any other exclusive rights under section 
                106. Nothing in this section shall be construed 
                to annul, limit, impair or otherwise affect in 
                any way the ability of the owner of a copyright 
                in a sound recording to exercise the rights 
                under sections 106(1), 106(2) and 106(3), or to 
                obtain the remedies available under this title 
                pursuant to such rights, as such rights and 
                remedies exist either before or after the date 
                of enactment of the Digital Performance Right 
                in Sound Recordings Act of 1995.
    (e) Authority for Negotiations.--
          (1) Notwithstanding any provision of the antitrust 
        laws, in negotiating statutory licenses in accordance 
        with subsection (f), any copyright owners of sound 
        recordings and any entities performing sound recordings 
        affected by this section may negotiate and agree upon 
        the royalty rates and license terms and conditions for 
        the performance of such sound recordings and the 
        proportionate division of fees paid among copyright 
        owners, and may designate common agents on a 
        nonexclusive basis to negotiate, agree to, pay, or 
        receive payments.
          (2) For licenses granted under section 106(6), other 
        than statutory licenses, such as for performances by 
        interactive services or performances that exceed the 
        sound recording performance complement--
                  (A) copyright owners of sound recordings 
                affected by this section may designate common 
                agents to act on their behalf to grant licenses 
                and receive and remit royalty payments, 
                Provided, That each copyright owner shall 
                establish the royalty rates and material 
                license terms and conditions unilaterally, that 
                is, not in agreement, combination, or concert 
                with other copyright owners of sound 
                recordings; and
                  (B) entities performing sound recordings 
                affected by this section may designate common 
                agents to act on their behalf to obtain 
                licenses and collect and pay royalty fees, 
                Provided, That each entity performing sound 
                recordings shall determine the royalty rates 
                and material license terms and conditions 
                unilaterally, that is, not in agreement, 
                combination, or concert with other entities 
                performing sound recordings.
    (f) Licenses for Nonexempt Subscription Transmissions.--
          (1) No later than 30 days after the enactment of the 
        Digital Performance Right in Sound Recordings Act of 
        1995, the Librarian of Congress shall cause notice to 
        be published in the Federal Register of the initiation 
        of voluntary negotiation proceedings for the purpose of 
        determining reasonable terms and rates of royalty 
        payments for the activities specified by subsection 
        (d)(2) of this section during the period beginning on 
        the effective date of such Act and ending on December 
        31, 2000. Such terms and rates shall distinguish among 
        the different types of digital audio transmission 
        services then in operation. Any copyright owners of 
        sound recordings or any entities performing sound 
        recordings affected by this section may submit to the 
        Librarian of Congress licenses covering such activities 
        with respect to such sound recordings. The parties to 
        each negotiation proceeding shall bear their own costs.
          (2) In the absence of license agreements negotiated 
        under paragraph (1), the Librarian of Congress shall, 
        pursuant to chapter 8, convene a copyright arbitration 
        royalty panel to determine and publish in the Federal 
        Register a schedule of rates and terms which, subject 
        to paragraph (3), shall be binding on all copyright 
        owners of sound recordings and entities performing 
        sound recordings. In establishing such rates and terms 
        the copyright arbitration royalty panel may consider 
        the rates for comparable types of digital audio 
        transmission services and comparable circumstances 
        under voluntary license agreements negotiated as 
        provided in paragraph (1). The parties to the 
        proceeding shall bear the entire cost of the proceeding 
        in such manner and proportion as the arbitration panels 
        shall direct. The Librarian of Congress shall also 
        establish requirements by which copyright owners may 
        receive reasonable notice of the use of their sound 
        recordings under this section, and under which records 
        of such use shall be kept by entities performing sound 
        recordings.
          (3) License agreements voluntarily negotiated at any 
        time between one or more copyright owners of sound 
        recordings and one or more entities performing sound 
        recordings shall be given effect in lieu of any 
        determination by a copyright arbitration royalty panel 
        or decision by the Librarian of Congress.
          (4) The procedures specified in paragraphs (1) and 
        (2) shall be repeated and concluded, in accordance with 
        regulations that the Librarian of Congress shall 
        prescribe--
                  (A) within a 6-month period each time that a 
                petition is filed by any copyright owners of 
                sound recordings or any entities performing 
                sound recordings affected by this section 
                indicating that a new type of digital audio 
                transmission service on which sound recordings 
                are performed is or is about to become 
                operational, and
                  (B) between June 30 and December 31, 2000 and 
                at 5-year intervals thereafter.
          (5)(A) Any person who wishes to perform a sound 
        recording publicly by means of a nonexempt subscription 
        transmission under this subsection may do so without 
        infringing the exclusive right of the copyright owner 
        of the sound recording--
                  (i) by complying with such notice 
                requirements as the Register of Copyrights 
                shall prescribe by regulation and by paying 
                royalty fees in accordance with this 
                subsection; or
                  (ii) if such royalty fees have not been set, 
                by agreeing to pay such royalty fees as shall 
                be determined in accordance with this 
                subsection.
          (B) Any royalty payments in arrears shall be made on 
        or before the twentieth day of the month next 
        succeeding the month in which the royalty fees are set.
  (g) Proceeds From Licensing of Subscription Transmissions.--
          (1) Except in the case of a subscription transmission 
        licensed in accordance with subsection (f) of this 
        section--
                  (A) a featured recording artist who performs 
                on a sound recording that has been licensed for 
                a subscription transmission shall be entitled 
                to receive payments from the copyright owner of 
                the sound recording in accordance with the 
                terms of the artist's contract; and
                  (B) a nonfeatured recording artist who 
                performs on a sound recording that has been 
                licensed for a subscription transmission shall 
                be entitled to receive payments from the 
                copyright owner of the sound recording in 
                accordance with the terms of the nonfeatured 
                recording artist's applicable contract or other 
                applicable agreement.
          (2) The copyright owner of the exclusive right under 
        section 106(6) of this title to publicly perform a 
        sound recording by means of a digital audio 
        transmission shall allocate to recording artists in the 
        following manner its receipts from the statutory 
        licensing of subscription transmission performances of 
        the sound recording in accordance with subsection (f) 
        of this section:
                  (A) 2\1/2\ percent of the receipts shall be 
                deposited in an escrow account managed by an 
                independent administrator jointly appointed by 
                copyright owners of sound recordings and the 
                American Federation of Musicians (or any 
                successor entity) to be distributed to 
                nonfeatured musicians (whether or not members 
                of the American Federation of Musicians) who 
                have performed on sound recordings.
                  (B) 2\1/2\ percent of the receipts shall be 
                deposited in an escrow account managed by an 
                independent administrator jointly appointed by 
                copyright owners of sound recordings and the 
                American Federation of Television and Radio 
                Artists (or any successor entity) to be 
                distributed to nonfeatured vocalists (whether 
                or not members of the American Federation of 
                Television and Radio Artists) who have 
                performed on sound recordings.
                  (C) 45 percent of the receipts shall be 
                allocated, on a per sound recording basis, to 
                the recording artist or artists featured on 
                such sound recording (or the persons conveying 
                rights in the artists' performance in the sound 
                recordings).
    (h) Licensing to Affiliates.--
          (1) If the copyright owner of a sound recording 
        licenses an affiliated entity the right to publicly 
        perform a sound recording by means of a digital audio 
        transmission under section 106(6), the copyright owner 
        shall make the licensed sound recording available under 
        section 106(6) on no less favorable terms and 
        conditions to all bona fide entities that offer similar 
        services, except that, if there are material 
        differences in the scope of the requested license with 
        respect to the type of service, the particular sound 
        recordings licensed, the frequency of use, the number 
        of subscribers served, or the duration, then the 
        copyright owner may establish different terms and 
        conditions for such other services.
          (2) The limitation set forth in paragraph (1) of this 
        subsection shall not apply in the case where the 
        copyright owner of a sound recording licenses--
                  (A) an interactive service; or
                  (B) an entity to perform publicly up to 45 
                seconds of the sound recording and the sole 
                purpose of the performance is to promote the 
                distribution or performance of that sound 
                recording.
    (i) No Effect on Royalties for Underlying Works.--License 
fees payable for the public performance of sound recordings 
under clause (6) of section 106 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 public performance of their 
works. It is the intent of Congress that royalties payable to 
copyright owners of musical works for the public performance of 
their works shall not be diminished in any respect as a result 
of the rights granted by section 106(6).
    (j) Definitions.--As used in this section, the following 
terms have the following meanings:
          (1) An ``affiliated entity'' is an entity engaging in 
        digital audio transmissions covered by section 106(6), 
        other than an interactive service, in which the 
        licensor has any direct or indirect partnership or any 
        ownership interest amounting to 5 percent or more of 
        the outstanding voting or non-voting stock.
          (2) A ``broadcast transmission'' is a transmission 
        made by a broadcast station licensed as such by the 
        Federal Communications Commission.
          (3) A ``digital audio transmission'' is a digital 
        transmission as defined in section 101, that embodies 
        the transmission of a sound recording. This term does 
        not include the transmission of any audiovisual work.
          (4) An ``interactive service'' is one that enables a 
        member of the public to receive, on request, a 
        transmission of a particular sound recording chosen by 
        or on behalf of the recipient. The ability of 
        individuals to request that particular sound recordings 
        be performed for reception by the public at large does 
        not make a service interactive. If an entity offers 
        both interactive and non-interactive services (either 
        concurrently or at different times), the non-
        interactive component shall not be treated as part of 
        an interactive service.
          (5) A ``nonsubscription transmission'', 
        ``nonsubscription retransmission'', or a 
        ``nonsubscription broadcast transmission'' is any 
        transmission or retransmission that is not a 
        subscription transmission or retransmission.
          (6) A ``retransmission'' includes any further 
        simultaneous retransmission of the same transmission. 
        Nothing in this definition shall be construed to exempt 
        a transmission that fails to satisfy a separate element 
        required to qualify for an exemption under section 
        114(d)(1).
          (7) The ``sound recording performance complement'' is 
        the transmission during any 3-hour period, on a 
        particular channel used by a transmitting entity, of no 
        more than--
                  (A) 3 different selections of sound 
                recordings from any one phonorecord lawfully 
                distributed for public performance or sale in 
                the United States, if no more than 2 such 
                selections are transmitted consecutively; or
                  (B) 4 different selections of sound 
                recordings
                          (i) by the same featured recording 
                        artist; or
                          (ii) from any set or compilation of 
                        phonorecords lawfully distributed 
                        together as a unit for public 
                        performance or sale in the United 
                        States,
                if no more than three such selections are 
                transmitted consecutively:
        Provided, That the transmission of selections in excess 
        of the numerical limits provided for in clauses (A) and 
        (B) from multiple phonorecords shall nonetheless 
        qualify as a sound recording performance complement if 
        the programming of the multiple phonorecords was not 
        willfully intended to avoid the numerical limitations 
        prescribed in such clauses.
          (8) A ``subscription transmission'' is a transmission 
        that is controlled and limited to particular 
        recipients, and for which consideration is required to 
        be paid or otherwise given by or on behalf of the 
        recipient to receive the transmission or a package of 
        transmissions including the transmission.
Sec. 115. Scope of exclusive rights in nondramatic musical works: 
                    Compulsory license for making and distributing 
                    phonorecords

    In the case of nondramatic musical works, the exclusive 
rights provided by clauses (1) and (3) of section 106, to make 
and to distribute phonorecords of such works, are subject to 
compulsory licensing under the conditions specified by this 
section.
    (a) Availability and Scope of Compulsory License.--
          (1) When phonorecords of a nondramatic musical work 
        have been distributed to the public in the United 
        States under the authority of the copyright owner, [any 
        other person] any other person, including those who 
        make phonorecords or digital phonorecord deliveries by 
        means of a digital audio transmission, may, by 
        complying with the provisions of this section, obtain a 
        compulsory license to make and distribute phonorecords 
        of the work. A person may obtain a compulsory license 
        only if his or her primary purpose in making 
        phonorecords is to distribute them to the public for 
        private use, including by means of a digital 
        phonorecord delivery. A person may not obtain a 
        compulsory license for use of the work in the making of 
        phonorecords duplicating a sound recording fixed by 
        another, unless: (i) such sound recording was fixed 
        lawfully; and (ii) the making of the phonorecords was 
        authorized by the owner of copyright in the sound 
        recording or, if the sound recording was fixed before 
        February 15, 1972, by any person who fixed the sound 
        recording pursuant to an express license from the owner 
        of the copyright in the musical work or pursuant to a 
        valid compulsory license for use of such work in a 
        sound recording.
          * * * * * * *
    (c) Royalty Payable Under Compulsory License.--
          (1) To be entitled to receive royalties under a 
        compulsory license, the copyright owner must be 
        identified in the registration or other public records 
        of the Copyright Office. The owner is entitled to 
        royalties for phonorecords made and distributed after 
        being so identified, but is not entitled to recover for 
        any phonorecords previously made and distributed.
          (2) Except as provided by clause (1), the royalty 
        under a compulsory license shall be payable for every 
        phonorecord made and distributed in accordance with the 
        license. For this purpose, and other than as provided 
        in paragraph (3), a phonorecord is considered 
        ``distributed'' if the person exercising the compulsory 
        license has voluntarily and permanently parted with its 
        possession. With respect to each work embodied in the 
        phonorecord, the royalty shall be either two and three-
        fourths cents, or one-half of one cent per minute of 
        playing time or fraction thereof, whichever amount is 
        larger.
          (3)(A) A compulsory license under this section 
        includes the right of the compulsory licensee to 
        distribute or authorize the distribution of a 
        phonorecord of a nondramatic musical work by means of a 
        digital transmission which constitutes a digital 
        phonorecord delivery, regardless of whether the digital 
        transmission is also a public performance of the sound 
        recording under section 106(6) of this title or of any 
        nondramatic musical work embodied therein under section 
        106(4) of this title. For every digital phonorecord 
        delivery by or under the authority of the compulsory 
        licensee--
                  (i) on or before December 31, 1997, the 
                royalty payable by the compulsory licensee 
                shall be the royalty prescribed under paragraph 
                (2) and chapter 8 of this title; and
                  (ii) on or after January 1, 1998, the royalty 
                payable by the compulsory licensee shall be the 
                royalty prescribed under subparagraphs (B) 
                through (F) and chapter 8 of this title.
          (B) Notwithstanding any provision of the antitrust 
        laws, for the purpose of this subparagraph, any 
        copyright owners of nondramatic musical works and any 
        persons entitled to obtain a compulsory license under 
        subsection (a)(1) may negotiate and agree upon the 
        terms and rates of royalty payments under this 
        paragraph and the proportionate division of fees paid 
        among copyright owners, and may designate common agents 
        to negotiate, agree to, pay or receive such royalty 
        payments. Such authority to negotiate the terms and 
        rates of royalty payments includes, but is not limited 
        to, the authority to negotiate the year during which 
        the royalty rates prescribed under subparagraphs (B) 
        through (F) and chapter 8 of this title shall next be 
        determined.
          (C) During the period of June 30, 1996, through 
        December 31, 1996, Librarian of Congress shall cause 
        notice to be published in the Federal Register of the 
        initiation of voluntary negotiation proceedings for the 
        purpose of determining reasonable terms and rates of 
        royalty payments for the activities specified by 
        subparagraph (A) during the period beginning January 1, 
        1998, and ending on December 31, 2007, or such earlier 
        date (regarding digital transmissions) as the parties 
        may agree. Such terms and rates shall distinguish 
        between (i) digital phonorecord deliveries where the 
        reproduction or distribution of a phonorecord is 
        incidental to the transmission which constitutes the 
        digital phonorecord delivery, and (ii) digital 
        phonorecord deliveries in general. Any copyright owners 
        of nondramatic musical works and any persons entitled 
        to obtain a compulsory license under subsection (a)(1) 
        may submit to the Librarian of Congress licenses 
        covering such activities. The parties to each 
        negotiation proceeding shall bear their own costs.
          (D) In the absence of license agreements negotiated 
        under subparagraph (C), the Librarian of Congress 
        shall, pursuant to chapter 8, convene a copyright 
        arbitration royalty panel to determine and publish in 
        the Federal Register a schedule of rates and terms 
        which, subject to subparagraph (E), shall be binding on 
        all copyright owners of nondramatic musical works and 
        persons entitled to obtain a compulsory license under 
        subsection (a)(1) during the period beginning January 
        1, 1998, and ending on December 31, 2007, or such 
        earlier date (regarding digital transmissions) as may 
        be determined pursuant to subparagraph (C) or chapter 
        8. Such terms and rates shall distinguish between (i) 
        digital phonorecord deliveries where the reproduction 
        or distribution of a phonorecord is incidental to the 
        transmission which constitutes the digital phonorecord 
        delivery, and (ii) digital phonorecord deliveries in 
        general. In addition to the objectives set forth in 
        section 801(b)(1), in establishing such rates and 
        terms, the copyright arbitration royalty panel may 
        consider rates under voluntary license agreements 
        negotiated as provided in subparagraph (C). The royalty 
        rates payable for a compulsory license for a digital 
        phonorecord delivery under this section shall be 
        established de novo and no precedential effect shall be 
        given to the amount of the royalty payable by a 
        compulsory licensee for digital phonorecord deliveries 
        on or before December 31, 1997. The parties to the 
        proceeding shall bear the entire cost thereof in such 
        manner and proportion as the arbitration panels shall 
        direct. The Librarian of Congress shall also establish 
        requirements by which copyright owners may receive 
        reasonable notice of the use of their works under this 
        section, and under which records of such use shall be 
        kept and made available by persons making digital 
        phonorecord deliveries.
          (E)(i) License agreements voluntarily negotiated at 
        any time between one or more copyright owners of 
        nondramatic musical works and one or more persons 
        entitled to obtain a compulsory license under 
        subsection (a)(1) shall be given effect in lieu of any 
        determination by the Librarian of Congress. Subject to 
        clause (ii), the royalty rates determined pursuant to 
        subparagraph (C) or (D) shall be given effect in lieu 
        of any contrary royalty rates specified in a contract 
        pursuant to which a recording artist who is the author 
        of a nondramatic musical work grants a license under 
        that person's exclusive rights in the musical work 
        under section 106 (1) or (3) to a person desiring to 
        fix in a tangible medium of expression a sound 
        recording embodying the musical work.
          (ii) Clause (i) shall not apply to--
                  (I) a contract entered into on or before June 
                22, 1995, and not modified thereafter for the 
                purpose of reducing such rates or of increasing 
                the number of musical works within the scope of 
                the contract covered by the reduced rates, 
                except if a contract entered into on or before 
                June 22, 1995, is modified thereafter for the 
                purpose of increasing the number of musical 
                works within the scope of the contract, any 
                contrary royalty rates specified in the 
                contract shall be given effect in lieu of 
                royalty rates determined pursuant to 
                subparagraph (C) or (D) for the number of 
                musical works within the scope of the contract 
                as of June 22, 1995; and
                  (II) a contract entered into after the date 
                that the sound recording is fixed in a tangible 
                medium of expression substantially in a form 
                intended for commercial release, if at the time 
                the contract is entered into, the recording 
                artist retains the right to grant licenses 
                under sections 106(1) and 106(3).
          (F) The procedures specified in subparagraphs (C) and 
        (D) shall be repeated and concluded, in accordance with 
        regulations that the Librarian of Congress shall 
        prescribe, as provided in section 803(a)(3), except to 
        the extent that different times for the repeating and 
        concluding of such proceedings may be determined in 
        accordance with subparagraph (C) or (D).
          (G) Except as provided in section 1002(e) of this 
        title, a digital phonorecord delivery licensed under 
        this paragraph shall be accompanied by the information 
        encoded in the sound recording, if any, by or under the 
        authority of the copyright owner of that sound 
        recording, that identifies the title of the sound 
        recording, the featured recording artist who performs 
        on the sound recording, and related information, 
        including information concerning the underlying musical 
        work and its writer.
          (H)(i) A digital phonorecord delivery of a sound 
        recording is actionable as an act of infringement under 
        section 501, and is fully subject to the remedies 
        provided by sections 502 through 506 and sections 509 
        and 510, unless--
                  (I) the digital phonorecord delivery has been 
                authorized by the copyright owner of the sound 
                recording; and
                  (II) the owner of the copyright in the sound 
                recording or the entity making the digital 
                phonorecord delivery has obtained a compulsory 
                license under this section or has otherwise 
                been authorized to distribute or authorize the 
                distribution, by means of a digital phonorecord 
                delivery, of each nondramatic musical work 
                embodied in the sound recording.
          (ii) Any cause of action under this subparagraph 
        shall be in addition to those available to the owner of 
        the copyright in the nondramatic musical work under 
        subsection (c)(5) and section 106(4) and the owner of 
        the copyright in the sound recording under section 
        106(6).
          (I) The liability of the copyright owner of a sound 
        recording for infringement of the copyright in a 
        musical work embodied in the sound recording shall be 
        determined in accordance with applicable law, except 
        that the owner of a copyright in a sound recording 
        shall not be liable for a digital phonorecord delivery 
        by a third party if the owner of the copyright in the 
        sound recording does not license the distribution of a 
        phonorecord of the musical work.
          (J) Nothing in section 1008 shall be construed to 
        prevent the exercise of the rights and remedies allowed 
        by this paragraph, paragraph (7), and chapter 5 in the 
        event of a digital phonorecord delivery, except that no 
        action alleging infringement of copyright may be 
        brought under this title against a manufacturer, 
        importer or distributor of a digital audio recording 
        device, a digital audio recording medium, an analog 
        recording device, or an analog recording medium, or 
        against a consumer, based on the actions described in 
        such section.
          (K) Nothing in this section annuls or limits (i) the 
        exclusive right to publicly perform a sound recording 
        or the musical work embodied therein, including by 
        means of a digital transmission, under sections 106(4) 
        and 106(6), (ii) except for compulsory licensing under 
        the conditions specified by this section, the exclusive 
        rights to reproduce and distribute the sound recording 
        and the musical work embodied therein under sections 
        106(1) and 106(3), including by means of a digital 
        phonorecord delivery, or (iii) any other rights under 
        any other provision of section 106, or remedies 
        available under this title, as such rights or remedies 
        exist either before or after the date of enactment of 
        the Digital Performance Right in Sound Recordings Act 
        of 1995.
          (L) The provisions of this section concerning digital 
        phonorecord deliveries shall not apply to any exempt 
        transmissions or retransmissions under section 
        114(d)(1). The exemptions created in section 114(d)(1) 
        do not expand or reduce the rights of copyright owners 
        under section 106 (1) through (5) with respect to such 
        transmissions and retransmissions.
          [(3)] (4) A compulsory license under this section 
        includes the right of the maker of a phonorecord of a 
        nondramatic musical work under subsection (a)(1) to 
        distribute or authorize distribution of such 
        phonorecord by rental, lease, or lending (or by acts or 
        practices in the nature of rental, lease, or lending). 
        In addition to any royalty payable under clause (2) and 
        chapter 8 of this title, a royalty shall be payable by 
        the compulsory licensee for every act of distribution 
        of a phonorecord by or in the nature of rental, lease, 
        or lending, by or under the authority of the compulsory 
        licensee. With respect to each nondramatic musical work 
        embodied in the phonorecord, the royalty shall be a 
        proportion of the revenue received by the compulsory 
        licensee from every such act of distribution of the 
        phonorecord under this clause equal to the proportion 
        of the revenue received by the compulsory licensee from 
        distribution of the phonorecord under clause (2) that 
        is payable by a compulsory licensee under that clause 
        and under chapter 8. The Register of Copyrights shall 
        issue regulations to carry out the purpose of this 
        clause.
          [(4)] (5) Royalty payments shall be made on or before 
        the twentieth day of each month and shall include all 
        royalties for the month next preceding. Each monthly 
        payment shall be made under oath and shall comply with 
        requirements that the Register of Copyrights shall 
        prescribe by regulation. The Register shall also 
        prescribe regulations under with detailed cumulative 
        annual statements of account, certified by a certified 
        public accountant, shall be filed for every compulsory 
        license under this section. The regulations covering 
        both the monthly and the annual statements of account 
        shall prescribe the form, content, and manner of 
        certification with respect to the number of records 
        made and the number of records distributed.
          [(5)] (6) If the copyright owner does not receive the 
        monthly payment and the monthly and annual statements 
        of account when due, the owner may give written notice 
        to the licensee that, unless the default is remedied 
        within thirty days from the date of the notice, the 
        compulsory license will be automatically terminated. 
        Such termination renders either the making or the 
        distribution, or both, of all phonorecords for which 
        the royalty has not been paid, actionable as acts of 
        infringement under section 501 and fully subject to the 
        remedies provided by sections 502 through 506 and 509.
  (d) Definition.--As used in this section, the following term 
has the following meaning: A ``digital phonorecord delivery'' 
is each individual delivery of a phonorecord by digital 
transmission of a sound recording which results in a 
specifically identifiable reproduction by or for any 
transmission recipient of a phonorecord of that sound 
recording, regardless of whether the digital transmission is 
also a public performance of the sound recording or any 
nondramatic musical work embodied therein. A digital 
phonorecord delivery does not result from a real-time, 
noninteractive subscription transmission of a sound recording 
where no reproduction of the sound recording or the musical 
work embodied therein is made from the inception of the 
transmission through to its receipt by the transmission 
recipient in order to make the sound recording audible.
          * * * * * * *
Sec. 119. Limitations on exclusive rights: Secondary transmissions of 
                    superstations and network stations for private home 
                    viewing

    (a) Secondary Transmissions by Satellite Carriers.--
          (1) Superstations.--Subject to the provisions of 
        paragraphs (3), (4), and (6) of this subsection and 
        section 114(d), secondary transmissions of a primary 
        transmission made by a superstation and embodying a 
        performance or display of a work shall be subject to 
        statutory licensing under this section if the secondary 
        transmission is made by a satellite carrier to the 
        public for private home viewing, and the carrier makes 
        a direct or indirect charge for each retransmission 
        service to each household receiving the secondary 
        transmission or to a distributor that has contracted 
        with the carrier for direct or indirect delivery of the 
        secondary transmission to the public for private home 
        viewing.
          (2) Network stations.--
                  (A) In general.--Subject to the provisions of 
                subparagraphs (B) and (C) of this paragraph and 
                paragraphs (3), (4), (5), and (6) of this 
                subsection and section 114(d), secondary 
                transmissions of programming contained in a 
                primary transmission made by a network station 
                and embodying a performance or display of a 
                work shall be subject to statutory licensing 
                under this section if the secondary 
                transmission is made by a satellite carrier to 
                the public for private home viewing, and the 
                carrier makes a direct or indirect charge for 
                such retransmission service to each subscriber 
                receiving the secondary transmission.
          * * * * * * *

                 CHAPTER 8--COPYRIGHT ROYALTY TRIBUNAL

          * * * * * * *

Sec. 801. Copyright Royalty Tribunal: Establishment and purpose

    (a) There is hereby created an independent Copyright 
Royalty Tribunal in the legislative branch.
    (b) Subject to the provisions of this chapter, the purposes 
of the Tribunal shall be--
          (1) to make determinations concerning the adjustment 
        of reasonable copyright rates as provided in section 
        [115] 114, 115, and 116, and to make determinations as 
        to reasonable terms and rates of royalty payments as 
        provided in section 118. The rates applicable under 
        sections [115] 114, 115, and 116 shall be calculated to 
        achieve the following objectives:
          * * * * * * *
Sec. 802.  Membership and proceedings of copyright arbitration royalty 
                    panels

    (a) Composition of Copyright Arbitration Royalty Panels.--A 
copyright arbitration royalty panel shall consist of 3 
arbitrators selected by the Librarian of Congress pursuant to 
subsection (b).
          * * * * * * *
    (c) Arbitration Proceedings.--Copyright arbitration royalty 
panels shall conduct arbitration proceedings, subject to 
subchapter II of chapter 5 of title 5, for the purpose of 
making their determinations in carrying out the purposes set 
forth in section 801. The arbitration panels shall act on the 
basis of a fully documented written record, prior decisions of 
the Copyright Royalty Tribunal, prior copyright arbitration 
panel determinations, and rulings by the Librarian of Congress 
under section 801(c). Any copyright owner who claims to be 
entitled to royalties under [section 111, 116, or 119,] section 
111, 114, 116, or 119, any person entitled to a compulsory 
license under section 114(d), any person entitled to a 
compulsory license under section 115, or any interested 
copyright party who claims to be entitled to royalties under 
section 1006, may submit relevant information and proposals to 
the arbitration panels in proceedings applicable to such 
copyright owner or interested copyright party, and any other 
person participating in arbitration proceedings may submit such 
relevant information and proposals to the arbitration panel 
conducting the proceedings. In ratemaking proceedings, the 
parties to the proceedings shall bear the entire cost thereof 
in such manner and proportion as the arbitration panels shall 
direct. In distribution proceedings, the parties shall bear the 
cost in direct proportion to their share of the distribution.
          * * * * * * *
    (g) Judicial Review.--Any decision of the Librarian of 
Congress under subsection (f) with respect to a determination 
of an arbitration panel may be appealed, by any aggrieved party 
who would be bound by the determination, to the United States 
Court of Appeals for the District of Columbia Circuit, within 
30 days after the publication of the decision in the Federal 
Register. If no appeal is brought within such 30-day period, 
the decision of the Librarian is final, and the royalty fee or 
determination with respect to the distribution of fees, as the 
case may be, shall take effect as set forth in the decision. 
The pendency of an appeal under this paragraph shall not 
relieve persons obligated to make royalty payments under 
sections 111, 114, 115, 116, 118, 119, or 1003 who would be 
affected by the determination on appeal to deposit the 
statement of account and royalty fees specified in those 
sections. The court shall have jurisdiction to modify or vacate 
a decision of the Librarian only if it finds, on the basis of 
the record before the Librarian, that the Librarian acted in an 
arbitrary manner. If the court modifies the decision of the 
Librarian, the court shall have jurisdiction to enter its own 
determination with respect to the amount or distribution of 
royalty fees and costs, to order the repayment of any excess 
fees, and to order the payment of any underpaid fees, and the 
interest pertaining respectively thereto, in accordance with 
its final judgement. The court may further vacate the decision 
of the arbitration panel and remand the case to the Librarian 
for arbitration proceedings in accordance with subsection (c).
    (h) Administrative Matters.--
          (1) * * *
          (2) Positions required for administration of 
        compulsory licensing.--Section 307 of the Legislative 
        Branch Appropriations Act, 1994, shall not apply to 
        employee positions in the Library of Congress that are 
        required to be filled in order to carry out section 
        111, 114, 115, 116, 118, or 199 or chapter 10.