H. Rept. 108-408 - 108th Congress (2003-2004)
January 30, 2004, As Reported by the Judiciary Committee

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House Report 108-408 - COPYRIGHT ROYALTY AND DISTRIBUTION REFORM ACT OF 2003




[House Report 108-408]
[From the U.S. Government Printing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-408

======================================================================
 
         COPYRIGHT ROYALTY AND DISTRIBUTION REFORM ACT OF 2003

                                _______
                                

January 30, 2004.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                        [To accompany H.R. 1417]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 1417) to amend title 17, United States Code, to replace 
copyright arbitration royalty panels with a Copyright Royalty 
Judge, and for other purposes, having considered the same, 
report favorably thereon with amendments and recommend that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     1
Purpose and Summary..............................................    18
Background and Need for the Legislation..........................    18
Hearings.........................................................    18
Committee Consideration..........................................    19
Vote of the Committee............................................    19
Committee Oversight Findings.....................................    19
New Budget Authority and Tax Expenditures........................    19
Congressional Budget Office Cost Estimate........................    19
Performance Goals and Objectives.................................    21
Constitutional Authority Statement...............................    21
Section-by-Section Analysis and Discussion.......................    22
Changes in Existing Law Made by the Bill, as Reported............    43
Markup Transcript................................................    86

                             The Amendment

  The amendments are as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Copyright Royalty and Distribution 
Reform Act of 2003''.

SEC. 2. REFERENCE.

  Except as otherwise expressly provided, whenever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of title 17, United States 
Code.

SEC. 3. COPYRIGHT ROYALTY JUDGE AND STAFF.

  (a) In General.--Chapter 8 is amended to read as follows:

          ``CHAPTER 8--PROCEEDINGS BY COPYRIGHT ROYALTY JUDGES

``Sec.
``801. Copyright Royalty Judges; appointment and functions.
``802. Copyright Royalty Judgeships; staff.
``803. Proceedings of Copyright Royalty Judges.
``804. Institution of proceedings.
``805. General rule for voluntarily negotiated agreements.

``Sec. 801. Copyright Royalty Judges; appointment and functions

  ``(a) Appointment.--The Librarian of Congress shall appoint 3 full-
time Copyright Royalty Judges, and shall appoint one of the three as 
the Chief Copyright Royalty Judge. In making such appointments, the 
Librarian shall consult with the Register of Copyrights.
  ``(b) Functions.--Subject to the provisions of this chapter, the 
functions of the Copyright Royalty Judges shall be as follows:
          ``(1) To make determinations and adjustments of reasonable 
        terms and rates of royalty payments as provided in sections 
        112(e), 114, 115, 116, 118, 119 and 1004. The rates applicable 
        under sections 114(f)(1)(B), 115, and 116 shall be calculated 
        to achieve the following objectives:
                  ``(A) To maximize the availability of creative works 
                to the public.
                  ``(B) To afford the copyright owner a fair return for 
                his or her creative work and the copyright user a fair 
                income under existing economic conditions.
                  ``(C) To reflect the relative roles of the copyright 
                owner and the copyright user in the product made 
                available to the public with respect to relative 
                creative contribution, technological contribution, 
                capital investment, cost, risk, and contribution to the 
                opening of new markets for creative expression and 
                media for their communication.
                  ``(D) To minimize any disruptive impact on the 
                structure of the industries involved and on generally 
                prevailing industry practices.
          ``(2) To make determinations concerning the adjustment of the 
        copyright royalty rates under section 111 solely in accordance 
        with the following provisions:
                  ``(A) The rates established by section 111(d)(1)(B) 
                may be adjusted to reflect--
                          ``(i) national monetary inflation or 
                        deflation; or
                          ``(ii) changes in the average rates charged 
                        cable subscribers for the basic service of 
                        providing secondary transmissions to maintain 
                        the real constant dollar level of the royalty 
                        fee per subscriber which existed as of the date 
                        of October 19, 1976,
                except that--
                          ``(I) if the average rates charged cable 
                        system subscribers for the basic service of 
                        providing secondary transmissions are changed 
                        so that the average rates exceed national 
                        monetary inflation, no change in the rates 
                        established by section 111(d)(1)(B) shall be 
                        permitted; and
                          ``(II) no increase in the royalty fee shall 
                        be permitted based on any reduction in the 
                        average number of distant signal equivalents 
                        per subscriber.
                The Copyright Royalty Judges may consider all factors 
                relating to the maintenance of such level of payments, 
                including, as an extenuating factor, whether the 
                industry has been restrained by subscriber rate 
                regulating authorities from increasing the rates for 
                the basic service of providing secondary transmissions.
                  ``(B) In the event that the rules and regulations of 
                the Federal Communications Commission are amended at 
                any time after April 8, 1976, to permit the carriage by 
                cable systems of additional television broadcast 
                signals beyond the local service area of the primary 
                transmitters of such signals, the royalty rates 
                established by section 111(d)(1)(B) may be adjusted to 
                insure that the rates for the additional distant signal 
                equivalents resulting from such carriage are reasonable 
                in the light of the changes effected by the amendment 
                to such rules and regulations. In determining the 
                reasonableness of rates proposed following an amendment 
                of Federal Communications Commission rules and 
                regulations, the Copyright Royalty Judges shall 
                consider, among other factors, the economic impact on 
                copyright owners and users; except that no adjustment 
                in royalty rates shall be made under this subparagraph 
                with respect to any distant signal equivalent or 
                fraction thereof represented by--
                          ``(i) carriage of any signal permitted under 
                        the rules and regulations of the Federal 
                        Communications Commission in effect on April 
                        15, 1976, or the carriage of a signal of the 
                        same type (that is, independent, network, or 
                        noncommercial educational) substituted for such 
                        permitted signal; or
                          ``(ii) a television broadcast signal first 
                        carried after April 15, 1976, pursuant to an 
                        individual waiver of the rules and regulations 
                        of the Federal Communications Commission, as 
                        such rules and regulations were in effect on 
                        April 15, 1976.
                  ``(C) In the event of any change in the rules and 
                regulations of the Federal Communications Commission 
                with respect to syndicated and sports program 
                exclusivity after April 15, 1976, the rates established 
                by section 111(d)(1)(B) may be adjusted to assure that 
                such rates are reasonable in light of the changes to 
                such rules and regulations, but any such adjustment 
                shall apply only to the affected television broadcast 
                signals carried on those systems affected by the 
                change.
                  ``(D) The gross receipts limitations established by 
                section 111(d)(1)(C) and (D) shall be adjusted to 
                reflect national monetary inflation or deflation or 
                changes in the average rates charged cable system 
                subscribers for the basic service of providing 
                secondary transmissions to maintain the real constant 
                dollar value of the exemption provided by such section, 
                and the royalty rate specified therein shall not be 
                subject to adjustment.
          ``(3) To authorize the distribution, under sections 111, 119, 
        and 1007, of those royalty fees collected under sections 111, 
        119, and 1005, as the case may be, to the extent that the 
        Copyright Royalty Judges have found that the distribution of 
        such fees is not subject to controversy. In cases where the 
        Copyright Royalty Judges determine that controversy exists--
                  ``(A) the Copyright Royalty Judges shall determine 
                the distribution of such fees, in accordance with 
                section 111, 119, or 1007, as the case may be; and
                  ``(B) the Copyright Royalty Judges shall make a 
                partial distribution of such fees during the pendency 
                of the proceeding under subparagraph (A) if all 
                participants under section 803(b)(2) in the 
                proceeding--
                          ``(i) agree to such partial distribution;
                          ``(ii) sign an agreement obligating them to 
                        return any excess amounts to the extent 
                        necessary to comply with the final 
                        determination on the distribution of the fees 
                        made under subparagraph (A); and
                          ``(iii) file the agreement with the Copyright 
                        Royalty Judges.
        The Copyright Royalty Judges and any other officer or employee 
        acting in good faith in distributing funds under subparagraph 
        (B) shall not be held liable for the payment of any excess fees 
        under subparagraph (B). The Copyright Royalty Judges shall, at 
        the time the final determination is made, calculate any such 
        excess amounts.
          ``(4) To accept or reject royalty claims filed under section 
        111, 119, and 1007, on the basis of timeliness or the failure 
        to establish the basis for a claim.
          ``(5) To accept or reject rate adjustment petitions as 
        provided in section 804 and petitions to participate as 
        provided in section 803(b)(1) and (2).
          ``(6) To determine the status of a digital audio recording 
        device or a digital audio interface device under sections 1002 
        and 1003, as provided in section 1010.
          ``(7)(A) To adopt as the basis for statutory terms and rates 
        or as a basis for the distribution of statutory royalty 
        payments, an agreement concerning such matters reached among 
        some or all of the participants in a proceeding at any time 
        during the proceeding, except that--
                  ``(i) the Copyright Royalty Judges shall provide to 
                the other participants in the proceeding under section 
                803(b)(2) that would be bound by the terms, rates, 
                distribution, or other determination set by the 
                agreement an opportunity to comment on the agreement 
                and object to its adoption as the basis for statutory 
                terms and rates or as a basis for the distribution of 
                statutory royalty payments, as the case may be; and
                  ``(ii) the Copyright Royalty Judges may decline to 
                adopt the agreement as the basis for statutory terms 
                and rates or as the basis for the distribution of 
                statutory royalty payments, as the case may be, if any 
                other participant described in subparagraph (A) objects 
                to the agreement and the Copyright Royalty Judges find, 
                based on the record before them, that the agreement is 
                not likely to meet the statutory standard for setting 
                the terms and rates, or for distributing the royalty 
                payments, as the case may be.
          ``(B) License agreements voluntarily negotiated pursuant to 
        section 112(e)(5), 114(f)(3), 115(c)(3)(E)(i), 116(c), or 
        118(b)(2) that do not result in statutory terms and rates shall 
        not be subject to clauses (i) and (ii) of subparagraph (A).
  ``(c) Rulings.--The Copyright Royalty Judges may make any necessary 
procedural or evidentiary rulings in any proceeding under this chapter 
and may, before commencing a proceeding under this chapter, make any 
such rulings that would apply to the proceedings conducted by the 
Copyright Royalty Judges. The Copyright Royalty Judges may consult with 
the Register of Copyrights in making any rulings under section 
802(f)(1).
  ``(d) Administrative Support.--The Librarian of Congress shall 
provide the Copyright Royalty Judges with the necessary administrative 
services related to proceedings under this chapter.
  ``(e) Location in Library of Congress.--The offices of the Copyright 
Royalty Judges and staff shall be in the Library of Congress.

``Sec. 802. Copyright Royalty Judgeships; staff

  ``(a) Qualifications of Copyright Royalty Judges.--Each Copyright 
Royalty Judge shall be an attorney who has at least 7 years of legal 
experience. The Chief Copyright Royalty Judge shall have at least 5 
years of experience in adjudications, arbitrations, or court trials. Of 
the other two Copyright Royalty Judges, one shall have significant 
knowledge of copyright law, and the other shall have significant 
knowledge of economics. An individual may serve as a Copyright Royalty 
Judge only if the individual is free of any financial conflict of 
interest under subsection (h). In this subsection, `adjudication' has 
the meaning given that term in section 551 of title 5, but does not 
include mediation.
  ``(b) Staff.--The Chief Copyright Royalty Judge shall hire 3 full-
time staff members to assist the Copyright Royalty Judges in performing 
their functions.
  ``(c) Terms.--The terms of the Copyright Royalty Judges shall each be 
6 years, except of the individuals first appointed, the Chief Copyright 
Royalty Judge shall be appointed to a term of 6 years, and of the 
remaining Copyright Royalty Judges, one shall be appointed to a term of 
2 years, and the other shall be appointed to a term of 4 years. An 
individual serving as a Copyright Royalty Judge may be reappointed to 
subsequent terms. The term of a Copyright Royalty Judge shall begin 
when the term of the predecessor of that Copyright Royalty Judge ends. 
When the term of office of a Copyright Royalty Judge ends, the 
individual serving that term may continue to serve until a successor is 
selected.
  ``(d) Vacancies or Incapacity.--
          ``(1) Vacancies.--If a vacancy should occur in the position 
        of Copyright Royalty Judge, the Librarian of Congress shall act 
        expeditiously to fill the vacancy, and may appoint an interim 
        Copyright Royalty Judge to serve until another Copyright 
        Royalty Judge is appointed under this section. An individual 
        appointed to fill the vacancy occurring before the expiration 
        of the term for which the predecessor of that individual was 
        appointed shall be appointed for the remainder of that term.
          ``(2) Incapacity.--In the case in which a Copyright Royalty 
        Judge is temporarily unable to perform his or her duties, the 
        Librarian of Congress may appoint an interim Copyright Royalty 
        Judge to perform such duties during the period of such 
        incapacity.
  ``(e) Compensation.--
          ``(1) Judges.--The Chief Copyright Royalty Judge shall 
        receive compensation at the rate of basic pay payable for level 
        AL-1 for administrative law judges pursuant to section 5372(b) 
        of title 5, and each of the other two Copyright Royalty Judges 
        shall receive compensation at the rate of basic pay payable for 
        level AL-2 for administrative law judges pursuant to such 
        section. The compensation of the Copyright Royalty Judges shall 
        not be subject to any regulations adopted by the Office of 
        Personnel Management pursuant to its authority under section 
        5376(b)(1) of title 5.
          ``(2) Staff members.--Of the staff members appointed under 
        subsection (b)--
                  ``(A) the rate of pay of one staff member shall be 
                not more than the basic rate of pay payable for GS-15 
                of the General Schedule;
                  ``(B) the rate of pay of one staff member shall be 
                not less than the basic rate of pay payable for GS-13 
                of the General Schedule and not more than the basic 
                rate of pay payable for GS-14 of such Schedule; and
                  ``(C) the rate of pay for the third staff member 
                shall be not less than the basic rate of pay payable 
                for GS-8 of the General Schedule and not more than the 
                basic rate of pay payable for GS-11 of such Schedule.
  ``(f) Independence of Copyright Royalty Judge.--
          ``(1) In making determinations.--
                  ``(A) In general.--Subject to subparagraph (B), the 
                Copyright Royalty Judges shall have full independence 
                in making determinations concerning adjustments and 
                determinations of copyright royalty rates and terms, 
                the distribution of copyright royalties, the acceptance 
                or rejection of royalty claims, rate adjustment 
                petitions, and petitions to participate, and in issuing 
                other rulings under this title, except that the 
                Copyright Royalty Judges may consult with the Register 
                of Copyrights on any matter other than a question of 
                fact. Any such consultations between the Copyright 
                Royalty Judges and the Register of Copyright on any 
                question of law shall be in writing or on the record.
                  ``(B) Novel questions.--(i) Notwithstanding the 
                provisions of subparagraph (A), in any case in which 
                the Copyright Royalty Judges in a proceeding under this 
                title are presented with a novel question of law 
                concerning an interpretation of those provisions of 
                this title that are the subject of the proceeding, the 
                Copyright Royalty Judges shall request the Register of 
                Copyrights, in writing, to submit a written opinion on 
                the resolution of such novel question. The Register 
                shall submit and make public that opinion within such 
                time period as the Copyright Royalty Judges may 
                prescribe. Any consultations under this subparagraph 
                between the Copyright Royalty Judges and the Register 
                of Copyrights shall be in writing or on the record. The 
                opinion of the Register shall not be binding on the 
                Copyright Royalty Judges, but the Copyright Royalty 
                Judges shall take the opinion of the Register into 
                account in making the judges' determination on the 
                question concerned.
                  ``(ii) In clause (i), a `novel question of law' is a 
                question of law that has not been determined in prior 
                decisions, determinations, and rulings described in 
                section 803(a).
          ``(2) Performance appraisals.--
                  ``(A) In general.--Notwithstanding any other 
                provision of law or any regulation of the Library of 
                Congress, and subject to subparagraph (B), the 
                Copyright Royalty Judges shall not receive performance 
                appraisals.
                  ``(B) Relating to sanction or removal.--To the extent 
                that the Librarian of Congress adopts regulations under 
                subsection (h) relating to the sanction or removal of a 
                Copyright Royalty Judge and such regulations require 
                documentation to establish the cause of such sanction 
                or removal, the Copyright Royalty Judge may receive an 
                appraisal related specifically to the cause of the 
                sanction or removal.
  ``(g) Inconsistent Duties Barred.--No Copyright Royalty Judge may 
undertake duties inconsistent with his or her duties and 
responsibilities as Copyright Royalty Judge.
  ``(h) Standards of Conduct.--The Librarian of Congress shall adopt 
regulations regarding the standards of conduct, including financial 
conflict of interest and restrictions against ex parte communications, 
which shall govern the Copyright Royalty Judges and the proceedings 
under this chapter.
  ``(i) Removal or Sanction.--The Librarian of Congress may sanction or 
remove a Copyright Royalty Judge for violation of the standards of 
conduct adopted under subsection (h), misconduct, neglect of duty, or 
any disqualifying physical or mental disability. Any such sanction or 
removal may be made only after notice and opportunity for a hearing, 
but the Librarian of Congress may suspend the Copyright Royalty Judge 
during the pendency of such hearing. The Librarian shall appoint an 
interim Copyright Royalty Judge during the period of any such 
suspension.

``Sec. 803. Proceedings of Copyright Royalty Judges

  ``(a) Proceedings.--
          ``(1) In general.--The Copyright Royalty Judges shall act in 
        accordance with this title, and to the extent not inconsistent 
        with this title, in accordance with subchapter II of chapter 5 
        of title 5, in carrying out the purposes set forth in section 
        801. The Copyright Royalty Judges shall act in accordance with 
        regulations issued by the Copyright Royalty Judges and on the 
        basis of a fully documented written record, prior decisions of 
        the Copyright Royalty Tribunal, prior copyright arbitration 
        royalty panel determinations, rulings by the Librarian of 
        Congress before the effective date of the Copyright Royalty and 
        Distribution Reform Act of 2003, prior determinations of 
        Copyright Royalty Judges under this chapter, and decisions of 
        the court in appeals under this chapter before, on, or after 
        such effective date. Any participant in a proceeding under 
        subsection (b)(2) may submit relevant information and proposals 
        to the Copyright Royalty Judges.
          ``(2) Judges acting as panel and individually.--The Copyright 
        Royalty Judges shall preside over hearings in proceedings under 
        this chapter en banc. The Chief Copyright Royalty Judge may 
        designate a Copyright Royalty Judge to preside individually 
        over such collateral and administrative proceedings, and over 
        such proceedings under paragraphs (1) through (5) of subsection 
        (b), as the Chief Judge considers appropriate.
          ``(3) Determinations.--Final determinations of the Copyright 
        Royalty Judges in proceedings under this chapter shall be made 
        by majority vote. A Copyright Royalty Judge dissenting from the 
        majority on any determination under this chapter may issue his 
        or her dissenting opinion, which shall be included with the 
        determination.
  ``(b) Procedures.--
          ``(1) Initiation.--
                  ``(A) Call for petitions to participate.--(i) 
                Promptly upon the filing of a petition for a rate 
                adjustment or determination under section 804(a) or 
                804(b)(8), or by no later than January 5 of a year 
                specified in section 804 for the commencement of a 
                proceeding if a petition has not been filed by that 
                date, the Copyright Royalty Judges shall cause to be 
                published in the Federal Register notice of 
                commencement of proceedings under this chapter calling 
                for the filing of petitions to participate in a 
                proceeding under this chapter for the purpose of making 
                the relevant determination under section 111, 112, 114, 
                115, 116, 118, 119, 1004 or 1007, as the case may be.
                  ``(ii) Petitions to participate shall be filed by no 
                later than 30 days after publication of notice of 
                commencement of a proceeding, under clause (i), except 
                that the Copyright Royalty Judges may, for substantial 
                good cause shown and if there is no prejudice to the 
                participants that have already filed petitions, accept 
                late petitions to participate at any time up to the 
                date that is 90 days before the date on which 
                participants in the proceeding are to file their 
                written direct statements.
                  ``(B) Petitions to participate.--Each petition to 
                participate in a proceeding shall describe the 
                petitioner's interest in the subject matter of the 
                proceeding. Parties with similar interests may file a 
                single petition to participate.
          ``(2) Participation in general.--Subject to paragraph (4), a 
        person may participate in a proceeding under this chapter, 
        including through the submission of briefs or other 
        information, only if--
                  ``(A) that person has filed a petition to participate 
                in accordance with paragraph (1) (either individually 
                or as a group under paragraph (1)(B)), together with a 
                filing fee of $150;
                  ``(B) the Copyright Royalty Judges have not 
                determined that the petition to participate is facially 
                invalid; and
                  ``(C) the Copyright Royalty Judges have not 
                determined, sua sponte or on the motion of another 
                participant in the proceeding, that the person lacks a 
                significant interest in the proceeding.
          ``(3) Voluntary negotiation period.--
                  ``(A) In general.--Promptly after the date for filing 
                of petitions to participate in a proceeding, the 
                Copyright Royalty Judges shall make available to all 
                participants in the proceeding a list of such 
                participants and shall initiate a voluntary negotiation 
                period among the participants.
                  ``(B) Length of proceedings.--The voluntary 
                negotiation period initiated under subparagraph (A) 
                shall be 3 months.
                  ``(C) Determination of subsequent proceedings.--At 
                the close of the voluntary negotiation proceedings, the 
                Copyright Royalty Judges shall, if further proceedings 
                under this chapter are necessary, determine whether and 
                to what extent paragraphs (4) and (5) will apply to the 
                parties.
          ``(4) Small claims procedure in distribution proceedings.--
                  ``(A) In general.--If, in a proceeding under this 
                chapter to determine the distribution of royalties, a 
                participant in the proceeding asserts that the 
                contested amount of the claim is $10,000 or less, the 
                Copyright Royalty Judges shall decide the controversy 
                on the basis of the filing in writing of the initial 
                claim, the initial response by any opposing 
                participant, and one additional response by each such 
                party. The participant asserting the claim shall not be 
                required to pay the filing fee under paragraph (2).
                  ``(B) Bad faith inflation of claim.--If the Copyright 
                Royalty Judges determine that a participant asserts in 
                bad faith an amount in controversy in excess of $10,000 
                for the purpose of avoiding a determination under the 
                procedure set forth in subparagraph (A), the Copyright 
                Royalty Judges shall impose a fine on that participant 
                in an amount not to exceed the difference between the 
                actual amount distributed and the amount asserted by 
                the participant.
          ``(5) Paper proceedings in ratemaking proceedings.--The 
        Copyright Royalty Judges in proceedings under this chapter to 
        determine royalty rates may decide, sua sponte or upon motion 
        of a participant, to determine issues on the basis of initial 
        filings in writing, initial responses by any opposing 
        participant, and one additional response by each such 
        participant. Prior to making such decision to proceed on such a 
        paper record only, the Copyright Royalty Judges shall offer to 
        all parties to the proceeding the opportunity to comment on the 
        decision. The procedure under this paragraph--
                  ``(A) shall be applied in cases in which there is no 
                genuine issue of material fact, there is no need for 
                evidentiary hearings, and all participants in the 
                proceeding agree in writing to the procedure; and
                  ``(B) may be applied under such other circumstances 
                as the Copyright Royalty Judges consider appropriate.
          ``(6) Regulations.--
                  ``(A) In general.--The Copyright Royalty Judges may 
                issue regulations to carry out their functions under 
                this title. Not later than 120 days after Copyright 
                Royalty Judges or interim Copyright Royalty Judges, as 
                the case may be, are first appointed after the 
                enactment of the Copyright Royalty and Distribution 
                Reform Act of 2003, such judges shall issue regulations 
                to govern proceedings under this chapter.
                  ``(B) Interim regulations.--Until regulations are 
                adopted under subparagraph (A), the Copyright Royalty 
                Judges shall apply the regulations in effect under this 
                chapter on the day before the effective date of the 
                Copyright Royalty and Distribution Reform Act of 2003, 
                to the extent such regulations are not inconsistent 
                with this chapter, except that functions carried out 
                under such regulations by the Librarian of Congress, 
                the Register of Copyrights, or copyright arbitration 
                royalty panels that, as of such date of enactment, are 
                to be carried out by the Copyright Royalty Judges under 
                this chapter, shall be carried out by the Copyright 
                Royalty Judges under such regulations.
                  ``(C) Requirements.--Regulations issued under 
                subparagraph (A) shall include the following:
                          ``(i) The written direct statements of all 
                        participants in a proceeding under paragraph 
                        (2) shall be filed by a date specified by the 
                        Copyright Royalty Judges, which may be no 
                        earlier than four months, and no later than 
                        five months, after the end of the voluntary 
                        negotiation period under paragraph (3). 
                        Notwithstanding the preceding sentence, a 
                        participant in a proceeding may, within 15 days 
                        after the end of the discovery period specified 
                        in clause (iii), file an amended written direct 
                        statement based on new information received 
                        during the discovery process.
                          ``(ii)(I) Following the submission to the 
                        Copyright Royalty Judges of written direct 
                        statements by the participants in a proceeding 
                        under paragraph (2), the judges shall meet with 
                        the participants for the purpose of setting a 
                        schedule for conducting and completing 
                        discovery. Such schedule shall be determined by 
                        the Copyright Royalty Judges.
                          ``(II) In this chapter, the term `written 
                        direct statements' means witness statements, 
                        testimony, and exhibits to be presented in the 
                        proceedings, and such other information that is 
                        necessary to establish terms and rates, or the 
                        distribution of royalty payments, as the case 
                        may be, as set forth in regulations issued by 
                        the Copyright Royalty Judges.
                          ``(iii) Hearsay may be admitted in 
                        proceedings under this chapter to the extent 
                        deemed appropriate by the Copyright Royalty 
                        Judges.
                          ``(iv) Discovery in such proceedings shall be 
                        permitted for a period of 60 days, except for 
                        discovery ordered by the Copyright Royalty 
                        Judges in connection with the resolution of 
                        motions, orders and disputes pending at the end 
                        of such period.
                          ``(v) Any participant under paragraph (2) in 
                        a proceeding under this chapter to determine 
                        royalty rates may, upon written notice, seek 
                        discovery of information and materials relevant 
                        and material to the proceeding. Any objection 
                        to any such discovery request shall be resolved 
                        by a motion or request to compel discovery made 
                        to the Copyright Royalty Judges. Each motion or 
                        request to compel discovery shall be determined 
                        by the Copyright Royalty Judges, or by a 
                        Copyright Royalty Judge when permitted under 
                        subsection (a)(2), who may approve the request 
                        only if the evidence that would be produced is 
                        relevant and material. A Copyright Royalty 
                        Judge may refuse a request to compel discovery 
                        of evidence that has been found to be relevant 
                        and material, only upon good cause shown. For 
                        purposes of the preceding sentence, the basis 
                        for `good cause' may only be that--
                                  ``(I) the discovery sought is 
                                unreasonably cumulative or duplicative, 
                                or is obtainable from another source 
                                that is more convenient, less 
                                burdensome, or less expensive;
                                  ``(II) the participant seeking 
                                discovery has had ample opportunity by 
                                discovery in the action to obtain the 
                                information sought; or
                                  ``(II) the burden or expense of the 
                                proposed discovery outweighs its likely 
                                benefit, taking into account the needs 
                                and resources of the participants, the 
                                importance of the issues at stake, and 
                                the importance of the proposed 
                                discovery in resolving the issues.
                          ``(vi) The rules in effect on the day before 
                        the effective date of the Copyright Royalty and 
                        Distribution Reform Act of 2003, relating to 
                        discovery in proceedings under this title to 
                        determine the distribution of royalty fees, 
                        shall continue to apply to such proceedings on 
                        and after such effective date.
                          ``(vii) The Copyright Royalty Judges may 
                        issue subpoenas requiring the production of 
                        evidence or witnesses, but only if the evidence 
                        requested to be produced or that would be 
                        proffered by the witness is relevant and 
                        material.
                          ``(viii) The Copyright Royalty Judges shall 
                        order a settlement conference among the 
                        participants in the proceeding to facilitate 
                        the presentation of offers of settlement among 
                        the participants. The settlement conference 
                        shall be held during a 21-day period following 
                        the end of the discovery period.
  ``(c) Determination of Copyright Royalty Judges.--
          ``(1) Timing.--The Copyright Royalty Judges shall issue their 
        determination in a proceeding not later than 11 months after 
        the conclusion of the 21-day settlement conference period under 
        subsection (b)(3)(C)(vi), but, in the case of a proceeding to 
        determine successors to rates or terms that expire on a 
        specified date, in no event later than 15 days before the 
        expiration of the then current statutory rates and terms.
          ``(2) Rehearings.--
                  ``(A) In general.--The Copyright Royalty Judges may, 
                in exceptional cases, upon motion of a participant 
                under subsection (b)(2), order a rehearing, after the 
                determination in a proceeding is issued under paragraph 
                (1), on such matters as the Copyright Royalty Judges 
                determine to be appropriate.
                  ``(B) Timing for filing motion.--Any motion for a 
                rehearing under subparagraph (A) may only be filed 
                within 15 days after the date on which the Copyright 
                Royalty Judges deliver their initial determination 
                concerning rates and terms to the participants in the 
                proceeding.
                  ``(C) Participation by opposing party not required.--
                In any case in which a rehearing is ordered, any 
                opposing party shall not be required to participate in 
                the rehearing.
                  ``(D) No negative inference.--No negative inference 
                shall be drawn from lack of participation in a 
                rehearing.
                  ``(E) Continuity of rates and terms.--(i) If the 
                decision of the Copyright Royalty Judges on any motion 
                for a rehearing is not rendered before the expiration 
                of the statutory rates and terms that were previously 
                in effect, in the case of a proceeding to determine 
                successors to rates and terms that expire on a 
                specified date, then--
                          ``(I) the initial determination of the 
                        Copyright Royalty Judges that is the subject of 
                        the rehearing motion shall be effective as of 
                        the day following the date on which the rates 
                        and terms that were previously in effect 
                        expire; and
                          ``(II) in the case of a proceeding under 
                        section 114(f)(1)(C) or 114(f)(2)(C), royalty 
                        rates and terms shall, for purposes of section 
                        114(f)(4)(B), be deemed to have been set at 
                        those rates and terms contained in the initial 
                        determination of the Copyright Royalty Judges 
                        that is the subject of the rehearing motion, as 
                        of the date of that determination.
                  ``(ii) The pendency of a motion for a rehearing under 
                this paragraph shall not relieve persons obligated to 
                make royalty payments who would be affected by the 
                determination on that motion from providing the 
                statements of account and any reports of use, to the 
                extent required, and paying the royalties required 
                under the relevant determination or regulations.
                  ``(iii) Notwithstanding clause (ii), whenever 
                royalties described in clause (ii) are paid to a person 
                other than the Copyright Office, the entity designated 
                by the Copyright Royalty Judges to which such royalties 
                are paid by the copyright user (and any successor 
                thereto) shall, within 60 days after the motion for 
                rehearing is resolved or, if the motion is granted, 
                within 60 days after the rehearing is concluded, return 
                any excess amounts previously paid to the extent 
                necessary to comply with the final determination of 
                royalty rates by the Copyright Royalty Judges.
          ``(3) Contents of determination.--A determination of the 
        Copyright Royalty Judges shall be accompanied by the written 
        record, and shall set forth the facts that the Copyright 
        Royalty Judges found relevant to their determination. Among 
        other terms adopted in a determination, the Copyright Royalty 
        Judges may specify notice and recordkeeping requirements of 
        users of the copyrights at issue that apply in lieu of those 
        that would otherwise apply under regulations.
          ``(4) Continuing jurisdiction.--The Copyright Royalty Judges 
        may amend the determination or the regulations issued pursuant 
        to the determination in order to correct any technical errors 
        in the determination or to respond to unforeseen circumstances 
        that preclude the proper effectuation of the determination.
          ``(5) Protective order.--The Copyright Royalty Judges may 
        issue such orders as may be appropriate to protect confidential 
        information, including orders excluding confidential 
        information from the record of the determination that is 
        published or made available to the public, except that any 
        terms or rates of royalty payments or distributions may not be 
        excluded.
          ``(6) Publication of determination.--The Librarian of 
        Congress shall cause the determination, and any corrections 
        thereto, to be published in the Federal Register. The Librarian 
        of Congress shall also publicize the determination and 
        corrections in such other manner as the Librarian considers 
        appropriate, including, but not limited to, publication on the 
        Internet. The Librarian of Congress shall also make the 
        determination, corrections, and the accompanying record 
        available for public inspection and copying.
  ``(d) Judicial Review.--
          ``(1) Appeal.--Any determination of the Copyright Royalty 
        Judges under subsection (c) may, within 30 days after the 
        publication of the determination in the Federal Register, be 
        appealed, to the United States Court of Appeals for the 
        District of Columbia Circuit, by any aggrieved participant in 
        the proceeding under subsection (b)(2) who fully participated 
        in the proceeding and who would be bound by the determination. 
        If no appeal is brought within that 30-day period, the 
        determination of the Copyright Royalty Judges shall be 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 paragraph (2).
          ``(2) Effect of rates.--
                  ``(A) Expiration on specified date.--When this title 
                provides that the royalty rates and terms that were 
                previously in effect are to expire on a specified date, 
                any adjustment or determination by the Copyright 
                Royalty Judges of successor rates and terms for an 
                ensuing statutory license period shall be effective as 
                of the day following the date of expiration of the 
                rates and terms that were previously in effect, even if 
                the determination of the Copyright Royalty Judges is 
                rendered on a later date.
                  ``(B) Other cases.--In cases where rates and terms do 
                not expire on a specified date or have not yet been 
                established, successor or new rates or terms shall take 
                effect on the first day of the second month that begins 
                after the publication of the determination of the 
                Copyright Royalty Judges in the Federal Register, 
                except as otherwise provided in this title, and the 
                rates and terms previously in effect, to the extent 
                applicable, shall remain in effect until such successor 
                rates and terms become effective.
                  ``(C) Obligation to make payments.--(i) The pendency 
                of an appeal under this subsection shall not relieve 
                persons obligated to make royalty payments under 
                section 111, 112, 114, 115, 116, 118, 119, or 1003, who 
                would be affected by the determination on appeal, from 
                providing the statements of account (and any report of 
                use, to the extent required) and paying the royalties 
                required under the relevant determination or 
                regulations.
                  ``(ii) Notwithstanding clause (i), whenever royalties 
                described in clause (i) are paid to a person other than 
                the Copyright Office, the entity designated by the 
                Copyright Royalty Judges to which such royalties are 
                paid by the copyright user (and any successor thereto) 
                shall, within 60 days after the final resolution of the 
                appeal, return any excess amounts previously paid (and 
                interest thereon, if ordered pursuant to paragraph (3)) 
                to the extent necessary to comply with the final 
                determination of royalty rates on appeal.
          ``(3) Jurisdiction of court.--If the court, pursuant to 
        section 706 of title 5, modifies or vacates a determination of 
        the Copyright Royalty Judges, the court may enter its own 
        determination with respect to the amount or distribution of 
        royalty fees and costs, and order the repayment of any excess 
        fees, the payment of any underpaid fees, and the payment of 
        interest pertaining respectively thereto, in accordance with 
        its final judgment. The court may also vacate the determination 
        of the Copyright Royalty Judges and remand the case to the 
        Copyright Royalty Judges for further proceedings in accordance 
        with subsection (a).
  ``(e) Administrative Matters.--
          ``(1) Deduction of costs of library of congress and copyright 
        office from filing fees.--
                  ``(A) Deduction from filing fees.--The Librarian of 
                Congress may, to the extent not otherwise provided 
                under this title, deduct from the filing fees collected 
                under subsection (b) for a particular proceeding under 
                this chapter the reasonable costs incurred by the 
                Librarian of Congress, the Copyright Office, and the 
                Copyright Royalty Judges in conducting that proceeding, 
                other than the salaries of the Copyright Royalty Judges 
                and the 3 staff members appointed under section 802(b).
                  ``(B) Authorization of appropriations.--There are 
                authorized to be appropriated such sums as may be 
                necessary to pay the costs of proceedings under this 
                chapter not covered by the filing fees collected under 
                subsection (b). All funds made available pursuant to 
                this subparagraph shall remain available until 
                expended.
          ``(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, 112, 114, 115, 116, 118, or 119 
        or chapter 10.

``Sec. 804. Institution of proceedings

  ``(a) Filing of Petition.--With respect to proceedings referred to in 
paragraphs (1) and (2) of section 801(b) concerning the determination 
or adjustment of royalty rates as provided in sections 111, 112, 114, 
115, 116, 118, and 1004, during the calendar years specified in the 
schedule set forth in subsection (b), any owner or user of a 
copyrighted work whose royalty rates are specified by this title, or 
are established under this chapter before or after the enactment of the 
Copyright Royalty and Distribution Reform Act of 2003, may file a 
petition with the Copyright Royalty Judges declaring that the 
petitioner requests a determination or adjustment of the rate. The 
Copyright Royalty Judges shall make a determination as to whether the 
petitioner has such a significant interest in the royalty rate in which 
a determination or adjustment is requested. If the Copyright Royalty 
Judges determine that the petitioner has such a significant interest, 
the Copyright Royalty Judges shall cause notice of this determination, 
with the reasons therefor, to be published in the Federal Register, 
together with the notice of commencement of proceedings under this 
chapter. With respect to proceedings under paragraph (1) of section 
801(b) concerning the determination or adjustment of royalty rates as 
provided in sections 112 and 114, during the calendar years specified 
in the schedule set forth in subsection (b), the Copyright Royalty 
Judges shall cause notice of commencement of proceedings under this 
chapter to be published in the Federal Register as provided in section 
803(b)(1)(A).
  ``(b) Timing of Proceedings.--
          ``(1) Section 111 proceedings.--(A) A petition described in 
        subsection (a) to initiate proceedings under section 801(b)(2) 
        concerning the adjustment of royalty rates under section 111 to 
        which subparagraph (A) or (D) of section 801(b)(2) applies may 
        be filed during the year 2004 and in each subsequent fifth 
        calendar year.
          ``(B) In order to initiate proceedings under section 
        801(b)(2) concerning the adjustment of royalty rates under 
        section 111 to which subparagraph (B) or (C) of section 
        801(b)(2) applies, within 12 months after an event described in 
        either of those subsections, any owner or user of a copyrighted 
        work whose royalty rates are specified by section 111, or by a 
        rate established under this chapter before or after the 
        enactment of the Copyright Royalty and Distribution Reform Act 
        of 2003, may file a petition with the Copyright Royalty Judges 
        declaring that the petitioner requests an adjustment of the 
        rate. The Copyright Royalty Judges shall then proceed as set 
        forth in subsection (a) of this section. Any change in royalty 
        rates made under this chapter pursuant to this subparagraph may 
        be reconsidered in the year 2005, and each fifth calendar year 
        thereafter, in accordance with the provisions in section 
        801(b)(3)(B) or (C), as the case may be. A petition for 
        adjustment of rates under section 11(d)(1)(B) as a result of a 
        change is the rules and regulations of the Federal 
        Communications Commission shall set forth the change on which 
        the petition is based.
          ``(2) Certain section 112 proceedings.--Proceedings under 
        this chapter shall be commenced in the year 2007 to determine 
        reasonable terms and rates of royalty payments for the 
        activities described in section 112(e)(1) relating to the 
        limitation on exclusive rights specified by section 
        114(d)(1)(C)(iv), to become effective on January 1, 2009. Such 
        proceedings shall be repeated in each subsequent fifth calendar 
        year.
          ``(3) Section 114 and corresponding 112 proceedings.--
                  ``(A) For eligible nonsubscription services and new 
                subscription services.--Proceedings under this chapter 
                shall be commenced as soon as practicable after the 
                effective date of the Copyright Royalty and 
                Distribution Reform Act of 2003 to determine reasonable 
                terms and rates of royalty payments under sections 114 
                and 112 for the activities of eligible nonsubscription 
                transmission services and new subscription services, to 
                be effective for the period beginning on January 1, 
                2006, and ending on December 31, 2010. Such proceedings 
                shall next be commenced in January 2009 to determine 
                reasonable terms and rates of royalty payments, to 
                become effective on January 1, 2011. Thereafter, such 
                proceedings shall be repeated in each subsequent fifth 
                calendar year.
                  ``(B) For preexisting subscription and satellite 
                digital audio radio services.--Proceedings under this 
                chapter shall be commenced in January 2006 to determine 
                reasonable terms and rates of royalty payments under 
                sections 114 and 112 for the activities of preexisting 
                subscription services, to be effective during the 
                period beginning on January 1, 2008, and ending on 
                December 31, 2012, and preexisting satellite digital 
                audio radio services, to be effective during the period 
                beginning on January 1, 2007, and ending on December 
                31, 2012. Such proceedings shall next be commenced in 
                2011 to determine reasonable terms and rates of royalty 
                payments, to become effective on January 1, 2013. 
                Thereafter, such proceedings shall be repeated in each 
                subsequent fifth calendar year.
                  ``(C)(i) Notwithstanding any other provision of this 
                chapter, this subparagraph shall govern proceedings 
                commenced pursuant to sections 114(f)(1)(C) and 
                114(f)(2)(C) concerning new types of services.
                  ``(ii) Not later than 30 days after a petition to 
                determine rates and terms for a new type of service 
                that is filed by any copyright owner of sound 
                recordings, or such new type of service, indicating 
                that such new type of service is or is about to become 
                operational, the Copyright Royalty Judges shall issue a 
                notice for a proceeding to determine rates and terms 
                for such service.
                  ``(iii) The proceeding shall follow the schedule set 
                forth in such subsections (b), (c), and (d) of section 
                803, except that--
                          ``(I) the determination shall be issued by 
                        not later than 24 months after the publication 
                        of the notice under clause (ii); and
                          ``(II) the decision shall take effect as 
                        provided in subsections (c)(2) and (d)(2) of 
                        section 803 and section 114(f)(4)(B)(ii) and 
                        (C).
                  ``(iv) The rates and terms shall remain in effect for 
                the period set forth in section 114(f)(1)(C) or 
                114(f)(2)(C), as the case may be.
          ``(4) Section 115 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 801(b)(1) 
        concerning the adjustment or determination of royalty rates as 
        provided in section 115 may be filed in the year 2006 and in 
        each subsequent fifth calendar year, or at such other times as 
        the parties have agreed under section 115(c)(3)(B) and (C).
          ``(5) Section 116 proceedings.--(A) A petition described in 
        subsection (a) to initiate proceedings under section 801(b) 
        concerning the determination of royalty rates and terms as 
        provided in section 116 may be filed at any time within 1 year 
        after negotiated licenses authorized by section 116 are 
        terminated or expire and are not replaced by subsequent 
        agreements.
          ``(B) If a negotiated license authorized by section 116 is 
        terminated or expires and is not replaced by another such 
        license agreement which provides permission to use a quantity 
        of musical works not substantially smaller than the quantity of 
        such works performed on coin-operated phonorecord players 
        during the 1-year period ending March 1, 1989, the Copyright 
        Royalty Judges shall, upon petition filed under paragraph (1) 
        within 1 year after such termination or expiration, commence a 
        proceeding to promptly establish an interim royalty rate or 
        rates for the public performance by means of a coin-operated 
        phonorecord player of nondramatic musical works embodied in 
        phonorecords which had been subject to the terminated or 
        expired negotiated license agreement. Such rate or rates shall 
        be the same as the last such rate or rates and shall remain in 
        force until the conclusion of proceedings by the Copyright 
        Royalty Judges, in accordance with section 803, to adjust the 
        royalty rates applicable to such works, or until superseded by 
        a new negotiated license agreement, as provided in section 
        116(b).
          ``(6) Section 118 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 801(b)(1) 
        concerning the determination of reasonable terms and rates of 
        royalty payments as provided in section 118 may be filed in the 
        year 2006 and in each subsequent fifth calendar year.
          ``(7) Section 1004 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 801(b)(1) 
        concerning the adjustment of reasonable royalty rates under 
        section 1004 may be filed as provided in section 1004(a)(3).
          ``(8) Proceedings concerning distribution of royalty fees.--
        With respect to proceedings under section 801(b)(3) concerning 
        the distribution of royalty fees in certain circumstances under 
        section 111, 116, 119, or 1007, the Copyright Royalty Judges 
        shall, upon a determination that a controversy exists 
        concerning such distribution, cause to be published in the 
        Federal Register notice of commencement of proceedings under 
        this chapter.

``Sec. 805. General rule for voluntarily negotiated agreements

  ``Any rates or terms under this title that--
          ``(1) are agreed to by participants to a proceeding under 
        section 803(b)(2),
          ``(2) are adopted by the Copyright Royalty Judges as part of 
        a determination under this chapter, and
          ``(3) are in effect for a period shorter than would otherwise 
        apply under a determination pursuant to this chapter,
shall remain in effect for such period of time as would otherwise apply 
under such determination, except that the Copyright Royalty Judges 
shall adjust the rates pursuant to the voluntary negotiations to 
reflect national monetary inflation during the additional period the 
rates remain in effect.''.
  (b) Conforming Amendment.--The table of chapters for title 17, United 
States Code, is amended by striking the item relating to chapter 8 and 
inserting the following:

``8. Proceedings by Copyright Royalty Judges................     801''.

SEC. 4. DEFINITION.

  Section 101 is amended by inserting after the definition of 
``copies'' the following:
          ``A `Copyright Royalty Judge' is a Copyright Royalty Judge 
        appointed under section 802 of this title, and includes any 
        individual serving as an interim Copyright Royalty Judge under 
        such section.''.

SEC. 5. TECHNICAL AMENDMENTS.

  (a) Cable Rates.--Section 111(d) is amended--
          (1) in paragraph (2), in the second sentence, by striking ``a 
        copyright arbitration royalty panel'' and inserting ``the 
        Copyright Royalty Judges.''; and
          (2) in paragraph (4)--
                  (A) in subparagraph (A), by striking ``Librarian of 
                Congress'' each place it appears and inserting 
                ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) in the first sentence, by striking 
                        ``Librarian of Congress shall, upon the 
                        recommendation of the Register of Copyrights,'' 
                        and inserting ``Copyright Royalty Judges 
                        shall'';
                          (ii) in the second sentence, by striking 
                        ``Librarian determines'' and inserting 
                        ``Copyright Royalty Judges determine''; and
                          (iii) in the third sentence--
                                  (I) by striking ``Librarian'' each 
                                place it appears and inserting 
                                ``Copyright Royalty Judges''; and
                                  (II) by striking ``convene a 
                                copyright arbitration royalty panel'' 
                                and inserting ``conduct a proceeding''; 
                                and
                  (C) in subparagraph (C), by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges''.
  (b) Ephemeral Recordings.--Section 112(e) is amended--
          (1) in paragraph (3)--
                  (A) by amending the first sentence to read as 
                follows: ``Voluntary negotiation proceedings initiated 
                pursuant to section 804(a) for the purpose of 
                determining reasonable terms and rates of royalty 
                payments for the activities specified by paragraph (1) 
                shall cover the 5-year period beginning on January 1 of 
                the second year following the year in which the 
                proceedings are commenced, or such other period as the 
                parties may agree.''; and
                  (B) in the third sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (2) in paragraph (4)--
                  (A) by amending the first sentence to read as 
                follows: ``In the absence of license agreements 
                negotiated under paragraphs (2) and (3), the Copyright 
                Royalty Judges shall commence a proceeding pursuant to 
                chapter 8 to determine and publish in the Federal 
                Register a schedule of reasonable rates and terms 
                which, subject to paragraph (5), shall be binding on 
                all copyright owners of sound recordings and 
                transmitting organizations entitled to a statutory 
                license under this subsection during the 5-year period 
                specified in paragraph (3), or such other period as the 
                parties may agree.'';
                  (B) by striking ``copyright arbitration royalty 
                panel'' each subsequent place it appears and inserting 
                ``Copyright Royalty Judges'';
                  (C) in the fourth sentence, by striking ``its 
                decision'' and inserting ``their decision''; and
                  (D) in the last sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (3) in paragraph (5), by striking ``or decision by the 
        Librarian of Congress'' and inserting ``, decision by the 
        Librarian of Congress, or determination by the Copyright 
        Royalty Judges''; and
          (4) by striking paragraph (6) and redesignating paragraphs 
        (7), (8), and (9), as paragraphs (6), (7), and (8), 
        respectively; and
          (5) in paragraph (6)(A), as so redesignated, by striking 
        ``Librarian of Congress'' and inserting ``Copyright Royalty 
        Judges''.
  (c) Scope of Exclusive Rights in Sound Recordings.--Section 114(f) is 
amended--
          (1) in paragraph (1)--
                  (A) in subparagraph (A)--
                          (i) by amending the first sentence to read as 
                        follows: ``Voluntary negotiation proceedings 
                        initiated pursuant to section 804(a) for the 
                        purpose of determining reasonable terms and 
                        rates of royalty payments for subscription 
                        transmissions by preexisting subscription 
                        services and transmissions by preexisting 
                        satellite digital audio radio services shall 
                        cover the 5-year period beginning on January 1 
                        of the year following the second year in which 
                        the proceedings are commenced, except where 
                        differential transitional periods are provided 
                        in section 804(b)(3), or such other period as 
                        the parties may agree.''; and
                          (ii) in the third sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) by amending the first sentence to read as 
                        follows: ``In the absence of license agreements 
                        negotiated under subparagraph (A), the 
                        Copyright Royalty Judges shall commence a 
                        proceeding pursuant to chapter 8 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 affected by this paragraph 
                        during the 5-year period specified in 
                        subparagraph (A), or such other date as the 
                        parties may agree.''; and
                          (ii) in the second sentence, by striking 
                        ``copyright arbitration royalty panel'' and 
                        inserting ``Copyright Royalty Judges''; and
                  (C) by amending subparagraph (C) to read as follows:
          ``(C) The procedures under subparagraphs (A) and (B) also 
        shall be initiated pursuant to a petition filed by any 
        copyright owners of sound recordings, any preexisting 
        subscription services, or any preexisting satellite digital 
        audio radio services indicating that a new type of subscription 
        digital audio transmission service on which sound recordings 
        are performed is or is about to become operational, for the 
        purpose of determining reasonable terms and rates of royalty 
        payments with respect to such new type of transmission service 
        for the period beginning with the inception of such new type of 
        service and ending on the date on which the royalty rates and 
        terms for subscription digital audio transmission services most 
        recently determined under subparagraph (A) or (B) and chapter 8 
        expire, or such other period as the parties may agree.'';
          (2) in paragraph (2)--
                  (A) in subparagraph (A)--
                          (i) by amending the first sentence to read as 
                        follows: ``Voluntary negotiation proceedings 
                        initiated pursuant to section 804(a) for the 
                        purpose of determining reasonable terms and 
                        rates of royalty payments for public 
                        performances of sound recordings by means of 
                        eligible nonsubscription transmissions and 
                        transmissions by new subscription services 
                        specified by subsection (d)(2) shall cover the 
                        5-year period beginning on January 1 of the 
                        second year following the year in which the 
                        proceedings are commenced, except where 
                        different transitional periods are provided in 
                        section 804(b)(3)(A), or such other period as 
                        the parties may agree.''; and
                          (ii) in the third sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) by amending the first sentence to read as 
                        follows: ``In the absence of license agreements 
                        negotiated under subparagraph (A), the 
                        Copyright Royalty Judges shall commence a 
                        proceeding pursuant to chapter 8 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 affected by this paragraph 
                        during the period specified in subparagraph 
                        (A), or such other period as the parties may 
                        agree.''; and
                          (ii) by striking ``copyright arbitration 
                        royalty panel'' each subsequent place it 
                        appears and inserting ``Copyright Royalty 
                        Judges''; and
                  (C) by amending subparagraph (C) to read as follows:
          ``(C) The procedures under subparagraphs (A) and (B) shall 
        also be initiated pursuant to a petition filed by any copyright 
        owners of sound recordings or any eligible nonsubscription 
        service or new subscription service indicating that a new type 
        of eligible nonsubscription service or new subscription service 
        on which sound recordings are performed is or is about to 
        become operational, for the purpose of determining reasonable 
        terms and rates of royalty payments with respect to such new 
        type of service for the period beginning with the inception of 
        such new type of service and ending on the date on which the 
        royalty rates and terms for preexisting subscription digital 
        audio transmission services or preexisting satellite digital 
        radio audio services, as the case may be, most recently 
        determined under subparagraph (A) or (B) and chapter 8 expire, 
        or such other period as the parties may agree.'';
          (3) in paragraph (3), by striking ``or decision by the 
        Librarian of Congress'' and inserting ``, decision by the 
        Librarian of Congress, or determination by the Copyright 
        Royalty Judges''; and
          (4) in paragraph (4), by striking ``Librarian of Congress'' 
        each place it appears and inserting ``Copyright Royalty 
        Judges''.
  (d) Phonorecords of Nondramatic Musical Works.--Section 115(c)(3) is 
amended--
          (1) in subparagraph (A)(ii), by striking ``(F)'' and 
        inserting ``(E)'';
          (2) in subparagraph (B)--
                  (A) by striking ``under this paragraph'' and 
                inserting ``under this section; and
                  (B) by striking ``subparagraphs (B) through (F)'' and 
                inserting ``this subparagraph and subparagraphs (B) 
                through (E)'';
          (3) in subparagraph (C)--
                  (A) by amending the first sentence to read as 
                follows: ``Voluntary negotiation proceedings initiated 
                pursuant to a petition filed under section 804(a) for 
                the purpose of determining reasonable terms and rates 
                of royalty payments for the activities specified by 
                this section shall cover the period beginning with the 
                effective date of such terms and rates, but not earlier 
                than January 1 of the second year following the year in 
                which the petition is filed, and ending on the 
                effective date of successor terms and rates, or such 
                other period as the parties may agree.''; and
                  (B) in the third sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (4) in subparagraph (D)--
                  (A) by amending the first sentence to read as 
                follows: ``In the absence of license agreements 
                negotiated under subparagraphs (B) and (C), the 
                Copyright Royalty Judges shall commence proceedings 
                pursuant to chapter 8 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 specified in 
                subparagraph (C) or such other period as may be 
                determined pursuant to subparagraphs (B) and (C), or 
                such other period as the parties may agree.'';
                  (B) in the third sentence, by striking ``copyright 
                arbitration royalty panel'' and inserting ``Copyright 
                Royalty Judges''; and
                  (C) in the last sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (5) in subparagraph (E)--
                  (A) in clause (i)--
                          (i) in the first sentence, by striking ``the 
                        Librarian of Congress'' and inserting ``a 
                        copyright arbitration royalty panel, the 
                        Librarian of Congress, or the Copyright Royalty 
                        Judges''; and
                          (ii) in the second sentence, by striking 
                        ``(C), (D) or (F) shall be given effect'' and 
                        inserting ``(C) or (D) shall be given effect as 
                        to digital phonorecord deliveries''; and
                  (B) in clause (ii)(I), by striking ``(C), (D) or 
                (F)'' each place it appears and inserting ``(C) or 
                (D)'';
          (6) by striking subparagraph (F) and redesignating 
        subparagraphs (G) through (L) as subparagraphs (F) through (K), 
        respectively.
  (e) Coin-Operated Phonorecord Players.--Section 116 is amended--
          (1) in subsection (b), by amending paragraph (2) to read as 
        follows:
          ``(2) Chapter 8 proceeding.--Parties not subject to such a 
        negotiation may have the terms and rates and the division of 
        fees described in paragraph (1) determined in a proceeding in 
        accordance with the provisions of chapter 8.''; and
          (2) in subsection (c)--
                  (A) in the subsection heading, by striking 
                ``Copyright Arbitration Royalty Panel Determinations'' 
                and inserting ``Determinations by Copyright Royalty 
                Judges''; and
                  (B) by striking ``a copyright arbitration royalty 
                panel'' and inserting ``the Copyright Royalty Judges''.
  (f) Use of Certain Works in Connection With Noncommercial 
Broadcasting.--Section 118 is amended--
          (1) in subsection (b)--
                  (A) in paragraph (1)--
                          (i) in the first sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges''; and
                          (ii) by striking the second and third 
                        sentences;
                  (B) in paragraph (2), by striking ``the Librarian of 
                Congress:'' and all that follows through the end of the 
                sentence and inserting ``a copyright arbitration 
                royalty panel, the Librarian of Congress, or the 
                Copyright Royalty Judge, if copies of such agreements 
                are filed with the Copyright Royalty Judges within 30 
                days of execution in accordance with regulations that 
                the Copyright Royalty Judges shall issue.''; and
                  (C) in paragraph (3)--
                          (i) in the second sentence--
                                  (I) by striking ``copyright 
                                arbitration royalty panel'' and 
                                inserting ``Copyright Royalty Judges''; 
                                and
                                  (II) by striking ``paragraph (2).'' 
                                and inserting ``paragraph (2) or 
                                (3).'';
                          (ii) in the last sentence, by striking 
                        ```Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges''; and
                          (iii) by striking ``(3) In'' and all that 
                        follows through the end of the first sentence 
                        and inserting the following:
          ``(3) Voluntary negotiation proceedings initiated pursuant to 
        a petition filed under section 804(a) for the purpose of 
        determining a schedule of terms and rates of royalty payments 
        by public broadcasting entities to copyright owners in works 
        specified by this subsection and the proportionate division of 
        fees paid among various copyright owners shall cover the 5-year 
        period beginning on January 1 of the second year following the 
        year in which the petition is filed. The parties to each 
        negotiation proceeding shall bear their own costs.
          ``(4) In the absence of license agreements negotiated under 
        paragraph (2) or (3), the Copyright Royalty Judges shall, 
        pursuant to chapter 8, conduct a proceeding to determine and 
        publish in the Federal Register a schedule of rates and terms 
        which, subject to paragraph (2), shall be binding on all owners 
        of copyright in works specified by this subsection and public 
        broadcasting entities, regardless of whether such copyright 
        owners have submitted proposals to the Copyright Royalty 
        Judges.'';
          (2) by striking subsection (c) and redesignating subsections 
        (d) through (g) as subsections (c) through (f), respectively;
          (3) in subsection (c), as so redesignated, in the matter 
        preceding paragraph (1)--
                  (A) by striking ``(b)(2)'' and inserting ``(b)(2) or 
                (3)'';
                  (B) by striking ``(b)(3)'' and inserting ``(b)(4)''; 
                and
                  (C) by striking ``a copyright arbitration royalty 
                panel'' and inserting ``the Copyright Royalty Judges'';
          (4) in subsection (d), as so redesignated--
                  (A) by striking ``in the Copyright Office'' and 
                inserting ``with the Copyright Royalty Judges''; and
                  (B) by striking ``Register of Copyrights'' and 
                inserting ``Copyright Royalty Judges''; and
          (5) in subsection (f), as so redesignated, by striking 
        ``(d)'' and inserting ``(c)''.
  (g) Secondary Transmissions by Satellite Carriers.--Section 119(b) is 
amended--
          (1) in paragraph (3), by striking ``Librarian of Congress'' 
        and inserting ``Copyright Royalty Judges''; and
          (2) in paragraph (4)--
                  (A) in subparagraph (A), by striking ``Librarian of 
                Congress'' each place it appears and inserting 
                ``Copyright Royalty Judges''; and
                  (B) by amending subparagraphs (B) and (C) to read as 
                follows:
                  ``(B) Determination of controversy; distributions.--
                After the first day of August of each year, the 
                Copyright Royalty Judges shall determine whether there 
                exists a controversy concerning the distribution of 
                royalty fees. If the Copyright Royalty Judges determine 
                that no such controversy exists, the Librarian of 
                Congress shall, after deducting reasonable 
                administrative costs under this paragraph, distribute 
                such fees to the copyright owners entitled to receive 
                them, or to their designated agents. If the Copyright 
                Royalty Judges find the existence of a controversy, the 
                Copyright Royalty Judges shall, pursuant to chapter 8 
                of this title, conduct a proceeding to determine the 
                distribution of royalty fees.
                  ``(C) Withholding of fees during controversy.--During 
                the pendency of any proceeding under this subsection, 
                the Copyright Royalty Judges shall withhold from 
                distribution an amount sufficient to satisfy all claims 
                with respect to which a controversy exists, subject to 
                any distributions made under section 801(b)(3).''.
  (h) Digital Audio Recording Devices.--
          (1) Royalty payments.--Section 1004(a)(3) is amended by 
        striking ``Librarian of Congress'' each place it appears and 
        inserting ``Copyright Royalty Judges''.
          (2) Entitlement to royalty payments.--Section 1006(c) is 
        amended by striking ``Librarian of Congress shall convene a 
        copyright arbitration royalty panel which'' and inserting 
        ``Copyright Royalty Judges''.
          (3) Procedures for distributing royalty payments.--Section 
        1007 is amended--
                  (A) in subsection (a), by amending paragraph (1) to 
                read as follows:
          ``(1) Filing of claims.--During the first 2 months of each 
        calendar year, every interested copyright party seeking to 
        receive royalty payments to which such party is entitled under 
        section 1006 shall file with the Copyright Royalty Judges a 
        claim for payments collected during the preceding year in such 
        form and manner as the Copyright Royalty Judges shall prescribe 
        by regulation.''; and
                  (B) by amending subsections (b) and (c) to read as 
                follows:
  ``(b) Distribution of Payments in the Absence of a Dispute.--After 
the period established for the filing of claims under subsection (a), 
in each year, the Copyright Royalty Judges shall determine whether 
there exists a controversy concerning the distribution of royalty 
payments under section 1006(c). If the Copyright Royalty Judges 
determine that no such controversy exists, the Librarian of Congress 
shall, within 30 days after such determination, authorize the 
distribution of the royalty payments as set forth in the agreements 
regarding the distribution of royalty payments entered into pursuant to 
subsection (a). The Librarian of Congress shall, before such royalty 
payments are distributed, deduct the reasonable administrative costs 
incurred by the Librarian under this section.
  ``(c) Resolution of Disputes.--If the Copyright Royalty Judges find 
the existence of a controversy, the Copyright Royalty Judges shall, 
pursuant to chapter 8 of this title, conduct a proceeding to determine 
the distribution of royalty payments. During the pendency of such a 
proceeding, the Copyright Royalty Judges shall withhold from 
distribution an amount sufficient to satisfy all claims with respect to 
which a controversy exists, but shall, to the extent feasible, 
authorize the distribution of any amounts that are not in controversy. 
The Librarian of Congress shall, before such royalty payments are 
distributed, deduct the reasonable administrative costs incurred by the 
Librarian under this section.''.
          (4) Determination of certain disputes.--(A) Section 1010 is 
        amended to read as follows:

``Sec. 1010. Determination of certain disputes

  ``(a) Scope of Determination.--Before the date of first distribution 
in the United States of a digital audio recording device or a digital 
audio interface device, any party manufacturing, importing, or 
distributing such device, and any interested copyright party may 
mutually agree to petition the Copyright Royalty Judges to determine 
whether such device is subject to section 1002, or the basis on which 
royalty payments for such device are to be made under section 1003.
  ``(b) Initiation of Proceedings.--The parties under subsection (a) 
shall file the petition with the Copyright Royalty Judges requesting 
the commencement of a proceeding. Within 2 weeks after receiving such a 
petition, the Chief Copyright Royalty Judge shall cause notice to be 
published in the Federal Register of the initiation of the proceeding.
  ``(c) Stay of Judicial Proceedings.--Any civil action brought under 
section 1009 against a party to a proceeding under this section shall, 
on application of one of the parties to the proceeding, be stayed until 
completion of the proceeding.
  ``(d) Proceeding.--The Copyright Royalty Judges shall conduct a 
proceeding with respect to the matter concerned, in accordance with 
such procedures as the Copyright Royalty Judges may adopt. The 
Copyright Royalty Judges shall act on the basis of a fully documented 
written record. Any party to the proceeding may submit relevant 
information and proposals to the Copyright Royalty Judges. The parties 
to the proceeding shall each bear their respective costs of 
participation.
  ``(e) Judicial Review.--Any determination of the Copyright Royalty 
Judges under subsection (d) may be appealed, by a party to the 
proceeding, in accordance with section 803(d) of this title. The 
pendency of an appeal under this subsection shall not stay the 
determination of the Copyright Royalty Judges. If the court modifies 
the determination of the Copyright Royalty Judges, the court shall have 
jurisdiction to enter its own decision in accordance with its final 
judgment. The court may further vacate the determination of the 
Copyright Royalty Judges and remand the case for proceedings as 
provided in this section.''.
          (B) The item relating to section 1010 in the table of 
        sections for chapter 10 is amended to read as follows:

``1010. Determination of certain disputes.''.

SEC. 6. EFFECTIVE DATE AND TRANSITION PROVISIONS.

  (a) Effective Date.--This Act and the amendments made by this Act 
shall take effect 6 months after the date of the enactment of this Act, 
except that the Librarian of Congress shall appoint interim Copyright 
Royalty Judges under section 802(d) of title 17, United States Code, as 
amended by this Act, within 90 days after such date of enactment to 
carry out the functions of the Copyright Royalty Judges under title 17, 
United States Code, to the extent that Copyright Royalty Judges 
provided for in section 801(a) of title 17, United States Code, as 
amended by this Act, have not been appointed before the end of that 90-
day period.
  (b) Transition Provisions.--
          (1) In general.--Subject to paragraph (2), the amendments 
        made by this Act shall not affect any proceedings commenced, 
        petitions filed, or voluntary agreements entered into before 
        the enactment of this Act under the provisions of title 17, 
        United States Code, amended by this Act, and pending on such 
        date of enactment. Such proceedings shall continue, 
        determinations made in such proceedings, and appeals taken 
        therefrom, as if this Act had not been enacted, and shall 
        continue in effect until modified under title 17, United States 
        Code, as amended by this Act. Such petitions filed and 
        voluntary agreements entered into shall remain in effect as if 
        this Act had not been enacted.
          (2) Effective periods for certain ratemaking proceedings.--
        Notwithstanding paragraph (1), terms and rates in effect under 
        section 114(f)(2) or 112(e) of title 17, United States Code, 
        for new subscription services, eligible nonsubscription 
        services, and services exempt under section 114(d)(1)(C)(iv) of 
        such title for the period 2003 through 2004, and any rates 
        published in the Federal Register under the authority of the 
        Small Webcaster Settlement Act of 2002 for the years 2003 
        through 2004, shall be effective until the first applicable 
        effective date for successor terms and rates specified in 
        section 804(b)(2) or (3)(A) of title 17, United States Code, or 
        until such later date as the parties may agree. Any proceeding 
        commenced before the enactment of this Act pursuant to section 
        114(f)(2) and chapter 8 of title 17, United States Code, to 
        adjust or determine such rates and terms for periods following 
        2004 shall be terminated upon the enactment of this Act and 
        shall be null and void.
  (c) Existing Appropriations.--Any funds made available in an 
appropriations Act before the date of the enactment of this Act to 
carry out chapter 8 of title 17, United States Code, shall be available 
to the extent necessary to carry out this section.

  Amend the title so as to read:

    A bill to amend title 17, United States Code, to replace 
copyright arbitration royalty panels with Copyright Royalty 
Judges, and for other purposes.

                          Purpose and Summary

    H.R. 1417, the ``Copyright Royalty and Distribution Reform 
Act,'' would replace the existing administrative structure 
within the U.S. Copyright Office that determines copyright 
royalty rates and the distribution of royalties under various 
compulsory licenses.

                Background and Need for the Legislation

    The Copyright Royalty Tribunal Reform Act of 1993 \1\ 
empowered the Librarian of Congress to convene Copyright 
Arbitration Royalty Panels, or ``CARPs,'' whenever private 
negotiations among affected parties fail to establish rates or 
distribute royalties governing the commercial use of certain 
copyrighted works like movies and music.
---------------------------------------------------------------------------
    \1\ Pub. L. No. 103-198.
---------------------------------------------------------------------------
    In brief, critics of the existing CARP system offer the 
same general complaints:
          
 CARP decisions are unpredictable and 
        inconsistent.
          
 Arbitrators lack appropriate expertise to 
        render decisions and frequently reflect either a 
        ``content'' or ``user'' bias.
          
 The process is unnecessarily expensive.
    In response to these and other criticisms, the Subcommittee 
on Courts, the Internet, and Intellectual Property conducted a 
June 2002 oversight hearing \2\ regarding the CARP structure 
and process. The witnesses, including the Register of 
Copyrights, agreed that the system is dysfunctional and should 
be changed.\3\
---------------------------------------------------------------------------
    \2\ Hearings before the Subcommittee on Courts, the Internet, and 
Intellectual Property of the House Committee on the Judiciary: 
Copyright Arbitration Royalty Panel (CARP) Structure and Process, 107th 
Cong., 2nd Sess. (2002).
    \3\ See H. Rep. No. 78, 107th Cong., 2nd Sess., at 31 (2002).
---------------------------------------------------------------------------
    Subsequent to the hearing, the Subcommittee and the 
Copyright Office convened a government-industry roundtable on 
the subject, which included 32 participants who offered 
recommendations for improving the current system. The contents 
of H.R. 1417 are based on many of these suggestions and the 
testimony taken at the oversight hearing. Because of the highly 
technical and detailed nature of this bill, most of the 
substantive discussion is contained in the sectional analysis 
portion of the report below.

                                Hearings

    The Subcommittee on Courts, the Internet, and Intellectual 
Property held a hearing on H.R. 1417 on March 27, 2003. 
Testimony was received from four witnesses, representing 
several organizations, with additional material submitted by 12 
individuals and organizations.

                        Committee Consideration

    On May 20, 2003, the Subcommittee on Courts, the Internet, 
and Intellectual Property met in open session and ordered 
favorably reported the bill H.R. 1417, with an amendment, by 
voice vote, a quorum being present. On September 24, 2003, the 
Committee met in open session and ordered favorably reported 
the bill H.R. 1417, with an amendment, by voice vote, a quorum 
being present.

                         Vote of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee notes that there 
were no recorded votes during the committee consideration of 
H.R. 1417.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 1417, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                                  October 17, 2003.
Hon. F. James Sensenbrenner, Jr.,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1417, the 
Copyright Royalty and Distribution Reform Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Melissa E. 
Zimmerman.
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

H.R. 1417--Copyright Royalty and Distribution Reform Act of 2003

    Summary: Under current law, the Copyright Office (within 
the Library of Congress) collects and distributes royalties for 
use of certain copyrighted material. H.R. 1417 would change the 
process for determining the rates and distribution of these 
royalties. CBO estimates that implementing the bill would cost 
$1 million in 2004 and $5 million over the 2004-2008 period 
subject to appropriation of the necessary amounts. H.R. 1417 
also would have an insignificant effect on direct spending. 
Enacting the bill would have no effect on revenues.
    H.R. 1417 contains both an intergovernmental and a private-
sector mandate as defined in the Unfunded Mandates Reform Act 
(UMRA), but CBO estimates that the cost of complying with the 
mandate would be small and well below the relevant thresholds 
established by UMRA ($59 million for intergovernmental mandates 
and $117 million for private-sector mandates in 2003, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1417 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                          ------------------------------------------------------
                                                              2004       2005       2006       2007       2008
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Authorization Level............................          1          1          1          1          1
Estimated Outlays........................................          1          1          1          1          1
----------------------------------------------------------------------------------------------------------------

    Basis of Estimate: Under current law, the use of certain 
copyrighted material by the public operates under a compulsory 
license. Users of copyrighted material do not need specific 
permission from owners to use material with a compulsory 
license, but must pay royalties and abide by certain conditions 
when using the material.
    The Copyright Office collects royalties from users of 
compulsory licenses and then distributes the royalties to 
owners of copyrighted works using guidelines agreed upon in 
private negotiations between users and owners. Rates for these 
royalties are also determined by negotiation between interested 
parties. The majority of these royalties are for cable 
television signals, satellite television signals, and digital 
audio recording technology. For example, cable operators pay 
royalties to transmit distant broadcast signals to cable 
viewers, and satellite carriers pay royalties to retransmit 
distant network and superstation signals by satellite.
    When users and owners of copyright material cannot settle 
on rates or how to distribute royalties, the Librarian of 
Congress has the authority to convene a Copyright Arbitration 
Royalty Panel (CARP) made up of three independent arbitrators. 
CARPs hear testimony from interested parties and then make a 
recommendation to the Librarian of Congress regarding a rate or 
plan of royalty distribution. The Librarian of Congress adopts 
the CARPs recommendation unless the Librarian determines that 
the findings are arbitrary or conflicting with copyright law.
    H.R. 1417 would change the process used to determine 
royalty rates and distribution. Three full-time Copyright 
Royalty Judges (CRJs) would replace the CARPs and make 
determinations on rates and distribution of royalties when 
copyright users and carriers cannot settle on the rates or 
methods to distribute royalties in private negotiations.

Direct spending

    Under current law, payments to the arbitrators for their 
services and administrative costs for CARP proceedings are 
deducted from the royalties collected from users of the 
copyrighted material. H.R. 1417 would change this by making the 
salaries of the CRJs under the new system subject to 
appropriation. Based on information from the Copyright Office, 
CBO estimates that this change would have an insignificant 
impact on the pattern (but not the amount) of direct spending.

Spending subject to appropriations

    H.R. 1417 would require that the costs of compensation for 
the new CRJs, and the staff, and administrative costs for CARP 
proceedings come from appropriated funds. Based on information 
provided by the Copyright Office, CBO estimates that 
implementing H.R. 1417 would increase spending subject to 
appropriation by about $1 million in 2004 and $5 million over 
the 2004-2008 period. The bill also would require that each 
party wishing to participate in a proceeding before the CRJs 
pay a filing fee of $150 which would partly offset the 
administrative cost for proceedings before the CRJs. Based on 
information provided by the Copyright Office, CBO estimates 
that such fees would amount to less than $5,000 a year.
    Intergovernmental and private-sector impact: H.R. 1417 
would impose both an intergovernmental and a private-sector 
mandate, as defined in UMRA, because it would require state, 
local or tribal governments and entities in the private sector, 
if subpoenaed by the Copyright Royalty Judges, to appear or 
provide evidence.
    Based on conversations with affected entities, CBO expects 
that the Judges would likely exercise their subpoena power 
sparingly and that the costs to comply with a subpoena would 
not be significant. Consequently, CBO estimates that the cost 
of complying with the mandate would be small and well below the 
relevant thresholds established by UMRA ($59 million for 
intergovernmental mandates and $117 million for private-sector 
mandates in 2003, adjusted annually for inflation).
    Estimate prepared by: Federal Costs: Melissa E. Zimmerman; 
Impact on State, Local, and Tribal Governments: Sarah Puro; and 
Impact on the Private Sector: Paige Piper/Bach.
    Estimate approved by: Paul R. Cullinan, Chief for Human 
Resources Cost Estimate Unit, Budget Analysis Division.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee makes the following 
statement regarding performance goals and objectives. The 
Committee expects that H.R. 1417 will make the ratemaking and 
royalty distribution process less expensive and more 
expeditious and efficient.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8, clause 8 of the 
Constitution.

               Section-By-Section Analysis and Discussion

    The following section by section analysis describes the 
bill as reported by the Committee on the Judiciary.

Section 1. Short title

    The Act may be cited as the ``Copyright Royalty and 
Distribution Reform Act of 2003''.

Section 2. Reference

    Unless otherwise expressly provided for, any reference in 
this Act is to title 17, of the United States Code.

Section 3. Copyright Royalty Judge and staff

    This section renames Chapter 8 of title 17 of the United 
States Code: ``Proceedings by Copyright Royalty Judges.'' It 
amends that chapter to read as described below.

Section 801. Copyright Royalty Judge; appointment and functions

    (a) Appointment. The Librarian of Congress is to consult 
the Register of Copyrights and appoint three full-time 
Copyright Royalty Judges (CRJ). One judge will be designated as 
the Chief Copyright Royalty Judge.
    In Buckley v. Valeo \4\, the Supreme Court considered, 
inter alia, the constitutionality of the Federal Election 
Commission's (FEC) method of appointing its members. Although 
the FEC is an agency residing in the Legislative Branch, the 
Court ruled that some of the FEC's functions are related to the 
Executive Branch functions; therefore, persons exercising those 
functions ``must be appointed in accordance with Article II, 
Section 2, Clause 2 of the Constitution (the Appointments 
Clause'').\5\ In response to this decision, the Committee has 
chosen to vest the authority of appointing CRJs in the 
Librarian of Congress, an officer of the United States 
nominated by the President with the advice and consent of the 
Senate. The Committee does, however, acknowledge the expertise 
of the Copyright Office; and as such, is requiring that the 
Librarian consult with the Register.
---------------------------------------------------------------------------
    \4\ 424 U.S. 1 (1976).
    \5\ 424 U.S. at 126.
---------------------------------------------------------------------------
    Although parties have complained about the lack of 
stability and consistency with regard to the current system's 
reliance on arbitrators instead of permanent judges, parties 
also expressed their belief that a significant strength of the 
existing system was that three individuals, rather than any one 
single person, was charged with decisionmaking authority. The 
Committee believes that vesting decisionmaking authority in 
three permanent judges will address the issues of stability, 
consistency, and potential bias.
    (b) Functions. The functions of the CRJs are as follows.
    (1) This section confers authority upon CRJs to set and 
adjust reasonable terms and rates of royalty payments for the 
Sec. Sec. 112(e) (ephemeral recordings), 114 (limited 
performance rights under the Digital Performance in Sound 
Recording Act of 1995), 115 (mechanical compulsory license for 
certain uses of copyrighted musical compositions), 116 (public 
performance of musical works embodied in coin operated 
phonorecord players), 118 (published nondramatic musical works 
and published pictorial, graphic, and sculptural works in 
connection with noncommercial broadcasting), 119 
(retransmission of television broadcast signals by satellite 
carriers), and 1004 (devices set forth under the Audio Home 
Recordings Act) licenses.
    Subsection 801(b)(1) further provides that the CRJs must 
specifically calculate rates under the Sec. Sec. 114(f)(1)(B), 
115, and 116 licenses in a manner that ensures maximum 
availability of creative works to the public, fairly 
compensates copyright owners for their work, and affords 
copyright users a fair income under existing economic 
conditions. The rate reflects the relative contributions of 
both a copyright owner and user in the product made publicly 
available and minimizes any disruptive impact on affected 
industries or generally prevailing industry practices.
    Subsection 801(b)(2) governs the factors to be taken into 
account in adjusting compulsory license rates and the 
circumstances under which the Sec. 111 cable license rates may 
be adjusted, is amended only to make those procedural changes 
necessary to substitute CRJs for arbitration panels.
    Subsection 801(b)(3) grants authority to the CRJs to 
authorize the distribution of royalty fees collected under the 
Sec. 111 cable license, the Sec. 119 satellite license, and the 
Sec. 1007 license (distributing royalty payments under the 
Audio Home Recording Act). Under the current law, the Copyright 
Office has the discretion to distribute royalties under the 
licenses in this subsection which are not in controversy prior 
to the time that distribution proceedings are final, even 
though there may be controversy as to distribution of remaining 
royalties in the distribution pool. Copyright owners consider 
these ``partial distributions'' to be particularly important 
since there is often a lengthy period of time between the 
payment of royalties by copyright users and the conclusion of 
the distribution proceedings.
    This subsection amends the law to mandate that the CRJs 
make a partial distribution during the pendency of a 
distribution proceeding for the licenses listed in this 
subsection, whether they are in controversy or not, so long as 
all participants provide the CRJs with a signed written 
agreement obligating them to return any excess amounts 
necessary to comply with a final determination of a 
distribution proceeding. To alleviate concerns by employees of 
the licensing division of the Library of Congress that they 
would be personally liable for making partialdistributions when 
the funds to be distributed are in controversy, this section has been 
amended to relieve them of any future liability with respect to such 
distributions. Instead, the CRJs shall be responsible for calculating 
any such excess amounts at the time a final determination is made.
    Subsection 801(b)(4) gives authority to the CRJs to accept 
or reject royalty claims filed under Sec. Sec. 111, 119, and 
1007 on the basis of timeliness or the failure to establish the 
basis for a claim.
    Subsection 801(b)(5) gives authority to the CRJs to accept 
or reject rate adjustment petitions as provided in Sec. 804 and 
petitions to participate as provided in 17 U.S.C. 
Sec. Sec. 803(b)(1) \6\ and (2).\7\
---------------------------------------------------------------------------
    \6\ Subsection 803(b)(1) sets forth the procedures for initiating a 
rate adjustment or determination proceeding as set out in Chapter 8.
    \7\ Subsection 803(b)(2) sets forth the requirements a person must 
meet in order to participate in a proceeding under Chapter 8.
---------------------------------------------------------------------------
    Subsection 801(b)(6) gives authority to the CRJs to 
determine the status of a digital audio recording device or a 
digital audio interface device under Sec. Sec. 1002 and 1003, 
as provided for in Sec. 1010. Section 1010 authorizes parties 
to request the commencement of an arbitration proceeding for 
the purpose of establishing whether a digital audio recording 
device or digital audio interface device is a device subject to 
Sec. Sec. 1002 or 1003.
    Subsection 801(b)(7) gives the CRJs the necessary authority 
to adopt as binding on all participants settlement agreements 
proposed by some or all of the participants in ratesetting or 
distribution proceedings. By facilitating and encouraging 
settlement agreements for determining royalty rates and 
establishing distribution of royalties, this section reduces 
the need to conduct full-fledged ratesetting and distribution 
proceedings. This will generate savings while expediting the 
disposition of proceedings. Clauses (i) and (ii) are designed 
specifically to address concerns about CRJs having authority to 
adopt as binding on all participants the terms of agreements 
proposed by subsets of participants. Clause (i) allows other 
participants in the relevant proceeding who would be bound by 
the proposed settlement to object to the CRJ's adoption of the 
agreement. When an objection has been registered pursuant to 
clause (i), clause (ii) gives the CRJs discretionary power to 
decline to adopt the proposed agreement if they find, based on 
the record before them, that the agreement is not likely to 
meet the relevant statutory standard. Because settlement 
agreements can be offered at any time before final disposition 
of a proceeding, the extent of the record before the CRJs may 
vary widely depending on the timing of the settlement 
agreement. Bearing in mind the objective of encouraging 
settlement, the CRJs are to use their best judgment as to 
whether the record before them indicates the proposed agreement 
is not likely to meet the relevant statutory standard.
    (c) Rulings. This section gives authority to the CRJs to 
make any necessary procedural or evidentiary rulings in any 
proceeding under Chapter 8. In doing so, the CRJs may consult 
with the Register of Copyrights.
    (d) Administrative Support. This section states that the 
Librarian of Congress must provide the CRJs with the necessary 
administrative services required to carry out their obligations 
as set forth under Chapter 8.
    (e) Location in Library of Congress. This section provides 
that the offices of the CRJs and staff will be located within 
the Library of Congress. The current CARP system falls within 
the purview of the Library of Congress. The Staff, as well as 
the proceedings, have historically been seated in the Copyright 
Office, but the Committee intends that the CRJs will be 
separate and independent from the Copyright Office.

Section 802. Copyright Royalty Judgeships; staff

    (a) Qualifications of Copyright Royalty Judges. This 
subsection provides that there will be three CRJs, each of whom 
shall have at least seven years of legal experience. One of 
these judges will be designated the Chief Copyright Royalty 
Judge. This Judge must possess at least five years of 
experience in adjudications, arbitrations, or court trials. Of 
the other two CRJs, one must have significant knowledge of 
copyright law; the other must have a significant knowledge of 
economics.
    The Committee wishes to create a system that leads to 
stability and predictability in the decisionmaking process. 
Parties have expressed concern to the Committee that often the 
arbitrators selected under the current CARP system do not have 
the training, education, or experience in relevant subject 
matter. Specifically, parties expressed concern that the 
evidence presented in the determination of a rate necessitates 
a significant mastery of economics and marketplace factors as 
well as considerable knowledge of copyright law. Recognizing 
that finding an individual who possesses substantial knowledge 
and experience in all of these areas would be difficult at 
best, the Committee believes that an appropriate resolution is 
to divide the requisite knowledge and experience among all 
three judges.
    An individual may serve as a CRJ if he or she is free of 
any financial conflict of interest as defined by the Librarian 
of Congress under the authority granted in subsection (h). 
Subsection (h) grants the Librarian of Congress the authority 
to adopt regulations establishing CRJ standards of conduct. The 
definition of ``conflict of interest'' in this section 
sufficiently balances the competing interests of ensuring that 
individuals with considerable experience in the field of 
relevant subject matter to proceedings are not excluded for 
perceived bias while also ensuring that no monetary incentive 
exists by which a CRJ might otherwise improperly be influenced 
in their decisionmaking.
    (b) Staff. This section provides that the Chief CRJ will 
hire three full-time staff members to assist the CRJs in 
performing their functions. The CRJs will directly supervise 
the staffers. The Copyright Royalty Judge system will be an 
autonomous body independent of the Copyright Office. This 
attribute will obviate the need of the Copyright Office to 
employ staff to work solely on CARP related matters.
    (c) Terms. This section states that the CRJs will sit for 
six years, except the first individuals appointed to be CRJs 
shall have their terms staggered. The Committee intends that 
there be no more than one CRJ with less than two years 
experience ever sitting at one time. This will ensure that, 
except for the first individuals appointed, there will at all 
times be a sitting judge with prior experience as a CRJ.
    A CRJ may be reappointed to subsequent terms. The Committee 
expects that by allowing individuals who have produced high 
quality work to remain, the goals of stability and 
predictability of the system will be furthered.
    A sitting CRJ shall continue to serve in that capacity 
until a successor is selected.
    (d) Vacancies or Incapacity. This section provides that if 
a CRJ becomes incapacitated or leaves, the Librarian of 
Congress must quickly appoint an interim CRJ to serve out the 
remainder of the vacancy term.
    (e) Compensation.
    (1) Judges. This subsection provides that the Chief CRJ 
will be paid at the rate of basicpay payable for level AL-1 for 
administrative law judges pursuant to Sec. 5372(b) of title 5. The 
other two CRJs will be compensated at the rate of basic pay payable for 
level AL-2 for administrative law judges pursuant to Sec. 5372(b) of 
title 5. CRJs salaries are not subject to the regulations of the Office 
of Personnel Management.
    (2) Staff. The CRJs will be staffed by three individuals, 
one of whom will be paid no more than the basic rate of pay 
payable for GS-15 of the General Schedule, the second of pay 
payable for GS-13, the third of pay payable for GS-11.
    (f) Independence of Copyright Royalty Judge.
    (1) In Making Determinations. Subsection 802(f)(1)(A) 
states that the CRJs are to have full independence in making 
determinations concerning adjustments and determinations of 
copyright royalty rates and terms, the distribution of 
copyright royalties, the acceptance or rejection of royalty 
claims, rate adjustment petitions, and petitions to 
participate, and in issuing any other rulings under title 17 
that pertain to the responsibilities of the CRJs set forth in 
Sec. 801, except that the CRJs may consult with the Register of 
Copyrights on any matters other than questions of fact. Any 
consultations of this nature must be in writing or on the 
record.
    In an attempt to balance the concerns of preserving 
independence in the role and decisionmaking of the CRJs against 
the benefit of having the ability to consult the expertise of 
the Copyright Office, this section allows the CRJs to consult 
with the Register of Copyrights on any matter which they have 
authority over under title 8, other than a question of fact. 
This section will help to effectuate the Committee's goal that 
the Copyright Office retain responsibility for creating and 
implementing copyright policy, while the CRJs will retain sole 
responsibility for making factual and legal determinations 
regarding matters before them in a proceeding.
    Subsection 802(f)(1)(B) states that when presented with a 
novel question of law, a CRJ must request the Register of 
Copyrights, in writing, to submit a written opinion that is to 
be made public. The Committee defines a novel question of law 
as one that has not been determined in prior decisions, 
determinations, or rulings. The opinion of the Register will 
not be binding on the CRJ, but the CRJ must nonetheless take it 
into account.
    Because the Committee is cognizant of concerns that ex 
parte communications should not occur between the Copyright 
Office and CRJs without the knowledge of proceeding 
participants, any consultations under this subparagraph between 
the CRJs and the Register of Copyrights must be in writing or 
on the record.
    (2) Performance Appraisals.
    Subsection 802(f)(2)(A) states that the CRJs will not 
receive performance appraisals.
    Subsection 802(f)(2)(B) states, that if under subsection 
(h), which relates to the sanctioning and removal of a CRJ, 
those regulations require documentation to establish the cause 
of a sanction or removal, a CRJ may receive an appraisal 
relating specifically to the cause of the sanction or removal.
    (g) Inconsistent Duties Barred. This section holds that no 
CRJ may undertake duties inconsistent with his or her duties 
and responsibilities as a CRJ.
    (h) Standards of Conduct. This section requires the 
Librarian of Congress to adopt regulations regarding the 
standards of conduct, including financial conflict of interest 
and restrictions against ex parte communications, which will 
govern the CRJ and the proceedings under this chapter.
    (i) Removal or Sanction. The Librarian of Congress may 
sanction or remove a CRJ for violation of standards of conduct 
adopted under subsection (h), misconduct, neglect of duty, or 
any disqualifying physical or mental disability. Notice and an 
opportunity for a hearing must be given before a sanction or 
removal may occur. The Librarian shall appoint an interim 
Copyright Royalty Judge during the pendency of a suspension.

Section 803. Proceedings of Copyright Royalty Judges

    (a) Proceedings. This section provides that the CRJs are to 
act in accordance with regulations they have issued, a fully 
documented written record, prior decisions of the Copyright 
Royalty Tribunal, prior Copyright Arbitration Royalty Panel 
Determinations, rulings by the Librarian of Congress before the 
effective date of the Copyright Royalty and Distribution Reform 
Act of 2003, prior determinations of CRJs under this chapter, 
and appellate court decisions under this chapter before, on, or 
after such effective date.
    These decisions are not necessarily controlling, but will 
be considered for their precedential value and may be 
distinguished.
    Any participant in a proceeding under subsection 803(b)(2) 
may submit relevant information and proposals to the CRJs. 
Subsection 803(b)(2) sets forth the requirements a party must 
meet to become a participant in a proceeding. To ensure that 
only parties with legally protectable and tangible interests 
may take part in these processes, the Committee defines the 
term ``participant.'' The Committee intends that only those 
parties meeting the requirements of this definition may 
participate in the process as set forth in the new Chapter 8.
    The Committee anticipates that the CRJs will adopt 
regulations to define the requisite ``significant interest'' 
that a party must demonstrate to participate in a proceeding. 
Such regulations should recognize that the Committee intends 
the ``significant interest'' requirement to restrict 
participation to those who have a stake in the outcome of the 
proceeding. In other words, to have a significant interest in a 
royalty rate, the participant must be a party directly affected 
by the royalty fee (e.g., as a copyright owner, a copyright 
user, or an entity or organization involved in the collection 
and distribution of royalties). As a copyright owner, one has a 
significant interest in a royalty rate because the rate 
determines how much the owner will receive in compulsory 
license fees from the use of his or her works. As a copyright 
user, one has a significant interest in a royalty rate because 
the rate determines how much that party must pay for the use of 
copyrighted works. Included in these categories are 
organizations and societies that represent the rights and 
interests of copyright owners and users.
    (2) Judges Acting as Panel and Individually. The CRJs are 
to conduct hearings en banc, except that the Chief CRJ may, in 
his or her discretion, designate a CRJ to sit individually over 
collateral and administrative proceedings under subsections 
803(b)(1) through 803(b)(5).
    Although parties expressed concern that the ad hoc nature 
of the CARP produces instability and inconsistency, other 
participants have stated that a significant strength of the 
existing system is that a panel of three individuals conducts 
hearings. In keeping with the tradition of checks and balances, 
the Committee believes that the interaction of at least three 
decisionmakers who have the ability to consider and to debate 
the many issues involved in rate-setting and distribution 
proceedings produces the most reasoned, supportable, and 
credible results. Still, the Committee acknowledges that there 
may be instances where a single judge could fairly and 
equitably preside over part of the hearing process; the 
legislation makes thisallowance. The Committee does not intend, 
however, that individual CRJs should have the sole authority to render 
final decisions.
    (3) Determinations. Final determinations of CRJs under 
proceedings in Chapter 8 require a majority vote. A dissenting 
CRJ's opinion is to be included with the determination.
    The Committee expects that the majority vote requirement 
will ensure that a proper level of checks and balances in the 
proceedings is maintained.
    (b) Procedures.
    (1) Initiation.
    (A) Call for Petitions to Participate. Subsection 
803(b)(1)(A) requires that promptly upon a filing of a petition 
for a rate adjustment or determination as set forth under 
section 804(a) \8\ or 804(b),\9\ or by no later than January 5 
of a year specified in section 804 for a hearing to begin, if a 
petition has not been filed by that date, the CRJs will publish 
in the Federal Register notice of the beginning of proceedings 
under Chapter 8 for the filing of Petitions to Participate in a 
proceeding under Sec. Sec. 111, 112, 114, 115, 116, 118, 119, 
1004, or 1007. No later than 30 days after this publication, 
petitions to participate must be filed; but CRJs may accept 
late petitions to participate up to 90 days before written 
direct statements are due if there is no prejudice to the 
parties and the petitioner can show good cause.
---------------------------------------------------------------------------
    \8\ 17 U.S.C. Sec. 04(a) (Filing of Petition).
    \9\ 17 U.S.C. Sec. 04(b) (Timing of Proceedings).
---------------------------------------------------------------------------
    H.R. 1417 as reported out by the Subcommittee included a 
provision which required parties subject to statutory licenses 
to pay an interim rate equivalent to the old rate until a new 
one is determined.
    The user community voiced concern that if these ``interim 
fees'' were not housed in an escrow account that the content 
community would have the ability to access the fees and fund 
their litigation pursuits against the user community. This 
concern stemmed from a provision in the Small Webcaster 
Settlement Act of 2002 \10\ that allowed Sound Exchange, the 
designated receiving agent, to deduct its litigation expenses 
from the royalties collected.
---------------------------------------------------------------------------
    \10\ Small Webcaster Settlement Act of 2002, P.L. No. 107-321.
---------------------------------------------------------------------------
    The copyright community opposed an escrow account, claiming 
the interim funds were necessary for Sound Exchange to continue 
its operations. In an industry-wide agreement, both communities 
adopted the position of the Copyright Office that the best 
solution was to implement ratesetting proceedings under chapter 
8 far enough in advance so as to render certain there will 
always be a new rate in place prior to the expiration of an old 
rate. To ensure that this principle is maintained, this bill 
sets forth a specific timeline in which steps in the Chapter 8 
proceedings must be completed. Since there may be instances in 
which a party may have a valid excuse for not complying, the 
bill will permit late filing of petitions to participate under 
limited circumstances.
    Subsection 803(b)(1)(B) states that a petition to 
participate must describe a petitioner's interest in the 
subject matter. Parties with similar interests may file a 
single petition.
    By requiring petitioners to set forth their ``interest in 
the subject matter'', CRJs will be better prepared to identify 
parties with legally protectable and tangible interests that 
qualify as participants.
    Traditionally, as in the case of the performing rights 
societies, parties with a similar interest have always filed a 
single petition. The Committee believes this mechanism has 
worked successfully and should therefore continue to be 
utilized.
    (2) Participation in General. This subsection requires that 
to participate in a proceeding under Chapter 8, a person must 
file a ``facially valid'' petition to participate setting forth 
his other significant interest in a proceeding, and pay a $150 
filing fee. Only participants subject to the small claims 
procedure in distribution proceedings under subsection (4) or 
paper proceedings in ratemaking proceedings under subsection 5 
are exempt from the $150 filing fee. This amount is identical 
to that required in 28 U.S.C. Sec. 1914 for all litigants 
filing civil actions in U.S. district courts. The Committee 
intends that one filing fee be paid for each notice filed. The 
CRJs may decide on their own motion or on the motion of another 
participant in the proceeding that a party lacks a significant 
interest in a proceeding.
    Under the current CARP system, parties are responsible for 
bearing the costs of the proceedings. The legislative history 
accompanying the Copyright Royalty Tribunal Reform Act of 
1993,\11\ as well as at least one reviewing court,\12\ have 
indicated that the original intent behind the creation of the 
CARP system was to create a system which would, by its design, 
discourage parties from choosing to engage it. Both copyright 
owners and users have indicated that the CARP system has not 
accomplished this goal. Cognizant of both copyright owner and 
user concerns about the costs of rate-setting and distribution 
proceedings, this bill as reported provides for the majority of 
all administrative costs associated with these proceedings to 
be born by the government, save the de minimus $150 filing fee. 
The Committee intends that this money will help defray in part 
these administrative costs as well as have the added benefit of 
perhaps discouraging the filing of frivolous claims.
---------------------------------------------------------------------------
    \11\ H. Rep. No. 103-286.
    \12\ National Ass'n of Broadcasters v. Librarian of Congress, 146 
F. 3d 907, 920 (D.C. Cir. 1998).
---------------------------------------------------------------------------
    (3) Voluntary Negotiation Period. This section requires 
that promptly after petitions to participate have been filed, 
the CRJs must make available to all participants in the 
proceeding a list of all other participants. Upon making 
available these names, the CRJs are to initiate a voluntary 
negotiation among the participants which is to last for three 
months. At the close of the voluntary negotiation proceedings, 
the CRJs are to determine whether and to what extent paragraphs 
(4) (small claims procedure in distribution proceedings) and 
(5) (paper proceedings in ratemaking proceedings).
    In granting CRJs the necessary authority to adopt as 
binding on all participants settlement agreements proposed by 
some or all of the participants in rate-setting or distribution 
proceedings, the Committee intends that the bill as reported 
will facilitate and encourage settlement agreements for 
determining royalty rates and the distribution of royalties 
throughout the Chapter 8 process. The Committee believes that 
by creating a formalized time period for encouraging settlement 
under the direction of the CRJs, parties will necessarily have 
to focus their attentions upon the Committee's goal of 
achieving settlements. The Committee intends that the CRJs 
during this time period act in a capacity similar to that of 
Federal judges during their scheduling conferences. The 
Committee expects the CRJs to act in a manner which ensures 
that the timetable for proceedings are adhered to, while 
helping to facilitate the ultimate goal of conflict resolution 
between participants. The Committee does not expect the CRJs to 
be present with parties during all discussions during this time 
period.
    (4) Small Claims Procedure in Distribution Proceedings. If 
a participant in a proceedingunder Chapter 8 asserts a 
contested claim of $10,000 or less, the CRJs must decide the 
controversy on the basis of a written initial claim, an initial written 
response by any opposing participant, and one additional response by 
each party. Any participant subject to a proceeding under this 
subsection is exempt from paying the $150 filing fee required under 
subsection (2).
    The large claimants expressed concern that the current 
statutory mandate prescribing allocation of CARP costs in a 
``distribution proceeding in proportion to the royalty funds 
awarded to each party'' has had the unfortunate effect of 
allowing those with small claims to inflate their claims and 
initiate litigation at the expense of other parties. The 
Copyright Office asserts that it lacks authority either to 
prevent these abuses or expedite decision-making. In contrast, 
small claimants expressed concern about the costs associated 
with distribution hearings and their inability to pay such 
costs.
    The Committee expects that the creation of this small 
claims proceeding will streamline the resolution of small 
claims making the procedure more efficient to all participants 
involved. In arriving at the threshold amount by which a party 
may be subjected to a paper proceeding, the Committee looked to 
the threshold amount utilized by small claims courts ($10,000).
    Subsection 803(b)(4)(B) provides that if a CRJ decides that 
a participant has set forth an invalid amount in controversy to 
avoid settling the controversy through an all-paper small 
claims proceeding set forth in subsection 803(b)(4)(A), the CRJ 
must impose a fine on the participant in an amount not to 
exceed the difference between the actual amount distributed and 
the amount asserted by the participant.
    The Committee has created this sanction with the goal of 
not allowing participants to circumvent the Committee's intent 
of creating a streamlined mechanism for resolving small claim 
disputes in a distribution hearing.
    (5) Paper Proceedings in Ratemaking Proceedings. The CRJs 
have broad authority to determine royalty rates through 
abbreviated, paper-only proceedings. These paper proceedings 
allow each participant to make an initial filing in writing, an 
initial response, and one additional response.
    Paper proceedings should further the overriding objectives 
of this legislation by resulting in less costly and far quicker 
rate-settings than those achieved through full-blown rate-
setting proceedings. CRJs are required to conduct paper 
proceedings to determine rates in situations where (1) there is 
no genuine issue of material fact, (2) there is no need for 
evidentiary hearings, and (3) all participants to the 
proceeding agree in writing to conduct a paper proceeding. The 
CRJ's may conduct paper proceedings in such other circumstances 
as they deem appropriate. It is anticipated that CRJs will 
choose to exercise their discretion to order paper proceedings 
in circumstances where, for instance, the cost of the 
proceeding would exceed the royalties likely to be collected, 
or where a class of participants may otherwise find it 
impossible to participate. The CRJ may choose to conduct paper 
proceedings either on their own initiative or in response to a 
motion of a participant. In either case, the CRJs must offer 
all parties to the proceeding the opportunity to comment on the 
decision to conduct a paper proceeding.
    (6) Regulations.
    Subsection 803(b)(6)(A) provides that the CRJs may issue 
regulations to carry out their functions under title 17. No 
later than 120 days after the CRJs or interim CRJs are 
appointed after the enactment of this bill, the CRJs must issue 
regulations to govern proceedings under this chapter.
    Subsection 803(b)(6)(B) provides that until permanent 
regulations have been adopted, CRJs are to apply those 
regulations in effect under this chapter on the day before the 
effective date of the Copyright Royalty and Distribution Reform 
Act of 2003, which are not inconsistent with this chapter.
    Subsection 803(b)(6)(C) requires that the CRJs must, at 
minimum, issue the regulations that include the following:
    (i) A required date by which participants' written direct 
statements must be filed, which may be no earlier than four 
months and no later than five months after the end of the 
voluntary negotiation period, except that participants may, 
within 15 days after the end of the discovery period, file an 
amended written direct statement based on new information 
received during the discovery process. Prior to discovery under 
the current CARP system, parties are required simultaneously to 
submit and exchange in written form the direct testimony of 
each of their witnesses--lay and expert alike--together with 
every trial exhibit to be utilized. Some parties expressed 
concern that this is contrary to the Federal Rules of Evidence 
and effectively locks in their trial positions based upon 
limited information. Other parties expressed concern that if 
this sequencing was changed, it would yield the potential for 
open-ended discovery which would ultimately lead to abuse and 
exorbitant costs. Recognizing the importance of creating a full 
and accurate record at the fact-finding level, the Committee 
believes that the addition of the 15-day period is the proper 
amount of time for parties to amend their written statements 
that reflects additional information gained through the 
discovery process.
    (ii)(I) The CRJs must meet with participants subsequent to 
their filing written direct statements to set a schedule for 
conducting and completing discovery. The CRJs will determine 
the schedule.
    (II) Written direct statements means witness statements, 
testimony, and exhibits to be presented in proceedings, and 
such information as is necessary to establish terms and rates 
or the distribution of royalty payments. The Committee relied 
on the Federal Rule of Civil Procedure Rule 16 in creating this 
subsection. The Committee intends that the creation of this 
subsection will give CRJs early control of a proceeding, 
thereby ensuring that the proceedings will not be protracted as 
a result of mismanagement. The creation of a discovery schedule 
will minimize discovery costs by prohibiting participants from 
engaging in stall tactics and forcing participants to compress 
the amount of resources invested in the proceedings. The bill 
codifies the definition of ``written direct statements'' 
currently set forth under 37 CFR Sec. 251.43(b) and expands it 
by adding that other information deemed necessary to a 
proceeding under this chapter may be admitted.
    (iii) Hearsay may be admitted in proceedings under this 
chapter to the extent deemed appropriate by the CRJ. The 
Committee intends that this subclause contemplates a more 
permissive approach to the admission of hearsay than the 
Federal Rules of Evidence. Instead of limiting admission of 
hearsay to certain specific instances, this subclause gives the 
CRJs full discretion as to the admissibility of hearsay. This 
subsection also gives the CRJs full discretion to decide how 
much credibility to accord any particular hearsay evidence. The 
Committee anticipates that the CRJs will exercise their 
discretion judiciously to ensure that the admission of hearsay 
leads to speedier, better supported, and less costly 
resolutions.
    (iv) The discovery duration is 60 days, except when a CRJ 
orders otherwise in connection with the resolution, motions, 
orders, and disputes pending at the end of such period. As 
noted,the bill initiates ratesetting proceedings under chapter 
8 far enough in advance so as to render certain there will always be a 
new rate in place prior to the expiration of an old rate. To achieve 
this objective, the substitute sets forth specific time periods for the 
various procedural and substantive steps participants complete 
throughout a ratesetting or distribution proceeding, (e.g., the 60-day 
discovery period). Concerns were expressed as to how motions that had 
been filed within the 60-day time period but remained pending after the 
60-day time period should be resolved. Since the Committee's intent is 
to create a complete and accurate record at the fact-finding level of 
the rate making and distribution process, this goal is best furthered 
by allowing timely-filed motions still pending at the conclusion of the 
60-day discovery time period to be resolved.
    (v) Any participant may, in writing, seek discovery of 
information and materials relevant and material to the 
proceeding. If the responding participant chooses not to 
comply, then the participant may request a CRJ to compel 
compliance. A CRJ may approve a request for compliance if the 
evidence that would be produced is relevant and material. Even 
if a request would produce relevant and material evidence, a 
CRJ may still refuse the request for good cause shown. Good 
cause shown entails looking at such indicia as whether the 
discovery sought is unreasonably cumulative or duplicative, is 
obtainable from another more convenient source, is less 
burdensome, or is less expensive.
    (vi) The rules in place under the current regulations for 
discovery are codified in this subsection. Parties involved in 
both the ratemaking and distribution processes expressed to the 
Committee that there are substantial differences between the 
purposes of these two processes and therefore they should be 
treated separate and distinct. The Committee is cognizant of 
the inherent differences in the desired goal of each of these 
processes. For example, there has been a 25-year-plus history 
of cable royalty distribution proceedings among essentially the 
same participants in which a substantial body of precedent and 
practice has been established. This experience contrasts 
sharply with the recent Sec. 114 proceedings designed to 
establish for the first time a rate for a new compulsory 
license. The Committee believes that the regulations for 
discovery currently in place function to achieve the desired 
goals of the Committee in relation to the distribution process.
    (vii) The CRJs may issue subpoenas for the purpose of 
obtaining evidence that is relevant and material to the task of 
setting rates and terms of payment or making distributions to 
copyright owners and performers. The purpose of this provision 
is to give the decisionmakers a means to create a more complete 
record upon which to make their decisions. Historically, the 
process has allowed parties to circumscribe the type and amount 
of evidence considered by limiting discovery to documents 
underlying a party's direct case and by limiting the 
decisionmakers' authority to request additional evidence. 
Consequently, decisionmakers have set rates or made 
distributions in some instances without the benefit of the most 
probative evidence or access to witnesses that, for example, 
were better to explain to the intricacies of a study or explain 
the rationale for specific provisions in a negotiated 
agreement. The Committee believes that the grant of subpoena 
power to the CRJs will alleviate this problem by allowing the 
CRJs to subpoena additional witnesses and evidence when it is 
apparent the record is incomplete. The Committee does not 
anticipate that the use of subpoena power will become a common 
occurrence. The CRJs are expected to exercise this power 
judiciously and only in those instances where they believe a 
subpoena is necessary to obtain information that the parties 
have not provided and that the judges deem necessary to make 
their decision.
    (viii) At the end of the discovery period the CRJs will 
order a 21-day settlement conference. In granting CRJs the 
necessary authority to adopt as binding on all participants 
settlement agreements proposed by some or all of the 
participants in rate-setting or distribution proceedings, the 
Committee intends that the bill will facilitate and encourage 
settlement agreements for determining royalty rates and 
establishing distribution of royalties throughout the entire 
process under Chapter 8. The Committee believes that by 
creating formalized time periods for encouraging settlement 
under the direction of the CRJs, parties will necessarily focus 
their attention on the goal of achieving a settlement. The 
Committee recognizes that information obtained during the 
discovery process may alter a pre-discovery position, making 
the affected party more likely to engage in settlement 
negotiations. The Committee intends that the CRJs during this 
time period act in a capacity similar to that of federal judges 
during their FRCP Rule 16 scheduling conferences. The Committee 
expects CRJs to act in a manner which ensures that the 
timetable for proceedings as set forth in this bill as amended 
are adhered to, while helping to facilitate the ultimate goal 
of conflict resolution between participants. The Committee does 
not expect the CRJs to be present with parties during all 
discussions during this time period.
    (c) Determination of Copyright Royalty Judges.
    (1) Timing. Subsection 803(c)(1) states that CRJs must 
issue their determination within 11 months of the end of the 
21-day settlement conference, except in the case of a 
ratemaking proceeding which expires on a specified date. In 
that case, a decision must be rendered within 15 days before 
the expiration of the then current statutory rates and terms.
    This bill starts ratesetting proceedings under Chapter 8 
far enough in advance to ensure certain there will always be a 
new rate in place prior to the expiration of an old rate. To 
achieve this objective, the substitute sets forth specific time 
periods for the various procedural and substantive steps 
participants must complete throughout a ratesetting or 
distribution proceeding. In keeping with this goal, this 
subsection ensures that decisions are rendered in a timely 
fashion.
    (2) Rehearings. Subsection 803(c)(2)(A) provides that CRJs 
may, in exceptional cases, and upon the motion of a 
participant, order a rehearing after a determination has been 
issued. The Librarian of Congress believes that under existing 
law it is unclear whether he has the authority to correct 
errors or address unanticipated issues that have arisen 
subsequent to a determination. Many parties, including the 
Register of Copyrights, requested that the Committee provide 
the CRJs with continuing jurisdiction so that matters such as 
these could be addressed. The Committee expects that this 
provision will not be used as a ``back door'' for aggrieved 
parties to circumvent the process.
    Subsection 803(c)(2)(B) provides that motions for 
rehearings must be filed within 15 days after the date on which 
the CRJs deliver their initial determination concerning rates 
and terms.
    Subsection 803(c)(2)(C) states that any opposing party is 
not required to participate in a rehearing. Many parties voiced 
concerns that the rehearing mechanism in this substitute would 
force them to expend cost and time which, if given the option, 
they would choose not to do. Although the Committee believes 
that the CRJs should be given the first opportunity to address 
affected parties' arguments, it also does not intend to impose 
rehearing proceedings upon participants.
    Subsection 803(c)(2)(D) provides that no negative inference 
is to be drawn from lack of participation in a hearing.
    (E) Continuity of Rates and Terms. Subsection 
803(c)(2)(E)(i)(I) provides that if a rehearing decision in a 
rate making proceeding is not rendered before the expiration of 
the statutory license previously in effect, then the rates and 
terms set forth in the decision which are subject to the 
rehearing will remain in place until a final rehearing decision 
is rendered.
    Subsection 803(c)(2)(E)(i)(II) states that in the case of a 
proceeding under Sec. 114(f)(1)(C) \13\ or 
Sec. 114(f)(2)(C),\14\ royalty rates and terms are, for 
purposes of Sec. 114(f)(4)(B),\15\ deemed to have been set at 
those rates and terms contained in the initial determination of 
the CRJs that is the subject of the rehearing motion, as of the 
date of that determination.
---------------------------------------------------------------------------
    \13\ 17 U.S.C. Sec. 114(f)(1)(C) is amended in this substitute to 
state that procedures under subparagraphs Sec. Sec. 114(f)(1)(A) and 
(B) are also to be initiated by a petition filed by any copyright 
owners of sound recordings, any preexisting subscription services, or 
any preexisting satellite digital audio radio services indicating a new 
type of subscription digital audio transmission service on which sound 
recordings are performed is or is about to become operational, for the 
purpose of determining rates and terms of royalty payments with respect 
to those new types of services for the time period starting with the 
inception of such service and ending on the date on which the rates and 
terms for subscription digital audio transmission services most 
recently were determined under Sec. Sec. 114(f)(1)(A) and (B), or such 
other period as the parties may agree.
    \14\ 17 U.S.C. Sec. 114(f)(2)(C) is amended in this substitute to 
state that procedures under subparagraphs Sec. Sec. 114(f)(1)(A) and 
(B) are to be initiated by a petition filed by any copyright owners of 
sound recordings or any eligible nonsubscription service or new 
subscription service indicating that a new type of eligible 
nonsubscription service or new subscription service on which sound 
recordings are performed is or is about to become operational, for the 
purpose of determining reasonable terms and rates of royalty payments 
with respect to such new type of service for the time period starting 
with the inception of such new type of service and ending on the date 
on which the royalty rates and terms for preexisting subscription 
digital audio transmission services, as the case may be, most recently 
were determined under Sec. Sec. 114(f)(1)(A) or (B), or such period as 
the parties may agree.
    \15\ 17 U.S.C. Sec. 114(f)(1)(B) is amended in this substitute to 
state that in the absence of license agreements negotiated under 
subparagraph Sec. 114(f)(1)(A), which sets forth the dates by which 
voluntary negotiation proceedings initiated for the purpose of 
determining terms and rates for subscription transmission by 
preexisting subscription services and transmissions by preexisting 
satellite digital audio radio services, CRJs are to begin a proceeding 
pursuant to Chapter 8 to determine and publish in the Federal Register 
a schedule of rates and terms pertaining to these licenses.
---------------------------------------------------------------------------
    Subsection 803(c)(2)(E)(ii) and (iii) provide that persons 
obligated to make royalty payments under the licenses which are 
the subject of determinations in a pending motion for a 
rehearing must continue to provide statements of account and 
any reports of use as well as make all royalty payments as 
required under the relevant regulations or determinations. When 
a copyright user or successor makes royalty payments to a 
person other than the Copyright Office, the entity designated 
by the CRJ to receive these royalties must return any excess 
amounts paid by those persons to the extent necessary to comply 
with a final determination by the CRJs. This must be done 
within 60 days after a motion for a rehearing is resolved or, 
if the motion is granted, within 60 days after the rehearing is 
concluded.
    During the 107th Congress, a CARP was convened to set a 
rate for those licenses affecting webcasters and simulcasters. 
A rate was determined, and a situation arose where certain 
members of the webcasting and simulcasting market claimed that 
they could not pay that amount. More specifically, these 
parties argued that the prescribed rate exceeded their 
expectations and insufficient funds were therefore put aside.
    Because of this complaint, the bill includes a provision 
that requires parties subject to statutory licenses to continue 
to fulfill their obligations under the applicable statute or 
regulation until new rates and terms have been established.
    (3) Contents of Determination. A determination by the CRJs 
must be accompanied by the written record and set forth the 
facts that the CRJs found relevant to their determination. CRJs 
may specify notice and recordkeeping requirements for users of 
copyrights that apply in lieu of those that would otherwise 
apply under regulations.
    Subsection 803(c)(3) addresses the need to preserve the 
facts as discovered for later potential ``appealable'' purposes 
as well as addresses concerns raised by various parties that 
under the current system, CARP decisions have been rendered 
without adequate explanations.
    Although the CRJs' core function with regard to rate making 
proceedings is to set rates and terms for statutory licenses, 
the issues relating to notice and recordkeeping or to notices 
of use are often integral to the issues of rates and terms of 
payment; therefore, the CRJs are best equipped to handle this 
task.
    (4) Continuing Jurisdiction. Subsection 803(c)(4) allows 
CRJs to amend a determination or regulation issued pursuant to 
a determination to correct any technical errors in a 
determination or respond to unforseen circumstances that 
preclude the proper effectuation of the determination.
    The Copyright Office and other parties requested that a 
provision be included that afforded the CRJs with continuing 
jurisdiction, to correct actual errors and to respond to 
unforseen circumstances. To illustrate, when the rates and 
terms for the Sec. 114 license were set in 2002, the question 
arose as to what would happen if the designated receiving agent 
were to go out of business. The Copyright Office took the 
position that the Librarian's power to set rates and terms 
under the existing CARP system did not on its face include the 
power to amend the terms subsequent to a final determination. 
The inclusion of this provision now provides a mechanism under 
which such a potential circumstance might be addressed.
    (5) Protective Order. Subsection 803(c)(5) provides that 
CRJs may issue orders to protect confidential information, 
including orders excluding confidential information from the 
record of the determination that is published or made available 
to the public; except that all terms or rates of royalty 
payments or distributions must be published.
    Participants expressed to the Committee the importance of 
protecting proprietary information during the course of a 
proceeding, after the official close of a proceeding, or in a 
final version of a report from the CRJs. Because parties to the 
proceedings depend on this continuing protection when they make 
the decision to produce sensitive commercial and financial 
information, they argued that they would be deterred from 
submitting that information as part of the proceeding record in 
the absence of continuing protection. Since an overarching goal 
of the Committee is to create a complete and full record, the 
Committee has included this provision to ensure that parties 
will submit all necessary information providing the CRJs the 
opportunity to make well-informed decisions based on a full and 
complete record of the contested issues in proceedings.
    (6) Publication of Determination. Subsection 803(c)(6) 
mandates that the Librarian of Congress ensure that the CRJs 
determinations and corrections thereto are published in the 
Federal Register, published on the Internet, and made publicly 
available in any other manner which the Librarian considers 
appropriate. The Librarian must also make determinations, 
corrections, and the accompanying records available for public 
inspection and reproduction. Historically, the Librarian of 
Congress has been responsible for ensuring the publication 
ofdeterminations in the Federal Register. In light of Buckley v. 
Valeo,\16\ the Committee believes that the initial responsibility for 
publication should rest with the Librarian and that the Library may in 
its discretion delegate such responsibility.
---------------------------------------------------------------------------
    \16\ See Notes 3 and 4, supra. In Buckley, the Supreme Court ruled 
that a statute authorizing the President pro tempore of the Senate and 
the Speaker of the House of Representatives to appoint a majority of 
members of the FEC, was unconstitutional because some of the 
Commission's duties were Executive Branch functions. Consequently, a 
person exercising those functions ``must be appointed in accordance 
with article II, sec. 2, clause 2 of the Constitution, the Appointments 
Clause.'' 424 U.S. at 126.
---------------------------------------------------------------------------
    (d) Judicial Review.
    (1) Appeal. Subsection 803(d)(1) mandates that any 
determination by a CRJ may within 30 days after publication of 
the determination in the Federal Register, be appealed to the 
United States Court of Appeals for the District of Columbia 
Circuit by any aggrieved participant in the proceeding who 
fully participated in the proceeding and who would be bound by 
the determination. If no appeal is brought within that 30-day 
time period, the determination of the CRJs is final and the 
royalty fee or distribution determination is to take effect as 
set forth in subsection 803(d)(2). The United States Court of 
Appeals for the District of Columbia Circuit has historically 
been the court of review for many agency actions. The judges on 
that court are familiar with the standard of review for agency 
determinations and the often intricate body of law to which 
agencies are subject. As such, the Committee believes that 
these judges are best suited to review CRJ's determinations.
    (2) Effect of Rates.
    Subsection 803(d)(2)(A) states that where this title 
provides that royalty rates and terms expire on a certain date, 
any adjustment or determination by the CRJs of successor rates 
and terms will be effective as of the day following the date of 
expiration of previous rates and terms in effect, even if the 
determination of the CRJs are rendered on a later date.
    Subsection 803(d)(2)(B) states that where rates and terms 
do not expire on a specified date or have not yet been 
established, successor rates or terms are to take effect on the 
first day of the second month that begins after publication of 
the CRJs determination in the Federal Register, unless this 
title provides otherwise. Rates and terms previously in effect 
are to remain in effect until successor rates and terms become 
effective.
    Subsection 803(d)(2)(C)(i) provides that persons who are 
obligated to make royalty payments under Sec. Sec. 111, 112, 
114, 115, 116, 118, 119, or 1003 and who would be affected by a 
determination on appeal, must continue during the pendency of 
that appeal to provide statements of account, any report of use 
to the extent required, and pay royalties required under the 
relevant determination or regulations.
    Subsection 803(d)(2)(C)(ii) provides that whenever a 
copyright user or its successor pays royalties to a person 
other than the Copyright Office, the entity designated by the 
CRJs to receive those royalties must, within 60 days after the 
final resolution of the appeal, return any excess amounts 
previously paid and any interest ordered by the Court of 
Appeal.
    (3) Jurisdiction of Court. If the court, pursuant to 
Sec. 706 of title 5, modifies or vacates a determination of the 
CRJs, the court may enter its own determination with respect to 
the amount or distribution of royalty fees and costs, and order 
the repayment of any excess fees, the payment of any underpaid 
fees, and the payment of interest, in accordance with its final 
judgment. The court may also vacate the determination of the 
CRJ and remand the case to the CRJ for further proceedings. If 
a reviewing court finds that an agency action is ``arbitrary, 
capricious, an abuse of discretion, or otherwise not in 
accordance with law,'' \17\ that agency action is to be held 
unlawful and set aside. The Committee believes that Sec. 706 of 
title 5 provides a clear statutory directive to the reviewing 
court.
---------------------------------------------------------------------------
    \17\ 706 U.S.C. Sec. 5(2)(C).
---------------------------------------------------------------------------
    (e) Administrative Matters.
    (1) Deduction of Costs of Library of Congress and Copyright 
Office From Filing Fees.
    Subsection 803(e)(1)(A) provides that the Librarian of 
Congress may, to the extent not otherwise provided for under 
this title, deduct from the $150 filing fee generally required 
by participants for a particular proceeding under this chapter 
the reasonable costs incurred by the Librarian of Congress, the 
Copyright Office, the CRJ, and the three staff members. The 
Committee intends that the $150 filing fee will be utilized to 
defray the administrative costs incurred by the Office in 
connection with proceedings under this chapter. Parties voiced 
concerns that it would be inequitable to use monies gained from 
the $150 filing fees paid by parties in a particular proceeding 
to fund administrative costs accompanying another proceeding. 
As such, the Committee intends that monies collected from the 
$150 filing fee be applied to the proceeding in which the 
parties who have paid that fee are participating.
    Subsection 803(e)(1)(B) gives authorization for whatever 
funds are necessary to pay for the costs of proceedings under 
this chapter not covered by the monies collected from the $150 
filing fee generally required by participants. All funds made 
available under this subparagraph are to remain available until 
expended. Both copyright owners and users voiced serious 
concerns about the costs associated with the current CARP 
system. In particular, copyright owners noted that compulsory 
licenses allow the government to set prices for copyrighted 
works. They believe the CARP system compounds this burden by 
generating lower royalties.
    The Committee intends that H.R. 1417 create a system 
responsible for ratesetting and distribution of funds for 
compulsory licenses that minimizes costs to participants. The 
Committee expects the participating parties to make good faith 
efforts to resolve their differences to the extent possible, 
either without engaging the process set forth in Chapter 8 or 
in the form of settlement during the process set forth in the 
bill as reported.
    (2) Positions Required for Administration of Compulsory 
Licensing. Section 307 \18\ of the Legislative Branch 
Appropriations Act does not apply to employee positions in the 
Library of Congress that are required to be filled to carry out 
Sec. Sec. 111, 112, 114, 115, 116, 118, or 119, or chapter 10.
---------------------------------------------------------------------------
    \18\ Section 307 of the Legislative Branch Appropriations Act 
states that the number of employee positions, on a full-time equivalent 
basis, for each covered entity shall be reduced by at least four 
percent from the level, other than those supported by gift and trust 
funds, as of September 30,1992, or, with the approval of the Committee 
on Appropriations of the House of Representatives and the Committee on 
Appropriations of the Senate, as of a later date, but not later than 
September 30, 1993. At least 10 percent of the positions eliminated 
shall be positions the pay for which is equal to or greater than the 
annual rate of basic pay payable for grade GS-14 of the General 
Schedule. This required reduction shall be completed not later than 
September 30, 1995, with at least 62.5 percent of the reduction for 
each covered entity to be achieved by September 30, 1994. The 
Comptroller General shall carry out compliance reporting under this 
section.
---------------------------------------------------------------------------

Section 804. Institution and conclusion of proceedings

    (a) Filing of Petition. Any owner or user of a copyrighted 
work whose royalty rates are subject to determinations and 
adjustments as provided in Sec. Sec. 111, 112(e), 114, 115, 
116, 118, 119, and 1004, or are established under this chapter 
before or after the enactment of H.R. 1417, may file a petition 
with the CRJs declaring that the petition requests a 
determination oradjustment of the rate during the calendar 
years specified in the schedule set forth in Sec. 804(b). CRJs are to 
determine whether the petitioner has such a significant interest in the 
royalty rate in which a determination or adjustment is requested. If a 
petitioner is found to have a significant interest, the CRJs are to 
publish this determination with an accompanying explanation in the 
Federal Register. Responding specifically to the determination or 
adjustment of royalty rates in Sec. Sec. 112 and 114, during the 
calendar years specified in Sec. 804(b), the CRJ must notice 
commencement of proceedings under this chapter to be published in the 
Federal Register as provided in subsection 803(b)(1)(A).
    By requiring the filing of petitions on dates certain, this 
mechanism ensures that ratesetting proceedings will be 
accomplished in a timely manner thereby ensuring that new rates 
are always in place prior to the expiration of old rates.
    Some parties expressed concern that the current system 
subjects the Copyright Office and the arbitrators to an extreme 
workload fluctuation. They are either inundated with several 
proceedings at once or faced with periods where there is 
relatively little to do. To create a steady flow of work 
justifying the need for three CRJs and three professional 
staffers, as well as to alleviate the overwhelming burden of 
such immense workloads at given periods of time, H.R. 1417 
changes the license period for all licenses to a five-year 
period, and staggers the actual dates at which they will be 
addressed. Filing petitions on dates certain will ensure that 
distribution and rate-making proceedings are conducted in a 
timely fashion.
    (b) Timing of Proceedings.
    (1) Section 111 proceedings. Rates for use of the cable 
license set forth in Sec. 111 are to be considered under the 
new schedule in two different proceedings on two different 
timetables. In 2004, a petition to adjust the cable rates to 
reflect changes in national monetary inflation or deflation or 
changes in the rate charged for basic services may be filed 
with the CRJs, whereas consideration of the rates that reflect 
changes in rules and regulations of the Federal Communications 
Commission would take place the following year with the filing 
of a petition in 2005. Petitions to consider further 
adjustments to these rates may be initiated with the filing of 
a petition during each subsequent fifth calendar year.
    (2) Certain Sec. 112 proceedings. Two different schedules 
have been established for the consideration of the adjustments 
of rates and terms for use of the Sec. 112 license for the 
making of ephemeral recordings to allow for the consideration 
of statutory rates with respect to different types of services. 
Petitions to adjust the rates of the Sec. 112 license for use 
of the license by those services that are exempt from the 
digital performance right under Sec. 114(d)(1)(C)(iv) are to be 
filed in 2007 and each subsequent fifth calendar year, whereas 
those services that require a statutory license for making 
ephemeral recordings for the purpose of making digital 
transmissions of sound recordings under the statutory license 
set forth in Sec. 114, are to file their petitions for 
consideration of the applicable Sec. 112 rates concurrently 
with their petition to consider adjustment of the rates and 
terms for the Sec. 114 license pursuant to Sec. 804(b)(3), as 
explained below.
    (3) Section 114 and corresponding 112 proceedings. The 
first rate adjustment proceeding scheduled to begin after the 
enactment of H.R. 1417 shall be for the reconsideration of the 
rates and terms for the use of the Sec. 114 and Sec. 112 
licenses by nonsubscription transmission services and new 
subscription services. It shall commence immediately with the 
publication of a notice of commencement in the Federal Register 
in accordance with Sec. 803(b)(1) and shall consider rates for 
the license period beginning on January 1, 2006 and ending on 
December 31, 2010. A petition requesting a proceeding to set 
rates and terms applicable to nonsubscription transmission 
services and new subscription services for the subsequent 
license periods may be filed with the CRJs in 2009, and in each 
fifth calendar year thereafter.
    Similarly, petitions to consider the rates and terms for 
use of the Sec. Sec. 112 and 114 licenses by preexisting 
subscription and satellite digital audio radio services may be 
filed in 2006 and again in 2011. Thereafter, proceedings to 
consider the Sec. Sec. 112 and 114 licenses for use by 
preexisting subscription and satellite digital audio radio 
services may be filed in each subsequent fifth calendar year. 
However, the effective dates for these rates and terms differ 
for the first license period to accommodate the previous 
determinations made under the CARP system. Hence, the initial 
license period to be determined by the CRJs for the activities 
of the preexisting subscription services begins on January 1, 
2008, and ends on December 31, 2012; and the license period for 
the preexisting satellite digital audio radio services begins 
on January 1, 2007, and ends on December 31, 2012, at which 
time, the license periods for the preexisting services become 
synchronized.
    In the case of a new type of digital audio transmission 
service, a petition may be filed to set rates and terms for use 
of the Sec. 114 license and the corresponding Sec. 112 license. 
The CRJs must then publish a notice in the Federal Register to 
commence a rate adjustment proceeding for such service, and do 
so not later than 30 days after the filing of the petition.
    (4) Section 115 proceedings. Petitions concerning the 
adjustment or determinations of rates for the making and 
distribution of phonorecords may be filed in 2006 and each 
subsequent fifth calendar year, or at such other times as the 
parties have agreed under Sec. 115(c)(3)(B) and (C). Congress 
first granted the power to vary the rate setting schedule to 
the parties with respect to digital phonorecord deliveries 
(``DPDs'') in 1995, when it amended Sec. 115 and adopted a 
mechanism to set rates for digital download on a five-year 
cycle. Congress chose this approach because it recognized the 
rapid pace at which digital technology was developing and the 
potential need to revisit the issue more frequently than once 
every 10 years as provided for the physical phonorecords.
    However, with the advent of new and continually emerging 
business models, the distinction between physical phonorecords 
and DPDs has become less meaningful since 1995. Consequently, 
the bill as reported adjusts the schedule for setting physical 
phonorecords, providing for a single proceeding, the purpose of 
which will be to set rates for both physical phonorecords and 
DPDs and adopts a five-year cycle for reviewing these rates. 
Moreover, the Committee finds the market to be in a state of 
flux and acknowledges the need to maintain a degree of 
flexibility with respect to the schedule for reviewing the 
rates. Thus, the Committee has chosen to retain the provision 
whereby parties may vary the schedule in order to respond to 
changing technology and to meet marketplace demand.
    (5) Section 116 proceedings. The amendment to Sec. 116 
maintains the prior mechanism for setting rates for Sec. 116, 
including the provision for the filing of a petition to 
establish rates for the public performance of nondramatic 
musicals work by means of a coin-operated phonorecord player 
within one year of the expiration or termination of a 
negotiated license authorized by Sec. 116. Because the rates 
for the Sec. 116 license have been established through 
voluntary license agreements since 1990 and continue to be set 
in this manner, no statutory schedule has been established for 
the reconsideration of such rates.
    (6) Section 118 proceedings. Parties with a significant 
interest in the Sec. 118 rates may petition the CRJs to 
initiate a proceeding to reexamine the rates for the use of 
certain works in connection with noncommercial broadcasting in 
2006 and in each subsequent fifth calendar year.
    (7) Section 1004 proceedings. Subsection 804(b)(7) 
incorporates by reference the procedures specified in 
Sec. 1004(a)(3) for initiating a proceeding to consider an 
adjustment to the royalty rates for the importation and 
distribution of, or the manufacture and distribution of, any 
digital audio recording device or digital audio recording media 
pursuant to Sec. 1004.
    (8) Proceedings concerning distribution of royalty fees. 
Proceedings concerning the distribution of royalty fees 
collected by the Copyright Office pursuant to Sec. Sec. 111, 
116, 119, and 1007 are not restricted to a set schedule. 
However, once the CRJs have determined that a controversy 
exists with respect to a particular distribution, they shall 
cause to be published in the Federal Register a notice 
announcing the commencement of a proceeding to determine the 
distribution of those funds that are in controversy.

Section 805. General rule for voluntarily negotiated agreements

    Any rates or terms under this title that are agreed to by 
participants, adopted by the CRJs, and are in effect for a 
period shorter than would otherwise apply under a determination 
pursuant to this chapter are to remain in effect for the time 
period that would otherwise apply under a determination, except 
that the CRJ will adjust the rates pursuant to voluntary 
negotiations to reflect national monetary inflation during the 
additional period the rates remain in effect.
    In addition, by extending the license periods subject to 
the proceedings under this chapter to five-year periods, the 
Committee believes that parties will resolve disputes in the 
marketplace or via settlement, that might otherwise be dealt 
with through the process set forth in this chapter. While the 
Committee does not wish to restrict parties' ability to resolve 
disputes among themselves, it also believes that to engage the 
process as set out in this chapter prior to every five years 
would be a waste of government funding as well as contrary to 
the overall goal of eliminating participants costs.

Section 4. Definition

    Section 101 is amended by inserting after the definition of 
copies, a CRJ is a CRJ appointed under section 802 of this 
title, and includes any individual serving as an interim CRJ.

Section 5. Technical Amendments

    In general, Sec. 5 makes the necessary technical amendments 
to title 17 to confer authority on the CRJs to conduct 
proceedings to set rates and, as required, terms of payment, 
for use of the statutory licenses set forth in Sec. Sec. 111, 
112, 114, 115, 116, 118, 119, and chapter 10, and proceedings 
to determine the distribution of royalty fees collected under 
Sec. Sec. 111, 119, and 1005. In conjunction with these 
responsibilities, the technical amendments grant specific 
authorization to the CRJs to accept or reject royalty claims 
filed under Sec. Sec. 111, 119 and 1007; to make distributions 
of the royalty fees deposited with the Copyright Office 
(including partial distributions under certain circumstances); 
to prescribe regulations governing the proceedings, the filing 
of claims, and notice and recordkeeping activities; and to make 
determinations whether a digital audio recording device or a 
digital audio interface device is subject to Sec. 1002 and 
requires payment of the royalty fee under Sec. 1003.
    Previously, the Register of Copyrights prescribed 
regulations setting forth rules for providing notice of use of 
copyrighted works to the rightful owners. However, such terms 
have no direct bearing on copyright law or policy and, 
therefore, do not require the expertise of the Register for 
their formulation. Rather, such information is required only to 
insure the proper use of the license and to insure payment to 
the proper parties. For these reasons, the responsibility for 
establishing regulations governing notice and record of use has 
been given to the CRJs thus requiring amendment of 
Sec. Sec. 112(e)(4), 114(f)(4)(A), 115(c)(3)(D), and 118(b)(3).
    The CRJs also now have the responsibility for considering 
the status of digital audio technology devices and media and 
whether a specific device or media is subject to the royalty 
fees to be made under Sec. 1003. Formerly, parties could agree 
to binding arbitration and have the matter decided by an 
independent panel of three arbitrators who considered the 
matter according to their own rules. However, such a process 
does not insure continuity in the decision making process, nor 
does it allow any agency or tribunal to develop a level of 
expertise with respect to the highly specialized nature of the 
inquiry. Consequently, the CRJs are vested with the authority 
to consider these questions, thereby allowing for the 
development of a consistent body of law on the question of what 
constitutes a digital audio technology device or media for 
purposes of chapter 10. Necessary technical amendments have 
been made to Sec. 1010 to effectuate this change.
    In 1995, Congress passed the Digital Performance Right in 
Sound Recording Act which, inter alia, amended Sec. 115 to 
create a new statutory license for the making and distribution 
of nondramatic musical works by means of a digital 
transmission. As part of that license, Congress included an 
antitrust exemption with respect to collective negotiations and 
agreements related to the new statutory license. However, the 
provision did not extend to negotiations and agreements related 
to the traditional mechanical license. Consequently, 
Sec. 115(c)(3)(B) has been amended to cover collective 
negotiations and agreements relating to statutory licenses, in 
order to harmonize the licensing practices covered by section 
115 and conform those practices with similar practices found 
elsewhere in the law.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                      TITLE 17, UNITED STATES CODE

Chap.                                                               Sec.
      Subject Matter and Scope of Copyright..........................101
     * * * * * * *
      Copyright Arbitration Royalty Panels..........................801]
      Proceedings by Copyright Royalty Judges........................801
     * * * * * * *

CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT

           *       *       *       *       *       *       *


Sec. 101. Definitions

  Except as otherwise provided in this title, as used in this 
title, the following terms and their variant forms mean the 
following:
          An ``anonymous work'' is a work on the copies or 
        phonorecords of which no natural person is identified 
        as author.

           *       *       *       *       *       *       *

          ``Copies'' are material objects, other than 
        phonorecords, in which a work is fixed by any method 
        now known or later developed, and from which the work 
        can be perceived, reproduced, or otherwise 
        communicated, either directly or with the aid of a 
        machine or device. The term ``copies'' includes the 
        material object, other than a phonorecord, in which the 
        work is first fixed.
          A ``Copyright Royalty Judge'' is a Copyright Royalty 
        Judge appointed under section 802 of this title, and 
        includes any individual serving as an interim Copyright 
        Royalty Judge under such section.

           *       *       *       *       *       *       *


Sec. 111. Limitations on exclusive rights: Secondary transmissions

  (a) * * *

           *       *       *       *       *       *       *

  (d) Compulsory License for Secondary Transmissions by Cable 
Systems.--
          (1) * * *
          (2) The Register of Copyrights shall receive all fees 
        deposited under this section and, after deducting the 
        reasonable costs incurred by the Copyright Office under 
        this section, shall deposit the balance in the Treasury 
        of the United States, in such manner as the Secretary 
        of the Treasury directs. All funds held by the 
        Secretary of the Treasury shall be invested in 
        interest-bearing United States securities for later 
        distribution with interest by the Librarian of Congress 
        in the event no controversy over distribution exists, 
        or by [a copyright arbitration royalty panel] the 
        Copyright Royalty Judges in the event a controversy 
        over such distribution exists.

           *       *       *       *       *       *       *

          (4) The royalty fees thus deposited shall be 
        distributed in accordance with the following 
        procedures:
                  (A) During the month of July in each year, 
                every person claiming to be entitled to 
                statutory license fees for secondary 
                transmissions shall file a claim with the 
                [Librarian of Congress] Copyright Royalty 
                Judges, in accordance with requirements that 
                the [Librarian of Congress] Copyright Royalty 
                Judges shall prescribe by regulation. 
                Notwithstanding any provisions of the antitrust 
                laws, for purposes of this clause any claimants 
                may agree among themselves as to the 
                proportionate division of statutory licensing 
                fees among them, may lump their claims together 
                and file them jointly or as a single claim, or 
                may designate a common agent to receive payment 
                on their behalf.
                  (B) After the first day of August of each 
                year, the [Librarian of Congress shall, upon 
                the recommendation of the Register of 
                Copyrights,] Copyright Royalty Judges shall 
                determine whether there exists a controversy 
                concerning the distribution of royalty fees. If 
                the [Librarian determines] Copyright Royalty 
                Judges determine that no such controversy 
                exists, the Librarian shall, after deducting 
                reasonable administrative costs under this 
                section, distribute such fees to the copyright 
                owners entitled to such fees, or to their 
                designated agents. If the [Librarian] Copyright 
                Royalty Judges finds the existence of a 
                controversy, the [Librarian] Copyright Royalty 
                Judges shall, pursuant to chapter 8 of this 
                title, [convene a copyright arbitration royalty 
                panel] conduct a proceeding to determine the 
                distribution of royalty fees.
                  (C) During the pendency of any proceeding 
                under this subsection, the [Librarian of 
                Congress] Copyright Royalty Judges shall 
                withhold from distribution an amount sufficient 
                to satisfy all claims with respect to which a 
                controversy exists, but shall have discretion 
                to proceed to distribute any amounts that are 
                not in controversy.

           *       *       *       *       *       *       *


Sec. 112. Limitations on exclusive rights: Ephemeral recordings

  (a) * * *

           *       *       *       *       *       *       *

  (e) Statutory License.--(1) * * *

           *       *       *       *       *       *       *

  (3) [No later than 30 days after the date of the enactment of 
the Digital Millennium Copyright Act, 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 paragraph (1) of this 
subsection during the period beginning on the date of the 
enactment of such Act and ending on December 31, 2000, or such 
other date as the parties may agree.] Voluntary negotiation 
proceedings initiated pursuant to section 804(a) for the 
purpose of determining reasonable terms and rates of royalty 
payments for the activities specified by paragraph (1) shall 
cover the 5-year period beginning on January 1 of the second 
year following the year in which the proceedings are commenced, 
or such other period as the parties may agree. Such rates shall 
include a minimum fee for each type of service offered by 
transmitting organizations. Any copyright owners of sound 
recordings or any transmitting organizations entitled to a 
statutory license under this subsection may submit to the 
[Librarian of Congress] Copyright Royalty Judges licenses 
covering such activities with respect to such sound recordings. 
The parties to each negotiation proceeding shall bear their own 
costs.
  (4) [In the absence of license agreements negotiated under 
paragraph (2), during the 60-day period commencing 6 months 
after publication of the notice specified in paragraph (3), and 
upon the filing of a petition in accordance with section 
803(a)(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 reasonable 
rates and terms which, subject to paragraph (5), shall be 
binding on all copyright owners of sound recordings and 
transmitting organizations entitled to a statutory license 
under this subsection during the period beginning on the date 
of the enactment of the Digital Millennium Copyright Act and 
ending on December 31, 2000, or such other date as the parties 
may agree.] In the absence of license agreements negotiated 
under paragraphs (2) and (3), the Copyright Royalty Judges 
shall commence a proceeding pursuant to chapter 8 to determine 
and publish in the Federal Register a schedule of reasonable 
rates and terms which, subject to paragraph (5), shall be 
binding on all copyright owners of sound recordings and 
transmitting organizations entitled to a statutory license 
under this subsection during the 5-year period specified in 
paragraph (3), or such other period as the parties may agree. 
Such rates shall include a minimum fee for each type of service 
offered by transmitting organizations. The [copyright 
arbitration royalty panel] Copyright Royalty Judges shall 
establish rates that most clearly represent the fees that would 
have been negotiated in the marketplace between a willing buyer 
and a willing seller. In determining such rates and terms, the 
[copyright arbitration royalty panel] Copyright Royalty Judges 
shall base [its] their decision on economic, competitive, and 
programming information presented by the parties, including--
          (A) whether use of the service may substitute for or 
        may promote the sales of phonorecords or otherwise 
        interferes with or enhances the copyright owner's 
        traditional streams of revenue; and
          (B) the relative roles of the copyright owner and the 
        transmitting organization in the copyrighted work and 
        the service made available to the public with respect 
        to relative creative contribution, technological 
        contribution, capital investment, cost, and risk.
In establishing such rates and terms, the [copyright 
arbitration royalty] Copyright Royalty Judges panel may 
consider the rates and terms under voluntary license agreements 
negotiated as provided in paragraphs (2) and (3). The 
[Librarian of Congress] Copyright Royalty Judges 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 
and made available by transmitting organizations entitled to 
obtain a statutory license under this subsection.
  (5) License agreements voluntarily negotiated at any time 
between 1 or more copyright owners of sound recordings and 1 or 
more transmitting organizations entitled to obtain a statutory 
license under this subsection shall be given effect in lieu of 
any determination by a copyright arbitration royalty panel [or 
decision by the Librarian of Congress], decision by the 
Librarian of Congress, or determination by the Copyright 
Royalty Judges.
  [(6) Publication of a notice of the initiation of voluntary 
negotiation proceedings as specified in paragraph (3) shall be 
repeated, in accordance with regulations that the Librarian of 
Congress shall prescribe, in the first week of January 2000, 
and at 2-year intervals thereafter, except to the extent that 
different years for the repeating of such proceedings may be 
determined in accordance with paragraph (3). The procedures 
specified in paragraph (4) shall be repeated, in accordance 
with regulations that the Librarian of Congress shall 
prescribe, upon filing of a petition in accordance with section 
803(a)(1), during a 60-day period commencing on July 1, 2000, 
and at 2-year intervals thereafter, except to the extent that 
different years for the repeating of such proceedings may be 
determined in accordance with paragraph (3). The procedures 
specified in paragraph (4) shall be concluded in accordance 
with section 802.]
  [(7)] (6)(A) Any person who wishes to make a phonorecord of a 
sound recording under a statutory license in accordance with 
this subsection may do so without infringing the exclusive 
right of the copyright owner of the sound recording under 
section 106(1)--
          (i) by complying with such notice requirements as the 
        [Librarian of Congress] Copyright Royalty Judges shall 
        prescribe by regulation and by paying royalty fees in 
        accordance with this subsection; or

           *       *       *       *       *       *       *

  [(8)] (7) If a transmitting organization entitled to make a 
phonorecord under this subsection is prevented from making such 
phonorecord by reason of the application by the copyright owner 
of technical measures that prevent the reproduction of the 
sound recording, the copyright owner shall make available to 
the transmitting organization the necessary means for 
permitting the making of such phonorecord as permitted under 
this subsection, if it is technologically feasible and 
economically reasonable for the copyright owner to do so. If 
the copyright owner fails to do so in a timely manner in light 
of the transmitting organization's reasonable business 
requirements, the transmitting organization shall not be liable 
for a violation of section 1201(a)(1) of this title for 
engaging in such activities as are necessary to make such 
phonorecords as permitted under this subsection.
  [(9)] (8) Nothing in this subsection annuls, limits, impairs, 
or otherwise affects in any way the existence or value of any 
of the exclusive rights of the copyright owners in a sound 
recording, except as otherwise provided in this subsection, or 
in a musical work, including the exclusive rights to reproduce 
and distribute a sound recording or musical work, including by 
means of a digital phonorecord delivery, under sections 106(1), 
106(3), and 115, and the right to perform publicly a sound 
recording or musical work, including by means of a digital 
audio transmission, under sections 106(4) and 106(6).

           *       *       *       *       *       *       *


Sec. 114. Scope of exclusive rights in sound recordings

  (a) * * *

           *       *       *       *       *       *       *

  (f) Licenses for Certain Nonexempt Transmissions.--
          (1)(A) [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 subscription transmissions by 
        preexisting subscription services and transmissions by 
        preexisting satellite digital audio radio services 
        specified by subsection (d)(2) of this section during 
        the period beginning on the effective date of such Act 
        and ending on December 31, 2001, or, if a copyright 
        arbitration royalty panel is convened, ending 30 days 
        after the Librarian issues and publishes in the Federal 
        Register an order adopting the determination of the 
        copyright arbitration royalty panel or an order setting 
        the terms and rates (if the Librarian rejects the 
        panel's determination).] Voluntary negotiation 
        proceedings initiated pursuant to section 804(a) for 
        the purpose of determining reasonable terms and rates 
        of royalty payments for subscription transmissions by 
        preexisting subscription services and transmissions by 
        preexisting satellite digital audio radio services 
        shall cover the 5-year period beginning on January 1 of 
        the year following the second year in which the 
        proceedings are commenced, except where differential 
        transitional periods are provided in section 804(b)(3), 
        or such other period as the parties may agree. Such 
        terms and rates shall distinguish among the different 
        types of digital audio transmission services then in 
        operation. Any copyright owners of sound recordings, 
        preexisting subscription services, or preexisting 
        satellite digital audio radio services may submit to 
        the [Librarian of Congress] Copyright Royalty Judges 
        licenses covering such subscription transmissions with 
        respect to such sound recordings. The parties to each 
        negotiation proceeding shall bear their own costs.
          (B) [In the absence of license agreements negotiated 
        under subparagraph (A), during the 60-day period 
        commencing 6 months after publication of the notice 
        specified in subparagraph (A), and upon the filing of a 
        petition in accordance with section 803(a)(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 
        affected by this paragraph.] In the absence of license 
        agreements negotiated under subparagraph (A), the 
        Copyright Royalty Judges shall commence a proceeding 
        pursuant to chapter 8 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 affected by this paragraph 
        during the 5-year period specified in subparagraph (A), 
        or such other date as the parties may agree. In 
        establishing rates and terms for preexisting 
        subscription services and preexisting satellite digital 
        audio radio services, in addition to the objectives set 
        forth in section 801(b)(1), the [copyright arbitration 
        royalty panel] Copyright Royalty Judges may consider 
        the rates and terms for comparable types of 
        subscription digital audio transmission services and 
        comparable circumstances under voluntary license 
        agreements negotiated as provided in subparagraph (A).
          [(C)(i) Publication of a notice of the initiation of 
        voluntary negotiation proceedings as specified in 
        subparagraph (A) shall be repeated, in accordance with 
        regulations that the Librarian of Congress shall 
        prescribe--
                  [(I) no later than 30 days after a petition 
                is filed by any copyright owners of sound 
                recordings, any preexisting subscription 
                services, or any preexisting satellite digital 
                audio radio services indicating that a new type 
                of subscription digital audio transmission 
                service on which sound recordings are performed 
                is or is about to become operational; and
                  [(II) in the first week of January 2001, and 
                at 5-year intervals thereafter.
          [(ii) The procedures specified in subparagraph (B) 
        shall be repeated, in accordance with regulations that 
        the Librarian of Congress shall prescribe, upon filing 
        of a petition in accordance with section 803(a)(1) 
        during a 60-day period commencing--
                  [(I) 6 months after publication of a notice 
                of the initiation of voluntary negotiation 
                proceedings under subparagraph (A) pursuant to 
                a petition under clause (i)(I) of this 
                subparagraph; or
                  [(II) on July 1, 2001, and at 5-year 
                intervals thereafter.
          [(iii) The procedures specified in subparagraph (B) 
        shall be concluded in accordance with section 802.]
          (C) The procedures under subparagraphs (A) and (B) 
        also shall be initiated pursuant to a petition filed by 
        any copyright owners of sound recordings, any 
        preexisting subscription services, or any preexisting 
        satellite digital audio radio services indicating that 
        a new type of subscription digital audio transmission 
        service on which sound recordings are performed is or 
        is about to become operational, for the purpose of 
        determining reasonable terms and rates of royalty 
        payments with respect to such new type of transmission 
        service for the period beginning with the inception of 
        such new type of service and ending on the date on 
        which the royalty rates and terms for subscription 
        digital audio transmission services most recently 
        determined under subparagraph (A) or (B) and chapter 8 
        expire, or such other period as the parties may agree.
          (2)(A) [No later than 30 days after the date of the 
        enactment of the Digital Millennium Copyright Act, 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 public performances of sound recordings by 
        means of eligible nonsubscription transmissions and 
        transmissions by new subscription services specified by 
        subsection (d)(2) during the period beginning on the 
        date of the enactment of such Act and ending on 
        December 31, 2000, or such other date as the parties 
        may agree.] Voluntary negotiation proceedings initiated 
        pursuant to section 804(a) for the purpose of 
        determining reasonable terms and rates of royalty 
        payments for public performances of sound recordings by 
        means of eligible nonsubscription transmissions and 
        transmissions by new subscription services specified by 
        subsection (d)(2) shall cover the 5-year period 
        beginning on January 1 of the second year following the 
        year in which the proceedings are commenced, except 
        where different transitional periods are provided in 
        section 804(b)(3)(A), or such other period as the 
        parties may agree. Such rates and terms shall 
        distinguish among the different types of eligible 
        nonsubscription transmission services and new 
        subscription services then in operation and shall 
        include a minimum fee for each such type of service. 
        Any copyright owners of sound recordings or any 
        entities performing sound recordings affected by this 
        paragraph may submit to the [Librarian of Congress] 
        Copyright Royalty Judges licenses covering such 
        eligible nonsubscription transmissions and new 
        subscription services with respect to such sound 
        recordings. The parties to each negotiation proceeding 
        shall bear their own costs.
          (B) [In the absence of license agreements negotiated 
        under subparagraph (A), during the 60-day period 
        commencing 6 months after publication of the notice 
        specified in subparagraph (A), and upon the filing of a 
        petition in accordance with section 803(a)(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 
        affected by this paragraph during the period beginning 
        on the date of the enactment of the Digital Millennium 
        Copyright Act and ending on December 31, 2000, or such 
        other date as the parties may agree.] In the absence of 
        license agreements negotiated under subparagraph (A), 
        the Copyright Royalty Judges shall commence a 
        proceeding pursuant to chapter 8 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 affected by this 
        paragraph during the period specified in subparagraph 
        (A), or such other period as the parties may agree. 
        Such rates and terms shall distinguish among the 
        different types of eligible nonsubscription 
        transmission services then in operation and shall 
        include a minimum fee for each such type of service, 
        such differences to be based on criteria including, but 
        not limited to, the quantity and nature of the use of 
        sound recordings and the degree to which use of the 
        service may substitute for or may promote the purchase 
        of phonorecords by consumers. In establishing rates and 
        terms for transmissions by eligible nonsubscription 
        services and new subscription services, the [copyright 
        arbitration royalty panel] Copyright Royalty Judges 
        shall establish rates and terms that most clearly 
        represent the rates and terms that would have been 
        negotiated in the marketplace between a willing buyer 
        and a willing seller. In determining such rates and 
        terms, the [copyright arbitration royalty panel] 
        Copyright Royalty Judges shall base its decision on 
        economic, competitive and programming information 
        presented by the parties, including--
                  (i) whether use of the service may substitute 
                for or may promote the sales of phonorecords or 
                otherwise may interfere with or may enhance the 
                sound recording copyright owner's other streams 
                of revenue from its sound recordings; and
                  (ii) the relative roles of the copyright 
                owner and the transmitting entity in the 
                copyrighted work and the service made available 
                to the public with respect to relative creative 
                contribution, technological contribution, 
                capital investment, cost, and risk.
        In establishing such rates and terms, the [copyright 
        arbitration royalty panel] Copyright Royalty Judges may 
        consider the rates and terms for comparable types of 
        digital audio transmission services and comparable 
        circumstances under voluntary license agreements 
        negotiated under subparagraph (A).
          [(C)(i) Publication of a notice of the initiation of 
        voluntary negotiation proceedings as specified in 
        subparagraph (A) shall be repeated in accordance with 
        regulations that the Librarian of Congress shall 
        prescribe--
                  [(I) no later than 30 days after a petition 
                is filed by any copyright owners of sound 
                recordings or any eligible nonsubscription 
                service or new subscription service indicating 
                that a new type of eligible nonsubscription 
                service or new subscription service on which 
                sound recordings are performed is or is about 
                to become operational; and
                  [(II) in the first week of January 2000, and 
                at 2-year intervals thereafter, except to the 
                extent that different years for the repeating 
                of such proceedings may be determined in 
                accordance with subparagraph (A).
          [(ii) The procedures specified in subparagraph (B) 
        shall be repeated, in accordance with regulations that 
        the Librarian of Congress shall prescribe, upon filing 
        of a petition in 
        accordance with section 803(a)(1) during a 60-day 
        period commencing--
                  [(I) 6 months after publication of a notice 
                of the 
                initiation of voluntary negotiation proceedings 
                under subparagraph (A) pursuant to a petition 
                under clause (i)(I); or
                  [(II) on July 1, 2000, and at 2-year 
                intervals thereafter, except to the extent that 
                different years for the repeating of such 
                proceedings may be determined in accordance 
                with subparagraph (A).
          [(iii) The procedures specified in subparagraph (B) 
        shall be concluded in accordance with section 802.]
          (C) The procedures under subparagraphs (A) and (B) 
        shall also be initiated pursuant to a petition filed by 
        any copyright owners of sound recordings or any 
        eligible nonsubscription service or new subscription 
        service indicating that a new type of eligible 
        nonsubscription service or new subscription service on 
        which sound recordings are performed is or is about to 
        become operational, for the purpose of determining 
        reasonable terms and rates of royalty payments with 
        respect to such new type of service for the period 
        beginning with the inception of such new type of 
        service and ending on the date on which the royalty 
        rates and terms for preexisting subscription digital 
        audio transmission services or preexisting satellite 
        digital radio audio services, as the case may be, most 
        recently determined under subparagraph (A) or (B) and 
        chapter 8 expire, or such other period as the parties 
        may agree.
          (3) License agreements voluntarily negotiated at any 
        time between 1 or more copyright owners of sound 
        recordings and 1 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], decision by 
        the Librarian of Congress, or determination by the 
        Copyright Royalty Judges.
          (4)(A) The [Librarian of Congress] Copyright Royalty 
        Judges 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 and made 
        available by entities performing sound recordings.
          (B) Any person who wishes to perform a sound 
        recording publicly by means of a transmission eligible 
        for statutory licensing 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 [Librarian of Congress] 
                Copyright Royalty Judges shall prescribe by 
                regulation and by paying royalty fees in 
                accordance with this subsection; or

           *       *       *       *       *       *       *


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) * * *

           *       *       *       *       *       *       *

  (c) Royalty Payable Under Compulsory License.--
          (1) * * *

           *       *       *       *       *       *       *

          (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) * * *
                  (ii) on or after January 1, 1998, the royalty 
                payable by the compulsory licensee shall be the 
                royalty prescribed under subparagraphs (B) 
                through [(F)] (E) and chapter 8 of this title.
          (B) Notwithstanding any provision of the antitrust 
        laws, 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] under this section 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)] this 
        subparagraph and subparagraphs (B) through (E) and 
        chapter 8 of this title shall next be determined.
          (C) [During the period of June 30, 1996, through 
        December 31, 1996, 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 
        subparagraph (A) during the period beginning January 1, 
        1998, and ending on the effective date of any new terms 
        and rates established pursuant to subparagraph (C), (D) 
        or (F), or such other date (regarding digital 
        phonorecord deliveries) as the parties may agree.] 
        Voluntary negotiation proceedings initiated pursuant to 
        a petition filed under section 804(a) for the purpose 
        of determining reasonable terms and rates of royalty 
        payments for the activities specified by this section 
        shall cover the period beginning with the effective 
        date of such terms and rates, but not earlier than 
        January 1 of the second year following the year in 
        which the petition is filed, and ending on the 
        effective date of successor terms and rates, or such 
        other period 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] Copyright Royalty Judges licenses covering 
        such activities. The parties to each negotiation 
        proceeding shall bear their own costs.
          (D) [In the absence of license agreements negotiated 
        under subparagraphs (B) and (C), upon the filing of a 
        petition in accordance with section 803(a)(1), the 
        Librarian of Congress shall, pursuant to chapter 8, 
        convene a copyright arbitration royalty panel to 
        determine 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 the effective date of any new 
        terms and rates established pursuant to subparagraph 
        (C), (D) or (F), or such other date (regarding digital 
        phonorecord deliveries) as may be determined pursuant 
        to subparagraphs (B) and (C).] In the absence of 
        license agreements negotiated under subparagraphs (B) 
        and (C), the Copyright Royalty Judges shall commence 
        proceedings pursuant to chapter 8 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 
        specified in subparagraph (C) or such other period as 
        may be determined pursuant to subparagraphs (B) and 
        (C), or such other period 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. In addition to the objectives set forth in 
        section 801(b)(1), in establishing such rates and 
        terms, the [copyright arbitration royalty panel] 
        Copyright Royalty Judges may consider rates and terms 
        under voluntary license agreements negotiated as 
        provided in subparagraphs (B) and (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 [Librarian of 
        Congress] Copyright Royalty Judges 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] a 
        copyright arbitration royalty panel, the Librarian of 
        Congress, or the Copyright Royalty Judges. Subject to 
        clause (ii), the royalty rates determined pursuant to 
        subparagraph [(C), (D) or (F) shall be given effect] 
        (C) or (D) shall be given effect as to digital 
        phonorecord deliveries 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 paragraphs 
        (1) and (3) of section 106 or commits another person to 
        grant a license in that musical work under paragraphs 
        (1) and (3) of section 106, to a person desiring to fix 
        in a tangible medium of expression a sound recording 
        embodying the musical work.
          (ii) The second sentence of 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 the royalty rates 
                determined pursuant to subparagraph [(C), (D) 
                or (F)] (C) or (D) 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), (D) or (F)] (C) or (D) for 
                the number of musical works within the scope of 
                the contract as of June 22, 1995; and

           *       *       *       *       *       *       *

          [(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, in each fifth calendar year after 1997, 
        except to the extent that different years for the 
        repeating and concluding of such proceedings may be 
        determined in accordance with subparagraphs (B) and 
        (C).]
          [(G)] (F) 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)] (G)(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 section 509, 
        unless--
                  (I) * * *

           *       *       *       *       *       *       *

          [(I)] (H) The liability of the copyright owner of a 
        sound recording for infringement of the copyright in a 
        nondramatic 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 nondramatic 
        musical work.
          [(J)] (I) Nothing in section 1008 shall be construed 
        to prevent the exercise of the rights and remedies 
        allowed by this paragraph, paragraph (6), 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)] (J) 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)] (K) 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.

           *       *       *       *       *       *       *


Sec. 116. Negotiated licenses for public performances by means of coin-
                    operated phonorecord players

  (a) * * *
  (b) Negotiated Licenses.--
          (1) * * *
          [(2) Arbitration.--Parties not subject to such a 
        negotiation may determine, by arbitration in accordance 
        with the provisions of chapter 8, the terms and rates 
        and the division of fees described in paragraph (1).]
          (2) Chapter 8 proceeding.--Parties not subject to 
        such a negotiation may have the terms and rates and the 
        division of fees described in paragraph (1) determined 
        in a proceeding in accordance with the provisions of 
        chapter 8.
  (c) License Agreements Superior to [Copyright Arbitration 
Royalty Panel Determinations] Determinations by Copyright 
Royalty Judges.--License agreements between one or more 
copyright owners and one or more operators of coin-operated 
phonorecord players, which are negotiated in accordance with 
subsection (b), shall be given effect in lieu of any otherwise 
applicable determination by [a copyright arbitration royalty 
panel] the Copyright Royalty Judges.

           *       *       *       *       *       *       *


Sec. 118. Scope of exclusive rights: Use of certain works in connection 
                    with noncommercial broadcasting

  (a) * * *
  (b) Notwithstanding any provision of the antitrust laws, any 
owners of copyright in published nondramatic musical works and 
published pictorial, graphic, and sculptural works and any 
public broadcasting entities, respectively, may negotiate and 
agree upon the terms and rates of royalty payments and the 
proportionate division of fees paid among various copyright 
owners, and may designate common agents to negotiate, agree to, 
pay, or receive payments.
          (1) Any owner of copyright in a work specified in 
        this subsection or any public broadcasting entity may 
        submit to the [Librarian of Congress] Copyright Royalty 
        Judges proposed licenses covering such activities with 
        respect to such works. [The Librarian of Congress shall 
        proceed on the basis of the proposals submitted as well 
        as any other relevant information. The Librarian of 
        Congress shall permit any interested party to submit 
        information relevant to such proceedings.]
          (2) License agreements, voluntarily negotiated at any 
        time between one or more copyright owners and one or 
        more public broadcasting entities shall be given effect 
        in lieu of any determination by [the Librarian of 
        Congress: Provided, That copies of such agreements are 
        filed in the Copyright Office within thirty days of 
        execution in accordance with regulations that the 
        Register of Copyrights shall prescribe.] a copyright 
        arbitration royalty panel, the Librarian of Congress, 
        or the Copyright Royalty Judge, if copies of such 
        agreements are filed with the Copyright Royalty Judges 
        within 30 days of execution in accordance with 
        regulations that the Copyright Royalty Judges shall 
        issue.
          [(3) In the absence of license agreements negotiated 
        under paragraph (2), 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 (2), shall be binding on all owners of 
        copyright in works specified by this subsection and 
        public broadcasting entities, regardless of whether 
        such copyright owners have submitted proposals to the 
        Librarian of Congress.]
          (3) Voluntary negotiation proceedings initiated 
        pursuant to a petition filed under section 804(a) for 
        the purpose of determining a schedule of terms and 
        rates of royalty payments by public broadcasting 
        entities to copyright owners in works specified by this 
        subsection and the proportionate division of fees paid 
        among various copyright owners shall cover the 5-year 
        period beginning on January 1 of the second year 
        following the year in which the petition is filed. The 
        parties to each negotiation proceeding shall bear their 
        own costs.
          (4) In the absence of license agreements negotiated 
        under paragraph (2) or (3), the Copyright Royalty 
        Judges shall, pursuant to chapter 8, conduct a 
        proceeding to determine and publish in the Federal 
        Register a schedule of rates and terms which, subject 
        to paragraph (2), shall be binding on all owners of 
        copyright in works specified by this subsection and 
        public broadcasting entities, regardless of whether 
        such copyright owners have submitted proposals to the 
        Copyright Royalty Judges. In establishing such rates 
        and terms the [copyright arbitration royalty panel] 
        Copyright Royalty Judges may consider the rates for 
        comparable circumstances under voluntary license 
        agreements negotiated as provided in paragraph (2) or 
        (3). The [Librarian of Congress] Copyright Royalty 
        Judges 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 by public 
        broadcasting entities.
  [(c) The initial procedure specified in subsection (b) shall 
be repeated and concluded between June 30 and December 31, 
1997, and at five-year intervals thereafter, in accordance with 
regulations that the Librarian of Congress shall prescribe.]
  [(d)] (c) Subject to the terms of any voluntary license 
agreements that have been negotiated as provided by subsection 
(b)(2) or (3), a public broadcasting entity may, upon 
compliance with the provisions of this section, including the 
rates and terms established by [a copyright arbitration royalty 
panel] the Copyright Royalty Judges under subsection [(b)(3)] 
(b)(4), engage in the following activities with respect to 
published nondramatic musical works and published pictorial, 
graphic, and sculptural works:
          (1) * * *

           *       *       *       *       *       *       *

  [(e)] (d) Except as expressly provided in this subsection, 
this section shall have no applicability to works other than 
those specified in subsection (b). Owners of copyright in 
nondramatic literary works and public broadcasting entities 
may, during the course of voluntary negotiations, agree among 
themselves, respectively, as to the terms and rates of royalty 
payments without liability under the antitrust laws. Any such 
terms and rates of royalty payments shall be effective upon 
filing [in the Copyright Office] with the Copyright Royalty 
Judges, in accordance with regulations that the [Register of 
Copyrights] Copyright Royalty Judges shall prescribe.
  [(f)] (e) Nothing in this section shall be construed to 
permit, beyond the limits of fair use as provided by section 
107, the unauthorized dramatization of a nondramatic musical 
work, the production of a transmission program drawn to any 
substantial extent from a published compilation of pictorial, 
graphic, or sculptural works, or the unauthorized use of any 
portion of an audiovisual work.
  [(g)] (f) As used in this section, the term ``public 
broadcasting entity'' means a noncommercial educational 
broadcast station as defined in section 397 of title 47 and any 
nonprofit institution or organization engaged in the activities 
described in paragraph (2) of subsection [(d)] (c).

Sec. 119. Limitations on exclusive rights: Secondary transmissions of 
                    superstations and network stations for private home 
                    viewing

  (a) * * *
  (b) Statutory License for Secondary Transmissions for Private 
Home Viewing.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Persons to whom fees are distributed.--The 
        royalty fees deposited under paragraph (2) shall, in 
        accordance with the procedures provided by paragraph 
        (4), be distributed to those copyright owners whose 
        works were included in a secondary transmission for 
        private home viewing made by a satellite carrier during 
        the applicable 6-month accounting period and who file a 
        claim with the [Librarian of Congress] Copyright 
        Royalty Judges under paragraph (4).
          (4) Procedures for distribution.--The royalty fees 
        deposited under paragraph (2) shall be distributed in 
        accordance with the following procedures:
                  (A) Filing of claims for fees.--During the 
                month of July in each year, each person 
                claiming to be entitled to statutory license 
                fees for secondary transmissions for private 
                home viewing shall file a claim with the 
                [Librarian of Congress] Copyright Royalty 
                Judges, in accordance with requirements that 
                the [Librarian of Congress] Copyright Royalty 
                Judges shall prescribe by regulation. For 
                purposes of this paragraph, any claimants may 
                agree among themselves as to the proportionate 
                division of statutory license fees among them, 
                may lump their claims together and file them 
                jointly or as a single claim, or may designate 
                a common agent to receive payment on their 
                behalf.
                  [(B) Determination of controversy; 
                distributions.--After the first day of August 
                of each year, the Librarian of Congress shall 
                determine whether there exists a controversy 
                concerning the distribution of royalty fees. If 
                the Librarian of Congress determines that no 
                such controversy exists, the Librarian of 
                Congress shall, after deducting reasonable 
                administrative costs under this paragraph, 
                distribute such fees to the copyright owners 
                entitled to receive them, or to their 
                designated agents. If the Librarian of Congress 
                finds the existence of a controversy, the 
                Librarian of Congress shall, pursuant to 
                chapter 8 of this title, convene a copyright 
                arbitration royalty panel to determine the 
                distribution of royalty fees.
                  [(C) Withholding of fees during 
                controversy.--During the pendency of any 
                proceeding under this subsection, the Librarian 
                of Congress shall withhold from distribution an 
                amount sufficient to satisfy all claims with 
                respect to which a controversy exists, but 
                shall have discretion to proceed to distribute 
                any amounts that are not in controversy.]
                  (B) Determination of controversy; 
                distributions.--After the first day of August 
                of each year, the Copyright Royalty Judges 
                shall determine whether there exists a 
                controversy concerning the distribution of 
                royalty fees. If the Copyright Royalty Judges 
                determine that no such controversy exists, the 
                Librarian of Congress shall, after deducting 
                reasonable administrative costs under this 
                paragraph, distribute such fees to the 
                copyright owners entitled to receive them, or 
                to their designated agents. If the Copyright 
                Royalty Judges find the existence of a 
                controversy, the Copyright Royalty Judges 
                shall, pursuant to chapter 8 of this title, 
                conduct a proceeding to determine the 
                distribution of royalty fees.
                  (C) Withholding of fees during controversy.--
                During the pendency of any proceeding under 
                this subsection, the Copyright Royalty Judges 
                shall withhold from distribution an amount 
                sufficient to satisfy all claims with respect 
                to which a controversy exists, subject to any 
                distributions made under section 801(b)(3).

           *       *       *       *       *       *       *


            [CHAPTER 8--COPYRIGHT ARBITRATION ROYALTY PANELS

[Sec.
[801.  Copyright arbitration royalty panels: Establishment and purpose.
[802.  Membership and proceedings of copyright arbitration royalty 
          panels.
[803.  Institution and conclusion of proceedings.

[Sec. 801. Copyright arbitration royalty panels: Establishment and 
                    purpose

  [(a) Establishment.--The Librarian of Congress, upon the 
recommendation of the Register of Copyrights, is authorized to 
appoint and convene copyright arbitration royalty panels.
  [(b) Purposes.--Subject to the provisions of this chapter, 
the purposes of the copyright arbitration royalty panels shall 
be as follows:
          [(1) To make determinations concerning the adjustment 
        of reasonable copyright royalty rates as provided in 
        sections 114, 115, 116, and 119, and to make 
        determinations as to reasonable terms and rates of 
        royalty payments as provided in section 118. The rates 
        applicable under sections 114(f)(1)(B), 115, and 116 
        shall be calculated to achieve the following 
        objectives:
                  [(A) To maximize the availability of creative 
                works to the public;
                  [(B) To afford the copyright owner a fair 
                return for his creative work and the copyright 
                user a fair income under existing economic 
                conditions;
                  [(C) To reflect the relative roles of the 
                copyright owner and the copyright user in the 
                product made available to the public with 
                respect to relative creative contribution, 
                technological contribution, capital investment, 
                cost, risk, and contribution to the opening of 
                new markets for creative expression and media 
                for their communication;
                  [(D) To minimize any disruptive impact on the 
                structure of the industries involved and on 
                generally prevailing industry practices.
          [(2) To make determinations concerning the adjustment 
        of the copyright royalty rates in section 111 solely in 
        accordance with the following provisions:
                  [(A) The rates established by section 
                111(d)(1)(B) may be adjusted to reflect (i) 
                national monetary inflation or deflation or 
                (ii) changes in the average rates charged cable 
                subscribers for the basic service of providing 
                secondary transmissions to maintain the real 
                constant dollar level of the royalty fee per 
                subscriber which existed as of the date of 
                enactment of this Act: Provided, That if the 
                average rates charged cable system subscribers 
                for the basic service of providing secondary 
                transmissions are changed so that the average 
                rates exceed national monetary inflation, no 
                change in the rates established by section 
                111(d)(1)(B) shall be permitted: And provided 
                further, That no increase in the royalty fee 
                shall be permitted based on any reduction in 
                the average number of distant signal 
                equivalents per subscriber. The copyright 
                arbitration royalty panels may consider all 
                factors relating to the maintenance of such 
                level of payments including, as an extenuating 
                factor, whether the cable industry has been 
                restrained by subscriber rate regulating 
                authorities from increasing the rates for the 
                basic service of providing secondary 
                transmissions.
                  [(B) In the event that the rules and 
                regulations of the Federal Communications 
                Commission are amended at any time after April 
                15, 1976, to permit the carriage by cable 
                systems of additional television broadcast 
                signals beyond the local service area of the 
                primary transmitters of such signals, the 
                royalty rates established by section 
                111(d)(1)(B) may be adjusted to insure that the 
                rates for the additional distant signal 
                equivalents resulting from such carriage are 
                reasonable in the light of the changes effected 
                by the amendment to such rules and regulations. 
                In determining the reasonableness of rates 
                proposed following an amendment of Federal 
                Communications Commission rules and 
                regulations, the copyright arbitration royalty 
                panels shall consider, among other factors, the 
                economic impact on copyright owners and users: 
                Provided, That no adjustment in royalty rates 
                shall be made under this subclause with respect 
                to any distant signal equivalent or fraction 
                thereof represented by (i) carriage of any 
                signal permitted under the rules and 
                regulations of the Federal Communications 
                Commission in effect on April 15, 1976, or the 
                carriage of a signal of the same type (that is, 
                independent, network, or noncommercial 
                educational) substituted for such permitted 
                signal, or (ii) a television broadcast signal 
                first carried after April 15, 1976, pursuant to 
                an individual waiver of the rules and 
                regulations of the Federal Communications 
                Commission, as such rules and regulations were 
                in effect on April 15, 1976.
                  [(C) In the event of any change in the rules 
                and regulations of the Federal Communications 
                Commission with respect to syndicated and 
                sports program exclusivity after April 15, 
                1976, the rates established by section 
                111(d)(1)(B) may be adjusted to assure that 
                such rates are reasonable in light of the 
                changes to such rules and regulations, but any 
                such adjustment shall apply only to the 
                affected television broadcast signals carried 
                on those systems affected by the change.
                  [(D) The gross receipts limitations 
                established by section 111(d)(1)(C) and (D) 
                shall be adjusted to reflect national monetary 
                inflation or deflation or changes in the 
                average rates charged cable system subscribers 
                for the basic service of providing secondary 
                transmissions to maintain the real constant 
                dollar value of the exemption provided by such 
                section; and the royalty rate specified therein 
                shall not be subject to adjustment.
          [(3) To distribute royalty fees deposited with the 
        Register of Copyrights under sections 111, 116, 119(b), 
        and 1003, and to determine, in cases where controversy 
        exists, the distribution of such fees.
  [(c) Rulings.--The Librarian of Congress, upon the 
recommendation of the Register of Copyrights, may, before a 
copyright arbitration royalty panel is convened, make any 
necessary procedural or evidentiary rulings that would apply to 
the proceedings conducted by such panel, including--
          [(1) authorizing the distribution of those royalty 
        fees collected under sections 111, 119, and 1005 that 
        the Librarian has found are not subject to controversy; 
        and
          [(2) accepting or rejecting royalty claims filed 
        under sections 111, 119, and 1007 on the basis of 
        timeliness or the failure to establish the basis for a 
        claim.
  [(d) Support and Reimbursement of Arbitration Panels.--The 
Librarian of Congress, upon the recommendation of the Register 
of Copyrights, shall provide the copyright arbitration royalty 
panels with the necessary administrative services related to 
proceedings under this chapter, and shall reimburse the 
arbitrators presiding in distribution proceedings at such 
intervals and in such manner as the Librarian shall provide by 
regulation. Each such arbitrator is an independent contractor 
acting on behalf of the United States, and shall be hired 
pursuant to a signed agreement between the Library of Congress 
and the arbitrator. Payments to the arbitrators shall be 
considered reasonable costs incurred by the Library of Congress 
and the Copyright Office for purposes of section 802(h)(1).

[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).
  [(b) Selection of Arbitration Panel.--Not later than 10 days 
after publication of a notice in the Federal Register 
initiating an arbitration proceeding under section 803, and in 
accordance with procedures specified by the Register of 
Copyrights, the Librarian of Congress shall, upon the 
recommendation of the Register of Copyrights, select 2 
arbitrators from lists provided by professional arbitration 
associations. Qualifications of the arbitrators shall include 
experience in conducting arbitration proceedings and 
facilitating the resolution and settlement of disputes, and any 
qualifications which the Librarian of Congress, upon the 
recommendation of the Register of Copyrights, shall adopt by 
regulation. The 2 arbitrators so selected shall, within 10 days 
after their selection, choose a third arbitrator from the same 
lists, who shall serve as the chairperson of the arbitrators. 
If such 2 arbitrators fail to agree upon the selection of a 
third arbitrator, the Librarian of Congress shall promptly 
select the third arbitrator. The Librarian of Congress, upon 
the recommendation of the Register of Copyrights, shall adopt 
regulations regarding standards of conduct which shall govern 
arbitrators and the proceedings under this chapter.
  [(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, 112, 114, 116, or 119, 
any transmitting organization entitled to a statutory license 
under section 112(g), any person entitled to a statutory 
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.
  [(d) Procedures.--Effective on the date of the enactment of 
the Copyright Royalty Tribunal Reform Act of 1993, the 
Librarian of Congress shall adopt the rules and regulations set 
forth in chapter 3 of title 37 of the Code of Federal 
Regulations to govern proceedings under this chapter. Such 
rules and regulations shall remain in effect unless and until 
the Librarian, upon the recommendation of the Register of 
Copyrights, adopts supplemental or superseding regulations 
under subchapter II of chapter 5 of title 5.
  [(e) Report to the Librarian of Congress.--Not later than 180 
days after publication of the notice in the Federal Register 
initiating an arbitration proceeding, the copyright arbitration 
royalty panel conducting the proceeding shall report to the 
Librarian of Congress its determination concerning the royalty 
fee or distribution of royalty fees, as the case may be. Such 
report shall be accompanied by the written record, and shall 
set forth the facts that the arbitration panel found relevant 
to its determination.
  [(f) Action by Librarian of Congress.--Within 90 days after 
receiving the report of a copyright arbitration royalty panel 
under subsection (e), the Librarian of Congress, upon the 
recommendation of the Register of Copyrights, shall adopt or 
reject the determination of the arbitration panel. The 
Librarian shall adopt the determination of the arbitration 
panel unless the Librarian finds that the determination is 
arbitrary or contrary to the applicable provisions of this 
title. If the Librarian rejects the determination of the 
arbitration panel, the Librarian shall, before the end of an 
additional 30-day period, and after full examination of the 
record created in the arbitration proceeding, issue an order 
setting the royalty fee or distribution of fees, as the case 
may be. The Librarian shall cause to be published in the 
Federal Register the determination of the arbitration panel, 
and the decision of the Librarian (including an order issued 
under the preceding sentence). The Librarian shall also 
publicize such determination and decision in such other manner 
as the Librarian considers appropriate. The Librarian shall 
also make the report of the arbitration panel and the 
accompanying record available for public inspection and 
copying.
  [(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. 
When this title provides that the royalty rates or terms that 
were previously in effect are to expire on a specified date, 
any adjustment by the Librarian of those rates or terms shall 
be effective as of the day following the date of expiration of 
the rates or terms that were previously in effect, even if the 
Librarian's decision is rendered on a later date. The pendency 
of an appeal under this paragraph shall not relieve persons 
obligated to make royalty payments under sections 111, 112, 
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 judgment. 
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) Deduction of costs of library of congress and 
        copyright office from royalty fees.--The Librarian of 
        Congress and the Register of Copyrights may, to the 
        extent not otherwise provided under this title, deduct 
        from royalty fees deposited or collected under this 
        title the reasonable costs incurred by the Library of 
        Congress and the Copyright Office under this chapter. 
        Such deduction may be made before the fees are 
        distributed to any copyright claimants. In addition, 
        all funds made available by an appropriations Act as 
        offsetting collections and available for deductions 
        under this subsection shall remain available until 
        expended. In ratemaking proceedings, the reasonable 
        costs of the Librarian of Congress and the Copyright 
        Office shall be borne by the parties to the proceedings 
        as directed by the arbitration panels under subsection 
        (c).
          [(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, 112, 114, 115, 116, 118, or 119 or chapter 10.

[Sec. 803. Institution and conclusion of proceedings

  [(a)(1) With respect to proceedings under section 801(b)(1) 
concerning the adjustment of royalty rates as provided in 
sections 112, 114, 115 and 116, and with respect to proceedings 
under subparagraphs (A) and (D) of section 801(b)(2), during 
the calendar years specified in the schedule set forth in 
paragraphs (2), (3), (4) and (5), any owner or user of a 
copyrighted work whose royalty rates are specified by this 
title, established by the Copyright Royalty Tribunal before the 
date of the enactment of the Copyright Royalty Tribunal Reform 
Act of 1993, or established by a copyright arbitration royalty 
panel after such date of enactment, may file a petition with 
the Librarian of Congress declaring that the petitioner 
requests an adjustment of the rate. The Librarian of Congress 
shall, upon the recommendation of the Register of Copyrights, 
make a determination as to whether the petitioner has such a 
significant interest in the royalty rate in which an adjustment 
is requested. If the Librarian determines that the petitioner 
has such a significant interest, the Librarian shall cause 
notice of this determination, with the reasons therefor, to be 
published in the Federal Register, together with the notice of 
commencement of proceedings under this chapter.
  [(2) In proceedings under section 801(b)(2)(A) and (D), a 
petition described in paragraph (1) may be filed during 1995 
and in each subsequent fifth calendar year.
  [(3) In proceedings under section 801(b)(1) concerning the 
adjustment of royalty rates as provided in section 115, a 
petition described in paragraph (1) may be filed in 1997 and in 
each subsequent tenth calendar year or as prescribed in section 
115(c)(3)(D).
  [(4)(A) In proceedings under section 801(b)(1) concerning the 
adjustment of royalty rates as provided in section 116, a 
petition described in paragraph (1) may be filed at any time 
within 1 year after negotiated licenses authorized by section 
116 are terminated or expire and are not replaced by subsequent 
agreements.
  [(B) If a negotiated license authorized by section 116 is 
terminated or expires and is not replaced by another such 
license agreement which provides permission to use a quantity 
of musical works not substantially smaller than the quantity of 
such works performed on coin-operated phonorecord players 
during the 1-year period ending March 1, 1989, the Librarian of 
Congress shall, upon petition filed under paragraph (1) within 
1 year after such termination or expiration, convene a 
copyright arbitration royalty panel. The arbitration panel 
shall promptly establish an interim royalty rate or rates for 
the public performance by means of a coin-operated phonorecord 
player of non-dramatic musical works embodied in phonorecords 
which had been subject to the terminated or expired negotiated 
license agreement. Such rate or rates shall be the same as the 
last such rate or rates and shall remain in force until the 
conclusion of proceedings by the arbitration panel, in 
accordance with section 802, to adjust the royalty rates 
applicable to such works, or until superseded by a new 
negotiated license agreement, as provided in section 116(b).
  [(5) With respect to proceedings under section 801(b)(1) 
concerning the determination of reasonable terms and rates of 
royalty payments as provided in section 112 or 114, the 
Librarian of Congress shall proceed when and as provided by 
those sections.
  [(b) With respect to proceedings under subparagraph (B) or 
(C) of section 801(b)(2), following an event described in 
either of those subsections, any owner or user of a copyrighted 
work whose royalty rates are specified by section 111, or by a 
rate established by the Copyright Royalty Tribunal or the 
Librarian of Congress, may, within twelve months, file a 
petition with the Librarian declaring that the petitioner 
requests an adjustment of the rate. In this event the Librarian 
shall proceed as in subsection (a) of this section. Any change 
in royalty rates made by the Copyright Royalty Tribunal or the 
Librarian of Congress pursuant to this subsection may be 
reconsidered in 1980, 1985, and each fifth calendar year 
thereafter, in accordance with the provisions in section 
801(b)(2)(B) or (C), as the case may be.
  [(c) With respect to proceedings under section 801(b)(1), 
concerning the determination of reasonable terms and rates of 
royalty payments as provided in section 118, the Librarian of 
Congress shall proceed when and as provided by that section.
  [(d) With respect to proceedings under section 801(b)(3) or 
(4), concerning the distribution of royalty fees in certain 
circumstances under section 111, 116, 119, or 1007, the 
Librarian of Congress shall, upon a determination that a 
controversy exists concerning such distribution, cause to be 
published in the Federal Register notice of commencement of 
proceedings under this chapter.]

           CHAPTER 8--PROCEEDINGS BY COPYRIGHT ROYALTY JUDGES

Sec.
801. Copyright Royalty Judges; appointment and functions.
802. Copyright Royalty Judgeships; staff.
803. Proceedings of Copyright Royalty Judges.
804. Institution of proceedings.
805. General rule for voluntarily negotiated agreements.

Sec. 801. Copyright Royalty Judges; appointment and functions

  (a) Appointment.--The Librarian of Congress shall appoint 3 
full-time Copyright Royalty Judges, and shall appoint one of 
the three as the Chief Copyright Royalty Judge. In making such 
appointments, the Librarian shall consult with the Register of 
Copyrights.
  (b) Functions.--Subject to the provisions of this chapter, 
the functions of the Copyright Royalty Judges shall be as 
follows:
          (1) To make determinations and adjustments of 
        reasonable terms and rates of royalty payments as 
        provided in sections 112(e), 114, 115, 116, 118, 119 
        and 1004. The rates applicable under sections 
        114(f)(1)(B), 115, and 116 shall be calculated to 
        achieve the following objectives:
                  (A) To maximize the availability of creative 
                works to the public.
                  (B) To afford the copyright owner a fair 
                return for his or her creative work and the 
                copyright user a fair income under existing 
                economic conditions.
                  (C) To reflect the relative roles of the 
                copyright owner and the copyright user in the 
                product made available to the public with 
                respect to relative creative contribution, 
                technological contribution, capital investment, 
                cost, risk, and contribution to the opening of 
                new markets for creative expression and media 
                for their communication.
                  (D) To minimize any disruptive impact on the 
                structure of the industries involved and on 
                generally prevailing industry practices.
          (2) To make determinations concerning the adjustment 
        of the copyright royalty rates under section 111 solely 
        in accordance with the following provisions:
                  (A) The rates established by section 
                111(d)(1)(B) may be adjusted to reflect--
                          (i) national monetary inflation or 
                        deflation; or
                          (ii) changes in the average rates 
                        charged cable subscribers for the basic 
                        service of providing secondary 
                        transmissions to maintain the real 
                        constant dollar level of the royalty 
                        fee per subscriber which existed as of 
                        the date of October 19, 1976,
                except that--
                          (I) if the average rates charged 
                        cable system subscribers for the basic 
                        service of providing secondary 
                        transmissions are changed so that the 
                        average rates exceed national monetary 
                        inflation, no change in the rates 
                        established by section 111(d)(1)(B) 
                        shall be permitted; and
                          (II) no increase in the royalty fee 
                        shall be permitted based on any 
                        reduction in the average number of 
                        distant signal equivalents per 
                        subscriber.
                The Copyright Royalty Judges may consider all 
                factors relating to the maintenance of such 
                level of payments, including, as an extenuating 
                factor, whether the industry has been 
                restrained by subscriber rate regulating 
                authorities from increasing the rates for the 
                basic service of providing secondary 
                transmissions.
                  (B) In the event that the rules and 
                regulations of the Federal Communications 
                Commission are amended at any time after April 
                8, 1976, to permit the carriage by cable 
                systems of additional television broadcast 
                signals beyond the local service area of the 
                primary transmitters of such signals, the 
                royalty rates established by section 
                111(d)(1)(B) may be adjusted to insure that the 
                rates for the additional distant signal 
                equivalents resulting from such carriage are 
                reasonable in the light of the changes effected 
                by the amendment to such rules and regulations. 
                In determining the reasonableness of rates 
                proposed following an amendment of Federal 
                Communications Commission rules and 
                regulations, the Copyright Royalty Judges shall 
                consider, among other factors, the economic 
                impact on copyright owners and users; except 
                that no adjustment in royalty rates shall be 
                made under this subparagraph with respect to 
                any distant signal equivalent or fraction 
                thereof represented by--
                          (i) carriage of any signal permitted 
                        under the rules and regulations of the 
                        Federal Communications Commission in 
                        effect on April 15, 1976, or the 
                        carriage of a signal of the same type 
                        (that is, independent, network, or 
                        noncommercial educational) substituted 
                        for such permitted signal; or
                          (ii) a television broadcast signal 
                        first carried after April 15, 1976, 
                        pursuant to an individual waiver of the 
                        rules and regulations of the Federal 
                        Communications Commission, as such 
                        rules and regulations were in effect on 
                        April 15, 1976.
                  (C) In the event of any change in the rules 
                and regulations of the Federal Communications 
                Commission with respect to syndicated and 
                sports program exclusivity after April 15, 
                1976, the rates established by section 
                111(d)(1)(B) may be adjusted to assure that 
                such rates are reasonable in light of the 
                changes to such rules and regulations, but any 
                such adjustment shall apply only to the 
                affected television broadcast signals carried 
                on those systems affected by the change.
                  (D) The gross receipts limitations 
                established by section 111(d)(1)(C) and (D) 
                shall be adjusted to reflect national monetary 
                inflation or deflation or changes in the 
                average rates charged cable system subscribers 
                for the basic service of providing secondary 
                transmissions to maintain the real constant 
                dollar value of the exemption provided by such 
                section, and the royalty rate specified therein 
                shall not be subject to adjustment.
          (3) To authorize the distribution, under sections 
        111, 119, and 1007, of those royalty fees collected 
        under sections 111, 119, and 1005, as the case may be, 
        to the extent that the Copyright Royalty Judges have 
        found that the distribution of such fees is not subject 
        to controversy. In cases where the Copyright Royalty 
        Judges determine that controversy exists--
                  (A) the Copyright Royalty Judges shall 
                determine the distribution of such fees, in 
                accordance with section 111, 119, or 1007, as 
                the case may be; and
                  (B) the Copyright Royalty Judges shall make a 
                partial distribution of such fees during the 
                pendency of the proceeding under subparagraph 
                (A) if all participants under section 803(b)(2) 
                in the proceeding--
                          (i) agree to such partial 
                        distribution;
                          (ii) sign an agreement obligating 
                        them to return any excess amounts to 
                        the extent necessary to comply with the 
                        final determination on the distribution 
                        of the fees made under subparagraph 
                        (A); and
                          (iii) file the agreement with the 
                        Copyright Royalty Judges.
        The Copyright Royalty Judges and any other officer or 
        employee acting in good faith in distributing funds 
        under subparagraph (B) shall not be held liable for the 
        payment of any excess fees under subparagraph (B). The 
        Copyright Royalty Judges shall, at the time the final 
        determination is made, calculate any such excess 
        amounts.
          (4) To accept or reject royalty claims filed under 
        section 111, 119, and 1007, on the basis of timeliness 
        or the failure to establish the basis for a claim.
          (5) To accept or reject rate adjustment petitions as 
        provided in section 804 and petitions to participate as 
        provided in section 803(b)(1) and (2).
          (6) To determine the status of a digital audio 
        recording device or a digital audio interface device 
        under sections 1002 and 1003, as provided in section 
        1010.
          (7)(A) To adopt as the basis for statutory terms and 
        rates or as a basis for the distribution of statutory 
        royalty payments, an agreement concerning such matters 
        reached among some or all of the participants in a 
        proceeding at any time during the proceeding, except 
        that--
                  (i) the Copyright Royalty Judges shall 
                provide to the other participants in the 
                proceeding under section 803(b)(2) that would 
                be bound by the terms, rates, distribution, or 
                other determination set by the agreement an 
                opportunity to comment on the agreement and 
                object to its adoption as the basis for 
                statutory terms and rates or as a basis for the 
                distribution of statutory royalty payments, as 
                the case may be; and
                  (ii) the Copyright Royalty Judges may decline 
                to adopt the agreement as the basis for 
                statutory terms and rates or as the basis for 
                the distribution of statutory royalty payments, 
                as the case may be, if any other participant 
                described in subparagraph (A) objects to the 
                agreement and the Copyright Royalty Judges 
                find, based on the record before them, that the 
                agreement is not likely to meet the statutory 
                standard for setting the terms and rates, or 
                for distributing the royalty payments, as the 
                case may be.
          (B) License agreements voluntarily negotiated 
        pursuant to section 112(e)(5), 114(f)(3), 
        115(c)(3)(E)(i), 116(c), or 118(b)(2) that do not 
        result in statutory terms and rates shall not be 
        subject to clauses (i) and (ii) of subparagraph (A).
  (c) Rulings.--The Copyright Royalty Judges may make any 
necessary procedural or evidentiary rulings in any proceeding 
under this chapter and may, before commencing a proceeding 
under this chapter, make any such rulings that would apply to 
the proceedings conducted by the Copyright Royalty Judges. The 
Copyright Royalty Judges may consult with the Register of 
Copyrights in making any rulings under section 802(f)(1).
  (d) Administrative Support.--The Librarian of Congress shall 
provide the Copyright Royalty Judges with the necessary 
administrative services related to proceedings under this 
chapter.
  (e) Location in Library of Congress.--The offices of the 
Copyright Royalty Judges and staff shall be in the Library of 
Congress.

Sec. 802. Copyright Royalty Judgeships; staff

  (a) Qualifications of Copyright Royalty Judges.--Each 
Copyright Royalty Judge shall be an attorney who has at least 7 
years of legal experience. The Chief Copyright Royalty Judge 
shall have at least 5 years of experience in adjudications, 
arbitrations, or court trials. Of the other two Copyright 
Royalty Judges, one shall have significant knowledge of 
copyright law, and the other shall have significant knowledge 
of economics. An individual may serve as a Copyright Royalty 
Judge only if the individual is free of any financial conflict 
of interest under subsection (h). In this subsection, 
``adjudication'' has the meaning given that term in section 551 
of title 5, but does not include mediation.
  (b) Staff.--The Chief Copyright Royalty Judge shall hire 3 
full-time staff members to assist the Copyright Royalty Judges 
in performing their functions.
  (c) Terms.--The terms of the Copyright Royalty Judges shall 
each be 6 years, except of the individuals first appointed, the 
Chief Copyright Royalty Judge shall be appointed to a term of 6 
years, and of the remaining Copyright Royalty Judges, one shall 
be appointed to a term of 2 years, and the other shall be 
appointed to a term of 4 years. An individual serving as a 
Copyright Royalty Judge may be reappointed to subsequent terms. 
The term of a Copyright Royalty Judge shall begin when the term 
of the predecessor of that Copyright Royalty Judge ends. When 
the term of office of a Copyright Royalty Judge ends, the 
individual serving that term may continue to serve until a 
successor is selected.
  (d) Vacancies or Incapacity.--
          (1) Vacancies.--If a vacancy should occur in the 
        position of Copyright Royalty Judge, the Librarian of 
        Congress shall act expeditiously to fill the vacancy, 
        and may appoint an interim Copyright Royalty Judge to 
        serve until another Copyright Royalty Judge is 
        appointed under this section. An individual appointed 
        to fill the vacancy occurring before the expiration of 
        the term for which the predecessor of that individual 
        was appointed shall be appointed for the remainder of 
        that term.
          (2) Incapacity.--In the case in which a Copyright 
        Royalty Judge is temporarily unable to perform his or 
        her duties, the Librarian of Congress may appoint an 
        interim Copyright Royalty Judge to perform such duties 
        during the period of such incapacity.
  (e) Compensation.--
          (1) Judges.--The Chief Copyright Royalty Judge shall 
        receive compensation at the rate of basic pay payable 
        for level AL-1 for administrative law judges pursuant 
        to section 5372(b) of title 5, and each of the other 
        two Copyright Royalty Judges shall receive compensation 
        at the rate of basic pay payable for level AL-2 for 
        administrative law judges pursuant to such section. The 
        compensation of the Copyright Royalty Judges shall not 
        be subject to any regulations adopted by the Office of 
        Personnel Management pursuant to its authority under 
        section 5376(b)(1) of title 5.
          (2) Staff members.--Of the staff members appointed 
        under subsection (b)--
                  (A) the rate of pay of one staff member shall 
                be not more than the basic rate of pay payable 
                for GS-15 of the General Schedule;
                  (B) the rate of pay of one staff member shall 
                be not less than the basic rate of pay payable 
                for GS-13 of the General Schedule and not more 
                than the basic rate of pay payable for GS-14 of 
                such Schedule; and
                  (C) the rate of pay for the third staff 
                member shall be not less than the basic rate of 
                pay payable for GS-8 of the General Schedule 
                and not more than the basic rate of pay payable 
                for GS-11 of such Schedule.
  (f) Independence of Copyright Royalty Judge.--
          (1) In making determinations.--
                  (A) In general.--Subject to subparagraph (B), 
                the Copyright Royalty Judges shall have full 
                independence in making determinations 
                concerning adjustments and determinations of 
                copyright royalty rates and terms, the 
                distribution of copyright royalties, the 
                acceptance or rejection of royalty claims, rate 
                adjustment petitions, and petitions to 
                participate, and in issuing other rulings under 
                this title, except that the Copyright Royalty 
                Judges may consult with the Register of 
                Copyrights on any matter other than a question 
                of fact. Any such consultations between the 
                Copyright Royalty Judges and the Register of 
                Copyright on any question of law shall be in 
                writing or on the record.
                  (B) Novel questions.--(i) Notwithstanding the 
                provisions of subparagraph (A), in any case in 
                which the Copyright Royalty Judges in a 
                proceeding under this title are presented with 
                a novel question of law concerning an 
                interpretation of those provisions of this 
                title that are the subject of the proceeding, 
                the Copyright Royalty Judges shall request the 
                Register of Copyrights, in writing, to submit a 
                written opinion on the resolution of such novel 
                question. The Register shall submit and make 
                public that opinion within such time period as 
                the Copyright Royalty Judges may prescribe. Any 
                consultations under this subparagraph between 
                the Copyright Royalty Judges and the Register 
                of Copyrights shall be in writing or on the 
                record. The opinion of the Register shall not 
                be binding on the Copyright Royalty Judges, but 
                the Copyright Royalty Judges shall take the 
                opinion of the Register into account in making 
                the judges' determination on the question 
                concerned.
                  (ii) In clause (i), a ``novel question of 
                law'' is a question of law that has not been 
                determined in prior decisions, determinations, 
                and rulings described in section 803(a).
          (2) Performance appraisals.--
                  (A) In general.--Notwithstanding any other 
                provision of law or any regulation of the 
                Library of Congress, and subject to 
                subparagraph (B), the Copyright Royalty Judges 
                shall not receive performance appraisals.
                  (B) Relating to sanction or removal.--To the 
                extent that the Librarian of Congress adopts 
                regulations under subsection (h) relating to 
                the sanction or removal of a Copyright Royalty 
                Judge and such regulations require 
                documentation to establish the cause of such 
                sanction or removal, the Copyright Royalty 
                Judge may receive an appraisal related 
                specifically to the cause of the sanction or 
                removal.
  (g) Inconsistent Duties Barred.--No Copyright Royalty Judge 
may undertake duties inconsistent with his or her duties and 
responsibilities as Copyright Royalty Judge.
  (h) Standards of Conduct.--The Librarian of Congress shall 
adopt regulations regarding the standards of conduct, including 
financial conflict of interest and restrictions against ex 
parte communications, which shall govern the Copyright Royalty 
Judges and the proceedings under this chapter.
  (i) Removal or Sanction.--The Librarian of Congress may 
sanction or remove a Copyright Royalty Judge for violation of 
the standards of conduct adopted under subsection (h), 
misconduct, neglect of duty, or any disqualifying physical or 
mental disability. Any such sanction or removal may be made 
only after notice and opportunity for a hearing, but the 
Librarian of Congress may suspend the Copyright Royalty Judge 
during the pendency of such hearing. The Librarian shall 
appoint an interim Copyright Royalty Judge during the period of 
any such suspension.

Sec. 803. Proceedings of Copyright Royalty Judges

  (a) Proceedings.--
          (1) In general.--The Copyright Royalty Judges shall 
        act in accordance with this title, and to the extent 
        not inconsistent with this title, in accordance with 
        subchapter II of chapter 5 of title 5, in carrying out 
        the purposes set forth in section 801. The Copyright 
        Royalty Judges shall act in accordance with regulations 
        issued by the Copyright Royalty Judges and on the basis 
        of a fully documented written record, prior decisions 
        of the Copyright Royalty Tribunal, prior copyright 
        arbitration royalty panel determinations, rulings by 
        the Librarian of Congress before the effective date of 
        the Copyright Royalty and Distribution Reform Act of 
        2003, prior determinations of Copyright Royalty Judges 
        under this chapter, and decisions of the court in 
        appeals under this chapter before, on, or after such 
        effective date. Any participant in a proceeding under 
        subsection (b)(2) may submit relevant information and 
        proposals to the Copyright Royalty Judges.
          (2) Judges acting as panel and individually.--The 
        Copyright Royalty Judges shall preside over hearings in 
        proceedings under this chapter en banc. The Chief 
        Copyright Royalty Judge may designate a Copyright 
        Royalty Judge to preside individually over such 
        collateral and administrative proceedings, and over 
        such proceedings under paragraphs (1) through (5) of 
        subsection (b), as the Chief Judge considers 
        appropriate.
          (3) Determinations.--Final determinations of the 
        Copyright Royalty Judges in proceedings under this 
        chapter shall be made by majority vote. A Copyright 
        Royalty Judge dissenting from the majority on any 
        determination under this chapter may issue his or her 
        dissenting opinion, which shall be included with the 
        determination.
  (b) Procedures.--
          (1) Initiation.--
                  (A) Call for petitions to participate.--(i) 
                Promptly upon the filing of a petition for a 
                rate adjustment or determination under section 
                804(a) or 804(b)(8), or by no later than 
                January 5 of a year specified in section 804 
                for the commencement of a proceeding if a 
                petition has not been filed by that date, the 
                Copyright Royalty Judges shall cause to be 
                published in the Federal Register notice of 
                commencement of proceedings under this chapter 
                calling for the filing of petitions to 
                participate in a proceeding under this chapter 
                for the purpose of making the relevant 
                determination under section 111, 112, 114, 115, 
                116, 118, 119, 1004 or 1007, as the case may 
                be.
                  (ii) Petitions to participate shall be filed 
                by no later than 30 days after publication of 
                notice of commencement of a proceeding, under 
                clause (i), except that the Copyright Royalty 
                Judges may, for substantial good cause shown 
                and if there is no prejudice to the 
                participants that have already filed petitions, 
                accept late petitions to participate at any 
                time up to the date that is 90 days before the 
                date on which participants in the proceeding 
                are to file their written direct statements.
                  (B) Petitions to participate.--Each petition 
                to participate in a proceeding shall describe 
                the petitioner's interest in the subject matter 
                of the proceeding. Parties with similar 
                interests may file a single petition to 
                participate.
          (2) Participation in general.--Subject to paragraph 
        (4), a person may participate in a proceeding under 
        this chapter, including through the submission of 
        briefs or other information, only if--
                  (A) that person has filed a petition to 
                participate in accordance with paragraph (1) 
                (either individually or as a group under 
                paragraph (1)(B)), together with a filing fee 
                of $150;
                  (B) the Copyright Royalty Judges have not 
                determined that the petition to participate is 
                facially invalid; and
                  (C) the Copyright Royalty Judges have not 
                determined, sua sponte or on the motion of 
                another participant in the proceeding, that the 
                person lacks a significant interest in the 
                proceeding.
          (3) Voluntary negotiation period.--
                  (A) In general.--Promptly after the date for 
                filing of petitions to participate in a 
                proceeding, the Copyright Royalty Judges shall 
                make available to all participants in the 
                proceeding a list of such participants and 
                shall initiate a voluntary negotiation period 
                among the participants.
                  (B) Length of proceedings.--The voluntary 
                negotiation period initiated under subparagraph 
                (A) shall be 3 months.
                  (C) Determination of subsequent 
                proceedings.--At the close of the voluntary 
                negotiation proceedings, the Copyright Royalty 
                Judges shall, if further proceedings under this 
                chapter are necessary, determine whether and to 
                what extent paragraphs (4) and (5) will apply 
                to the parties.
          (4) Small claims procedure in distribution 
        proceedings.--
                  (A) In general.--If, in a proceeding under 
                this chapter to determine the distribution of 
                royalties, a participant in the proceeding 
                asserts that the contested amount of the claim 
                is $10,000 or less, the Copyright Royalty 
                Judges shall decide the controversy on the 
                basis of the filing in writing of the initial 
                claim, the initial response by any opposing 
                participant, and one additional response by 
                each such party. The participant asserting the 
                claim shall not be required to pay the filing 
                fee under paragraph (2).
                  (B) Bad faith inflation of claim.--If the 
                Copyright Royalty Judges determine that a 
                participant asserts in bad faith an amount in 
                controversy in excess of $10,000 for the 
                purpose of avoiding a determination under the 
                procedure set forth in subparagraph (A), the 
                Copyright Royalty Judges shall impose a fine on 
                that participant in an amount not to exceed the 
                difference between the actual amount 
                distributed and the amount asserted by the 
                participant.
          (5) Paper proceedings in ratemaking proceedings.--The 
        Copyright Royalty Judges in proceedings under this 
        chapter to determine royalty rates may decide, sua 
        sponte or upon motion of a participant, to determine 
        issues on the basis of initial filings in writing, 
        initial responses by any opposing participant, and one 
        additional response by each such participant. Prior to 
        making such decision to proceed on such a paper record 
        only, the Copyright Royalty Judges shall offer to all 
        parties to the proceeding the opportunity to comment on 
        the decision. The procedure under this paragraph--
                  (A) shall be applied in cases in which there 
                is no genuine issue of material fact, there is 
                no need for evidentiary hearings, and all 
                participants in the proceeding agree in writing 
                to the procedure; and
                  (B) may be applied under such other 
                circumstances as the Copyright Royalty Judges 
                consider appropriate.
          (6) Regulations.--
                  (A) In general.--The Copyright Royalty Judges 
                may issue regulations to carry out their 
                functions under this title. Not later than 120 
                days after Copyright Royalty Judges or interim 
                Copyright Royalty Judges, as the case may be, 
                are first appointed after the enactment of the 
                Copyright Royalty and Distribution Reform Act 
                of 2003, such judges shall issue regulations to 
                govern proceedings under this chapter.
                  (B) Interim regulations.--Until regulations 
                are adopted under subparagraph (A), the 
                Copyright Royalty Judges shall apply the 
                regulations in effect under this chapter on the 
                day before the effective date of the Copyright 
                Royalty and Distribution Reform Act of 2003, to 
                the extent such regulations are not 
                inconsistent with this chapter, except that 
                functions carried out under such regulations by 
                the Librarian of Congress, the Register of 
                Copyrights, or copyright arbitration royalty 
                panels that, as of such date of enactment, are 
                to be carried out by the Copyright Royalty 
                Judges under this chapter, shall be carried out 
                by the Copyright Royalty Judges under such 
                regulations.
                  (C) Requirements.--Regulations issued under 
                subparagraph (A) shall include the following:
                          (i) The written direct statements of 
                        all participants in a proceeding under 
                        paragraph (2) shall be filed by a date 
                        specified by the Copyright Royalty 
                        Judges, which may be no earlier than 
                        four months, and no later than five 
                        months, after the end of the voluntary 
                        negotiation period under paragraph (3). 
                        Notwithstanding the preceding sentence, 
                        a participant in a proceeding may, 
                        within 15 days after the end of the 
                        discovery period specified in clause 
                        (iii), file an amended written direct 
                        statement based on new information 
                        received during the discovery process.
                          (ii)(I) Following the submission to 
                        the Copyright Royalty Judges of written 
                        direct statements by the participants 
                        in a proceeding under paragraph (2), 
                        the judges shall meet with the 
                        participants for the purpose of setting 
                        a schedule for conducting and 
                        completing discovery. Such schedule 
                        shall be determined by the Copyright 
                        Royalty Judges.
                          (II) In this chapter, the term 
                        ``written direct statements'' means 
                        witness statements, testimony, and 
                        exhibits to be presented in the 
                        proceedings, and such other information 
                        that is necessary to establish terms 
                        and rates, or the distribution of 
                        royalty payments, as the case may be, 
                        as set forth in regulations issued by 
                        the Copyright Royalty Judges.
                          (iii) Hearsay may be admitted in 
                        proceedings under this chapter to the 
                        extent deemed appropriate by the 
                        Copyright Royalty Judges.
                          (iv) Discovery in such proceedings 
                        shall be permitted for a period of 60 
                        days, except for discovery ordered by 
                        the Copyright Royalty Judges in 
                        connection with the resolution of 
                        motions, orders and disputes pending at 
                        the end of such period.
                          (v) Any participant under paragraph 
                        (2) in a proceeding under this chapter 
                        to determine royalty rates may, upon 
                        written notice, seek discovery of 
                        information and materials relevant and 
                        material to the proceeding. Any 
                        objection to any such discovery request 
                        shall be resolved by a motion or 
                        request to compel discovery made to the 
                        Copyright Royalty Judges. Each motion 
                        or request to compel discovery shall be 
                        determined by the Copyright Royalty 
                        Judges, or by a Copyright Royalty Judge 
                        when permitted under subsection (a)(2), 
                        who may approve the request only if the 
                        evidence that would be produced is 
                        relevant and material. A Copyright 
                        Royalty Judge may refuse a request to 
                        compel discovery of evidence that has 
                        been found to be relevant and material, 
                        only upon good cause shown. For 
                        purposes of the preceding sentence, the 
                        basis for ``good cause'' may only be 
                        that--
                                  (I) the discovery sought is 
                                unreasonably cumulative or 
                                duplicative, or is obtainable 
                                from another source that is 
                                more convenient, less 
                                burdensome, or less expensive;
                                  (II) the participant seeking 
                                discovery has had ample 
                                opportunity by discovery in the 
                                action to obtain the 
                                information sought; or
                                  (II) the burden or expense of 
                                the proposed discovery 
                                outweighs its likely benefit, 
                                taking into account the needs 
                                and resources of the 
                                participants, the importance of 
                                the issues at stake, and the 
                                importance of the proposed 
                                discovery in resolving the 
                                issues.
                          (vi) The rules in effect on the day 
                        before the effective date of the 
                        Copyright Royalty and Distribution 
                        Reform Act of 2003, relating to 
                        discovery in proceedings under this 
                        title to determine the distribution of 
                        royalty fees, shall continue to apply 
                        to such proceedings on and after such 
                        effective date.
                          (vii) The Copyright Royalty Judges 
                        may issue subpoenas requiring the 
                        production of evidence or witnesses, 
                        but only if the evidence requested to 
                        be produced or that would be proffered 
                        by the witness is relevant and 
                        material.
                          (viii) The Copyright Royalty Judges 
                        shall order a settlement conference 
                        among the participants in the 
                        proceeding to facilitate the 
                        presentation of offers of settlement 
                        among the participants. The settlement 
                        conference shall be held during a 21-
                        day period following the end of the 
                        discovery period.
  (c) Determination of Copyright Royalty Judges.--
          (1) Timing.--The Copyright Royalty Judges shall issue 
        their determination in a proceeding not later than 11 
        months after the conclusion of the 21-day settlement 
        conference period under subsection (b)(3)(C)(vi), but, 
        in the case of a proceeding to determine successors to 
        rates or terms that expire on a specified date, in no 
        event later than 15 days before the expiration of the 
        then current statutory rates and terms.
          (2) Rehearings.--
                  (A) In general.--The Copyright Royalty Judges 
                may, in exceptional cases, upon motion of a 
                participant under subsection (b)(2), order a 
                rehearing, after the determination in a 
                proceeding is issued under paragraph (1), on 
                such matters as the Copyright Royalty Judges 
                determine to be appropriate.
                  (B) Timing for filing motion.--Any motion for 
                a rehearing under subparagraph (A) may only be 
                filed within 15 days after the date on which 
                the Copyright Royalty Judges deliver their 
                initial determination concerning rates and 
                terms to the participants in the proceeding.
                  (C) Participation by opposing party not 
                required.--In any case in which a rehearing is 
                ordered, any opposing party shall not be 
                required to participate in the rehearing.
                  (D) No negative inference.--No negative 
                inference shall be drawn from lack of 
                participation in a rehearing.
                  (E) Continuity of rates and terms.--(i) If 
                the decision of the Copyright Royalty Judges on 
                any motion for a rehearing is not rendered 
                before the expiration of the statutory rates 
                and terms that were previously in effect, in 
                the case of a proceeding to determine 
                successors to rates and terms that expire on a 
                specified date, then--
                          (I) the initial determination of the 
                        Copyright Royalty Judges that is the 
                        subject of the rehearing motion shall 
                        be effective as of the day following 
                        the date on which the rates and terms 
                        that were previously in effect expire; 
                        and
                          (II) in the case of a proceeding 
                        under section 114(f)(1)(C) or 
                        114(f)(2)(C), royalty rates and terms 
                        shall, for purposes of section 
                        114(f)(4)(B), be deemed to have been 
                        set at those rates and terms contained 
                        in the initial determination of the 
                        Copyright Royalty Judges that is the 
                        subject of the rehearing motion, as of 
                        the date of that determination.
                  (ii) The pendency of a motion for a rehearing 
                under this paragraph shall not relieve persons 
                obligated to make royalty payments who would be 
                affected by the determination on that motion 
                from providing the statements of account and 
                any reports of use, to the extent required, and 
                paying the royalties required under the 
                relevant determination or regulations.
                  (iii) Notwithstanding clause (ii), whenever 
                royalties described in clause (ii) are paid to 
                a person other than the Copyright Office, the 
                entity designated by the Copyright Royalty 
                Judges to which such royalties are paid by the 
                copyright user (and any successor thereto) 
                shall, within 60 days after the motion for 
                rehearing is resolved or, if the motion is 
                granted, within 60 days after the rehearing is 
                concluded, return any excess amounts previously 
                paid to the extent necessary to comply with the 
                final determination of royalty rates by the 
                Copyright Royalty Judges.
          (3) Contents of determination.--A determination of 
        the Copyright Royalty Judges shall be accompanied by 
        the written record, and shall set forth the facts that 
        the Copyright Royalty Judges found relevant to their 
        determination. Among other terms adopted in a 
        determination, the Copyright Royalty Judges may specify 
        notice and recordkeeping requirements of users of the 
        copyrights at issue that apply in lieu of those that 
        would otherwise apply under regulations.
          (4) Continuing jurisdiction.--The Copyright Royalty 
        Judges may amend the determination or the regulations 
        issued pursuant to the determination in order to 
        correct any technical errors in the determination or to 
        respond to unforeseen circumstances that preclude the 
        proper effectuation of the determination.
          (5) Protective order.--The Copyright Royalty Judges 
        may issue such orders as may be appropriate to protect 
        confidential information, including orders excluding 
        confidential information from the record of the 
        determination that is published or made available to 
        the public, except that any terms or rates of royalty 
        payments or distributions may not be excluded.
          (6) Publication of determination.--The Librarian of 
        Congress shall cause the determination, and any 
        corrections thereto, to be published in the Federal 
        Register. The Librarian of Congress shall also 
        publicize the determination and corrections in such 
        other manner as the Librarian considers appropriate, 
        including, but not limited to, publication on the 
        Internet. The Librarian of Congress shall also make the 
        determination, corrections, and the accompanying record 
        available for public inspection and copying.
  (d) Judicial Review.--
          (1) Appeal.--Any determination of the Copyright 
        Royalty Judges under subsection (c) may, within 30 days 
        after the publication of the determination in the 
        Federal Register, be appealed, to the United States 
        Court of Appeals for the District of Columbia Circuit, 
        by any aggrieved participant in the proceeding under 
        subsection (b)(2) who fully participated in the 
        proceeding and who would be bound by the determination. 
        If no appeal is brought within that 30-day period, the 
        determination of the Copyright Royalty Judges shall be 
        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 paragraph (2).
          (2) Effect of rates.--
                  (A) Expiration on specified date.--When this 
                title provides that the royalty rates and terms 
                that were previously in effect are to expire on 
                a specified date, any adjustment or 
                determination by the Copyright Royalty Judges 
                of successor rates and terms for an ensuing 
                statutory license period shall be effective as 
                of the day following the date of expiration of 
                the rates and terms that were previously in 
                effect, even if the determination of the 
                Copyright Royalty Judges is rendered on a later 
                date.
                  (B) Other cases.--In cases where rates and 
                terms do not expire on a specified date or have 
                not yet been established, successor or new 
                rates or terms shall take effect on the first 
                day of the second month that begins after the 
                publication of the determination of the 
                Copyright Royalty Judges in the Federal 
                Register, except as otherwise provided in this 
                title, and the rates and terms previously in 
                effect, to the extent applicable, shall remain 
                in effect until such successor rates and terms 
                become effective.
                  (C) Obligation to make payments.--(i) The 
                pendency of an appeal under this subsection 
                shall not relieve persons obligated to make 
                royalty payments under section 111, 112, 114, 
                115, 116, 118, 119, or 1003, who would be 
                affected by the determination on appeal, from 
                providing the statements of account (and any 
                report of use, to the extent required) and 
                paying the royalties required under the 
                relevant determination or regulations.
                  (ii) Notwithstanding clause (i), whenever 
                royalties described in clause (i) are paid to a 
                person other than the Copyright Office, the 
                entity designated by the Copyright Royalty 
                Judges to which such royalties are paid by the 
                copyright user (and any successor thereto) 
                shall, within 60 days after the final 
                resolution of the appeal, return any excess 
                amounts previously paid (and interest thereon, 
                if ordered pursuant to paragraph (3)) to the 
                extent necessary to comply with the final 
                determination of royalty rates on appeal.
          (3) Jurisdiction of court.--If the court, pursuant to 
        section 706 of title 5, modifies or vacates a 
        determination of the Copyright Royalty Judges, the 
        court may enter its own determination with respect to 
        the amount or distribution of royalty fees and costs, 
        and order the repayment of any excess fees, the payment 
        of any underpaid fees, and the payment of interest 
        pertaining respectively thereto, in accordance with its 
        final judgment. The court may also vacate the 
        determination of the Copyright Royalty Judges and 
        remand the case to the Copyright Royalty Judges for 
        further proceedings in accordance with subsection (a).
  (e) Administrative Matters.--
          (1) Deduction of costs of library of congress and 
        copyright office from filing fees.--
                  (A) Deduction from filing fees.--The 
                Librarian of Congress may, to the extent not 
                otherwise provided under this title, deduct 
                from the filing fees collected under subsection 
                (b) for a particular proceeding under this 
                chapter the reasonable costs incurred by the 
                Librarian of Congress, the Copyright Office, 
                and the Copyright Royalty Judges in conducting 
                that proceeding, other than the salaries of the 
                Copyright Royalty Judges and the 3 staff 
                members appointed under section 802(b).
                  (B) Authorization of appropriations.--There 
                are authorized to be appropriated such sums as 
                may be necessary to pay the costs of 
                proceedings under this chapter not covered by 
                the filing fees collected under subsection (b). 
                All funds made available pursuant to this 
                subparagraph shall remain available until 
                expended.
          (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, 112, 114, 115, 116, 118, or 119 or chapter 10.

Sec. 804. Institution of proceedings

  (a) Filing of Petition.--With respect to proceedings referred 
to in paragraphs (1) and (2) of section 801(b) concerning the 
determination or adjustment of royalty rates as provided in 
sections 111, 112, 114, 115, 116, 118, and 1004, during the 
calendar years specified in the schedule set forth in 
subsection (b), any owner or user of a copyrighted work whose 
royalty rates are specified by this title, or are established 
under this chapter before or after the enactment of the 
Copyright Royalty and Distribution Reform Act of 2003, may file 
a petition with the Copyright Royalty Judges declaring that the 
petitioner requests a determination or adjustment of the rate. 
The Copyright Royalty Judges shall make a determination as to 
whether the petitioner has such a significant interest in the 
royalty rate in which a determination or adjustment is 
requested. If the Copyright Royalty Judges determine that the 
petitioner has such a significant interest, the Copyright 
Royalty Judges shall cause notice of this determination, with 
the reasons therefor, to be published in the Federal Register, 
together with the notice of commencement of proceedings under 
this chapter. With respect to proceedings under paragraph (1) 
of section 801(b) concerning the determination or adjustment of 
royalty rates as provided in sections 112 and 114, during the 
calendar years specified in the schedule set forth in 
subsection (b), the Copyright Royalty Judges shall cause notice 
of commencement of proceedings under this chapter to be 
published in the Federal Register as provided in section 
803(b)(1)(A).
  (b) Timing of Proceedings.--
          (1) Section 111 proceedings.--(A) A petition 
        described in subsection (a) to initiate proceedings 
        under section 801(b)(2) concerning the adjustment of 
        royalty rates under section 111 to which subparagraph 
        (A) or (D) of section 801(b)(2) applies may be filed 
        during the year 2004 and in each subsequent fifth 
        calendar year.
          (B) In order to initiate proceedings under section 
        801(b)(2) concerning the adjustment of royalty rates 
        under section 111 to which subparagraph (B) or (C) of 
        section 801(b)(2) applies, within 12 months after an 
        event described in either of those subsections, any 
        owner or user of a copyrighted work whose royalty rates 
        are specified by section 111, or by a rate established 
        under this chapter before or after the enactment of the 
        Copyright Royalty and Distribution Reform Act of 2003, 
        may file a petition with the Copyright Royalty Judges 
        declaring that the petitioner requests an adjustment of 
        the rate. The Copyright Royalty Judges shall then 
        proceed as set forth in subsection (a) of this section. 
        Any change in royalty rates made under this chapter 
        pursuant to this subparagraph may be reconsidered in 
        the year 2005, and each fifth calendar year thereafter, 
        in accordance with the provisions in section 
        801(b)(3)(B) or (C), as the case may be. A petition for 
        adjustment of rates under section 11(d)(1)(B) as a 
        result of a change is the rules and regulations of the 
        Federal Communications Commission shall set forth the 
        change on which the petition is based.
          (2) Certain section 112 proceedings.--Proceedings 
        under this chapter shall be commenced in the year 2007 
        to determine reasonable terms and rates of royalty 
        payments for the activities described in section 
        112(e)(1) relating to the limitation on exclusive 
        rights specified by section 114(d)(1)(C)(iv), to become 
        effective on January 1, 2009. Such proceedings shall be 
        repeated in each subsequent fifth calendar year.
          (3) Section 114 and corresponding 112 proceedings.--
                  (A) For eligible nonsubscription services and 
                new subscription services.--Proceedings under 
                this chapter shall be commenced as soon as 
                practicable after the effective date of the 
                Copyright Royalty and Distribution Reform Act 
                of 2003 to determine reasonable terms and rates 
                of royalty payments under sections 114 and 112 
                for the activities of eligible nonsubscription 
                transmission services and new subscription 
                services, to be effective for the period 
                beginning on January 1, 2006, and ending on 
                December 31, 2010. Such proceedings shall next 
                be commenced in January 2009 to determine 
                reasonable terms and rates of royalty payments, 
                to become effective on January 1, 2011. 
                Thereafter, such proceedings shall be repeated 
                in each subsequent fifth calendar year.
                  (B) For preexisting subscription and 
                satellite digital audio radio services.--
                Proceedings under this chapter shall be 
                commenced in January 2006 to determine 
                reasonable terms and rates of royalty payments 
                under sections 114 and 112 for the activities 
                of preexisting subscription services, to be 
                effective during the period beginning on 
                January 1, 2008, and ending on December 31, 
                2012, and preexisting satellite digital audio 
                radio services, to be effective during the 
                period beginning on January 1, 2007, and ending 
                on December 31, 2012. Such proceedings shall 
                next be commenced in 2011 to determine 
                reasonable terms and rates of royalty payments, 
                to become effective on January 1, 2013. 
                Thereafter, such proceedings shall be repeated 
                in each subsequent fifth calendar year.
                  (C)(i) Notwithstanding any other provision of 
                this chapter, this subparagraph shall govern 
                proceedings commenced pursuant to sections 
                114(f)(1)(C) and 114(f)(2)(C) concerning new 
                types of services.
                  (ii) Not later than 30 days after a petition 
                to determine rates and terms for a new type of 
                service that is filed by any copyright owner of 
                sound recordings, or such new type of service, 
                indicating that such new type of service is or 
                is about to become operational, the Copyright 
                Royalty Judges shall issue a notice for a 
                proceeding to determine rates and terms for 
                such service.
                  (iii) The proceeding shall follow the 
                schedule set forth in such subsections (b), 
                (c), and (d) of section 803, except that--
                          (I) the determination shall be issued 
                        by not later than 24 months after the 
                        publication of the notice under clause 
                        (ii); and
                          (II) the decision shall take effect 
                        as provided in subsections (c)(2) and 
                        (d)(2) of section 803 and section 
                        114(f)(4)(B)(ii) and (C).
                  (iv) The rates and terms shall remain in 
                effect for the period set forth in section 
                114(f)(1)(C) or 114(f)(2)(C), as the case may 
                be.
          (4) Section 115 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 
        801(b)(1) concerning the adjustment or determination of 
        royalty rates as provided in section 115 may be filed 
        in the year 2006 and in each subsequent fifth calendar 
        year, or at such other times as the parties have agreed 
        under section 115(c)(3)(B) and (C).
          (5) Section 116 proceedings.--(A) A petition 
        described in subsection (a) to initiate proceedings 
        under section 801(b) concerning the determination of 
        royalty rates and terms as provided in section 116 may 
        be filed at any time within 1 year after negotiated 
        licenses authorized by section 116 are terminated or 
        expire and are not replaced by subsequent agreements.
          (B) If a negotiated license authorized by section 116 
        is terminated or expires and is not replaced by another 
        such license agreement which provides permission to use 
        a quantity of musical works not substantially smaller 
        than the quantity of such works performed on coin-
        operated phonorecord players during the 1-year period 
        ending March 1, 1989, the Copyright Royalty Judges 
        shall, upon petition filed under paragraph (1) within 1 
        year after such termination or expiration, commence a 
        proceeding to promptly establish an interim royalty 
        rate or rates for the public performance by means of a 
        coin-operated phonorecord player of nondramatic musical 
        works embodied in phonorecords which had been subject 
        to the terminated or expired negotiated license 
        agreement. Such rate or rates shall be the same as the 
        last such rate or rates and shall remain in force until 
        the conclusion of proceedings by the Copyright Royalty 
        Judges, in accordance with section 803, to adjust the 
        royalty rates applicable to such works, or until 
        superseded by a new negotiated license agreement, as 
        provided in section 116(b).
          (6) Section 118 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 
        801(b)(1) concerning the determination of reasonable 
        terms and rates of royalty payments as provided in 
        section 118 may be filed in the year 2006 and in each 
        subsequent fifth calendar year.
          (7) Section 1004 proceedings.--A petition described 
        in subsection (a) to initiate proceedings under section 
        801(b)(1) concerning the adjustment of reasonable 
        royalty rates under section 1004 may be filed as 
        provided in section 1004(a)(3).
          (8) Proceedings concerning distribution of royalty 
        fees.--With respect to proceedings under section 
        801(b)(3) concerning the distribution of royalty fees 
        in certain circumstances under section 111, 116, 119, 
        or 1007, the Copyright Royalty Judges shall, upon a 
        determination that a controversy exists concerning such 
        distribution, cause to be published in the Federal 
        Register notice of commencement of proceedings under 
        this chapter.

Sec. 805. General rule for voluntarily negotiated agreements

  Any rates or terms under this title that--
          (1) are agreed to by participants to a proceeding 
        under section 803(b)(2),
          (2) are adopted by the Copyright Royalty Judges as 
        part of a determination under this chapter, and
          (3) are in effect for a period shorter than would 
        otherwise apply under a determination pursuant to this 
        chapter,
shall remain in effect for such period of time as would 
otherwise apply under such determination, except that the 
Copyright Royalty Judges shall adjust the rates pursuant to the 
voluntary negotiations to reflect national monetary inflation 
during the additional period the rates remain in effect.

           *       *       *       *       *       *       *


         CHAPTER 10--DIGITAL AUDIO RECORDING DEVICES AND MEDIA

                        SUBCHAPTER A--DEFINITIONS

Sec.
1001.  Definitions.
     * * * * * * *

SUBCHAPTER D--PROHIBITION ON CERTAIN INFRINGEMENT ACTIONS, REMEDIES, AND 
                               ARBITRATION

1008.  Prohibition on certain infringement actions.
     * * * * * * *
[1010.  Arbitration of certain disputes.]
1010.  Determination of certain disputes.
          * * * * * * *

                     SUBCHAPTER C--ROYALTY PAYMENTS

          * * * * * * *

Sec. 1004. Royalty payments

  (a) Digital Audio Recording Devices.--
          (1) * * *
          * * * * * * *
          (3) Limits on royalties.--Notwithstanding paragraph 
        (1) or (2), the amount of the royalty payment for each 
        digital audio recording device shall not be less than 
        $1 nor more than the royalty maximum. The royalty 
        maximum shall be $8 per device, except that in the case 
        of a physically integrated unit containing more than 1 
        digital audio recording device, the royalty maximum for 
        such unit shall be $12. During the 6th year after the 
        effective date of this chapter, and not more than once 
        each year thereafter, any interested copyright party 
        may petition the [Librarian of Congress] Copyright 
        Royalty Judges to increase the royalty maximum and, if 
        more than 20 percent of the royalty payments are at the 
        relevant royalty maximum, the [Librarian of Congress] 
        Copyright Royalty Judges shall prospectively increase 
        such royalty maximum with the goal of having no more 
        than 10 percent of such payments at the new royalty 
        maximum; however the amount of any such increase as a 
        percentage of the royalty maximum shall in no event 
        exceed the percentage increase in the Consumer Price 
        Index during the period under review.
          * * * * * * *

Sec. 1006. Entitlement to royalty payments

  (a) * * *
          * * * * * * *
  (c) Allocation of Royalty Payments Within Groups.--If all 
interested copyright parties within a group specified in 
subsection (b) do not agree on a voluntary proposal for the 
distribution of the royalty payments within each group, the 
[Librarian of Congress shall convene a copyright arbitration 
royalty panel which] Copyright Royalty Judges shall, pursuant 
to the procedures specified under section 1007(c), allocate 
royalty payments under this section based on the extent to 
which, during the relevant period--
          (1) * * *
          * * * * * * *

Sec. 1007. Procedures for distributing royalty payments

  (a) Filing of Claims and Negotiations.--
          [(1) Filing of claims.--During the first 2 months of 
        each calendar year after calendar year 1992, every 
        interested copyright party seeking to receive royalty 
        payments to which such party is entitled under section 
        1006 shall file with the Librarian of Congress a claim 
        for payments collected during the preceding year in 
        such form and manner as the Librarian of Congress shall 
        prescribe by regulation.]
          (1) Filing of claims.--During the first 2 months of 
        each calendar year, every interested copyright party 
        seeking to receive royalty payments to which such party 
        is entitled under section 1006 shall file with the 
        Copyright Royalty Judges a claim for payments collected 
        during the preceding year in such form and manner as 
        the Copyright Royalty Judges shall prescribe by 
        regulation.

           *       *       *       *       *       *       *

  [(b) Distribution of Payments in the Absence of a Dispute.--
After the period established for the filing of claims under 
subsection (a), in each year after 1992, the Librarian of 
Congress shall determine whether there exists a controversy 
concerning the distribution of royalty payments under section 
1006(c). If the Librarian of Congress determines that no such 
controversy exists, the Librarian of Congress shall, within 30 
days after such determination, authorize the distribution of 
the royalty payments as set forth in the agreements regarding 
the distribution of royalty payments entered into pursuant to 
subsection (a), after deducting its reasonable administrative 
costs under this section.
  [(c) Resolution of Disputes.--If the Librarian of Congress 
finds the existence of a controversy, the Librarian shall, 
pursuant to chapter 8 of this title, convene a copyright 
arbitration royalty panel to determine the distribution of 
royalty payments. During the pendency of such a proceeding, the 
Librarian of Congress shall withhold from distribution an 
amount sufficient to satisfy all claims with respect to which a 
controversy exists, but shall, to the extent feasible, 
authorize the distribution of any amounts that are not in 
controversy. The Librarian of Congress shall, before 
authorizing the distribution of such royalty payments, deduct 
the reasonable administrative costs incurred by the Librarian 
under this section.]
  (b) Distribution of Payments in the Absence of a Dispute.--
After the period established for the filing of claims under 
subsection (a), in each year, the Copyright Royalty Judges 
shall determine whether there exists a controversy concerning 
the distribution of royalty payments under section 1006(c). If 
the Copyright Royalty Judges determine that no such controversy 
exists, the Librarian of Congress shall, within 30 days after 
such determination, authorize the distribution of the royalty 
payments as set forth in the agreements regarding the 
distribution of royalty payments entered into pursuant to 
subsection (a). The Librarian of Congress shall, before such 
royalty payments are distributed, deduct the reasonable 
administrative costs incurred by the Librarian under this 
section.
  (c) Resolution of Disputes.--If the Copyright Royalty Judges 
find the existence of a controversy, the Copyright Royalty 
Judges shall, pursuant to chapter 8 of this title, conduct a 
proceeding to determine the distribution of royalty payments. 
During the pendency of such a proceeding, the Copyright Royalty 
Judges shall withhold from distribution an amount sufficient to 
satisfy all claims with respect to which a controversy exists, 
but shall, to the extent feasible, authorize the distribution 
of any amounts that are not in controversy. The Librarian of 
Congress shall, before such royalty payments are distributed, 
deduct the reasonable administrative costs incurred by the 
Librarian under this section.

 SUBCHAPTER D--PROHIBITION ON CERTAIN INFRINGEMENT ACTIONS, REMEDIES, 
AND ARBITRATION

           *       *       *       *       *       *       *


[Sec. 1010. Arbitration of certain disputes

  [(a) Scope of Arbitration.--Before the date of first 
distribution in the United States of a digital audio recording 
device or a digital audio interface device, any party 
manufacturing, importing, or distributing such device, and any 
interested copyright party may mutually agree to binding 
arbitration for the purpose of determining whether such device 
is subject to section 1002, or the basis on which royalty 
payments for such device are to be made under section 1003.
  [(b) Initiation of Arbitration Proceedings.--Parties agreeing 
to such arbitration shall file a petition with the Librarian of 
Congress requesting the commencement of an arbitration 
proceeding. The petition may include the names and 
qualifications of potential arbitrators. Within 2 weeks after 
receiving such a petition, the Librarian of Congress shall 
cause notice to be published in the Federal Register of the 
initiation of an arbitration proceeding. Such notice shall 
include the names and qualifications of 3 arbitrators chosen by 
the Librarian of Congress from a list of available arbitrators 
obtained from the American Arbitration Association or such 
similar organization as the Librarian of Congress shall select, 
and from potential arbitrators listed in the parties' petition. 
The arbitrators selected under this subsection shall constitute 
an Arbitration Panel.
  [(c) Stay of Judicial Proceedings.--Any civil action brought 
under section 1009 against a party to arbitration under this 
section shall, on application of one of the parties to the 
arbitration, be stayed until completion of the arbitration 
proceeding.
  [(d) Arbitration Proceeding.--The Arbitration Panel shall 
conduct an arbitration proceeding with respect to the matter 
concerned, in accordance with such procedures as it may adopt. 
The Panel shall act on the basis of a fully documented written 
record. Any party to the arbitration may submit relevant 
information and proposals to the Panel. The parties to the 
proceeding shall bear the entire cost thereof in such manner 
and proportion as the Panel shall direct.
  [(e) Report to Librarian of Congress.--Not later than 60 days 
after publication of the notice under subsection (b) of the 
initiation of an arbitration proceeding, the Arbitration Panel 
shall report to the Librarian of Congress its determination 
concerning whether the device concerned is subject to section 
1002, or the basis on which royalty payments for the device are 
to be made under section 1003. Such report shall be accompanied 
by the written record, and shall set forth the facts that the 
Panel found relevant to its determination.
  [(f) Action by the Librarian of Congress.--Within 60 days 
after receiving the report of the Arbitration Panel under 
subsection (e), the Librarian of Congress shall adopt or reject 
the determination of the Panel. The Librarian of Congress shall 
adopt the determination of the Panel unless the Librarian of 
Congress finds that the determination is clearly erroneous. If 
the Librarian of Congress rejects the determination of the 
Panel, the Librarian of Congress shall, before the end of that 
60-day period, and after full examination of the record created 
in the arbitration proceeding, issue an order setting forth the 
Librarian's decision and the reasons therefor. The Librarian of 
Congress shall cause to be published in the Federal Register 
the determination of the Panel and the decision of the 
Librarian of Congress under this subsection with respect to the 
determination (including any order issued under the preceding 
sentence).
  [(g) Judicial Review.--Any decision of the Librarian of 
Congress under subsection (f) with respect to a determination 
of the Arbitration Panel may be appealed, by a party to the 
arbitration, 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. The 
pendency of an appeal under this subsection shall not stay the 
decision of the Librarian of Congress. The court shall have 
jurisdiction to modify or vacate a decision of the Librarian of 
Congress only if it finds, on the basis of the record before 
the Librarian of Congress, that the Arbitration Panel or the 
Librarian of Congress acted in an arbitrary manner. If the 
court modifies the decision of the Librarian of Congress, the 
court shall have jurisdiction to enter its own decision in 
accordance with its final judgment. The court may further 
vacate the decision of the Librarian of Congress and remand the 
case for arbitration proceedings as provided in this section.]

Sec. 1010. Determination of certain disputes

  (a) Scope of Determination.--Before the date of first 
distribution in the United States of a digital audio recording 
device or a digital audio interface device, any party 
manufacturing, importing, or distributing such device, and any 
interested copyright party may mutually agree to petition the 
Copyright Royalty Judges to determine whether such device is 
subject to section 1002, or the basis on which royalty payments 
for such device are to be made under section 1003.
  (b) Initiation of Proceedings.--The parties under subsection 
(a) shall file the petition with the Copyright Royalty Judges 
requesting the commencement of a proceeding. Within 2 weeks 
after receiving such a petition, the Chief Copyright Royalty 
Judge shall cause notice to be published in the Federal 
Register of the initiation of the proceeding.
  (c) Stay of Judicial Proceedings.--Any civil action brought 
under section 1009 against a party to a proceeding under this 
section shall, on application of one of the parties to the 
proceeding, be stayed until completion of the proceeding.
  (d) Proceeding.--The Copyright Royalty Judges shall conduct a 
proceeding with respect to the matter concerned, in accordance 
with such procedures as the Copyright Royalty Judges may adopt. 
The Copyright Royalty Judges shall act on the basis of a fully 
documented written record. Any party to the proceeding may 
submit relevant information and proposals to the Copyright 
Royalty Judges. The parties to the proceeding shall each bear 
their respective costs of participation.
  (e) Judicial Review.--Any determination of the Copyright 
Royalty Judges under subsection (d) may be appealed, by a party 
to the proceeding, in accordance with section 803(d) of this 
title. The pendency of an appeal under this subsection shall 
not stay the determination of the Copyright Royalty Judges. If 
the court modifies the determination of the Copyright Royalty 
Judges, the court shall have jurisdiction to enter its own 
decision in accordance with its final judgment. The court may 
further vacate the determination of the Copyright Royalty 
Judges and remand the case for proceedings as provided in this 
section.

           *       *       *       *       *       *       *

    The Committee met, pursuant to notice, at 11 a.m., in room 
1241, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr. (chairman of the Committee) presiding.
    Chairman Sensenbrenner. The Committee will be in order. A 
quorum is present.
    The first item on the agenda is H.R. 1417, the Copyright 
Royalty and Distribution Reform Act of 2003. The Chair 
recognizes the gentleman from Texas, Mr. Smith, for a motion.
    Mr. Smith. Thank you, Mr. Chairman.
    The Subcommittee on Courts, the Internet and Intellectual 
property reports favorably the bill H.R. 1417, with a single 
amendment in the nature of a substitute, and moves its 
favorable recommendation to the full House.
    Chairman Sensenbrenner. Without objection, the bill will be 
considered as read and open for amendment at any point. The 
Subcommittee amendment in the nature of a substitute, which the 
members have before them, will be considered as read, 
considered as the original text for purposes of amendment, and 
open for amendment at any point.
    Without objection all members' opening statements will be 
placed in the record.
    [The amendment in the nature of a substitute follows:]

  Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Copyright Royalty and Distribution 
Reform Act of 2003''.

SEC. 2. REFERENCE.

  Except as otherwise expressly provided, whenever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of title 17, United States 
Code.

SEC. 3. COPYRIGHT ROYALTY JUDGE AND STAFF.

  (a) In General.--Chapter 8 is amended to read as follows:

           CHAPTER 8--PROCEEDINGS BY COPYRIGHT ROYALTY JUDGES

``Sec.
``801. Copyright Royalty Judges; appointment and functions.
``802. Copyright Royalty Judgeships; staff.
``803. Proceedings of Copyright Royalty Judges.
``804. Institution and conclusion of proceedings.
``805. Interim royalty payments.
``806. General rule for voluntarily negotiated agreements.

``Sec. 801. Copyright Royalty Judge; appointment and functions

  ``(a) Appointment.--The Librarian of Congress shall appoint 3 full-
time Copyright Royalty Judges, and shall appoint one of the three as 
the Chief Copyright Royalty Judge. In making such appointments, the 
Librarian may consult with the Register of Copyrights.
  ``(b) Functions.--Subject to the provisions of this chapter, the 
functions of the Copyright Royalty Judges shall be as follows:
          ``(1) To make determinations concerning the adjustment of 
        reasonable copyright royalty rates as provided in sections 114, 
        115, 119, and 1004.
          ``(2) To make determinations as to reasonable terms and rates 
        of royalty payments as provided in sections 112(e), 114, 115, 
        116, and 118. The rates applicable under sections 114(f)(1)(B), 
        115, and 116 shall be calculated to achieve the following 
        objectives:
                  ``(A) To maximize the availability of creative works 
                to the public.
                  ``(B) To afford the copyright owner a fair return for 
                his or her creative work and the copyright user a fair 
                income under existing economic conditions.
                  ``(C) To reflect the relative roles of the copyright 
                owner and the copyright user in the product made 
                available to the public with respect to relative 
                creative contribution, technological contribution, 
                capital investment, cost, risk, and contribution to the 
                opening of new markets for creative expression and 
                media for their communication.
                  ``(D) To minimize any disruptive impact on the 
                structure of the industries involved and on generally 
                prevailing industry practices.
          ``(3) To make determinations concerning the adjustment of the 
        copyright royalty rates under section 111 solely in accordance 
        with the following provisions:
                  ``(A) The rates established by section 111(d)(1)(B) 
                may be adjusted to reflect--
                          ``(i) national monetary inflation or 
                        deflation; or
                          ``(ii) changes in the average rates charged 
                        cable subscribers for the basic service of 
                        providing secondary transmissions to maintain 
                        the real constant dollar level of the royalty 
                        fee per subscriber which existed as of the date 
                        of October 19, 1976,
                except that--
                          ``(I) if the average rates charged cable 
                        system subscribers for the basic service of 
                        providing secondary transmissions are changed 
                        so that the average rates exceed national 
                        monetary inflation, no change in the rates 
                        established by section 111(d)(1)(B) shall be 
                        permitted; and
                          ``(II) no increase in the royalty fee shall 
                        be permitted based on any reduction in the 
                        average number of distant signal equivalents 
                        per subscriber.
                The Copyright Royalty Judges may consider all factors 
                relating to the maintenance of such level of payments, 
                including, as an extenuating factor, whether the 
                industry has been restrained by subscriber rate 
                regulating authorities from increasing the rates for 
                the basic service of providing secondary transmissions.
                  ``(B) In the event that the rules and regulations of 
                the Federal Communications Commission are amended at 
                any time after April 8, 1976, to permit the carriage by 
                cable systems of additional television broadcast 
                signals beyond the local service area of the primary 
                transmitters of such signals, the royalty rates 
                established by section 111(d)(1)(B) may be adjusted to 
                insure that the rates for the additional distant signal 
                equivalents resulting from such carriage are reasonable 
                in the light of the changes effected by the amendment 
                to such rules and regulations. In determining the 
                reasonableness of rates proposed following an amendment 
                of Federal Communications Commission rules and 
                regulations, the Copyright Royalty Judges shall 
                consider, among other factors, the economic impact on 
                copyright owners and users; except that no adjustment 
                in royalty rates shall be made under this subparagraph 
                with respect to any distant signal equivalent or 
                fraction thereof represented by--
                          ``(i) carriage of any signal permitted under 
                        the rules and regulations of the Federal 
                        Communications Commission in effect on April 
                        15, 1976, or the carriage of a signal of the 
                        same type (that is, independent, network, or 
                        noncommercial educational) substituted for such 
                        permitted signal; or
                          ``(ii) a television broadcast signal first 
                        carried after April 15, 1976, pursuant to an 
                        individual waiver of the rules and regulations 
                        of the Federal Communications Commission, as 
                        such rules and regulations were in effect on 
                        April 15, 1976.
                  ``(C) In the event of any change in the rules and 
                regulations of the Federal Communications Commission 
                with respect to syndicated and sports program 
                exclusivity after April 15, 1976, the rates established 
                by section 111(d)(1)(B) may be adjusted to assure that 
                such rates are reasonable in light of the changes to 
                such rules and regulations, but any such adjustment 
                shall apply only to the affected television broadcast 
                signals carried on those systems affected by the 
                change.
                  ``(D) The gross receipts limitations established by 
                section 111(d)(1)(C) and (D) shall be adjusted to 
                reflect national monetary inflation or deflation or 
                changes in the average rates charged cable system 
                subscribers for the basic service of providing 
                secondary transmissions to maintain the real constant 
                dollar value of the exemption provided by such section, 
                and the royalty rate specified therein shall not be 
                subject to adjustment.
          ``(4) To authorize the distribution of those royalty fees 
        collected under sections 111, 119, and 1005 that the Copyright 
        Royalty Judges have found are not subject to controversy, in 
        accordance with those sections, and to determine, in cases 
        where controversy exists, the distribution of such fees, in 
        accordance with those sections.
          ``(5) To accept or reject royalty claims filed under section 
        111, 119, and 1007, on the basis of timeliness or the failure 
        to establish the basis for a claim.
          ``(6) To determine the status of a digital audio recording 
        device or a digital audio interface device under sections 1002 
        and 1003, as provided in section 1010.
          ``(7) To adopt any agreement on terms and rates of royalty 
        payments made pursuant to voluntary negotiation proceedings 
        under section 112(e), 114, 115, 116, 118, and agreements made 
        among the parties regarding the distribution of royalty 
        payments under section 111, 119, or 1007, except that--
                  ``(A) the Copyright Royalty Judges shall provide an 
                opportunity to any party that would be bound by the 
                terms, rates, or distribution set by the agreement to 
                comment on the agreement; and
                  ``(B) if any party described in the subparagraph (A) 
                objects to the agreement, the Copyright Royalty Judges 
                shall reject the agreement.
  ``(c) Rulings.--The Copyright Royalty Judges may make any necessary 
procedural or evidentiary rulings in any proceeding under this chapter 
and may, before commencing a proceeding under this chapter, make any 
such rulings that would apply to the proceedings conducted by the 
Copyright Royalty Judges. The Copyright Royalty Judges may consult with 
the Register of Copyrights in making any rulings under this subsection.
  ``(d) Administrative Support.--The Librarian of Congress shall 
provide the Copyright Royalty Judges with the necessary administrative 
services related to proceedings under this chapter.
  ``(e) Location in Library of Congress.--The offices of the Copyright 
Royalty Judges shall be in the Library of Congress.

``Sec. 802. Copyright Royalty Judgeships; staff

  ``(a) Qualifications of Copyright Royalty Judges.--Each Copyright 
Royalty Judge shall be an attorney who has at least 7 years of legal 
experience. The Chief Copyright Royalty Judge shall have at least 5 
years of experience in adjudications, arbitrations, or court trials. Of 
the other two Copyright Royalty Judges, one shall have significant 
knowledge of copyright law, and the other shall have significant 
knowledge of economics. An individual may serve as a Copyright Royalty 
Judge only if the individual is free of any financial conflict of 
interest under subsection (h). In this subsection, `adjudication' has 
the meaning given that term in section 551 of title 5, but does not 
include mediation.
  ``(b) Staff.--The Chief Copyright Royalty Judge shall hire 3 full-
time staff members to assist the Copyright Royalty Judges in performing 
their functions.
  ``(c) Terms.--The terms of the Copyright Royalty Judges shall each be 
6 years, except of the individuals first appointed, the Chief Copyright 
Royalty Judge shall be appointed to a term of 6 years, and of the 
remaining Copyright Royalty Judges, one shall be appointed to a term of 
2 years, and the other shall be appointed to a term of 4 years. An 
individual serving as a Copyright Royalty Judge may be reappointed to 
subsequent terms. The term of the Copyright Royalty Judge shall begin 
when the term of the predecessor of that Judge ends. When the term of 
office of a Copyright Royalty Judge ends, the individual serving that 
term may continue to serve until a successor is selected.
  ``(d) Vacancies or incapacity.--
          ``(1) Vacancies.--If a vacancy should occur in the position 
        of Copyright Royalty Judge, the Librarian of Congress shall act 
        expeditiously to fill the vacancy, and may appoint an interim 
        Copyright Royalty Judge to serve until another Copyright 
        Royalty Judge is appointed under this section. An individual 
        appointed to fill the vacancy occurring before the expiration 
        of the term for which the predecessor of that individual was 
        appointed shall be appointed for the remainder of that term.
          ``(2) Incapacity.--In the case in which a Copyright Royalty 
        Judge is temporarily unable to perform his or her duties, the 
        Librarian of Congress may appoint an interim Copyright Royalty 
        Judge to perform such duties during the period of such 
        incapacity.
  ``(e) Compensation.--The Chief Copyright Royalty Judge shall receive 
compensation at the rate of basic pay payable for level AL-1 for 
administrative law judges pursuant to section 5372(b) of title 5, each 
of the other two Copyright Royalty Judges shall receive compensation at 
the rate of basic pay payable for level AL-2 for administrative law 
judges pursuant to such section. The staff members appointed under 
subsection (b) shall each be paid at a rate of pay determined by the 
Librarian of Congress, except that--
          ``(1) the rate of pay for two of the staff members shall be 
        not less than the basic rate of pay payable for GS-13 of the 
        General Schedule and not more than the basic rate of pay 
        payable for GS-14 of such Schedule; and
          ``(2) the rate of pay for the third staff member shall be not 
        less than the basic rate of pay payable for GS-8 of the General 
        Schedule and not more than the basic rate of pay payable for 
        GS-11 of such Schedule.
The compensation of the Copyright Royalty Judges shall not be subject 
to any regulations adopted by the Office of Personnel Management 
pursuant to its authority under section 5376(b)(1) of title 5.
  ``(f) Independence of Copyright Royalty Judge.--
          ``(1) In making determinations.--
                  ``(A) In general.--Subject to subparagraph (B), the 
                Copyright Royalty Judges shall have full independence 
                in making determinations concerning adjustments and 
                determinations of copyright royalty rates and terms, 
                the distribution of copyright royalties, the acceptance 
                or rejection of royalty claims and rate adjustment 
                petitions, and in issuing rulings under this title, 
                except that the Copyright Royalty Judges may consult 
                with the Register of Copyrights in making such 
                determinations.
                  ``(B) Novel questions.--(i) In any case in which the 
                Copyright Royalty Judges in a proceeding under this 
                title are presented with a novel question concerning an 
                interpretation of those provisions of this title that 
                are the subject of the proceeding, the Copyright 
                Royalty Judges shall request the Register of 
                Copyrights, in writing, to submit a written opinion on 
                the resolution of such novel question. The Register 
                shall submit and make public that opinion within such 
                time period as the Copyright Royalty Judges may 
                prescribe. The opinion of the Register shall not be 
                binding on the judges, but the Copyright Royalty Judges 
                shall take the opinion of the Register into account in 
                making the judges' determination on the question 
                concerned.
                  ``(ii) In clause (i), a `novel' question is a 
                question that has not been determined in prior 
                decisions, determinations, and rulings described in 
                section 803(a).
          ``(2) Performance appraisals.--
                  ``(A) In general.--Notwithstanding any other 
                provision of law or any regulation of the Library of 
                Congress, and subject to subparagraph (B), the 
                Copyright Royalty Judges shall not receive performance 
                appraisals.
                  ``(B) Relating to sanction or removal.--To the extent 
                that the Librarian of Congress adopts regulations under 
                subsection (h) relating to the sanction or removal of a 
                Copyright Royalty Judge and such regulations require 
                documentation to establish the cause of such sanction 
                or removal, the Copyright Royalty Judge may receive an 
                appraisal related specifically to the cause of the 
                sanction or removal.
  ``(g) Inconsistent Duties Barred.--No Copyright Royalty Judge may 
undertake duties inconsistent with his or her duties and 
responsibilities as Copyright Royalty Judge.
  ``(h) Standards of Conduct.--The Librarian of Congress shall adopt 
regulations regarding the standards of conduct, including financial 
conflict of interest and restrictions against ex parte communications, 
which shall govern the Copyright Royalty Judges and the proceedings 
under this chapter.
  ``(i) Removal or Sanction.--The Librarian of Congress may sanction or 
remove a Copyright Royalty Judge for violation of the standards of 
conduct adopted under subsection (h), misconduct, neglect of duty, or 
any disqualifying physical or mental disability. Any such sanction or 
removal may be made only after notice and opportunity for a hearing, 
but the Librarian of Congress may suspend the Copyright Royalty Judge 
during the pendency of such hearing. The Librarian shall appoint an 
interim Copyright Royalty Judge during the period of any such 
suspension.

``Sec. 803. Proceedings of Copyright Royalty Judges

  ``(a) Proceedings.--
          ``(1) In general.--The Copyright Royalty Judges shall conduct 
        proceedings in accordance with subchapter II of chapter 5 of 
        title 5, for the purpose of making determinations in carrying 
        out the purposes set forth in section 801. The Copyright 
        Royalty Judges 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 before the effective date 
        of the Copyright Royalty and Distribution Reform Act of 2003, 
        and prior determinations of Copyright Royalty Judges under this 
        chapter. Any person participating in proceedings under this 
        chapter may submit relevant information and proposals to the 
        Copyright Royalty Judges.
          ``(2) Judges acting as panel and individually.--The Copyright 
        Royalty Judges shall preside over hearings in proceedings under 
        this chapter en banc, but the Chief Copyright Royalty Judge may 
        designate a Copyright Royalty Judge to preside individually 
        over such collateral and administrative proceedings, and over 
        such proceedings under paragraphs (2) and (3) of subsection 
        (b), as the Chief Judge considers appropriate.
          ``(3) Determinations.--Final determinations of the Copyright 
        Royalty Judges in proceedings under this chapter shall be made 
        by majority vote. A Copyright Royalty Judge dissenting from the 
        majority on any determination under this chapter may issue his 
        or her dissenting opinion, which shall be included with the 
        determination.
  ``(b) Procedures.--
          ``(1) Participation in general.--Subject to paragraph (2), a 
        person may participate in proceedings under this chapter, 
        including through the submission of briefs or other 
        information, only if that person files with the Copyright 
        Royalty Judges, in such form and manner as the Copyright 
        Royalty Judges may by regulation prescribe, a notice of intent 
        to participate in the proceedings, together with a filing fee 
        of $150, before the proceedings commence.
          ``(2) Small claims procedure in distribution proceedings.--
                  ``(A) In general.--If the amount in controversy that 
                a party to a proceeding under this chapter to determine 
                the distribution of royalties asserts is $10,000 or 
                less, the Copyright Royalty Judges shall decide the 
                controversy on the basis of the filing in writing of 
                the initial claim, initial response by any opposing 
                party, and one additional response by each such party. 
                The party asserting the claim shall not be required to 
                pay the filing fee under paragraph (1).
                  ``(B) Bad faith inflation of claim.--If the Copyright 
                Royalty Judges determine that a party asserts in bad 
                faith an amount in controversy in excess of $10,000 for 
                the purpose of avoiding a determination under the 
                procedure set forth in subparagraph (A), the Copyright 
                Royalty Judges shall impose a fine on that party, in an 
                amount not to exceed the difference between the actual 
                amount distributed and the amount asserted by the 
                party.
          ``(3) Paper proceedings in ratemaking proceedings.--The 
        Copyright Royalty Judges in proceedings under this chapter to 
        determine royalty rates may decide, sua sponte or upon motion 
        of a party, to determine issues on the basis of initial filings 
        in writing, initial responses by any opposing party, and one 
        additional response by each such party. Prior to making such 
        decision, the judges shall offer to all parties to the 
        proceeding the opportunity to comment on the decision. The 
        procedure under this paragraph would apply in cases in which a 
        small amount of royalties are involved, there is no genuine 
        issue of material fact, there is no need for evidentiary 
        hearings, and under such other circumstances as the judges 
        consider appropriate.
          ``(4) Regulations.--
                  ``(A) In general.--The Copyright Royalty Judges 
                shall, not later than 120 days after the effective date 
                of the Copyright Royalty and Distribution Reform Act of 
                2003, issue regulations to govern proceedings under 
                this chapter.
                  ``(B) Interim regulations.--Until regulations are 
                adopted under subparagraph (A), the Copyright Royalty 
                Judges shall apply the regulations in effect under this 
                chapter on the day before the effective date of the 
                Copyright Royalty and Distribution Reform Act of 2003, 
                to the extent such regulations are not inconsistent 
                with this chapter, except that functions carried out 
                under such regulations by the Librarian of Congress, 
                the Register of Copyrights, or copyright arbitration 
                royalty panels that, as of such date of enactment, are 
                to be carried out by the Copyright Royalty Judges under 
                this chapter, shall be carried out by the Copyright 
                Royalty Judges under such regulations.
                  ``(C) Requirements.--Regulations issued under 
                subparagraph (A) shall include the following:
                          ``(i) The Federal Rules of Evidence with 
                        respect to hearsay shall apply to proceedings 
                        under this chapter.
                          ``(ii) Discovery in such proceedings shall be 
                        permitted for a period of 60 days.
                          ``(iii) The Copyright Royalty Judges shall 
                        order a settlement conference among the parties 
                        for the presentation of offers of settlement 
                        among the parties. The settlement conference 
                        shall be held during a 21-day period following 
                        the end of the discovery period and before the 
                        submission in writing to the judges of the 
                        testimony, witnesses, and exhibits to be 
                        presented in the proceedings. Copyright Royalty 
                        Judges may accept settlement agreements until 
                        the end of that 21-day period.
                          ``(iv) A defending party to a claim in a 
                        proceeding to determine the distribution of 
                        royalties may, not later than the day on which 
                        the settlement conference under clause (iii) 
                        ends, serve upon an adverse party, with notice 
                        thereof to the Chief Copyright Royalty Judge, 
                        an offer to allow for a determination to be 
                        made against the adverse party for the claimed 
                        money or property or other specified amount. If 
                        before the day on which hearings in the 
                        proceeding begin an offer under this clause is 
                        accepted, the parties shall file the offer and 
                        notice of acceptance of the offer with the 
                        Copyright Royalty Judges, who shall enter their 
                        determination pursuant thereto. If the final 
                        determination in the proceeding is not more 
                        favorable to the offeree than the offer made 
                        under this clause, then the Copyright Royalty 
                        Judges shall order the offeree to pay the 
                        reasonable attorney's fees of the defending 
                        party who made the offer that is attributable 
                        to the offer.
                          ``(v) Each request to compel discovery in 
                        proceedings to determine royalty rates must be 
                        approved by a Copyright Royalty Judge, who may 
                        approve the request only if the evidence that 
                        would be produced is relevant and material. A 
                        Copyright Royalty Judge may refuse a request to 
                        compel discovery of evidence that has been 
                        found to be relevant and material, only upon 
                        good cause shown.
                          ``(vi) The Copyright Royalty Judges may issue 
                        subpoenas requiring the production of evidence 
                        or witnesses, but only if the evidence 
                        requested to be produced or that would be 
                        proffered by the witness is relevant and 
                        material.
  ``(c) Determination of Copyright Royalty Judges.--
          ``(1) Timing.--Not later than 6 months after the date on 
        which the settlement conference convened under subsection 
        (b)(3)(C)(iii) begins, the Copyright Royalty Judges shall issue 
        their determination in the proceeding, except that the 
        Copyright Royalty Judges may extend that 6-month period to a 
        period of up to 1 year for that proceeding if the Copyright 
        Royalty Judges determine such extension to be necessary.
          ``(2) Rehearings.--The Copyright Royalty Judges may, in 
        exceptional cases, upon motion of a party to proceedings under 
        this chapter, order a rehearing on such matters as the judges 
        determine to be appropriate. In the case in which a rehearing 
        is ordered, any opposing party shall not be required to 
        participate in the rehearing.
          ``(3) Contents of determination.--The determination of the 
        Copyright Royalty Judges shall be accompanied by the written 
        record, and shall set forth the facts that the Copyright 
        Royalty Judges found relevant to their determination.
          ``(4) Correction of errors.--The Copyright Royalty Judges 
        may, after the determination is issued, correct any technical 
        errors in the determination and correct any error in the 
        determination that would prevent the determination from 
        becoming effective.
          ``(5) Protective order.--The Copyright Royalty Judges may 
        issue an order excluding confidential information from the 
        record of the determination that is published or made available 
        to the public, except that any terms or rates of royalty 
        payments or distributions may not be excluded.
          ``(6) Publication of determination.--The Chief Copyright 
        Royalty Judge shall cause the determination, and any 
        corrections thereto, to be published in the Federal Register. 
        The Chief Copyright Royalty Judge shall also publicize the 
        determination and corrections in such other manner as the Chief 
        Copyright Royalty Judge considers appropriate, including, but 
        not limited to, publication on the official website of the 
        Copyright Office. The Chief Copyright Royalty Judge shall also 
        make the determination and corrections and the accompanying 
        record available for public inspection and copying.
  ``(d) Judicial Review.--
          ``(1) Appeal.--Any determination of the Copyright Royalty 
        Judges under subsection (c) may, within 30 days after the 
        publication of the determination in the Federal Register, be 
        appealed, to the United States Court of Appeals for the 
        District of Columbia Circuit, by any party who would be bound 
        by the determination, who, under subsection (b)(1), filed a 
        notice of intent to participate in the proceeding pursuant to 
        which the determination was made, and who submitted in writing 
        to the Copyright Royalty Judges the testimony, witnesses, and 
        exhibits to be presented in the proceeding. If no appeal is 
        brought within that 30-day period, the determination of the 
        Copyright Royalty Judges 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 
        determination of the Copyright Royalty Judges.
          ``(2) Effect of rates.--When this title provides that the 
        royalty rates or terms that were previously in effect are to 
        expire on a specified date, any adjustment by the Copyright 
        Royalty Judges of those rates or terms shall be effective as of 
        the day following the date of expiration of the rates or terms 
        that were previously in effect, even if the Copyright Royalty 
        Judges' determination is rendered on a later date. The pendency 
        of an appeal under this paragraph shall not relieve persons 
        obligated to make royalty payments under section 111, 112, 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.
          ``(3) Jurisdiction of court.--The court shall have 
        jurisdiction to modify or vacate a determination of the 
        Copyright Royalty Judges only if it finds, on the basis of the 
        record before the Copyright Royalty Judges, that the Copyright 
        Royalty Judges acted in an arbitrary or capricious manner. If 
        the court modifies the determination of the Copyright Royalty 
        Judges, 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 judgment. The court may further vacate the 
        determination of the Copyright Royalty Judges and remand the 
        case to the Copyright Royalty Judges for proceedings in 
        accordance with subsection (a).
  ``(e) Administrative Matters.--
          ``(1) Deduction of costs of library of congress and copyright 
        office from filing fees.--
                  ``(A) Deduction from filing fees.--The Librarian of 
                Congress may, to the extent not otherwise provided 
                under this title, deduct from the filing fees collected 
                under subsection (b) for a particular proceeding under 
                this chapter the reasonable costs incurred by the 
                Librarian of Congress, the Copyright Office, and the 
                Copyright Royalty Judges in conducting that proceeding, 
                other than the salaries of the Copyright Royalty Judges 
                and the 3 staff members appointed under section 802(b).
                  ``(B) Authorization of appropriations.--There are 
                authorized to be appropriated such sums as may be 
                necessary to pay the costs of proceedings under this 
                chapter not covered by the filing fees collected under 
                subsection (b). All funds made available pursuant to 
                this subparagraph shall remain available until 
                expended.
          ``(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, 112, 114, 115, 116, 118, or 119 
        or chapter 10.

``Sec. 804. Institution and conclusion of proceedings

  ``(a) Filing of Petition.--With respect to proceedings under 
paragraphs (1) and (2) of section 801(b) concerning the determination 
or adjustment of royalty rates as provided in sections 111, 112, 114, 
115, 116, 118, and 1004, during the calendar years specified in the 
schedule set forth in subsection (b), any owner or user of a 
copyrighted work whose royalty rates are specified by this title, or 
are established under this chapter before or after the enactment of the 
Copyright Royalty and Distribution Reform Act of 2003, may file a 
petition with the Copyright Royalty Judges declaring that the 
petitioner requests a determination or adjustment of the rate. The 
Copyright Royalty Judges shall make a determination as to whether the 
petitioner has such a significant interest in the royalty rate in which 
a determination or adjustment is requested. If the Copyright Royalty 
Judges determine that the petitioner has such a significant interest, 
the Copyright Royalty Judges shall cause notice of this determination, 
with the reasons therefor, to be published in the Federal Register, 
together with the notice of commencement of proceedings under this 
chapter.
  ``(b) Timing of Petitions.--
          ``(1) Section 111 proceedings.--(A) In proceedings under 
        section 801(b)(1) concerning the adjustment of royalty rates 
        under section 111 to which subparagraph (A) or (D) of section 
        801(b)(3) applies, a petition described in subsection (a) may 
        be filed during the year 2005 and in each subsequent fifth 
        calendar year.
          ``(B) In proceedings under section 801(b)(1) concerning the 
        adjustment of royalty rates under section 111 to which 
        subparagraph (B) or (C) of section 801(b)(3) applies, within 12 
        months after an event described in either of those subsections, 
        any owner or user of a copyrighted work whose royalty rates are 
        specified by section 111, or by a rate established under this 
        chapter before or after the enactment of the Copyright Royalty 
        and Distribution Reform Act of 2003, may file a petition with 
        the Copyright Royalty Judges declaring that the petitioner 
        requests an adjustment of the rate. The Copyright Royalty 
        Judges shall then proceed as set forth in subsection (a) of 
        this section. Any change in royalty rates made under this 
        chapter pursuant to this subparagraph may be reconsidered in 
        the year 2005, and each fifth calendar year thereafter, in 
        accordance with the provisions in section 801(b)(3)(B) or (C), 
        as the case may be.
          ``(2) Section 115 proceedings.--In proceedings under section 
        801(b)(1) or (2) concerning the adjustment or determination of 
        royalty rates as provided in section 115, a petition described 
        in paragraph (1) may be filed in the year 2007 and in each 
        subsequent fifth calendar year or as prescribed in section 
        115(c)(3)(B), (C), or (D).
          ``(3) Section 116 proceedings.--(A) In proceedings under 
        section 801(b)(2) concerning the determination of royalty rates 
        and terms as provided in section 116, a petition described in 
        paragraph (1) may be filed at any time within 1 year after 
        negotiated licenses authorized by section 116 are terminated or 
        expire and are not replaced by subsequent agreements.
          ``(B) If a negotiated license authorized by section 116 is 
        terminated or expires and is not replaced by another such 
        license agreement which provides permission to use a quantity 
        of musical works not substantially smaller than the quantity of 
        such works performed on coin-operated phonorecord players 
        during the 1-year period ending March 1, 1989, the Copyright 
        Royalty Judges shall, upon petition filed under paragraph (1) 
        within 1 year after such termination or expiration, commence a 
        proceeding to promptly establish an interim royalty rate or 
        rates for the public performance by means of a coin-operated 
        phonorecord player of nondramatic musical works embodied in 
        phonorecords which had been subject to the terminated or 
        expired negotiated license agreement. Such rate or rates shall 
        be the same as the last such rate or rates and shall remain in 
        force until the conclusion of proceedings by the Copyright 
        Royalty Judges, in accordance with section 803, to adjust the 
        royalty rates applicable to such works, or until superseded by 
        a new negotiated license agreement, as provided in section 
        116(b).
          ``(4) Section 112 and 114.--With respect to proceedings under 
        section 801(b)(2) concerning the determination of reasonable 
        terms and rates of royalty payments as provided in section 112 
        or 114, the Librarian of Congress and the Copyright Royalty 
        Judges shall proceed when and as provided by those sections.
          ``(5) Section 118 proceedings.--With respect to proceedings 
        under section 801(b)(2) concerning the determination of 
        reasonable terms and rates of royalty payments as provided in 
        section 118, the Librarian of Congress and the Copyright 
        Royalty Judges shall proceed when and as provided by that 
        section.
          ``(6) Proceedings concerning distribution of royalty fees.--
        With respect to proceedings under section 801(b)(5) concerning 
        the distribution of royalty fees in certain circumstances under 
        section 111, 116, 119, or 1007, the Copyright Royalty Judges 
        shall, upon a determination that a controversy exists 
        concerning such distribution, cause to be published in the 
        Federal Register notice of commencement of proceedings under 
        this chapter.

``Sec. 805. Interim royalty payments

  ``Whenever royalty rates or terms provided in this title expire 
before new rates and terms are provided in this title to replace the 
expired rates and terms, persons obligated to make such payments shall 
continue to make the payments under the expired rates and terms until 
the new rates and terms take effect. If the new rates and terms require 
lower payments, refunds of the overpayments shall be made retroactively 
to the date the new terms and rates are effective. If the new terms and 
rates require higher payments, the Copyright Royalty Judges shall 
specify the time within which the persons obligated to make such 
payments must pay the difference between the expired rates and terms 
and the new rates and terms for such period that the new rates and 
terms are applied retroactively.

``Sec. 806. General rule for voluntarily negotiated agreements

  ``Any rates or terms under this title that--
          ``(1) are agreed to during the voluntary negotiation periods 
        provided for under this title,
          ``(2) are adopted by the Copyright Royalty Judges as part of 
        a determination under this chapter, and
          ``(3) are in effect for a period shorter than would otherwise 
        apply under a determination pursuant to this chapter,
shall remain in effect for such period of time as would otherwise apply 
under such determination, except that the Copyright Royalty Judges 
shall adjust the rates pursuant to the voluntary negotiations to 
reflect national monetary inflation during the additional period the 
rates remain in effect.''.
  (b) Conforming Amendment.--The table of chapters for title 17, United 
States Code, is amended by striking the item relating to chapter 8 and 
inserting the following:

``8. PROCEEDINGS OF COPYRIGHT ROYALTY JUDGE.................     801''.

SEC. 4. DEFINITION.

  Section 101 is amended by inserting after the definition of 
``copies'' the following:
          ``A `Copyright Royalty Judge' is a Copyright Royalty Judge 
        appointed under section 802 of this title, and includes any 
        individual serving as an interim Copyright Royalty Judge under 
        such section.''.

SEC. 5. TECHNICAL AMENDMENTS.

  (a) Cable Rates.--Section 111(d) is amended--
          (1) in paragraph (2), in the second sentence, by striking ``a 
        copyright royalty panel'' and inserting ``the Copyright Royalty 
        Judges.''; and
          (2) in paragraph (4)--
                  (A) in subparagraph (A), by striking ``Librarian of 
                Congress'' each place it appears and inserting 
                ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) in the first sentence, by striking 
                        ``Librarian of Congress shall, upon the 
                        recommendation of the Register of Copyrights,'' 
                        and inserting ``Copyright Royalty Judges 
                        shall'';
                          (ii) in the second sentence, by striking 
                        ``Librarian determines'' and inserting 
                        ``Copyright Royalty Judges determine''; and
                          (iii) in the third sentence--
                                  (I) by striking ``Librarian'' each 
                                place it appears and inserting 
                                ``Copyright Royalty Judges''; and
                                  (II) by striking ``convene a 
                                copyright arbitration royalty panel'' 
                                and inserting ``conduct a proceeding''; 
                                and
                  (C) in subparagraph (C), by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges''.
  (b) Ephemeral Recordings.--Section 112(e) is amended--
          (1) in paragraph (3)--
                  (A) by amending the first sentence to read as 
                follows: ``During the first week of January 2007, the 
                Chief Copyright Royalty Judge 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 paragraph (1) 
                during the period beginning on January 1, 2007, and 
                ending on December 31, 2011, or such other date as the 
                parties may agree.''; and
                  (B) in the third sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (2) in paragraph (4)--
                  (A) by amending the first sentence to read as 
                follows: ``In the absence of license agreements 
                negotiated under paragraph (2), during the 60-day 
                period beginning on the date that is 6 months after 
                publication of the notice specified in paragraph (3), 
                and upon the filing of a petition in accordance with 
                section 804(a), the Copyright Royalty Judges shall 
                commence a proceeding pursuant to chapter 8 to 
                determine and publish in the Federal Register a 
                schedule of reasonable rates and terms which, subject 
                to paragraph (5), shall be binding on all copyright 
                owners of sound recordings and transmitting 
                organizations entitled to a statutory license under 
                this subsection during the 5-year period specified in 
                paragraph (3), or such other date as the parties may 
                agree.'';
                  (B) by striking ``copyright arbitration royalty 
                panel'' each subsequent place it appears and inserting 
                ``Copyright Royalty Judges'';
                  (C) in the fourth sentence, by striking ``its 
                decision'' and inserting ``their decision''; and
                  (D) in the last sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (3) in paragraph (5), by striking ``or decision by the 
        Librarian of Congress'' and inserting ``, decision by Librarian 
        of Congress, or determination by the Copyright Royalty 
        Judges''; and
          (4) in paragraph (6)--
                  (A) in the first sentence--
                          (i) by striking ``Librarian of Congress'' 
                        each place it appears and inserting ``Copyright 
                        Royalty Judges''; and
                          (ii) by striking ``January 2000, and at 2-
                        year'' and inserting ``January 2012, and at 5-
                        year'';
                  (B) in the second sentence--
                          (i) by striking ``803(a)(1)'' and inserting 
                        ``804(a)''; and
                          (ii) by striking ``July 1, 2000, and at 2-
                        year'' and inserting ``July 1, 2012, and at 5-
                        year''; and
                  (C) in the last sentence, by striking ``802'' and 
                inserting ``803''; and
          (5) in paragraph (7)(A), by striking ``Librarian of 
        Congress'' and inserting ``Copyright Royalty Judges''.
  (c) Scope of Exclusive Rights in Sound Recordings.--Section 114(f) is 
amended--
          (1) in paragraph (1)--
                  (A) in subparagraph (A)--
                          (i) by amending the first sentence to read as 
                        follows: ``During the first week of January 
                        2006, the Chief Copyright Royalty Judge 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 subscription transmissions 
                        by preexisting subscription services and 
                        transmissions by preexisting satellite digital 
                        audio radio services specified by subsection 
                        (d)(2) during the period beginning on January 
                        1, 2006, and ending on December 31, 2010, or 
                        such other date as the parties may agree.''; 
                        and
                          (ii) in the third sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) by amending the first sentence to read as 
                        follows: ``In the absence of license agreements 
                        negotiated under subparagraph (A), during the 
                        60-day period beginning on the date that is 6 
                        months after publication of the notice 
                        specified in subparagraph (A), and upon the 
                        filing of a petition in accordance with section 
                        804(a), the Copyright Royalty Judges shall 
                        commence proceedings pursuant to chapter 8 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 affected 
                        by this paragraph.''; and
                          (ii) in the second sentence, by striking 
                        ``copyright arbitration royalty panel'' and 
                        inserting ``Copyright Royalty Judges''; and
                  (C) in subparagraph (C)--
                          (i) in clause (i)--
                                  (I) by striking ``Librarian of 
                                Congress'' and inserting ``Copyright 
                                Royalty Judges''; and
                                  (II) in subclause (II), by striking 
                                ``2001'' and inserting ``2011'';
                          (ii) in clause (ii)--
                                  (I) by striking ``Librarian of 
                                Congress'' and inserting ``Copyright 
                                Royalty Judges'';
                                  (II) by striking ``803(a)(1)'' and 
                                inserting ``804(a)''; and
                                  (III) in subclause (II), by striking 
                                ``2001'' and inserting ``2011''; and
                          (iii) in clause (iii), by striking ``802'' 
                        and inserting ``803'';
          (2) in paragraph (2)--
                  (A) in subparagraph (A)--
                          (i) by amending the first sentence to read as 
                        follows: ``During the first week of January 
                        2007, the Chief Copyright Royalty Judge 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 public performances of 
                        sound recordings by means of eligible 
                        nonsubscription transmissions and transmissions 
                        by new subscription services specified by 
                        subsection (d)(2) during the period beginning 
                        on January 1, 2007, and ending on December 31, 
                        2011, or such other date as the parties may 
                        agree.''; and
                          (ii) in the third sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) by amending the first sentence to read as 
                        follows: ``In the absence of license agreements 
                        negotiated under subparagraph (A), during the 
                        60-day period beginning on the date that is 6 
                        months after publication of the notice 
                        specified in subparagraph (A), and upon the 
                        filing of a petition in accordance with section 
                        804(a), the Copyright Royalty Judges shall 
                        commence proceedings pursuant to chapter 8 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 affected 
                        by this paragraph during the period beginning 
                        on January 1, 2007, and ending on December 31, 
                        2011, or such other date as the parties may 
                        agree.''; and
                          (ii) by striking ``copyright arbitration 
                        royalty panel'' each subsequent place it 
                        appears and inserting ``Copyright Royalty 
                        Judges'';
                  (C) in subparagraph (C)--
                          (i) in clause (i)--
                                  (I) by striking ``Librarian of 
                                Congress'' and inserting ``Copyright 
                                Royalty Judges''; and
                                  (II) in subclause (II), by striking 
                                ``January 2000, and at 2-year'' and 
                                inserting ``January 2012, and at 5-
                                year'';
                          (ii) in clause (ii)--
                                  (I) by striking ``Librarian of 
                                Congress'' and inserting ``Copyright 
                                Royalty Judges'';
                                  (II) by striking ``803(a)(1)'' and 
                                inserting ``804(a)''; and
                                  (III) in subclause (II), by striking 
                                ``July 1, 2000, and at 2-year'' and 
                                inserting ``July 1, 2012, and at 5-
                                year''; and
                          (iii) in clause (iii), by striking ``802'' 
                        and inserting ``803'';
          (3) in paragraph (3), by striking ``or decision by the 
        Librarian of Congress'' and inserting ``, decision by the 
        Librarian of Congress, or determination by the Copyright 
        Royalty Judges''; and
          (4) in paragraph (4), by striking ``Librarian of Congress'' 
        each place it appears and inserting ``Copyright Royalty 
        Judges''.
  (d) Phonorecords of Nondramatic Musical Works.--Section 115(c)(3) is 
amended--
          (1) in subparagraph (C)--
                  (A) by amending the first sentence to read as 
                follows: ``During the period of June 30, 2006, through 
                December 31, 2006, the Chief Copyright Royalty Judge 
                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, 2008, and ending on the effective 
                date of any new terms and rates established pursuant to 
                this subparagraph or subparagraph (D) or (F), or such 
                other date (regarding digital phonorecord deliveries) 
                as the parties may agree.''; and
                  (B) in the third sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (2) in subparagraph (D)--
                  (A) by amending the first sentence to read as 
                follows: ``In the absence of license agreements 
                negotiated under subparagraphs (B) and (C), upon the 
                filing of a petition in accordance with section 804(a), 
                the Copyright Royalty Judges shall commence proceedings 
                pursuant to chapter 8 to determine and publish in the 
                Federal Register a schedule or 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, 2008, and ending on the effective date of any new 
                terms and rates established pursuant to subparagraph 
                (C) or (F) or this subparagraph, or such other date 
                (regarding digital phonorecord deliveries) as may be 
                determined pursuant to subparagraphs (B) and (C).'';
                  (B) in the third sentence, by striking ``copyright 
                arbitration royalty panel'' and inserting ``Copyright 
                Royalty Judges''; and
                  (C) in the last sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (3) in subparagraph (E)(i), in the first sentence, by 
        striking ``the Librarian of Congress'' and inserting ``a 
        copyright arbitration royalty panel, the Librarian of Congress, 
        or the Copyright Royalty Judges''; and
          (4) in subparagraph (F)--
                  (A) by striking ``Librarian of Congress'' and 
                inserting ``Copyright Royalty Judges''; and
                  (B) by striking ``1997'' and inserting ``2002''.
  (e) Coin-Operated Phonorecord Players.--Section 116 is amended--
          (1) in subsection (b), by amending paragraph (2) to read as 
        follows:
          ``(2) Chapter 8 proceeding.--Parties not subject to such a 
        negotiation may have the terms and rates and the division of 
        fees described in paragraph (1) determined in a proceeding in 
        accordance with the provisions of chapter 8.''; and
          (2) in subsection (c)--
                  (A) in the subsection heading, by striking 
                ``Copyright Arbitration Royalty Panel Determinations'' 
                and inserting ``Determinations by Copyright Royalty 
                Judges''; and
                  (B) by striking ``a copyright arbitration royalty 
                panel'' and inserting ``the Copyright Royalty Judges''.
  (f) Use of Certain Works in Connection With Noncommercial 
Broadcasting.--Section 118 is amended--
          (1) in subsection (b)--
                  (A) in paragraph (1)--
                          (i) in the first sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges''; and
                          (ii) by striking the second and third 
                        sentences;
                  (B) in paragraph (2), by striking ``the Librarian of 
                Congress:'' and all that follows through the end of the 
                sentence and inserting ``a copyright arbitration 
                royalty panel, the Librarian of Congress, or the 
                Copyright Royalty Judge, if copies of such agreements 
                are filed with the Copyright Royalty Judges within 30 
                days of execution in accordance with regulations that 
                the Copyright Royalty Judges shall issue.''; and
                  (C) in paragraph (3)--
                          (i) by amending the first sentence to read as 
                        follows: ``In the absence of license agreements 
                        negotiated under paragraph (2), the Copyright 
                        Royalty Judges shall, pursuant to chapter 8, 
                        conduct a proceeding to determine and publish 
                        in the Federal Register a schedule of rates and 
                        terms which, subject to paragraph (2), shall be 
                        binding on all owners of copyright in works 
                        specified by this subsection and public 
                        broadcasting entities, regardless of whether 
                        such copyright owners have submitted proposals 
                        to the Copyright Royalty Judges.'';
                          (ii) in the second sentence, by striking 
                        ``copyright arbitration royalty panel'' and 
                        inserting ``Copyright Royalty Judges''; and
                          (iii) in the last sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges'';
          (2) in subsection (c)--
                  (A) by striking ``1997'' and inserting ``2007''; and
                  (B) by striking ``Librarian of Congress'' and 
                inserting ``Copyright Royalty Judges'';
          (3) in subsection (d), by striking ``a copyright arbitration 
        royalty panel'' and inserting ``the Copyright Royalty Judges''; 
        and
          (4) in subsection (e)--
                  (A) by striking ``in the Copyright Office'' and 
                inserting ``with the Copyright Royalty Judges''; and
                  (B) by striking ``Register of Copyrights'' and 
                inserting ``Copyright Royalty Judges''.
  (g) Secondary Transmissions by Satellite Carriers.--Section 119(b) is 
amended--
          (1) in paragraph (3), by striking ``Librarian of Congress'' 
        and inserting ``Copyright Royalty Judges''; and
          (2) in paragraph (4)--
                  (A) in subparagraph (A), by striking ``Librarian of 
                Congress'' each place it appears and inserting 
                ``Copyright Royalty Judges''; and
                  (B) by amending subparagraphs (B) and (C) to read as 
                follows:
                  ``(B) Determination of controversy; distributions.--
                After the first day of August of each year, the 
                Copyright Royalty Judges shall determine whether there 
                exists a controversy concerning the distribution of 
                royalty fees. If the Copyright Royalty Judges determine 
                that no such controversy exists, the Librarian of 
                Congress shall, after deducting reasonable 
                administrative costs under this paragraph, distribute 
                such fees to the copyright owners entitled to receive 
                them, or to their designated agents. If the Copyright 
                Royalty Judges find the existence of a controversy, the 
                Copyright Royalty Judges shall, pursuant to chapter 8 
                of this title, conduct a proceeding to determine the 
                distribution of royalty fees.
                  ``(C) Withholding of fees during controversy.--During 
                the pendency of any proceeding under this subsection, 
                the Copyright Royalty Judges shall withhold from 
                distribution an amount sufficient to satisfy all claims 
                with respect to which a controversy exists, but shall 
                have discretion to authorize the distribution of any 
                amounts that are not in controversy.''.
  (h) Digital Audio Recording Devices.--
          (1) Royalty payments.--Section 1004(a)(3) is amended by 
        amending the third sentence to read as follows: ``Not more than 
        once each year, any interested copyright party may petition the 
        Copyright Royalty Judges to increase the royalty maximum and, 
        if more than 20 percent of the royalty payments are at the 
        relevant royalty maximum, the Copyright Royalty Judges shall 
        prospectively increase such royalty maximum with the goal of 
        having no more than 10 percent of such payments at the new 
        royalty maximum; however the amount of any such increase as a 
        percentage of the royalty maximum shall in no event exceed the 
        percentage increase in the Consumer Price Index during the 
        period under review.''.
          (2) Entitlement to royalty payments.--Section 1006(c) is 
        amended by striking ``Librarian of Congress shall convene a 
        copyright arbitration royalty panel which'' and inserting 
        ``Copyright Royalty Judges''.
          (3) Procedures for distributing royalty payments.--Section 
        1007 is amended--
                  (A) in subsection (a), by amending paragraph (1) to 
                read as follows:
          ``(1) Filing of claims.--During the first 2 months of each 
        calendar year, every interested copyright party seeking to 
        receive royalty payments to which such party is entitled under 
        section 1006 shall file with the Copyright Royalty Judges a 
        claim for payments collected during the preceding year in such 
        form and manner as the Copyright Royalty Judges shall prescribe 
        by regulation.''; and
                  (B) by amending subsections (b) and (c) to read as 
                follows:
  ``(b) Distribution of Payments in the Absence of a Dispute.--After 
the period established for the filing of claims under subsection (a), 
in each year, the Copyright Royalty Judges shall determine whether 
there exists a controversy concerning the distribution of royalty 
payments under section 1006(c). If the Copyright Royalty Judges 
determine that no such controversy exists, the Librarian of Congress 
shall, within 30 days after such determination, authorize the 
distribution of the royalty payments as set forth in the agreements 
regarding the distribution of royalty payments entered into pursuant to 
subsection (a). The Librarian of Congress shall, before such royalty 
payments are distributed, deduct the reasonable administrative costs 
incurred by the Librarian under this section.
  ``(c) Resolution of Disputes.--If the Copyright Royalty Judges find 
the existence of a controversy, the Copyright Royalty Judges shall, 
pursuant to chapter 8 of this title, conduct a proceeding to determine 
the distribution of royalty payments. During the pendency of such a 
proceeding, the Copyright Royalty Judges shall withhold from 
distribution an amount sufficient to satisfy all claims with respect to 
which a controversy exists, but shall, to the extent feasible, 
authorize the distribution of any amounts that are not in controversy. 
The Librarian of Congress shall, before such royalty payments are 
distributed, deduct the reasonable administrative costs incurred by the 
Librarian under this section.''.
          (5) Determination of certain disputes.--(A) Section 1010 is 
        amended to read as follows:

``Sec. 1010. Determination of certain disputes

  ``(a) Scope of Determination.--Before the date of first distribution 
in the United States of a digital audio recording device or a digital 
audio interface device, any party manufacturing, importing, or 
distributing such device, and any interested copyright party may 
mutually agree to petition the Copyright Royalty Judges to determine 
whether such device is subject to section 1002, or the basis on which 
royalty payments for such device are to be made under section 1003.
  ``(b) Initiation of Proceedings.--The parties under subsection (a) 
shall file the petition with the Copyright Royalty Judges requesting 
the commencement of a proceeding. Within 2 weeks after receiving such a 
petition, the Chief Copyright Royalty Judge shall cause notice to be 
published in the Federal Register of the initiation of the proceeding.
  ``(c) Stay of Judicial Proceedings.--Any civil action brought under 
section 1009 against a party to a proceeding under this section shall, 
on application of one of the parties to the proceeding, be stayed until 
completion of the proceeding.
  ``(d) Proceeding.--The Copyright Royalty Judges shall conduct a 
proceeding with respect to the matter concerned, in accordance with 
such procedures as the Copyright Royalty Judges may adopt. The 
Copyright Royalty Judges shall act on the basis of a fully documented 
written record. Any party to the proceeding may submit relevant 
information and proposals to the Copyright Royalty Judges. The parties 
to the proceeding shall bear the entire cost thereof in such manner and 
proportion as the Copyright Royalty Judges shall direct.
  ``(e) Judicial Review.--Any determination of the Copyright Royalty 
Judges under subsection (d) may be appealed, by a party to the 
proceeding, in accordance with section 803(d) of this title. The 
pendency of an appeal under this subsection shall not stay the 
determination of the Copyright Royalty Judges. If the court modifies 
the determination of the Copyright Royalty Judges, the court shall have 
jurisdiction to enter its own decision in accordance with its final 
judgment. The court may further vacate the determination of the 
Copyright Royalty Judges and remand the case for proceedings as 
provided in this section.''.
          (B) The item relating to section 1010 in the table of 
        sections for chapter 10 is amended to read as follows:

``1010. Determination of certain disputes.''.

SEC. 6. EFFECTIVE DATE AND TRANSITION PROVISIONS.

  (a) Effective Date.--This Act and the amendments made by this Act 
shall take effect 30 days after the date of the enactment of this Act, 
except that the Librarian of Congress shall appoint interim Copyright 
Royalty Judges under section 802(d) of title 17, United States Code, as 
amended by this Act, within that 30-day period to carry out the 
functions of the Copyright Royalty Judges under title 17, United States 
Code, to the extent that Copyright Royalty Judges provided for in 
section 801(a) of title 17, United States Code, as amended by this Act, 
have not been appointed before the end of that 30-day period.
  (b) Transition Provisions.--
          (1) In general.--Subject to paragraph (2), the amendments 
        made by this Act shall not affect any proceedings commenced 
        before the enactment of this Act under the provisions of title 
        17, United States Code, amended by this Act, and pending on 
        such date of enactment. Such proceedings shall continue, 
        determinations made in such proceedings, and appeals taken 
        therefrom, as if this Act had not been enacted, and shall 
        continue in effect until modified under title 17, United States 
        Code, as amended by this Act.
          (2) Effective periods for certain ratemaking proceedings.--
        Notwithstanding paragraph (1), terms and rates determined under 
        proceedings under section 114(f)(2) or 112(e) of title 17, 
        United States Code, commenced in 2002 shall be effective for an 
        additional period of 3 years, or until such later date as the 
        parties may agree, in lieu of the 2-year period otherwise 
        provided for under such sections.

    Chairman Sensenbrenner. The Chair recognizes the gentleman 
from Texas, Mr. Smith, to strike the last word.
    Mr. Smith. Mr. Chairman, I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized.
    Mr. Smith. Mr. Chairman, today's legislation represents a 
bipartisan effort to reform the ratemaking and royalty 
distribution system for compulsory and statutory licenses, a 
task currently performed by the Copyright Arbitration Royalty 
Panels, called CARPs.
    For more than 20 years, Congress has struggled to develop 
the appropriate mechanism to govern the copyright royalty 
ratemaking and distribution process. Congress created the 
Copyright Royalty Tribunals in 1976, but abolished them in 1993 
in response to criticism voiced by the Copyright Office and 
other interested parties. The tribunals gave way to the present 
CARP system, but we are faced yet again with the task of 
reforming a system that forces parties to participate on 
costly, laborious proceedings that often result in contentious 
decisions and additional litigation.
    The existing CARP process with its attorneys fees, arbiter 
fees, Copyright Office fees and expert fees, is a very costly 
experience for participants. The discovery aspect of the CARP 
proceeding is restrictive. The scope of the discovery is 
limited to written testimony, with access to official documents 
not available to shed more light on a particular issue, and 
because CARPs have no subpoena powers, the arbitrators are left 
with no real mechanism to gain the information they often need 
to make a fair and balanced decision.
    In response to these concerns, the subcommittee conducted 
an oversight hearing and subsequently convened a government-
industry roundtable on this subject, which included 32 
participants who offered recommendations for improving the 
current system. H.R. 1417 reflects the suggestions made at the 
hearing and at the roundtable discussions.
    Along with ranking member Howard Berman, I will offer a 
substitute amendment that improves the underlying bill. I urge 
my colleagues to support both the amendment and the bill, and I 
yield back the balance of my time.
    Chairman Sensenbrenner. The gentleman from California, Mr. 
Berman.
    Mr. Berman. Thank you, Mr. Chairman. Mr. Chairman, I think 
you are to be commended for pushing H.R. 1417 through Committee 
before the October recess. What October recess? There is now a 
realistic possibility that it will become law during the 108th 
Congress.
    You are also to be commended for ensuring that the bill 
remedies the substantial procedural defects of the CARP 
process, but does not stray into substantive copyright law 
issues that would surely waylay its adoption.
    I also thank you and Subcommittee Chairman Smith for 
working so closely with me and my staff in drafting this bill 
and its various iterations.
    There is widespread agreement among copyright owners and 
users alike that the CARP process is broken. The costs involved 
often are so high that parties cannot either afford to 
participate or find out that the costs outweigh any potential 
royalties or efficiencies. The decisions often take too long to 
issue and, thus, create uncertainty and confusion among 
licensors and licensees alike.
    Finally, even when the decisions do issue, they are often 
overturned or modified, are inconsistent with precedence, and 
can't be effectively implemented until corresponding 
rulemakings are completed. The bill reported by thesubcommittee 
will go a long way to remedying the defects of the CARP process.
    The amendment that Chairman Smith, ranking member Conyers 
and I offer today is intended to further perfect the reported 
bill. While I would not profess to 100 percent satisfaction 
with each provision included within the reported bill and 
amendment, I wholeheartedly support the overall product. Thus, 
I ask my colleagues to both support our amendment and vote to 
report the bill favorably, as amended.
    The amendment before us today contains a wide variety of 
changes designed to address some lingering concerns about the 
bill as reported by subcommittee. These changes further 
solidify the consensus support for this bill among all 
interested parties. While the changes are too copious to list 
in total, I would like to highlight a few of the improvements 
to be made through this amendment, and I do so in part because 
the distribution of the amendment in the nature of a substitute 
was rather late in the day.
    The subcommittee bill generated some concerns, legitimate 
in my eyes, that the new Copyright Royalty Judges would not be 
able to draw on and benefit from the substantial expertise of 
the Copyright Office in this area. To remedy these concerns, 
the amendment now requires that the librarian consult with the 
Registrar of Copyrights when appointing CRJs. Furthermore, the 
amendment allows the CRJs to consult on the record with the 
Registrar of Copyrights on all matters other than questions of 
fact.
    The series of interrelated changes ensures that all rates 
and terms for statutory licenses will be set prospectively, not 
retroactively, and eliminate, therefore, the possibility that a 
time period covered by a statutory license will commence before 
the establishment of rates and terms. As these changes 
eliminate the need for interim royalty payments, the amendment 
deletes the provisions regarding interim payments.
    The amendment reflects our ongoing effort to bridge 
differences regarding the evidentiary and discovery rules that 
will adhere in statutory licensing proceedings. The amendment 
allows admission of hearsay ``to the extent deemed 
appropriate'' by the CRJ, rather than according to the Federal 
Rules of Evidence, and allows CRJs to issue subpoenas for 
relevant and material information.
    It directs the CRJs to conduct discovery conferences for 
the purpose of setting a schedule for completing discovery. The 
amendment clarifies and provides assurance that the discovery 
rules in distribution proceedings will mirror those currently 
in use.
    For rate-setting proceedings, the amendment limits 
discovery to relevant and material information, and allows the 
CRJs to deny discovery for good cause. The circumstancesthat 
constitute good cause include whether the discovery requests are 
unreasonably cumulative or duplicative, easily obtainable from another 
source, or the burden of expense outweighs its likely benefit.
    While the amendment's rules of discovery may not wholly 
satisfy Chairman Smith or myself, they reflect a good faith 
accommodation. The amendment expands the continuing 
jurisdiction of the CRJs to ensure that they ``have the ability 
to respond to unforeseen circumstances that preclude the proper 
effectuation of the determination,'' again in quotes.
    It also ensures that only parties who have fully 
participated in the proceeding and are bound by its 
determination will have the right to appeal that determination.
    Finally, Mr. Chairman, the amendment addresses a concern 
that the reported bill would vitiate the ability of section 
115, licensors and licensees, to agree to out-of-cycle rate 
determinations through voluntary agreements adopted by the 
CRJs. The substitute amendment restores this ability to section 
115 participants, but allows the CRJs to reject such out-of-
cycle determinations if workload concerns so merit.
    I think H.R. 1417 and the proposed amendment will 
substantially improve the CARP process and I ask my colleagues 
to support both.
    Chairman Sensenbrenner. The gentleman's time has expired. 
Are there amendments?
    The gentleman from Texas.
    Mr. Smith. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. The Clerk will report the 
amendment.
    Without objection, the amendment is considered as read and 
open for amendment at any point. The gentleman from Texas is 
recognized for five quick minutes, because we're about ready to 
vote and have a reporting quorum.
    [The amendment of Mr. Smith follows:]

  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Copyright Royalty and Distribution 
Reform Act of 2003''.

SEC. 2. REFERENCE.

  Except as otherwise expressly provided, whenever in this Act an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of title 17, United States 
Code.

SEC. 3. COPYRIGHT ROYALTY JUDGE AND STAFF.

  (a) In General.--Chapter 8 is amended to read as follows:

           CHAPTER 8--PROCEEDINGS BY COPYRIGHT ROYALTY JUDGES

``Sec.
``801. Copyright Royalty Judges; appointment and functions.
``802. Copyright Royalty Judgeships; staff.
``803. Proceedings of Copyright Royalty Judges.
``804. Institution of proceedings.
``805. General rule for voluntarily negotiated agreements.

``Sec. 801. Copyright Royalty Judge; appointment and functions

  ``(a) Appointment.--The Librarian of Congress shall appoint 3 full-
time Copyright Royalty Judges, and shall appoint one of the three as 
the Chief Copyright Royalty Judge. In making such appointments, the 
Librarian shall consult with the Register of Copyrights.
  ``(b) Functions.--Subject to the provisions of this chapter, the 
functions of the Copyright Royalty Judges shall be as follows:
          ``(1) To make determinations and adjustments of reasonable 
        terms and rates of royalty payments as provided in sections 
        112(e), 114, 115, 116, 118, 119 and 1004. The rates applicable 
        under sections 114(f)(1)(B), 115, and 116 shall be calculated 
        to achieve the following objectives:
                  ``(A) To maximize the availability of creative works 
                to the public.
                  ``(B) To afford the copyright owner a fair return for 
                his or her creative work and the copyright user a fair 
                income under existing economic conditions.
                  ``(C) To reflect the relative roles of the copyright 
                owner and the copyright user in the product made 
                available to the public with respect to relative 
                creative contribution, technological contribution, 
                capital investment, cost, risk, and contribution to the 
                opening of new markets for creative expression and 
                media for their communication.
                  ``(D) To minimize any disruptive impact on the 
                structure of the industries involved and on generally 
                prevailing industry practices.
          ``(2) To make determinations concerning the adjustment of the 
        copyright royalty rates under section 111 solely in accordance 
        with the following provisions:
                  ``(A) The rates established by section 111(d)(1)(B) 
                may be adjusted to reflect--
                          ``(i) national monetary inflation or 
                        deflation; or
                          ``(ii) changes in the average rates charged 
                        cable subscribers for the basic service of 
                        providing secondary transmissions to maintain 
                        the real constant dollar level of the royalty 
                        fee per subscriber which existed as of the date 
                        of October 19, 1976,
                except that--
                          ``(I) if the average rates charged cable 
                        system subscribers for the basic service of 
                        providing secondary transmissions are changed 
                        so that the average rates exceed national 
                        monetary inflation, no change in the rates 
                        established by section 111(d)(1)(B) shall be 
                        permitted; and
                          ``(II) no increase in the royalty fee shall 
                        be permitted based on any reduction in the 
                        average number of distant signal equivalents 
                        per subscriber.
                The Copyright Royalty Judges may consider all factors 
                relating to the maintenance of such level of payments, 
                including, as an extenuating factor, whether the 
                industry has been restrained by subscriber rate 
                regulating authorities from increasing the rates for 
                the basic service of providing secondary transmissions.
                  ``(B) In the event that the rules and regulations of 
                the Federal Communications Commission are amended at 
                any time after April 8, 1976, to permit the carriage by 
                cable systems of additional television broadcast 
                signals beyond the local service area of the primary 
                transmitters of such signals, the royalty rates 
                established by section 111(d)(1)(B) may be adjusted to 
                insure that the rates for the additional distant signal 
                equivalents resulting from such carriage are reasonable 
                in the light of the changes effected by the amendment 
                to such rules and regulations. In determining the 
                reasonableness of rates proposed following an amendment 
                of Federal Communications Commission rules and 
                regulations, the Copyright Royalty Judges shall 
                consider, among other factors, the economic impact on 
                copyright owners and users; except that no adjustment 
                in royalty rates shall be made under this subparagraph 
                with respect to any distant signal equivalent or 
                fraction thereof represented by--
                          ``(i) carriage of any signal permitted under 
                        the rules and regulations of the Federal 
                        Communications Commission in effect on April 
                        15, 1976, or the carriage of a signal of the 
                        same type (that is, independent, network, or 
                        noncommercial educational) substituted for such 
                        permitted signal; or
                          ``(ii) a television broadcast signal first 
                        carried after April 15, 1976, pursuant to an 
                        individual waiver of the rules and regulations 
                        of the Federal Communications Commission, as 
                        such rules and regulations were in effect on 
                        April 15, 1976.
                  ``(C) In the event of any change in the rules and 
                regulations of the Federal Communications Commission 
                with respect to syndicated and sports program 
                exclusivity after April 15, 1976, the rates established 
                by section 111(d)(1)(B) may be adjusted to assure that 
                such rates are reasonable in light of the changes to 
                such rules and regulations, but any such adjustment 
                shall apply only to the affected television broadcast 
                signals carried on those systems affected by the 
                change.
                  ``(D) The gross receipts limitations established by 
                section 111(d)(1)(C) and (D) shall be adjusted to 
                reflect national monetary inflation or deflation or 
                changes in the average rates charged cable system 
                subscribers for the basic service of providing 
                secondary transmissions to maintain the real constant 
                dollar value of the exemption provided by such section, 
                and the royalty rate specified therein shall not be 
                subject to adjustment.
          ``(3) To authorize the distribution, under sections 111, 119, 
        and 1007, of those royalty fees collected under sections 111, 
        119, and 1005, as the case may be, to the extent that the 
        Copyright Royalty Judges have found that the distribution of 
        such fees is not subject to controversy. In cases where the 
        Copyright Royalty Judges determine that controversy exists--
                  ``(A) the Copyright Royalty Judges shall determine 
                the distribution of such fees, in accordance with 
                section 111, 119, or 1007, as the case may be; and
                  ``(B) the Copyright Royalty Judges shall make a 
                partial distribution of such fees during the pendency 
                of the proceeding under subparagraph (A) if all 
                participants under section 803(b)(2) in the 
                proceeding--
                          ``(i) agree to such partial distribution;
                          ``(ii) sign an agreement obligating them to 
                        return any excess amounts to the extent 
                        necessary to comply with the final 
                        determination on the distribution of the fees 
                        made under subparagraph (A); and
                          ``(iii) file the agreement with the Copyright 
                        Royalty Judges.
        The Copyright Royalty Judges and any other officer or employee 
        acting in good faith in distributing funds under subparagraph 
        (B) shall not be held liable for the payment of any excess fees 
        under subparagraph (B). The Copyright Royalty Judges shall, at 
        the time the final determination is made, calculate any such 
        excess amounts.
          ``(4) To accept or reject royalty claims filed under section 
        111, 119, and 1007, on the basis of timeliness or the failure 
        to establish the basis for a claim.
          ``(5) To accept or reject rate adjustment petitions as 
        provided in section 804 and petitions to participate as 
        provided in section 803(b)(1) and (2).
          ``(6) To determine the status of a digital audio recording 
        device or a digital audio interface device under sections 1002 
        and 1003, as provided in section 1010.
          ``(7)(A) To adopt as the basis for statutory terms and rates 
        or as a basis for the distribution of statutory royalty 
        payments, an agreement concerning such matters reached among 
        some or all of the participants in a proceeding at any time 
        during the proceeding, except that--
                  ``(i) the Copyright Royalty Judges shall provide to 
                the other participants in the proceeding under section 
                803(b)(2) that would be bound by the terms, rates, 
                distribution, or other determination set by the 
                agreement an opportunity to comment on the agreement 
                and object to its adoption as the basis for statutory 
                terms and rates or as a basis for the distribution of 
                statutory royalty payments, as the case may be; and
                  ``(ii) the Copyright Royalty Judges may decline to 
                adopt the agreement as the basis for statutory terms 
                and rates or as the basis for the distribution of 
                statutory royalty payments, as the case may be, if any 
                other participant described in subparagraph (A) objects 
                to the agreement and the Copyright Royalty Judges find, 
                based on the record before them, that the agreement is 
                not likely to meet the statutory standard for setting 
                the terms and rates, or for distributing the royalty 
                payments, as the case may be.
          ``(B) License agreements voluntarily negotiated pursuant to 
        section 112(e)(5), 114(f)(3), 115(c)(3)(E)(i), 116(c), or 
        118(b)(2) that do not result in statutory terms and rates shall 
        not be subject to clauses (i) and (ii) of subparagraph (A).
  ``(c) Rulings.--The Copyright Royalty Judges may make any necessary 
procedural or evidentiary rulings in any proceeding under this chapter 
and may, before commencing a proceeding under this chapter, make any 
such rulings that would apply to the proceedings conducted by the 
Copyright Royalty Judges. The Copyright Royalty Judges may consult with 
the Register of Copyrights in making any rulings under section 
802(f)(1).
  ``(d) Administrative Support.--The Librarian of Congress shall 
provide the Copyright Royalty Judges with the necessary administrative 
services related to proceedings under this chapter.
  ``(e) Location in Library of Congress.--The offices of the Copyright 
Royalty Judges and staff shall be in the Library of Congress.

``Sec. 802. Copyright Royalty Judgeships; staff

  ``(a) Qualifications of Copyright Royalty Judges.--Each Copyright 
Royalty Judge shall be an attorney who has at least 7 years of legal 
experience. The Chief Copyright Royalty Judge shall have at least 5 
years of experience in adjudications, arbitrations, or court trials. Of 
the other two Copyright Royalty Judges, one shall have significant 
knowledge of copyright law, and the other shall have significant 
knowledge of economics. An individual may serve as a Copyright Royalty 
Judge only if the individual is free of any financial conflict of 
interest under subsection (h). In this subsection, `adjudication' has 
the meaning given that term in section 551 of title 5, but does not 
include mediation.
  ``(b) Staff.--The Chief Copyright Royalty Judge shall hire 3 full-
time staff members to assist the Copyright Royalty Judges in performing 
their functions.
  ``(c) Terms.--The terms of the Copyright Royalty Judges shall each be 
6 years, except of the individuals first appointed, the Chief Copyright 
Royalty Judge shall be appointed to a term of 6 years, and of the 
remaining Copyright Royalty Judges, one shall be appointed to a term of 
2 years, and the other shall be appointed to a term of 4 years. An 
individual serving as a Copyright Royalty Judge may be reappointed to 
subsequent terms. The term of a Copyright Royalty Judge shall begin 
when the term of the predecessor of that Copyright Royalty Judge ends. 
When the term of office of a Copyright Royalty Judge ends, the 
individual serving that term may continue to serve until a successor is 
selected.
  ``(d) Vacancies or incapacity.--
          ``(1) Vacancies.--If a vacancy should occur in the position 
        of Copyright Royalty Judge, the Librarian of Congress shall act 
        expeditiously to fill the vacancy, and may appoint an interim 
        Copyright Royalty Judge to serve until another Copyright 
        Royalty Judge is appointed under this section. An individual 
        appointed to fill the vacancy occurring before the expiration 
        of the term for which the predecessor of that individual was 
        appointed shall be appointed for the remainder of that term.
          ``(2) Incapacity.--In the case in which a Copyright Royalty 
        Judge is temporarily unable to perform his or her duties, the 
        Librarian of Congress may appoint an interim Copyright Royalty 
        Judge to perform such duties during the period of such 
        incapacity.
  ``(e) Compensation.--
          ``(1) Judges.--The Chief Copyright Royalty Judge shall 
        receive compensation at the rate of basic pay payable for level 
        AL-1 for administrative law judges pursuant to section 5372(b) 
        of title 5, and each of the other two Copyright Royalty Judges 
        shall receive compensation at the rate of basic pay payable for 
        level AL-2 for administrative law judges pursuant to such 
        section. The compensation of the Copyright Royalty Judges shall 
        not be subject to any regulations adopted by the Office of 
        Personnel Management pursuant to its authority under section 
        5376(b)(1) of title 5.
          ``(2) Staff members.--Of the staff members appointed under 
        subsection (b)--
                  ``(A) the rate of pay of one staff member shall be 
                not more than the basic rate of pay payable for GS-15 
                of the General Schedule;
                  ``(B) the rate of pay of one staff member shall be 
                not less than the basic rate of pay payable for GS-13 
                of the General Schedule and not more than the basic 
                rate of pay payable for GS-14 of such Schedule; and
                  ``(C) the rate of pay for the third staff member 
                shall be not less than the basic rate of pay payable 
                for GS-8 of the General Schedule and not more than the 
                basic rate of pay payable for GS-11 of such Schedule.
  ``(f) Independence of Copyright Royalty Judge.--
          ``(1) In making determinations.--
                  ``(A) In general.--Subject to subparagraph (B), the 
                Copyright Royalty Judges shall have full independence 
                in making determinations concerning adjustments and 
                determinations of copyright royalty rates and terms, 
                the distribution of copyright royalties, the acceptance 
                or rejection of royalty claims, rate adjustment 
                petitions, and petitions to participate, and in issuing 
                other rulings under this title, except that the 
                Copyright Royalty Judges may consult with the Register 
                of Copyrights on any matter other than a question of 
                fact. Any such consultations between the Copyright 
                Royalty Judges and the Register of Copyright on any 
                question of law shall be in writing or on the record.
                  ``(B) Novel questions.--(i) Notwithstanding the 
                provisions of subparagraph (A), in any case in which 
                the Copyright Royalty Judges in a proceeding under this 
                title are presented with a novel question of law 
                concerning an interpretation of those provisions of 
                this title that are the subject of the proceeding, the 
                Copyright Royalty Judges shall request the Register of 
                Copyrights, in writing, to submit a written opinion on 
                the resolution of such novel question. The Register 
                shall submit and make public that opinion within such 
                time period as the Copyright Royalty Judges may 
                prescribe. Any consultations under this subparagraph 
                between the Copyright Royalty Judges and the Register 
                of Copyrights shall be in writing or on the record. The 
                opinion of the Register shall not be binding on the 
                Copyright Royalty Judges, but the Copyright Royalty 
                Judges shall take the opinion of the Register into 
                account in making the judges' determination on the 
                question concerned.
                  ``(ii) In clause (i), a `novel question of law' is a 
                question of law that has not been determined in prior 
                decisions, determinations, and rulings described in 
                section 803(a).
          ``(2) Performance appraisals.--
                  ``(A) In general.--Notwithstanding any other 
                provision of law or any regulation of the Library of 
                Congress, and subject to subparagraph (B), the 
                Copyright Royalty Judges shall not receive performance 
                appraisals.
                  ``(B) Relating to sanction or removal.--To the extent 
                that the Librarian of Congress adopts regulations under 
                subsection (h) relating to the sanction or removal of a 
                Copyright Royalty Judge and such regulations require 
                documentation to establish the cause of such sanction 
                or removal, the Copyright Royalty Judge may receive an 
                appraisal related specifically to the cause of the 
                sanction or removal.
  ``(g) Inconsistent Duties Barred.--No Copyright Royalty Judge may 
undertake duties inconsistent with his or her duties and 
responsibilities as Copyright Royalty Judge.
  ``(h) Standards of Conduct.--The Librarian of Congress shall adopt 
regulations regarding the standards of conduct, including financial 
conflict of interest and restrictions against ex parte communications, 
which shall govern the Copyright Royalty Judges and the proceedings 
under this chapter.
  ``(i) Removal or Sanction.--The Librarian of Congress may sanction or 
remove a Copyright Royalty Judge for violation of the standards of 
conduct adopted under subsection (h), misconduct, neglect of duty, or 
any disqualifying physical or mental disability. Any such sanction or 
removal may be made only after notice and opportunity for a hearing, 
but the Librarian of Congress may suspend the Copyright Royalty Judge 
during the pendency of such hearing. The Librarian shall appoint an 
interim Copyright Royalty Judge during the period of any such 
suspension.

``Sec. 803. Proceedings of Copyright Royalty Judges

  ``(a) Proceedings.--
          ``(1) In general.--The Copyright Royalty Judges shall act in 
        accordance with this title, and to the extent not inconsistent 
        with this title, in accordance with subchapter II of chapter 5 
        of title 5, in carrying out the purposes set forth in section 
        801. The Copyright Royalty Judges shall act in accordance with 
        regulations issued by the Copyright Royalty Judges and on the 
        basis of a fully documented written record, prior decisions of 
        the Copyright Royalty Tribunal, prior copyright arbitration 
        royalty panel determinations, rulings by the Librarian of 
        Congress before the effective date of the Copyright Royalty and 
        Distribution Reform Act of 2003, prior determinations of 
        Copyright Royalty Judges under this chapter, and decisions of 
        the court in appeals under this chapter before, on, or after 
        such effective date. Any participant in a proceeding under 
        subsection (b)(2) may submit relevant information and proposals 
        to the Copyright Royalty Judges.
          ``(2) Judges acting as panel and individually.--The Copyright 
        Royalty Judges shall preside over hearings in proceedings under 
        this chapter en banc. The Chief Copyright Royalty Judge may 
        designate a Copyright Royalty Judge to preside individually 
        over such collateral and administrative proceedings, and over 
        such proceedings under paragraphs (1) through (5) of subsection 
        (b), as the Chief Judge considers appropriate.
          ``(3) Determinations.--Final determinations of the Copyright 
        Royalty Judges in proceedings under this chapter shall be made 
        by majority vote. A Copyright Royalty Judge dissenting from the 
        majority on any determination under this chapter may issue his 
        or her dissenting opinion, which shall be included with the 
        determination.
  ``(b) Procedures.--
          ``(1) Initiation.--
                  ``(A) Call for petitions to participate.--(i) 
                Promptly upon the filing of a petition for a rate 
                adjustment or determination under section 804(a) or 
                804(b)(8), or by no later than January 5 of a year 
                specified in section 804 for the commencement of a 
                proceeding if a petition has not been filed by that 
                date, the Copyright Royalty Judges shall cause to be 
                published in the Federal Register notice of 
                commencement of proceedings under this chapter calling 
                for the filing of petitions to participate in a 
                proceeding under this chapter for the purpose of making 
                the relevant determination under section 111, 112, 114, 
                115, 116, 118, 119, 1004 or 1007, as the case may be.
                  ``(ii) Petitions to participate shall be filed by no 
                later than 30 days after publication of notice of 
                commencement of a proceeding, under clause (i), except 
                that the Copyright Royalty Judges may, for substantial 
                good cause shown and if there is no prejudice to the 
                participants that have already filed petitions, accept 
                late petitions to participate at any time up to the 
                date that is 90 days before the date on which 
                participants in the proceeding are to file their 
                written direct statements.
                  ``(B) Petitions to participate.--Each petition to 
                participate in a proceeding shall describe the 
                petitioner's interest in the subject matter of the 
                proceeding. Parties with similar interests may file a 
                single petition to participate.
          ``(2) Participation in general.--Subject to paragraph (4), a 
        person may participate in a proceeding under this chapter, 
        including through the submission of briefs or other 
        information, only if--
                  ``(A) that person has filed a petition to participate 
                in accordance with paragraph (1) (either individually 
                or as a group under paragraph (1)(B)), together with a 
                filing fee of $150;
                  ``(B) the Copyright Royalty Judges have not 
                determined that the petition to participate is facially 
                invalid; and
                  ``(C) the Copyright Royalty Judges have not 
                determined, sua sponte or on the motion of another 
                participant in the proceeding, that the person lacks a 
                significant interest in the proceeding.
          ``(3) Voluntary negotiation period.--
                  ``(A) In general.--Promptly after the date for filing 
                of petitions to participate in a proceeding, the 
                Copyright Royalty Judges shall make available to all 
                participants in the proceeding a list of such 
                participants and shall initiate a voluntary negotiation 
                period among the participants.
                  ``(B) Length of proceedings.--The voluntary 
                negotiation period initiated under subparagraph (A) 
                shall be 3 months.
                  ``(C) Determination of subsequent proceedings.--At 
                the close of the voluntary negotiation proceedings, the 
                Copyright Royalty Judges shall, if further proceedings 
                under this chapter are necessary, determine whether and 
                to what extent paragraphs (4) and (5) will apply to the 
                parties.
          ``(4) Small claims procedure in distribution proceedings.--
                  ``(A) In general.--If, in a proceeding under this 
                chapter to determine the distribution of royalties, a 
                participant in the proceeding asserts that the 
                contested amount of the claim is $10,000 or less, the 
                Copyright Royalty Judges shall decide the controversy 
                on the basis of the filing in writing of the initial 
                claim, the initial response by any opposing 
                participant, and one additional response by each such 
                party. The participant asserting the claim shall not be 
                required to pay the filing fee under paragraph (2).
                  ``(B) Bad faith inflation of claim.--If the Copyright 
                Royalty Judges determine that a participant asserts in 
                bad faith an amount in controversy in excess of $10,000 
                for the purpose of avoiding a determination under the 
                procedure set forth in subparagraph (A), the Copyright 
                Royalty Judges shall impose a fine on that participant 
                in an amount not to exceed the difference between the 
                actual amount distributed and the amount asserted by 
                the participant.
          ``(5) Paper proceedings in ratemaking proceedings.--The 
        Copyright Royalty Judges in proceedings under this chapter to 
        determine royalty rates may decide, sua sponte or upon motion 
        of a participant, to determine issues on the basis of initial 
        filings in writing, initial responses by any opposing 
        participant, and one additional response by each such 
        participant. Prior to making such decision to proceed on such a 
        paper record only, the Copyright Royalty Judges shall offer to 
        all parties to the proceeding the opportunity to comment on the 
        decision. The procedure under this paragraph--
                  ``(A) shall be applied in cases in which there is no 
                genuine issue of material fact, there is no need for 
                evidentiary hearings, and all participants in the 
                proceeding agree in writing to the procedure; and
                  ``(B) may be applied under such other circumstances 
                as the Copyright Royalty Judges consider appropriate.
          ``(6) Regulations.--
                  ``(A) In general.--The Copyright Royalty Judges may 
                issue regulations to carry out their functions under 
                this title. Not later than 120 days after Copyright 
                Royalty Judges or interim Copyright Royalty Judges, as 
                the case may be, are first appointed after the 
                enactment of the Copyright Royalty and Distribution 
                Reform Act of 2003, such judges shall issue regulations 
                to govern proceedings under this chapter.
                  ``(B) Interim regulations.--Until regulations are 
                adopted under subparagraph (A), the Copyright Royalty 
                Judges shall apply the regulations in effect under this 
                chapter on the day before the effective date of the 
                Copyright Royalty and Distribution Reform Act of 2003, 
                to the extent such regulations are not inconsistent 
                with this chapter, except that functions carried out 
                under such regulations by the Librarian of Congress, 
                the Register of Copyrights, or copyright arbitration 
                royalty panels that, as of such date of enactment, are 
                to be carried out by the Copyright Royalty Judges under 
                this chapter, shall be carried out by the Copyright 
                Royalty Judges under such regulations.
                  ``(C) Requirements.--Regulations issued under 
                subparagraph (A) shall include the following:
                          ``(i) The written direct statements of all 
                        participants in a proceeding under paragraph 
                        (2) shall be filed by a date specified by the 
                        Copyright Royalty Judges, which may be no 
                        earlier than four months, and no later than 
                        five months, after the end of the voluntary 
                        negotiation period under paragraph (3). 
                        Notwithstanding the preceding sentence, a 
                        participant in a proceeding may, within 15 days 
                        after the end of the discovery period specified 
                        in clause (iii), file an amended written direct 
                        statement based on new information received 
                        during the discovery process.
                          ``(ii)(I) Following the submission to the 
                        Copyright Royalty Judges of written direct 
                        statements by the participants in a proceeding 
                        under paragraph (2), the judges shall meet with 
                        the participants for the purpose of setting a 
                        schedule for conducting and completing 
                        discovery. Such schedule shall be determined by 
                        the Copyright Royalty Judges.
                          ``(II) In this chapter, the term `written 
                        direct statements' means witness statements, 
                        testimony, and exhibits to be presented in the 
                        proceedings, and such other information that is 
                        necessary to establish terms and rates, or the 
                        distribution of royalty payments, as the case 
                        may be, as set forth in regulations issued by 
                        the Copyright Royalty Judges.
                          ``(iii) Hearsay may be admitted in 
                        proceedings under this chapter to the extent 
                        deemed appropriate by the Copyright Royalty 
                        Judges.
                          ``(iv) Discovery in such proceedings shall be 
                        permitted for a period of 60 days, except for 
                        discovery ordered by the Copyright Royalty 
                        Judges in connection with the resolution of 
                        motions, orders and disputes pending at the end 
                        of such period.
                          ``(v) Any participant under paragraph (2) in 
                        a proceeding under this chapter to determine 
                        royalty rates may, upon written notice, seek 
                        discovery of information and materials relevant 
                        and material to the proceeding. Any objection 
                        to any such discovery request shall be resolved 
                        by a motion or request to compel discovery made 
                        to the Copyright Royalty Judges. Each motion or 
                        request to compel discovery shall be determined 
                        by the Copyright Royalty Judges, or by a 
                        Copyright Royalty Judge when permitted under 
                        subsection (a)(2), who may approve the request 
                        only if the evidence that would be produced is 
                        relevant and material. A Copyright Royalty 
                        Judge may refuse a request to compel discovery 
                        of evidence that has been found to be relevant 
                        and material, only upon good cause shown. For 
                        purposes of the preceding sentence, the basis 
                        for `good cause' may only be that--
                                  ``(I) the discovery sought is 
                                unreasonably cumulative or duplicative, 
                                or is obtainable from another source 
                                that is more convenient, less 
                                burdensome, or less expensive;
                                  ``(II) the participant seeking 
                                discovery has had ample opportunity by 
                                discovery in the action to obtain the 
                                information sought; or
                                  ``(III) the burden or expense of the 
                                proposed discovery outweighs its likely 
                                benefit, taking into account the needs 
                                and resources of the participants, the 
                                importance of the issues at stake, and 
                                the importance of the proposed 
                                discovery in resolving the issues.
                          ``(vi) The rules in effect on the day before 
                        the effective date of the Copyright Royalty and 
                        Distribution Reform Act of 2003, relating to 
                        discovery in proceedings under this title to 
                        determine the distribution of royalty fees, 
                        shall continue to apply to such proceedings on 
                        and after such effective date.
                          ``(vii) The Copyright Royalty Judges may 
                        issue subpoenas requiring the production of 
                        evidence or witnesses, but only if the evidence 
                        requested to be produced or that would be 
                        proffered by the witness is relevant and 
                        material.
                          ``(viii) The Copyright Royalty Judges shall 
                        order a settlement conference among the 
                        participants in the proceeding to facilitate 
                        the presentation of offers of settlement among 
                        the participants. The settlement conference 
                        shall be held during a 21-day period following 
                        the end of the discovery period.
  ``(c) Determination of Copyright Royalty Judges.--
          ``(1) Timing.--The Copyright Royalty Judges shall issue their 
        determination in a proceeding not later than 11 months after 
        the conclusion of the 21-day settlement conference period under 
        subsection (b)(3)(C)(vi), but, in the case of a proceeding to 
        determine successors to rates or terms that expire on a 
        specified date, in no event later than 15 days before the 
        expiration of the then current statutory rates and terms.
          ``(2) Rehearings.--
                  ``(A) In general.--The Copyright Royalty Judges may, 
                in exceptional cases, upon motion of a participant 
                under subsection (b)(2), order a rehearing, after the 
                determination in a proceeding is issued under paragraph 
                (1), on such matters as the Copyright Royalty Judges 
                determine to be appropriate.
                  ``(B) Timing for filing motion.--Any motion for a 
                rehearing under subparagraph (A) may only be filed 
                within 15 days after the date on which the Copyright 
                Royalty Judges deliver their initial determination 
                concerning rates and terms to the participants in the 
                proceeding.
                  ``(C) Participation by opposing party not required.--
                In any case in which a rehearing is ordered, any 
                opposing party shall not be required to participate in 
                the rehearing.
                  ``(D) No negative inference.--No negative inference 
                shall be drawn from lack of participation in a 
                rehearing.
                  ``(E) Continuity of rates and terms.--(i) If the 
                decision of the Copyright Royalty Judges on any motion 
                for a rehearing is not rendered before the expiration 
                of the statutory rates and terms that were previously 
                in effect, in the case of a proceeding to determine 
                successors to rates and terms that expire on a 
                specified date, then--
                          ``(I) the initial determination of the 
                        Copyright Royalty Judges that is the subject of 
                        the rehearing motion shall be effective as of 
                        the day following the date on which the rates 
                        and terms that were previously in effect 
                        expire; and
                          ``(II) in the case of a proceeding under 
                        section 114(f)(1)(C) or 114(f)(2)(C), royalty 
                        rates and terms shall, for purposes of section 
                        114(f)(4)(B), be deemed to have been set at 
                        those rates and terms contained in the initial 
                        determination of the Copyright Royalty Judges 
                        that is the subject of the rehearing motion, as 
                        of the date of that determination.
                  ``(ii) The pendency of a motion for a rehearing under 
                this paragraph shall not relieve persons obligated to 
                make royalty payments who would be affected by the 
                determination on that motion from providing the 
                statements of account and any reports of use, to the 
                extent required, and paying the royalties required 
                under the relevant determination or regulations.
                  ``(iii) Notwithstanding clause (ii), whenever 
                royalties described in clause (ii) are paid to a person 
                other than the Copyright Office, the entity designated 
                by the Copyright Royalty Judges to which such royalties 
                are paid by the copyright user (and any successor 
                thereto) shall, within 60 days after the motion for 
                rehearing is resolved or, if the motion is granted, 
                within 60 days after the rehearing is concluded, return 
                any excess amounts previously paid to the extent 
                necessary to comply with the final determination of 
                royalty rates by the Copyright Royalty Judges.
          ``(3) Contents of determination.--A determination of the 
        Copyright Royalty Judges shall be accompanied by the written 
        record, and shall set forth the facts that the Copyright 
        Royalty Judges found relevant to their determination. Among 
        other terms adopted in a determination, the Copyright Royalty 
        Judges may specify notice and recordkeeping requirements of 
        users of the copyrights at issue that apply in lieu of those 
        that would otherwise apply under regulations.
          ``(4) Continuing jurisdiction.--The Copyright Royalty Judges 
        may amend the determination or the regulations issued pursuant 
        to the determination in order to correct any technical errors 
        in the determination or to respond to unforeseen circumstances 
        that preclude the proper effectuation of the determination.
          ``(5) Protective order.--The Copyright Royalty Judges may 
        issue such orders as may be appropriate to protect confidential 
        information, including orders excluding confidential 
        information from the record of the determination that is 
        published or made available to the public, except that any 
        terms or rates of royalty payments or distributions may not be 
        excluded.
          ``(6) Publication of determination.--The Librarian of 
        Congress shall cause the determination, and any corrections 
        thereto, to be published in the Federal Register. The Librarian 
        of Congress shall also publicize the determination and 
        corrections in such other manner as the Librarian considers 
        appropriate, including, but not limited to, publication on the 
        Internet. The Librarian of Congress shall also make the 
        determination, corrections, and the accompanying record 
        available for public inspection and copying.
  ``(d) Judicial Review.--
          ``(1) Appeal.--Any determination of the Copyright Royalty 
        Judges under subsection (c) may, within 30 days after the 
        publication of the determination in the Federal Register, be 
        appealed, to the United States Court of Appeals for the 
        District of Columbia Circuit, by any aggrieved participant in 
        the proceeding under subsection (b)(2) who fully participated 
        in the proceeding and who would be bound by the determination. 
        If no appeal is brought within that 30-day period, the 
        determination of the Copyright Royalty Judges shall be 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 paragraph (2).
          ``(2) Effect of rates.--
                  ``(A) Expiration on specified date.--When this title 
                provides that the royalty rates and terms that were 
                previously in effect are to expire on a specified date, 
                any adjustment or determination by the Copyright 
                Royalty Judges of successor rates and terms for an 
                ensuing statutory license period shall be effective as 
                of the day following the date of expiration of the 
                rates and terms that were previously in effect, even if 
                the determination of the Copyright Royalty Judges is 
                rendered on a later date.
                  ``(B) Other cases.--In cases where rates and terms do 
                not expire on a specified date or have not yet been 
                established, successor or new rates or terms shall take 
                effect on the first day of the second month that begins 
                after the publication of the determination of the 
                Copyright Royalty Judges in the Federal Register, 
                except as otherwise provided in this title, and the 
                rates and terms previously in effect, to the extent 
                applicable, shall remain in effect until such successor 
                rates and terms become effective.
                  ``(C) Obligation to make payments.--(i) The pendency 
                of an appeal under this subsection shall not relieve 
                persons obligated to make royalty payments under 
                section 111, 112, 114, 115, 116, 118, 119, or 1003, who 
                would be affected by the determination on appeal, from 
                providing the statements of account (and any report of 
                use, to the extent required) and paying the royalties 
                required under the relevant determination or 
                regulations.
                  ``(ii) Notwithstanding clause (i), whenever royalties 
                described in clause (i) are paid to a person other than 
                the Copyright Office, the entity designated by the 
                Copyright Royalty Judges to which such royalties are 
                paid by the copyright user (and any successor thereto) 
                shall, within 60 days after the final resolution of the 
                appeal, return any excess amounts previously paid (and 
                interest thereon, if ordered pursuant to paragraph (3)) 
                to the extent necessary to comply with the final 
                determination of royalty rates on appeal.
          ``(3) Jurisdiction of court.--If the court, pursuant to 
        section 706 of title 5, modifies or vacates a determination of 
        the Copyright Royalty Judges, the court may enter its own 
        determination with respect to the amount or distribution of 
        royalty fees and costs, and order the repayment of any excess 
        fees, the payment of any underpaid fees, and the payment of 
        interest pertaining respectively thereto, in accordance with 
        its final judgment. The court may also vacate the determination 
        of the Copyright Royalty Judges and remand the case to the 
        Copyright Royalty Judges for further proceedings in accordance 
        with subsection (a).
  ``(e) Administrative Matters.--
          ``(1) Deduction of costs of library of congress and copyright 
        office from filing fees.--
                  ``(A) Deduction from filing fees.--The Librarian of 
                Congress may, to the extent not otherwise provided 
                under this title, deduct from the filing fees collected 
                under subsection (b) for a particular proceeding under 
                this chapter the reasonable costs incurred by the 
                Librarian of Congress, the Copyright Office, and the 
                Copyright Royalty Judges in conducting that proceeding, 
                other than the salaries of the Copyright Royalty Judges 
                and the 3 staff members appointed under section 802(b).
                  ``(B) Authorization of appropriations.--There are 
                authorized to be appropriated such sums as may be 
                necessary to pay the costs of proceedings under this 
                chapter not covered by the filing fees collected under 
                subsection (b). All funds made available pursuant to 
                this subparagraph shall remain available until 
                expended.
          ``(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, 112, 114, 115, 116, 118, or 119 
        or chapter 10.

``Sec. 804. Institution and conclusion of proceedings

  ``(a) Filing of Petition.--With respect to proceedings referred to in 
paragraphs (1) and (2) of section 801(b) concerning the determination 
or adjustment of royalty rates as provided in sections 111, 112, 114, 
115, 116, 118, and 1004, during the calendar years specified in the 
schedule set forth in subsection (b), any owner or user of a 
copyrighted work whose royalty rates are specified by this title, or 
are established under this chapter before or after the enactment of the 
Copyright Royalty and Distribution Reform Act of 2003, may file a 
petition with the Copyright Royalty Judges declaring that the 
petitioner requests a determination or adjustment of the rate. The 
Copyright Royalty Judges shall make a determination as to whether the 
petitioner has such a significant interest in the royalty rate in which 
a determination or adjustment is requested. If the Copyright Royalty 
Judges determine that the petitioner has such a significant interest, 
the Copyright Royalty Judges shall cause notice of this determination, 
with the reasons therefor, to be published in the Federal Register, 
together with the notice of commencement of proceedings under this 
chapter. With respect to proceedings under paragraph (1) of section 
801(b) concerning the determination or adjustment of royalty rates as 
provided in sections 112 and 114, during the calendar years specified 
in the schedule set forth in subsection (b), the Copyright Royalty 
Judges shall cause notice of commencement of proceedings under this 
chapter to be published in the Federal Register as provided in section 
803(b)(1)(A).
  ``(b) Timing of Proceedings.--
          ``(1) Section 111 proceedings.--(A) A petition described in 
        subsection (a) to initiate proceedings under section 801(b)(2) 
        concerning the adjustment of royalty rates under section 111 to 
        which subparagraph (A) or (D) of section 801(b)(2) applies may 
        be filed during the year 2004 and in each subsequent fifth 
        calendar year.
          ``(B) In order to initiate proceedings under section 
        801(b)(2) concerning the adjustment of royalty rates under 
        section 111 to which subparagraph (B) or (C) of section 
        801(b)(2) applies, within 12 months after an event described in 
        either of those subsections, any owner or user of a copyrighted 
        work whose royalty rates are specified by section 111, or by a 
        rate established under this chapter before or after the 
        enactment of the Copyright Royalty and Distribution Reform Act 
        of 2003, may file a petition with the Copyright Royalty Judges 
        declaring that the petitioner requests an adjustment of the 
        rate. The Copyright Royalty Judges shall then proceed as set 
        forth in subsection (a) of this section. Any change in royalty 
        rates made under this chapter pursuant to this subparagraph may 
        be reconsidered in the year 2005, and each fifth calendar year 
        thereafter, in accordance with the provisions in section 
        801(b)(3)(B) or (C), as the case may be. A petition for 
        adjustment of rates under section 11(d)(1)(B) as a result of a 
        change is the rules and regulations of the Federal 
        Communications Commission shall set forth the change on which 
        the petition is based.
          ``(2) Certain section 112 proceedings.--Proceedings under 
        this chapter shall be commenced in the year 2007 to determine 
        reasonable terms and rates of royalty payments for the 
        activities described in section 112(e)(1) relating to the 
        limitation on exclusive rights specified by section 
        114(d)(1)(C)(iv), to become effective on January 1, 2009. Such 
        proceedings shall be repeated in each subsequent fifth calendar 
        year.
          ``(3) Section 114 and corresponding 112 proceedings.--
                  ``(A) For eligible nonsubscription services and new 
                subscription services.--Proceedings under this chapter 
                shall be commenced as soon as practicable after the 
                effective date of the Copyright Royalty and 
                Distribution Reform Act of 2003 to determine reasonable 
                terms and rates of royalty payments under sections 114 
                and 112 for the activities of eligible nonsubscription 
                transmission services and new subscription services, to 
                be effective for the period beginning on January 1, 
                2006, and ending on December 31, 2010. Such proceedings 
                shall next be commenced in January 2009 to determine 
                reasonable terms and rates of royalty payments, to 
                become effective on January 1, 2011. Thereafter, such 
                proceedings shall be repeated in each subsequent fifth 
                calendar year.
                  ``(B) For preexisting subscription and satellite 
                digital audio radio services.--Proceedings under this 
                chapter shall be commenced in January 2006 to determine 
                reasonable terms and rates of royalty payments under 
                sections 114 and 112 for the activities of preexisting 
                subscription services, to be effective during the 
                period beginning on January 1, 2008, and ending on 
                December 31, 2012, and preexisting satellite digital 
                audio radio services, to be effective during the period 
                beginning on January 1, 2007, and ending on December 
                31, 2012. Such proceedings shall next be commenced in 
                2011 to determine reasonable terms and rates of royalty 
                payments, to become effective on January 1, 2013. 
                Thereafter, such proceedings shall be repeated in each 
                subsequent fifth calendar year.
                  ``(C)(i) Notwithstanding any other provision of this 
                chapter, this subparagraph shall govern proceedings 
                commenced pursuant to sections 114(f)(1)(C) and 
                114(f)(2)(C) concerning new types of services.
                  ``(ii) Not later than 30 days after a petition to 
                determine rates and terms for a new type of service 
                that is filed by any copyright owner of sound 
                recordings, or such new type of service, indicating 
                that such new type of service is or is about to become 
                operational, the Copyright Royalty Judges shall issue a 
                notice for a proceeding to determine rates and terms 
                for such service.
                  ``(iii) The proceeding shall follow the schedule set 
                forth in such subsections (b), (c), and (d) of section 
                803, except that--
                          ``(I) the determination shall be issued by 
                        not later than 24 months after the publication 
                        of the notice under clause (ii); and
                          ``(II) the decision shall take effect as 
                        provided in subsections (c)(2) and (d)(2) of 
                        section 803 and section 114(f)(4)(B)(ii) and 
                        (C).
                  ``(iv) The rates and terms shall remain in effect for 
                the period set forth in section 114(f)(1)(C) or 
                114(f)(2)(C), as the case may be.
          ``(4) Section 115 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 801(b)(1) 
        concerning the adjustment or determination of royalty rates as 
        provided in section 115 may be filed in the year 2006 and in 
        each subsequent fifth calendar year, or at such other times as 
        the parties have agreed under section 115(c)(3)(B) and (C).
          ``(5) Section 116 proceedings.--(A) A petition described in 
        subsection (a) to initiate proceedings under section 801(b) 
        concerning the determination of royalty rates and terms as 
        provided in section 116 may be filed at any time within 1 year 
        after negotiated licenses authorized by section 116 are 
        terminated or expire and are not replaced by subsequent 
        agreements.
          ``(B) If a negotiated license authorized by section 116 is 
        terminated or expires and is not replaced by another such 
        license agreement which provides permission to use a quantity 
        of musical works not substantially smaller than the quantity of 
        such works performed on coin-operated phonorecord players 
        during the 1-year period ending March 1, 1989, the Copyright 
        Royalty Judges shall, upon petition filed under paragraph (1) 
        within 1 year after such termination or expiration, commence a 
        proceeding to promptly establish an interim royalty rate or 
        rates for the public performance by means of a coin-operated 
        phonorecord player of nondramatic musical works embodied in 
        phonorecords which had been subject to the terminated or 
        expired negotiated license agreement. Such rate or rates shall 
        be the same as the last such rate or rates and shall remain in 
        force until the conclusion of proceedings by the Copyright 
        Royalty Judges, in accordance with section 803, to adjust the 
        royalty rates applicable to such works, or until superseded by 
        a new negotiated license agreement, as provided in section 
        116(b).
          ``(6) Section 118 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 801(b)(1) 
        concerning the determination of reasonable terms and rates of 
        royalty payments as provided in section 118 may be filed in the 
        year 2006 and in each subsequent fifth calendar year.
          ``(7) Section 1004 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 801(b)(1) 
        concerning the adjustment of reasonable royalty rates under 
        section 1004 may be filed as provided in section 1004(a)(3).
          ``(8) Proceedings concerning distribution of royalty fees.--
        With respect to proceedings under section 801(b)(3) concerning 
        the distribution of royalty fees in certain circumstances under 
        section 111, 116, 119, or 1007, the Copyright Royalty Judges 
        shall, upon a determination that a controversy exists 
        concerning such distribution, cause to be published in the 
        Federal Register notice of commencement of proceedings under 
        this chapter.

``Sec. 805. General rule for voluntarily negotiated agreements

  ``Any rates or terms under this title that--
          ``(1) are agreed to by participants to a proceeding under 
        section 803(b)(2),
          ``(2) are adopted by the Copyright Royalty Judges as part of 
        a determination under this chapter, and
          ``(3) are in effect for a period shorter than would otherwise 
        apply under a determination pursuant to this chapter,
shall remain in effect for such period of time as would otherwise apply 
under such determination, except that the Copyright Royalty Judges 
shall adjust the rates pursuant to the voluntary negotiations to 
reflect national monetary inflation during the additional period the 
rates remain in effect.''.
  (b) Conforming Amendment.--The table of chapters for title 17, United 
States Code, is amended by striking the item relating to chapter 8 and 
inserting the following:

``8. PROCEEDINGS OF COPYRIGHT ROYALTY JUDGE.................     801''.

SEC. 4. DEFINITION.

  Section 101 is amended by inserting after the definition of 
``copies'' the following:
          ``A `Copyright Royalty Judge' is a Copyright Royalty Judge 
        appointed under section 802 of this title, and includes any 
        individual serving as an interim Copyright Royalty Judge under 
        such section.''.

SEC. 5. TECHNICAL AMENDMENTS.

  (a) Cable Rates.--Section 111(d) is amended--
          (1) in paragraph (2), in the second sentence, by striking ``a 
        copyright royalty panel'' and inserting ``the Copyright Royalty 
        Judges.''; and
          (2) in paragraph (4)--
                  (A) in subparagraph (A), by striking ``Librarian of 
                Congress'' each place it appears and inserting 
                ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) in the first sentence, by striking 
                        ``Librarian of Congress shall, upon the 
                        recommendation of the Register of Copyrights,'' 
                        and inserting ``Copyright Royalty Judges 
                        shall'';
                          (ii) in the second sentence, by striking 
                        ``Librarian determines'' and inserting 
                        ``Copyright Royalty Judges determine''; and
                          (iii) in the third sentence--
                                  (I) by striking ``Librarian'' each 
                                place it appears and inserting 
                                ``Copyright Royalty Judges''; and
                                  (II) by striking ``convene a 
                                copyright arbitration royalty panel'' 
                                and inserting ``conduct a proceeding''; 
                                and
                  (C) in subparagraph (C), by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges''.
  (b) Ephemeral Recordings.--Section 112(e) is amended--
          (1) in paragraph (3)--
                  (A) by amending the first sentence to read as 
                follows: ``Voluntary negotiation proceedings initiated 
                pursuant to section 804(a) for the purpose of 
                determining reasonable terms and rates of royalty 
                payments for the activities specified by paragraph (1) 
                shall cover the 5-year period beginning on January 1 of 
                the second year following the year in which the 
                proceedings are commenced, or such other period as the 
                parties may agree.''; and
                  (B) in the third sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (2) in paragraph (4)--
                  (A) by amending the first sentence to read as 
                follows: ``In the absence of license agreements 
                negotiated under paragraphs (2) and (3), the Copyright 
                Royalty Judges shall commence a proceeding pursuant to 
                chapter 8 to determine and publish in the Federal 
                Register a schedule of reasonable rates and terms 
                which, subject to paragraph (5), shall be binding on 
                all copyright owners of sound recordings and 
                transmitting organizations entitled to a statutory 
                license under this subsection during the 5-year period 
                specified in paragraph (3), or such other period as the 
                parties may agree.'';
                  (B) by striking ``copyright arbitration royalty 
                panel'' each subsequent place it appears and inserting 
                ``Copyright Royalty Judges'';
                  (C) in the fourth sentence, by striking ``its 
                decision'' and inserting ``their decision''; and
                  (D) in the last sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (3) in paragraph (5), by striking ``or decision by the 
        Librarian of Congress'' and inserting ``, decision by the 
        Librarian of Congress, or determination by the Copyright 
        Royalty Judges''; and
          (4) by striking paragraph (6) and redesignating paragraphs 
        (7), (8), and (9), as paragraphs (6), (7), and (8), 
        respectively; and
          (5) in paragraph (6)(A), as so redesignated, by striking 
        ``Librarian of Congress'' and inserting ``Copyright Royalty 
        Judges''.
  (c) Scope of Exclusive Rights in Sound Recordings.--Section 114(f) is 
amended--
          (1) in paragraph (1)--
                  (A) in subparagraph (A)--
                          (i) by amending the first sentence to read as 
                        follows: ``Voluntary negotiation proceedings 
                        initiated pursuant to section 804(a) for the 
                        purpose of determining reasonable terms and 
                        rates of royalty payments for subscription 
                        transmissions by preexisting subscription 
                        services and transmissions by preexisting 
                        satellite digital audio radio services shall 
                        cover the 5-year period beginning on January 1 
                        of the year following the second year in which 
                        the proceedings are commenced, except where 
                        differential transitional periods are provided 
                        in section 804(b)(3), or such other period as 
                        the parties may agree.''; and
                          (ii) in the third sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) by amending the first sentence to read as 
                        follows: ``In the absence of license agreements 
                        negotiated under subparagraph (A), the 
                        Copyright Royalty Judges shall commence a 
                        proceeding pursuant to chapter 8 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 affected by this paragraph 
                        during the 5-year period specified in 
                        subparagraph (A), or such other date as the 
                        parties may agree.''; and
                          (ii) in the second sentence, by striking 
                        ``copyright arbitration royalty panel'' and 
                        inserting ``Copyright Royalty Judges''; and
                  (C) by amending subparagraph (C) to read as follows:
          ``(C) The procedures under subparagraphs (A) and (B) also 
        shall be initiated pursuant to a petition filed by any 
        copyright owners of sound recordings, any preexisting 
        subscription services, or any preexisting satellite digital 
        audio radio services indicating that a new type of subscription 
        digital audio transmission service on which sound recordings 
        are performed is or is about to become operational, for the 
        purpose of determining reasonable terms and rates of royalty 
        payments with respect to such new type of transmission service 
        for the period beginning with the inception of such new type of 
        service and ending on the date on which the royalty rates and 
        terms for subscription digital audio transmission services most 
        recently determined under subparagraph (A) or (B) and chapter 8 
        expire, or such other period as the parties may agree'';
          (2) in paragraph (2)--
                  (A) in subparagraph (A)--
                          (i) by amending the first sentence to read as 
                        follows: ``Voluntary negotiation proceedings 
                        initiated pursuant to section 804(a) for the 
                        purpose of determining reasonable terms and 
                        rates of royalty payments for public 
                        performances of sound recordings by means of 
                        eligible nonsubscription transmissions and 
                        transmissions by new subscription services 
                        specified by subsection (d)(2) shall cover the 
                        5-year period beginning on January 1 of the 
                        second year following the year in which the 
                        proceedings are commenced, except where 
                        different transitional periods are provided in 
                        section 804(b)(3)(A), or such other period as 
                        the parties may agree.''; and
                          (ii) in the third sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges'';
                  (B) in subparagraph (B)--
                          (i) by amending the first sentence to read as 
                        follows: ``In the absence of license agreements 
                        negotiated under subparagraph (A), the 
                        Copyright Royalty Judges shall commence a 
                        proceeding pursuant to chapter 8 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 affected by this paragraph 
                        during the period specified in subparagraph 
                        (A), or such other period as the parties may 
                        agree.''; and
                          (ii) by striking ``copyright arbitration 
                        royalty panel'' each subsequent place it 
                        appears and inserting ``Copyright Royalty 
                        Judges''; and
                  (C) by amending subparagraph (C) to read as follows:
          ``(C) The procedures under subparagraphs (A) and (B) shall 
        also be initiated pursuant to a petition filed by any copyright 
        owners of sound recordings or any eligible nonsubscription 
        service or new subscription service indicating that a new type 
        of eligible nonsubscription service or new subscription service 
        on which sound recordings are performed is or is about to 
        become operational, for the purpose of determining reasonable 
        terms and rates of royalty payments with respect to such new 
        type of service for the period beginning with the inception of 
        such new type of service and ending on the date on which the 
        royalty rates and terms for preexisting subscription digital 
        audio transmission services or preexisting satellite digital 
        radio audio services, as the case may be, most recently 
        determined under subparagraph (A) or (B) and chapter 8 expire, 
        or such other period as the parties may agree.'';
          (3) in paragraph (3), by striking ``or decision by the 
        Librarian of Congress'' and inserting ``, decision by the 
        Librarian of Congress, or determination by the Copyright 
        Royalty Judges''; and
          (4) in paragraph (4), by striking ``Librarian of Congress'' 
        each place it appears and inserting ``Copyright Royalty 
        Judges''.
  (d) Phonorecords of Nondramatic Musical Works.--Section 115(c)(3) is 
amended--
          (1) in subparagraph (B), by striking ``under this paragraph'' 
        and inserting ``under this section'';
          (2) in subparagraph (C)--
                  (A) by amending the first sentence to read as 
                follows: ``Voluntary negotiation proceedings initiated 
                pursuant to a petition filed under section 804(a) for 
                the purpose of determining reasonable terms and rates 
                of royalty payments for the activities specified by 
                this section shall cover the period beginning with the 
                effective date of such terms and rates, but not earlier 
                than January 1 of the second year following the year in 
                which the petition is filed, and ending on the 
                effective date of successor terms and rates, or such 
                other period as the parties may agree.''; and
                  (B) in the third sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (3) in subparagraph (D)--
                  (A) by amending the first sentence to read as 
                follows: ``In the absence of license agreements 
                negotiated under subparagraphs (B) and (C), the 
                Copyright Royalty Judges shall commence proceedings 
                pursuant to chapter 8 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 specified in 
                subparagraph (C) or such other period as may be 
                determined pursuant to subparagraphs (B) and (C), or 
                such other period as the parties may agree.'';
                  (B) in the third sentence, by striking ``copyright 
                arbitration royalty panel'' and inserting ``Copyright 
                Royalty Judges''; and
                  (C) in the last sentence, by striking ``Librarian of 
                Congress'' and inserting ``Copyright Royalty Judges'';
          (2) in subparagraph (E)--
                  (A) in clause (i)--
                          (i) in the first sentence, by striking ``the 
                        Librarian of Congress'' and inserting ``a 
                        copyright arbitration royalty panel, the 
                        Librarian of Congress, or the Copyright Royalty 
                        Judges''; and
                          (ii) in the second sentence, by striking 
                        ``(C), (D), or (F) shall be given effect'' and 
                        inserting ``(C) or (D) shall be given effect as 
                        to digital phonorecord deliveries''; and
                  (B) in clause (ii)(I), by striking ``(C), (D), or 
                (F)'' each place it appears and inserting ``(C) or 
                (D)'';
          (5) by striking subparagraph (F) and redesignating 
        subparagraphs (G) through (L) as subparagraphs (F) through (K), 
        respectively.
  (e) Coin-Operated Phonorecord Players.--Section 116 is amended--
          (1) in subsection (b), by amending paragraph (2) to read as 
        follows:
          ``(2) Chapter 8 proceeding.--Parties not subject to such a 
        negotiation may have the terms and rates and the division of 
        fees described in paragraph (1) determined in a proceeding in 
        accordance with the provisions of chapter 8.''; and
          (2) in subsection (c)--
                  (A) in the subsection heading, by striking 
                ``Copyright Arbitration Royalty Panel Determinations'' 
                and inserting ``Determinations by Copyright Royalty 
                Judges''; and
                  (B) by striking ``a copyright arbitration royalty 
                panel'' and inserting ``the Copyright Royalty Judges''.
  (f) Use of Certain Works in Connection With Noncommercial 
Broadcasting.--Section 118 is amended--
          (1) in subsection (b)--
                  (A) in paragraph (1)--
                          (i) in the first sentence, by striking 
                        ``Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges''; and
                          (ii) by striking the second and third 
                        sentences;
                  (B) in paragraph (2), by striking ``the Librarian of 
                Congress:'' and all that follows through the end of the 
                sentence and inserting ``a copyright arbitration 
                royalty panel, the Librarian of Congress, or the 
                Copyright Royalty Judge, if copies of such agreements 
                are filed with the Copyright Royalty Judges within 30 
                days of execution in accordance with regulations that 
                the Copyright Royalty Judges shall issue.''; and
                  (C) in paragraph (3)--
                          (i) in the second sentence--
                                  (I) by striking ``copyright 
                                arbitration royalty panel'' and 
                                inserting ``Copyright Royalty Judges``; 
                                and
                                  (II) by striking ``paragraph (2).'' 
                                and inserting ``paragraph (2) or 
                                (3).'';
                          (ii) in the last sentence, by striking 
                        ```Librarian of Congress'' and inserting 
                        ``Copyright Royalty Judges''; and
                          (iii) by striking ``(3) In'' and all that 
                        follows through the end of the first sentence 
                        and inserting the following:
          ``(3) Voluntary negotiation proceedings initiated pursuant to 
        a petition filed under section 804(a) for the purpose of 
        determining a schedule of terms and rates of royalty payments 
        by public broadcasting entities to copyright owners in works 
        specified by this subsection and the proportionate division of 
        fees paid among various copyright owners shall cover the 5-year 
        period beginning on January 1 of the second year following the 
        year in which the petition is filed. The parties to each 
        negotiation proceeding shall bear their own costs.
          ``(4) In the absence of license agreements negotiated under 
        paragraph (2) or (3), the Copyright Royalty Judges shall, 
        pursuant to chapter 8, conduct a proceeding to determine and 
        publish in the Federal Register a schedule of rates and terms 
        which, subject to paragraph (2), shall be binding on all owners 
        of copyright in works specified by this subsection and public 
        broadcasting entities, regardless of whether such copyright 
        owners have submitted proposals to the Copyright Royalty 
        Judges.'';
          (2) by striking subsection (c) and redesignating subsections 
        (d) through (g) as subsections (c) through (f), respectively;
          (3) in subsection (c), as so redesignated, in the matter 
        preceding paragraph (1)--
                  (A) by striking ``(b)(2)'' and inserting ``(b)(2) or 
                (3)'';
                  (B) by striking ``(b)(3)'' and inserting ``(b)(4)''; 
                and
                  (C) by striking ``a copyright arbitration royalty 
                panel'' and inserting ``the Copyright Royalty Judges'';
          (4) in subsection (d), as so redesignated--
                  (A) by striking ``in the Copyright Office'' and 
                inserting ``with the Copyright Royalty Judges''; and
                  (B) by striking ``Register of Copyrights'' and 
                inserting ``Copyright Royalty Judges''; and
          (5) in subsection (f), as so redesignated, by striking 
        ``(d)'' and inserting ``(c)''.
  (g) Secondary Transmissions by Satellite Carriers.--Section 119(b) is 
amended--
          (1) in paragraph (3), by striking ``Librarian of Congress'' 
        and inserting ``Copyright Royalty Judges''; and
          (2) in paragraph (4)--
                  (A) in subparagraph (A), by striking ``Librarian of 
                Congress'' each place it appears and inserting 
                ``Copyright Royalty Judges''; and
                  (B) by amending subparagraphs (B) and (C) to read as 
                follows:
                  ``(B) Determination of controversy; distributions.--
                After the first day of August of each year, the 
                Copyright Royalty Judges shall determine whether there 
                exists a controversy concerning the distribution of 
                royalty fees. If the Copyright Royalty Judges determine 
                that no such controversy exists, the Librarian of 
                Congress shall, after deducting reasonable 
                administrative costs under this paragraph, distribute 
                such fees to the copyright owners entitled to receive 
                them, or to their designated agents. If the Copyright 
                Royalty Judges find the existence of a controversy, the 
                Copyright Royalty Judges shall, pursuant to chapter 8 
                of this title, conduct a proceeding to determine the 
                distribution of royalty fees.
                  ``(C) Withholding of fees during controversy.--During 
                the pendency of any proceeding under this subsection, 
                the Copyright Royalty Judges shall withhold from 
                distribution an amount sufficient to satisfy all claims 
                with respect to which a controversy exists, subject to 
                any distributions made under section 801(b)(3).''.
  (h) Digital Audio Recording Devices.--
          (1) Royalty payments.--Section 1004(a)(3) is amended by 
        striking ``Librarian of Congress'' each place it appears and 
        inserting ``Copyright Royalty Judges''.
          (2) Entitlement to royalty payments.--Section 1006(c) is 
        amended by striking ``Librarian of Congress shall convene a 
        copyright arbitration royalty panel which'' and inserting 
        ``Copyright Royalty Judges''.
          (3) Procedures for distributing royalty payments.--Section 
        1007 is amended--
                  (A) in subsection (a), by amending paragraph (1) to 
                read as follows:
          ``(1) Filing of claims.--During the first 2 months of each 
        calendar year, every interested copyright party seeking to 
        receive royalty payments to which such party is entitled under 
        section 1006 shall file with the Copyright Royalty Judges a 
        claim for payments collected during the preceding year in such 
        form and manner as the Copyright Royalty Judges shall prescribe 
        by regulation.''; and
                  (B) by amending subsections (b) and (c) to read as 
                follows:
  ``(b) Distribution of Payments in the Absence of a Dispute.--After 
the period established for the filing of claims under subsection (a), 
in each year, the Copyright Royalty Judges shall determine whether 
there exists a controversy concerning the distribution of royalty 
payments under section 1006(c). If the Copyright Royalty Judges 
determine that no such controversy exists, the Librarian of Congress 
shall, within 30 days after such determination, authorize the 
distribution of the royalty payments as set forth in the agreements 
regarding the distribution of royalty payments entered into pursuant to 
subsection (a). The Librarian of Congress shall, before such royalty 
payments are distributed, deduct the reasonable administrative costs 
incurred by the Librarian under this section.
  ``(c) Resolution of Disputes.--If the Copyright Royalty Judges find 
the existence of a controversy, the Copyright Royalty Judges shall, 
pursuant to chapter 8 of this title, conduct a proceeding to determine 
the distribution of royalty payments. During the pendency of such a 
proceeding, the Copyright Royalty Judges shall withhold from 
distribution an amount sufficient to satisfy all claims with respect to 
which a controversy exists, but shall, to the extent feasible, 
authorize the distribution of any amounts that are not in controversy. 
The Librarian of Congress shall, before such royalty payments are 
distributed, deduct the reasonable administrative costs incurred by the 
Librarian under this section.''.
          (4) Determination of certain disputes.--(A) Section 1010 is 
        amended to read as follows:

``Sec. 1010. Determination of certain disputes

  ``(a) Scope of Determination.--Before the date of first distribution 
in the United States of a digital audio recording device or a digital 
audio interface device, any party manufacturing, importing, or 
distributing such device, and any interested copyright party may 
mutually agree to petition the Copyright Royalty Judges to determine 
whether such device is subject to section 1002, or the basis on which 
royalty payments for such device are to be made under section 1003.
  ``(b) Initiation of Proceedings.--The parties under subsection (a) 
shall file the petition with the Copyright Royalty Judges requesting 
the commencement of a proceeding. Within 2 weeks after receiving such a 
petition, the Chief Copyright Royalty Judge shall cause notice to be 
published in the Federal Register of the initiation of the proceeding.
  ``(c) Stay of Judicial Proceedings.--Any civil action brought under 
section 1009 against a party to a proceeding under this section shall, 
on application of one of the parties to the proceeding, be stayed until 
completion of the proceeding.
  ``(d) Proceeding.--The Copyright Royalty Judges shall conduct a 
proceeding with respect to the matter concerned, in accordance with 
such procedures as the Copyright Royalty Judges may adopt. The 
Copyright Royalty Judges shall act on the basis of a fully documented 
written record. Any party to the proceeding may submit relevant 
information and proposals to the Copyright Royalty Judges. The parties 
to the proceeding shall each bear their respective costs of 
participation.
  ``(e) Judicial Review.--Any determination of the Copyright Royalty 
Judges under subsection (d) may be appealed, by a party to the 
proceeding, in accordance with section 803(d) of this title. The 
pendency of an appeal under this subsection shall not stay the 
determination of the Copyright Royalty Judges. If the court modifies 
the determination of the Copyright Royalty Judges, the court shall have 
jurisdiction to enter its own decision in accordance with its final 
judgment. The court may further vacate the determination of the 
Copyright Royalty Judges and remand the case for proceedings as 
provided in this section.''.
          (B) The item relating to section 1010 in the table of 
        sections for chapter 10 is amended to read as follows:

``1010. Determination of certain disputes.''.

SEC. 6. EFFECTIVE DATE AND TRANSITION PROVISIONS.

  (a) Effective Date.--This Act and the amendments made by this Act 
shall take effect 6 months after the date of the enactment of this Act, 
except that the Librarian of Congress shall appoint interim Copyright 
Royalty Judges under section 802(d) of title 17, United States Code, as 
amended by this Act, within 90 days after such date of enactment to 
carry out the functions of the Copyright Royalty Judges under title 17, 
United States Code, to the extent that Copyright Royalty Judges 
provided for in section 801(a) of title 17, United States Code, as 
amended by this Act, have not been appointed before the end of that 90-
day period.
  (b) Transition Provisions.--
          (1) In general.--Subject to paragraph (2), the amendments 
        made by this Act shall not affect any proceedings commenced, 
        petitions filed, or voluntary agreements entered into before 
        the enactment of this Act under the provisions of title 17, 
        United States Code, amended by this Act, and pending on such 
        date of enactment. Such proceedings shall continue, 
        determinations made in such proceedings, and appeals taken 
        therefrom, as if this Act had not been enacted, and shall 
        continue in effect until modified under title 17, United States 
        Code, as amended by this Act. Such petitions filed and 
        voluntary agreements entered into shall remain in effect as if 
        this Act had not been enacted.
          (2) Effective periods for certain ratemaking proceedings.--
        Notwithstanding paragraph (1), terms and rates in effect under 
        section 114(f)(2) or 112(e) of title 17, United States Code, 
        for new subscription services, eligible nonsubscription 
        services, and services exempt under section 114(d)(1)(C)(iv) of 
        such title for the period 2003 through 2004, and any rates 
        published in the Federal Register under the authority of the 
        Small Webcaster Settlement Act of 2002 for the years 2003 
        through 2004, shall be effective until the first applicable 
        effective date for successor terms and rates specified in 
        section 804(b)(2) or (3)(A) of title 17, United States Code, or 
        until such later date as the parties may agree. Any proceeding 
        commenced before the enactment of this Act pursuant to section 
        114(f)(2) and chapter 8 of title 17, United States Code, to 
        adjust or determine such rates and terms for periods following 
        2004 shall be terminated upon the enactment of this Act and 
        shall be null and void.
  (c) Existing Appropriations.--Any funds made available in an 
appropriations Act before the date of the enactment of this Act to 
carry out chapter 8 of title 17, United States Code, shall be available 
to the extent necessary to carry out this section.

    Mr. Smith. Thank you, Mr. Chairman.
    Mr. Chairman, following our subcommittee markup, members 
and other interested parties continued to offer constructive 
recommendations to improve H.R. 1417. The substitute I am 
offering with Mr. Berman incorporates necessary tweaks on a 
number of issues that will improve the operations of the new 
ratemaking and distribution system. Mr. Berman has mentioned a 
couple of those tweaks and I will mention a couple more.
    Briefly, the substitute includes the following revisions: 
first, to preserve the integrity of privately-negotiated 
agreements and maintain the uniformity of the five-year 
extension of licensing periods. The substitute staggers the 
licenses accordingly.
    Second, parties and their petitions to participate must 
provide sufficient evidence demonstrating that they have a 
significant interest in the proceeding. This will ensure that 
only parties with standing become actual participants.
    Third, in the interest of uniformity, the Copyright Royalty 
Judges will conduct discovery conferences to ensure that the 
discovery process is conducted in a timely and consistent 
manner.
    Fourth, upon motion by participants or the Copyright 
Royalty Judge, a ratemaking determination may be conducted as 
an all-paper proceeding under specified conditions.
    Fifth, participants in a ratemaking proceeding may seek 
discovery of relevant and material information. A Copyright 
Royalty Judge may deny a discovery request for good cause shown 
that includes such factors as whether the discovery sought is 
unreasonable.
    Lastly, the substitute clarifies that Copyright Royalty 
Judges may consult the Copyright Office on any questions other 
than issues of fact. All questions of law, including novel 
questions, will remain as part of the proceedings record.
    Mr. Chairman, these and other provisions of the substitute 
were painstakingly negotiated over many weeks. Like the 
underlying text of H.R. 1417, the substitute is a product of 
compromise that reflects a bipartisan consensus on how best to 
improve the bill.
    I urge its adoption and yield back the balance of my time.
    Chairman Sensenbrenner. Are there amendments? If not, the 
question is on the amendment in the nature of a substitute. 
Those in favor will say aye. Opposed, no. The ayes appear to 
have it. The ayes have it and the amendment in the nature of a 
substitute is agreed to.
    A reporting quorum is present. The question now occurs on 
the motion to report the bill, H.R. 1417, favorably as amended. 
Those in favor will say aye. Opposed, no. The ayes appear to 
have it. The ayes have it and the motion to report favorably is 
adopted.
    Without objection, the bill will be reported favorably to 
the House in the form of a single amendment in the nature of a 
substitute, incorporating the amendment adopted here today. 
Without objection, the Chairman is authorized to move to go to 
conference pursuant to House rules. Without objection, the 
staff is directed to make any technical and conforming changes, 
and all members will be given two days pursuant to the rules in 
which to submit additional dissenting, supplemental, or 
minority views.
    [Statements of Hon. John Conyers, Jr. and Hon. Sheila 
Jackson-Lee follows:]

                  Statement of Hon. John Conyers, Jr.

    I would like to speak in favor of this legislation. It has been a 
year since the Committee held a hearing on concerns with the CARP, the 
system that sets royalty rates for copyrighted content. People on both 
sides, the owners and buyers, agree that the current system needs 
changes. Based on that hearing, Chairman Smith, Ranking Member Berman, 
and I introduced legislation, H.R. 1417, that would make substantial 
procedural changes.
    We heard the current system is costly because the copyright owners 
and users have to pay for the arbitrators. Our bill creates three 
Copyright Royalty Judges who would be paid from appropriated funds to 
carry out functions related to setting royalty rates and distributing 
royalty fees.
    Another complaint was that the CARP does not have adequate rules on 
how to address hearsay evidence. This bill explicitly requires that the 
Judges treat hearsay evidence in the same manner that it is treated in 
federal court.
    This bill also alters the terms for which certain royalty rates are 
in effect. Rates that are determined by the Copyright Royalty Judge 
will be in effect for five years. This should create some 
predictability and uniformity for those who rely on the Judge's 
determinations.
    Finally, parties on both sides argued that the substantive 
standards that the CARP uses to set royalty rates should be changed 
somehow. In an effort to reach a compromise and pass a bill that does 
not alter any substantive rights, this bill changes only the procedure 
for rate settings and distributions.
    There will be a substitute amendment to the bill that was worked 
out by the majority, minority, and all groups interested in the CARP 
process. I hope we can continue to work on resolving any outstanding 
issues and moving this bill through the full House and the Senate.
    I urge my colleagues to vote ``Yes'' on this bill as amended.
                                 ______
                                 

             Statement of Congresswoman Sheila Jackson-Lee

    Mr. Chairman and Mr. Ranking Member, I thank you for convening this 
markup to amend several bills, including H.R. 1417, the ``Copyright 
Royalty and Distribution Reform Act.'' Mr. Smith, Mr. Berman, and 
Ranking Member Conyers, thank you for your hard work in crafting this 
legislation.
    The bill would replace the existing administrative procedures 
within the U.S. Copyright Office that determine copyright royalty rates 
and the distribution of related royalties under various compulsory 
licenses.
    Under the Copyright Royalty Tribunal Reform Act of 1993, the 
Librarian of Congress has the authority to convene Copyright 
Arbitration Royalty Panels, or ``CARPs,'' to resolve failed private 
negotiations between parties that fail to establish rates or to 
distribute royalties regarding the commercial use of movies, music and 
other specified copyrighted works.
    For years, the CARP system has been criticized for rendering 
unpredictable and inconsistent decisions, employing arbitrators lacking 
the expertise to render sound decisions, and for being unnecessarily 
expensive.
    H.R. 1417 is a reasonable bill to cure these concerns and is based 
on the input and recommendations of government and industry experts.
    H.R. 1417 addresses the problem of lack of arbitrator expertise by 
appointing a ``Copyright Judge'' to preside over the new process. The 
Copyright Judge will be appointed by the Librarian of Congress, have 
full adjudicatory responsibility, and have the authority to make 
rulings on both the law and rates. The Copyright Judge will select two 
professional staff members with knowledge of economics, business, and 
finance. These staff qualifications will also improve the quality of 
the decisions rendered.
    H.R. 1417 redefines the role of the Copyright Office. Presently, 
acts as an intake agency answering initial case intake questions, as 
well as an appellate court for CARP decisions by advising the Librarian 
on cases. This dual role forces the Copyright Office to often decline 
to answer threshold intake questions for fear of having to review its 
own decisions at the appellate stage. Under H.R. 1417, the Copyright 
Office's appellate responsibilities will be removed and the Office will 
only act in an administrative and advisory capacity by counseling the 
Copyright Judge on substantive issues as requested.
    For small claimants who participate in the CARP process, the 
substantial expenses are practically preclusive. H.R. 1417 contains 
provisions to make the process more accessible. First, claimants must 
declare an ``amount in controversy'' during a distribution 
determination phase of the proceedings. If the dollar figure is $500 or 
less, the claimant will be assigned to the small claims process which 
is a less expensive, ``all-paper'' claim resolution method.
    Another provision of H.R. 1417, that benefits both large and small 
claimants requires the filing of a ``notice of intent to participate'' 
in either a rate-making or distribution proceeding. This requirement 
will discourage entities from disrupting the process by participating 
at the last minute. If a party failure to file in a timely manner or 
failure to pay the required fee, they will be an exclusion of either 
written or oral participation in that determination. Those exempted as 
small claimants would not be affected by this requirement.
    H.R. 1417 contains several procedural changes to make the claim 
resolution process more convenient for the parties. H.R. 1417 expands 
the duration of the discovery phase from 45 to 60 days to give parties 
more time to file their claims. Additionally, the 180-day time-frame 
for completing the CARP hearing process is amended to require parties 
complete the hearing phrase of a rate-making or distribution 
determination in six months. The Copyright Judge, at their discretion, 
could extend this period up to a maximum of six additional months.
    Mr. Chairman and Mr. Ranking Member, H.R. 1417 makes changes to the 
CARP system that benefit the parties as well as the agents of the 
copyright adjudication system. I support H.R. 1417, and I urge my 
colleagues on the Judiciary Committee to do likewise.