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Calendar No. 569
115th Congress } { Report
SENATE
2d Session } { 115-339
======================================================================
MUSIC MODERNIZATION ACT
_______
September 17, 2018.--Ordered to be printed
_______
Mr. Grassley, from the Committee on the Judiciary,
submitted the following
R E P O R T
[To accompany S. 2823]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to which was referred the
bill (S. 2823) a bill to modernize copyright law, and for other
purposes, having considered the same, reports favorably thereon
with an amendment in the nature of a substitute and recommends
that the bill, as amended, do pass.
CONTENTS
Page
I. Background and Purpose of the Music Modernization Act............1
II. History of the Bill and Committee Consideration.................21
III. Section-by-Section Summary of the Bill..........................22
IV. Congressional Budget Office Cost Estimate.......................29
V. Regulatory Impact Evaluation....................................34
VI. Conclusion......................................................35
VII. Changes to Existing Law Made by the Bill, as Reported...........35
I. Background and Purpose of the Music Modernization Act
A. BACKGROUND
The United States' copyright laws have helped make this
nation the center of the music world. Copyright laws protect
creators and artists, allowing them to thrive by granting them
exclusive rights and protections to their works. However, the
law has not kept pace with the music industry to reflect
changes in consumer preferences and technological developments.
The current statutory scheme applies inconsistent rules that
place certain technologies at a disadvantage and result in
inequitable compensation variances for music creators. These
inconsistencies have drawn criticism that music copyright and
licensing laws are too difficult to comply with and do not
adequately reward the artists and professionals responsible for
creating American music.
To address these issues, multiple bills were introduced in
the Senate and House of Representatives. Songwriters, artists,
publishers, producers, distributors, and other stakeholders
involved in the creation and distribution of music collaborated
with legislators in both the Senate and the House to find a
path forward on music reform. Legislative options were
discussed with copyright experts and the Copyright Office.
Hearings and briefings were held on music licensing reform and
multiple bills were introduced.
In the Senate, Mr. Hatch introduced S. 2823, the Music
Modernization Act, which is identical to the text of the House-
passed bill, H.R. 5447, introduced by Mr. Goodlatte. S. 2823
contains three titles consisting of updated versions of three
previously introduced bills:
S. 2334, the Music Modernization Act,
introduced by Mr. Hatch (Title I);
S. 2393, the Compensating Legacy Artists for
their Songs, Service, and Important Contributions to
Society Act (CLASSICS Act), introduced by Mr. Coons
(Title II); and
S. 2625, the Allocation for Music Producers
Act (AMP Act), introduced by Mr. Grassley (Title III).
B. PURPOSE
S. 2823 updates music copyright laws by creating a new
compulsory blanket licensing system for mechanical works,
updating the rate standards applicable to music licensing,
modifying the rate setting process in the Southern District of
New York, providing copyright royalties to pre-1972 artists,
and ensuring that producers, mixers, and sound engineers are
able to receive compensation for their creativity.
1. Title I--Music Licensing Modernization
The first title of S. 2823 is an amended version of S.
2334, the ``Music Modernization Act.''
17 U.S.C. 115(a) Availability and scope of compulsory
license clause
Clause (ii) in subparagraph (A) of paragraph (1) creates a
new method by which a digital music provider may obtain a
compulsory license for a nondramatic musical work. Under the
current Section 115, the musical work copyright owner has the
right to authorize the first recording of her musical work,
sometimes referred to as the ``first use'' right. Historically,
the first use was cleared by the record label, which obtained
the right to make a sound recording from the songwriter or her
music publisher and distribute the phonorecords derived from
that sound recording. A record label may continue to obtain a
compulsory license under clause (i) when it is the first to
record and distribute recordings of the musical work.
Clause (ii) applies in the situation in which a digital
music provider is the first person to make and distribute
digital phonorecord deliveries (DPDs) of a sound recording
embodying a musical work (i.e., in cases for which clause (i)
does not apply). In such instances, the digital music provider
may obtain a compulsory license if it satisfies three criteria:
(1) the first fixation of the musical work in a sound recording
is made under the authority of the musical work copyright
owner; (2) the sound recording copyright owner who first fixes
such sound recording has the authority of the musical work
copyright owner to make and distribute digital phonorecord
deliveries of such musical work to the public in the United
States; and (3) the sound recording copyright owner (or its
authorized distributor) authorizes the digital music provider
to make and distribute digital phonorecords of the sound
recording to the public in the United States.
Under the current language of section 115(a)(1), a
compulsory license is available to ``any other person'' after a
sound recording embodying a musical work has been distributed
to the public in the United States under the authority of the
musical work copyright owner. The new language is intended to
eliminate any ambiguity under existing law as to whether a
digital music provider may obtain a compulsory license when the
digital music provider is the first person to distribute
digital phonorecord deliveries of such musical work. The new
language makes clear that a digital music provider may obtain a
compulsory license in those instances in which the digital
music provider is the first person to make and distribute
digital phonorecord deliveries of a sound recording embodying a
musical work.
17 U.S.C. 115(b) Procedures to obtain a compulsory license
The amended section 115 provides two separate means of
obtaining a compulsory mechanical license. Subsection (b)(1)
maintains the ability to obtain a compulsory license to
reproduce and distribute phonorecords other than DPDs on a
work-by-work basis. This is the historical method by which
record labels have obtained compulsory licenses.
A new subsection (b)(2) provides the blanket mechanical
license for digital music providers to make and distribute
DPDs. If the digital music provider is making and distributing
the DPDs before the date the blanket license is available,
which is defined in subsection (e)(15) as January 1 following
the expiration of the 2 year period beginning on the date the
legislation is enacted, then the digital music provider must
file a notice of intent on the musical work copyright owner, if
the identity and location of the musical work copyright owner
is known. Unlike the current section 115, however, under the
legislation, in the event the musical work copyright owner is
unknown, the digital music provider does not file a notice of
intent on the Copyright Office. Instead, the digital music
provider continues to search for the musical work copyright
owner until the license availability date and, if the musical
work copyright owner has not been located by such time, the
digital music provider is required to turn over to the
mechanical licensing collective any accrued royalties and
reports of usage for such unmatched works pursuant to
subsection (d)(10). If the digital music provider is making and
distributing DPDs after the date the blanket license is
available, then the digital music provider may obtain the
blanket license by submitting a notice of license to the
mechanical licensing collective as described in subsection
(d)(2).
Subsection (b)(3) maintains the ``pass-through'' license
for record labels to obtain and pass through mechanical license
rights for individual permanent downloads. Under the Music
Modernization Act, a record label will no longer be eligible to
obtain and pass through a Section 115 license to a digital
music provider to engage in activities related to interactive
streams or limited downloads.
Subsection (b)(4)(A) maintains the current practice whereby
record labels that fail to serve or file a notice of intent are
foreclosed from the possibility of obtaining a compulsory
license for that work. Subsection (b)(4)(B) provides penalties
for a digital music provider for failing to file a notice of
intent or notice of license. Again, this subsection
distinguishes between activities that occur prior to the date
of availability of the blanket license and activities that
occur after. Before the date of availability of the blanket
license, if the digital music provider fails to serve a notice
of intent on the musical work copyright owner (as described in
subsection (b)(2)), then the digital music provider is
foreclosed from obtaining a compulsory license for use of that
particular work under such subsection. After the date the
blanket license is available, if the digital music provider
fails to submit the notice of license on the mechanical
licensing collective, then the digital music provider is
foreclosed from obtaining a blanket license for 3 years.
17 U.S.C. 115(c) Royalty payable under compulsory license
The amendments to subsection (c) change the current rate-
setting standard from that currently found at 801(b) to the
``willing buyer/willing seller'' standard now applicable to
setting rates for the public performance of sound recordings by
noninteractive webcasters under the section 114(d)(2) and
section 112 statutory licenses. Consistent with the current 115
compulsory license, subsection (c)(2)(A) makes clear that
voluntary licenses entered into between musical work copyright
owners and digital music providers are given effect in lieu of
the rates established for the blanket license.
17 U.S.C. 115(d) Blanket license for digital uses,
mechanical licensing collective, and digital
licensee coordinator
The majority of Title I creates a new section 115(d) that
establishes a blanket compulsory licensing system for qualified
digital music providers. The Committee has regularly heard from
various parties in the music industry that the existing music
licensing system does not functionally work to meet the needs
of the digital music economy where commercial services strive
to have available to their customers as much music as possible.
Song-by-song licensing negotiations increase the transaction
costs to the extent that only a limited amount of music would
be worth engaging in such licensing discussions, depriving
artists of revenue for less popular works and encouraging
piracy of such works by customers looking for such music.
The new mechanical licensing collective
The Board of Directors of the new collective is required to
be composed of individuals matching specific criteria. The
detailed requirements concerning the overall framework of the
Board of Directors of the collective and its three committees,
the criteria used to select individuals to serve on them, and
the advance publication of their names and affiliations all
highlight the importance of selecting the appropriate
individuals. Service on the Board or its committees is not a
reward for past actions, but is instead a serious
responsibility that must not be underestimated. With the
advance notification requirement, the Register is expected to
allow the public to submit comments on whether the individuals
and their affiliations meet the criteria specified in the
legislation; make some effort of its own as it deems
appropriate to verify that the individuals and their
affiliations actually meet the criteria specified in the
legislation; and allow the public to submit comments on whether
they support such individuals being appointed for these
positions. It has been agreed to by all parties that
songwriters should be responsible for identifying and choosing
representatives that faithfully reflect the entire songwriting
community on the Board.
To ensure that the collective's officers are independent,
individuals serving as officers of the collective may not, at
the same time, also be an employee or agent of any member of
the collective's Board of Directors or any entity represented
by a member of the collective's Board of Directors.
Given their importance, the three committees established by
the collective must operate in a transparent manner to the
greatest extent possible in order to avoid unnecessary
litigation as well as to gain the trust of the entire music
community. Although it would be desirable that the committees
reach unanimous decisions, that will not always be possible in
which case a majority vote will control the outcome of a
decision. It is expected that the Board of Directors will
establish rules on how to resolve tie vote decisions. For the
responsibilities described in subparagraphs (J) and (K) of
paragraph (3), the collective is only liable to a party for its
actions if the collective is grossly negligent in carrying out
the policies and procedures adopted by the Board of Directors
pursuant to section 115(d)(11)(D). Since the Register has broad
regulatory authority under paragraph (12) of subsection (d), it
is expected that such policies and procedures will be
thoroughly reviewed by the Register to ensure the fair
treatment of interested parties in such proceedings given the
high bar in seeking redress.
Not later than 1 year after designation by the Register,
the collective must establish and make public bylaws relating
to the governance of the collective.
The Register is allowed to re-designate an entity to serve
as the collective every 5 years after the initial designation.
Although there is no guarantee of a continued designation by
the collective, continuity in the collective would be
beneficial to copyright owners so long as the entity previously
chosen to be the collective has regularly demonstrated its
efficient and fair administration of the collective in a manner
that respects varying interests and concerns. In contrast,
evidence of fraud, waste, or abuse, including the failure to
follow the relevant regulations adopted by the Copyright
Office, over the prior five years should raise serious concerns
within the Copyright Office as to whether that same entity has
the administrative capabilities necessary to perform the
required functions of the collective. In such cases, where the
record of fraud, waste, or abuse is clear, the Register should
give serious consideration to the selection of a new entity
even if not all criteria are met pursuant to section
115(d)(3)(B)(iii).
Reasonable cost shifting of the mechanical licensing
collective
Digital music services and musical works copyright owners
reached an agreement to transfer the reasonable costs of the
new mechanical licensing collective to the licensees. The
Committee supports a true free market for copyrighted works
and, in the limited number of situations in which a compulsory
license exists, believes that the licensees benefit most from
the reduction in transaction costs. The Committee rejects
statements that copyright owners benefit from paying for the
costs of collectives to administer compulsory licenses in lieu
of a free market. Therefore, the legislation directs that
licensees should bear the reasonable costs of establishing and
operating the new mechanical licensing collective. This
transfer of costs is not unlimited, however, since it is
strongly cabined by the term ``reasonable.''
The legislation directs the Copyright Royalty Judges to
undertake a proceeding to determine the amount of an
administrative assessment fee to be paid by blanket and
significant nonblanket licensees for the reasonable costs of
starting up and continuing to operate the new mechanical
licensing collective. There are several other licensing
collectives, such as SoundExchange, American Society of
Composers, Authors and Publishers (ASCAP), and Broadcast Music
Inc. (BMI), that the Copyright Royalty Judges should look to
for comparison points, although their expenditures are simply
comparison points. The Copyright Royalty Judges shall make
their own determination(s) based upon the evidence provided to
them about the appropriate administrative assessment for such
reasonable costs that are identified with specificity.
It is expected that not all reasonable expenditures in the
first years of the collective may be identifiable in advance,
especially as they relate to startup costs, but that future
reasonable costs are more likely to be able to be determined in
advance with some certainty. When anticipated startup and
operational costs are different than anticipated, the Copyright
Royalty Judges are expected to use their best judgement as to
what has or has not been a reasonable expenditure of the
collective and use their authority to adjust the fee subject to
prior under or over collection of fees for reasonable costs, as
well as lesser or greater reasonable costs than anticipated.
The legislation is focused on the transfer of the
collective's reasonable startup and operating costs to blanket
and nonblanket licensees. It is expected that the collective
will only accrue reasonable costs and not expend unreasonable
costs either on a one-off or continuing basis. It is not the
responsibility of any other party other than the collective to
ensure that it only expends reasonable amounts of funds for its
activities. Although other parties such as the digital licensee
coordinator may choose to notify the collective of any concerns
of unreasonable spending, they do not have the legal burden to
do so and do not waive their right to object to the Copyright
Royalty Judges or a federal court of any unreasonable spending
by not notifying them of it when suspected or discovered.
Although the licensees are free to voluntarily pay some or all
unreasonable costs of the collective if they so choose, the
legislation does not require that and makes clear that all such
unreasonable costs as determined by the Copyright Royalty
Judges are not the responsibility of the licensees. Any such
unreasonable costs, to the extent that they are accrued, should
be borne by either the collective itself and/or the copyright
owners that benefit from the collective. Nor should any
unreasonable costs be offset by unmatched royalties or taken
from artist revenue. The legislation requires that the
collective pay out accrued royalties under a set schedule. With
the exception of future adjustments to the administrative
assessment, if so determined by the Copyright Royalty Judges,
once the licensees meet the terms of the legislation in paying
the applicable royalties with the administrative assessment and
providing the accompanying usage data for the covered
activities, their obligation ends for any additional payments
for such usage. This includes any need to pay replacement
royalties should the collective engage in waste, fraud, or
abuse of such royalties. In the event that an employee of the
collective engages in fraud by diverting royalty payments, it
is not the responsibility of the licensee(s) to replace these
stolen royalties.
Because of the importance to the music community that the
collective begin operating as soon as possible, even before any
administrative assessment fees are collected, the legislation
includes provisions to allow voluntary contributions by digital
music providers to the collective to offset some or all of its
startup and operational costs, as well as the adoption of
voluntary agreements to determine the administrative
assessment. Such contributions are to be voluntarily made and
accounted for and, unless explicitly agreed to, shall not cover
expenses deemed unreasonable by the Copyright Royalty Judges.
Oversight and accountability
The collective is expected to operate in a transparent and
accountable manner. The legislation specifically requires that
the collective shall ensure that its policies and practices are
transparent and accountable. The collective must identify a
point of contact for inquiries and complaints with timely
redress. It must also establish an anti-comingling policy for
funds.
Audit
To ensure that the collective does not engage in waste,
fraud and abuse, the collective is required to submit to
periodic audits to examine its operations and procedures.
Beginning in the fourth full calendar year that begins after
the initial designation of the collective by the Register, and
in every fifth calendar year thereafter, the collective shall
retain a qualified auditor to examine the collective's books,
records and operations and prepare a report for the Board of
Directors to be delivered no later than December 31 of the year
in which the auditor is retained. The auditor's report shall
address the implementation and efficacy of procedures of the
collective's (1) receipt, handling and distribution of royalty
funds, including any amounts held as unclaimed royalties; (2)
efforts to guard against fraud, abuse, waste, and unreasonable
use of funds; and (3) efforts to protect the confidentiality of
financial, proprietary, and other sensitive information. The
collective shall submit the report to the Register and make it
available via the internet to the public.
Musical works database
The legislation mandates the creation of a new musical
works database. For far too long, it has been difficult to
identify the copyright owner of most copyrighted works,
especially in the music industry where works are routinely
commercialized before all of the rights have been cleared and
documented. This has led to significant challenges in ensuring
fair and timely payment to all creators even when the licensee
can identify the proper individuals to pay. With millions of
songs now available to subscribers worldwide, technology also
has a role to play through digital fingerprinting of a sound
recording. However, there is no reliable, public database to
link sound recordings with their underlying musical works.
Unmatched works routinely occur as a result of different
spellings of artist names and song titles. Even differing
punctuation in the name of a work has been enough to create
unmatched works. There have been several attempts to create a
unified music database, most notably the 2008 Global Repertoire
Database project that brought together numerous music industry
participants in an attempt to solve the music industry's data
problem. Despite hopes that this effort would succeed where
others had failed, this project too ended without success due
to cost and data ownership issues. Music metadata has more
often been seen as a competitive advantage for the party that
controls the database, rather than as a resource for building
an industry on. In an era in which Americans can buy millions
of products via an app on their phone based upon the UPC code
on the product, the failure of the music industry to develop
and maintain a master database has led to significant
litigation and underpaid royalties for decades. This situation
must end so that all artists are paid for their creations and
that so-called ``black box'' revenue is not a drain on the
success of the entire industry.
The database that is required by this legislation will
contain information such as the title of a work, its copyright
owner(s) and shares thereof, contact information for the
copyright owner(s), International Standard Recordings Codes
(ISRC) and International Standard Work Codes (ISWC), relevant
information for the sound recordings a work is embodied in, and
any other information that the Register of Copyrights may
prescribe by regulation. Using standardized metadata such as
ISRC and ISWC codes, is a major step forward in reducing the
number of unmatched works. For example, the Register may at
some point wish to consider after an appropriate rulemaking
whether standardized identifiers for individuals would be
appropriate, or even audio fingerprints. The Register shall use
its judgement to determine what is an appropriate expansion of
the required fields, but shall not adopt new fields that have
not become reasonably accessible and used within the industry
unless there is widespread support for the inclusion of such
fields.
Given the importance of this database, the legislation
makes clear that it shall be made available to the Copyright
Office and the public without charge, with the exception of
recovery of the marginal cost of providing access in bulk to
the public. Individual lookups of works shall be free although
the collective may implement reasonable steps to block efforts
to bypass the marginal cost recovery for bulk access if it
appears that one or more entities are attempting to download
the database in bulk through repeated queries. However, there
shall be no requirement that a database user must register or
otherwise turn over personal information in order to obtain the
free access required by the legislation. The collective is
required under the legislation to routinely undertake its own
efforts to identify the musical works embodied in particular
sound recordings, as well as to identify and locate the
copyright owners of such works so that they can update the
database as appropriate. With only the exception of the
efficient and accurate collection and distribution of
royalties, such actions are the highest responsibility of the
collective.
Records of the collective
Beyond the new database, the legislation requires that the
collective's material records be kept for not less than 7 years
after the date of creation or receipt, whichever occurs later.
The records applicable to a particular copyright owner are to
be accessible to that copyright owner or their representative.
Beyond the seven-year limit, there are no such limitations that
apply to the access of any record by the Copyright Office.
Annual report
Not later than June 30 of each year after the first license
availability date, the mechanical licensing collective shall
publicly release an annual report that sets forth information
regarding the collective's operational and licensing practices;
how royalties are collected and distributed; budgeting and
expenditures; the collective's total costs for the preceding
calendar year; the projected annual collective budget;
aggregated royalty receipts and payments; expenses that are
more than 10% of the annual collective budget; and the efforts
of the collective to locate and identify copyright owners of
unmatched musical works and shares of works. It is expected
that the collective will create reports similar to that of
other collectives, while recognizing that certain reported
activities of other collectives, involving lobbying and
marketing that this collective is prohibited from doing, will
not be applicable.
Digital licensee coordinator
The legislation anticipates, but does not require, the
designation of a digital licensee coordinator to coordinate the
activities of the licensees. Similar to the collective, the
choice of the coordinator is subject to a review by the
Register of Copyrights every five years, has specified duties,
and is prohibited from engaging in lobbying. The coordinator
shall make reasonable, good-faith efforts to assist the
collective in locating and identifying copyright owners of
unmatched musical works (and shares of such works) by
encouraging digital music providers to publicize the existence
of the collective and the ability of copyright owners to claim
unclaimed accrued royalties, including by (1) posting contact
information for the collective at reasonably prominent
locations on digital music provider websites and applications,
and (2) conducting in-person outreach with songwriters. Both
the collective and the coordinator have the right to commence
an action in federal court for specified damages, injunctive
relief, attorneys' fees, costs, and other relief deemed
appropriate by a federal court against a significant nonblanket
licensee that fails to provide monthly usage reports or pay the
required administrative fee. Any financial recovery shall be
used to offset the costs of the collective's total costs.
Voluntary licenses
Although the primary focus of the legislation is the
creation of a new compulsory blanket license, voluntary
licenses remain in effect and are excluded from the blanket
license and individual licenses. However, such voluntary
licenses that rise to the threshold of a significant nonblanket
license must meet the conditions imposed upon such licensees.
Musical work copyright owners may designate the mechanical
licensing collective to administer voluntary licenses so long
as the rates and terms of the voluntary license were negotiated
individually between a musical work copyright owner and digital
music provider. Musical work copyright owners may not require
as a condition for entering into a direct license that the
mechanical licensing collective administer a voluntary license.
Transition to a blanket license
The legislation creates a transition period in order to
move from the current work-by-work license to the new blanket
license. After the date of enactment, a digital music provider
will no longer be able to serve notices of intent on the
Copyright Office for uses of musical works for which the
musical work copyright owner cannot be identified or located.
Notices of intent filed before the enactment date will no
longer be effective. However, prior to the blanket license
availability date a digital music provider is immune from
copyright infringement liability for any use of any musical
work for which the digital music provider was unable to
identify or locate the musical work copyright owner so long as
the digital music provider engages in good-faith, commercially
reasonable efforts to identify and locate musical work
copyright owners. The digital music provider is required to use
one or more bulk electronic matching processes, and must
continue using these processes, on a monthly basis for so long
as the musical work copyright owner is unidentified.
If the musical work copyright owner is identified or
located during this search process, then the digital music
provider is required to report and pay that copyright owner any
royalties owed. If the musical work copyright owner remains
unidentified between the date of enactment and the date the
blanket license is available, then the digital music provider
is required to provide a cumulative usage report and accrued
royalties to the mechanical licensing collective. There are no
late fees associated with these accrued royalties.
When the blanket license becomes available, the blanket
license will be substituted automatically for the compulsory
licenses obtained pursuant to notices of intent, without any
interruption in license authority. Because the new blanket
license replaces the previous work-by-work compulsory license,
the compulsory licenses obtained under notices of intent served
on musical work copyright owners prior to the availability of
the blanket license will no longer be valid. However, any
voluntary license agreement between a digital music provider
and a musical work copyright owner continues to be effective
and takes precedence over the blanket license until such
license expires according to its own terms.
Obtaining a blanket license
After the blanket license availability date, digital music
services interested in obtaining a blanket license shall
provide advance notice to the mechanical licensing collective.
The collective has 30 calendar days to reject such notice in
writing, listing with specificity why such notice was rejected,
either because it does meet the requirements of the legislation
or applicable regulations established the Copyright Office or
if the digital music service provider has had a blanket license
terminated by the collective within the past three years. There
is an additional 30-day cure period for a potential licensee.
Should a provider believe that their notice was improperly
rejected, they have the right to seek review in federal
district court on a de novo basis. Once obtained, the license
covers the making and distribution of server, intermediate,
archival, and incidental reproductions of musical works that
are reasonable and necessary.
Default and termination of a blanket license
Although it would be far preferable for every digital music
provider that obtains a compulsory license to meet all of the
terms of such license, there may be occasions when that will
not be the case. The legislation anticipates the imposition of
a late fee to be determined in advance by the Copyright Royalty
Judges to address late payments. However, the legislation also
recognizes that such late fees may not be enough to bring a
provider back into compliance and therefore identifies the
conditions upon which digital music providers shall be deemed
in default of such compulsory licenses, and thus allow the
collective to terminate such license automatically.
A provider that believes their blanket license was
improperly terminated has the right to seek review in federal
court on a de novo basis. However, the court should recognize
that the conditions for determining default and permitting
termination are quite specific. So long as those conditions are
met, a court may not impose additional termination requirements
or waive clear deadlines in an attempt to continue the blanket
license. If a party wants to obtain and then maintain a blanket
license, it must meet the stated terms specified in the
statute. Efforts by the collective to participate in such
proceedings, including its own reasonable attorneys' fees, are
a reasonable expense of the collective. Since the digital music
providers that benefit from the new licensing system are
responsible for paying such reasonable costs, other digital
music providers may wish to consider joining the case in
opposition to a defaulting licensee under Rule 24 of the
Federal Rules of Civil Procedure. However, a court could
determine that the collective has attempted to impose new
conditions beyond those permitted by the legislation. Should a
court make such determination, the court has the authority to
revoke such attempted termination and grant any other relief it
determines to be appropriate. The Committee strongly encourages
the court to make the Copyright Office aware of such
determination since any financial cost to the collective that
results from such relief or related litigation efforts shall
not be considered a reasonable cost of the collective.
Performance saving clause
Section (d)(13) contains two savings clauses intended to
protect the licensing of the public performing right in musical
works from interference by the mechanical compulsory license.
The clauses clarify that subsection 115(d) applies solely to
section 115 mechanical reproduction and distribution rights.
Subsection (d)(13)(A) clarifies that the section 115 blanket
license shall not extend to any other activity or right other
than exclusive rights of reproduction and distribution of
musical works with respect to covered activities. Subsection
(d)(13)(B) clarifies that subsection (d) does not extend to,
limit or affect any musical work public performance works. This
administration function can include a voluntary mechanical
license that bundles the public performance of musical works
when such licenses are entered into by the copyright owner
directly with a digital transmission services. However, the
mechanical license collective may not itself own, control,
grant or be granted the public performance right in musical
works. It is further intended that a performing rights society
or other entity licensing the public performing right to
musical works or administering voluntary licenses shall not be
required to use information from the mechanical licensing
collective's musical works database for the calculation or
distribution of license fees or other payments for public
performances of musical works licensed and/or administered by
such performing rights society or entity.
Audit rights
The legislation contains two different audit rights, one
for copyright owners due royalties from the collective and one
for the collective due royalties from licensees. Both audit
rights are subject to certain specified time limits and other
requirements including the ability to choose alternative
procedures if both parties agree. The key difference is that
only the audit right for the collective contains a shifting of
the cost of the audit to the digital music provider being
audited if there was an underpayment of 10 percent or more. The
reason for this difference is that the collective is assumed to
be operating in its members' best interests while digital music
services have no such underlying responsibility.
Significant nonblanket licensees
The legislation creates a category of licensees, identified
as significant nonblanket licensees, who operate outside the
blanket licensing context, but who are required to provide
notice to the collective of their existence and to help pay for
the operation of the new collective. Such licensees are subject
to a cause of action in federal court brought by either the
mechanical licensing collective or the digital licensee
coordinator if they fail to make monthly usage reports or pay
the administrative assessment fee. This fee is made applicable
to such licensees because they are presumed to benefit from the
new database and as a way to avoid parties attempting to avoid
funding of the mechanical licensing collective by engaging in
direct deals outside the blanket license. Two specific
exceptions to the definition of a significant nonblanket
licensee are incorporated in the definition of such licensee,
one concerning certain free-to-the-user streams of less than 90
seconds and the other in regards to public broadcasting
entities.
Royalty distribution of matched works
Usage reports from digital music services must include the
number of digital phonorecord deliveries, specifying the number
of limited downloads and interactive streams. Any reports
should be consistent with then-current industry practices
regarding how such limited downloads and interactive streams
are tracked and reported. The digital music provider must also
identify all musical work copyright owners with whom the
digital music provider has an effective voluntary license and
is not relying on the blanket license. Using this information,
the collective is then required to collect and distribute
royalties on a specific schedule set forth in the legislation.
All copyright owners shall have their royalties distributed
fairly and no copyright owner may receive special treatment as
a result of their position on the Board, its committees, or for
any other reason without a reasonable basis. For example, it
may be required for the Board and its committees to focus on
specific copyright owners for legitimate, specific reasons such
as representing them in a bankruptcy proceeding that not all
copyright owners are part of. Absent such legitimate reasons,
any such special treatment should be viewed by the Register and
federal courts as waste, fraud, and abuse.
It is expected that over time one or more music services
will file bankruptcy and the collective may represent its
copyright owners in related court proceedings in order to
recover as much of the royalties due as possible. The Board
shall then distribute any lesser amounts of royalties collected
through such bankruptcy proceedings to copyright owners using
the best usage data available. Since a bankruptcy proceeding
may conclude long after the relevant employees at the music
service have long since departed, there may be discrepancies in
the usage data that cannot be resolved. With a recorded vote,
the Board shall determine how best to proceed with
distribution(s) related to bankrupt music services. Although
not required by the legislation, the collective may wish to
consult with the Register for his or her opinion if a
particular approach is reasonable in which case the Register
shall provide a timely response.
Royalty distribution of unmatched works
It is expected that there will be some percentage of
unmatched works that generate royalties that will decline over
time as the collective's database becomes more robust and the
music industry continues to recognize the importance of
obtaining and sharing proper metadata in advance of the initial
distribution of a work. Since the legislation permits the
distribution of unclaimed royalties that were accrued on
unmatched works for which the creators will not be paid, a
significantly higher bar to such distributions is required
compared to the more routine royalty distributions of matched
works.
For unmatched works, the collective must wait for the
prescribed holding period of three years before making such
distribution. This is intended to give the collective time to
actively search for the copyright owner. SoundExchange, a
collective for royalties under Section 114 of the Copyright
Act, has an admirable history of undertaking significant
efforts to locate copyright owners who may not know they are
due royalties. Despite their robust efforts, however, even
SoundExchange distributes unmatched royalties after its
detailed search efforts conclude. This legislation requires the
new collective to undertake its own efforts to locate the
copyright owner and update its database accordingly if so
identified. If such efforts fail, then the unclaimed royalties
oversight committee shall establish such policies identified in
the legislation that the Committee believes are necessary to
undertake a fair distribution of such unclaimed royalties.
These policies include gathering of required information to
make such distributions, 90 calendar days' advance public
notice, and a requirement that at least 50 percent of such
unclaimed royalties be credited or paid to the songwriter(s)
represented by that copyright owner. It is the intent of
Congress to ensure that songwriters receive their fair share of
monies distributed to copyright owners under subsection
(d)(3)(J), while at the same time respecting contractual
relationships. To that end, payments and credits to songwriters
shall be allocated in proportion to the reported usage of
individual musical works by digital music providers during the
relevant reporting periods. The 50% payment or credit to a
songwriter referenced in subsection (d)(3)(J)(iv)(II) is
intended to be treated as a floor, not a ceiling, and is not
meant to override any applicable contractual arrangement
providing for a higher payment or credit of such monies to a
songwriter.
This process ensures that copyright owners and artists
benefit. While there may be some copyright owners and/or
artists who would prefer that such money be escrowed
indefinitely until claimed, the simple way to avoid any
distribution to other copyright owners and artists is to step
forward and identify oneself and one's works to the collective,
an exceedingly low bar to claiming one's royalties.
Public notice of unclaimed accrued royalties
The collective shall maintain a publicly accessible online
facility with contact information for the collective that lists
unmatched musical works (and shares of works), through which a
copyright owner may assert an ownership claim with respect to
such a work (and a share of such a work). The collective shall
engage in diligent, good-faith efforts to publicize the
collective and ability to claim unclaimed accrued royalties for
unmatched musical works (and shares of such works), the
procedures with respect to receiving accrued royalty payments,
and information on accrued royalty transfers and pending
distribution of unclaimed accrued royalties and accrued
interest.
Termination of prior litigation
The legislation contains a key component that was necessary
to bring the various parties together in an effort to reach
common ground by limiting liability for digital music providers
after January 1, 2018, so long as they undertake certain
payment and matching obligations. Such agreement is welcomed
since continued litigation generates unnecessary administrative
costs, diverting royalties from artists. Congress routinely
preempts such unnecessary litigation in other contexts and
views the application here of such date as warranted. The
imposition of detailed statutory requirements for obtaining
such a limitation of liability ensure that more artist
royalties will be paid than otherwise would be the case through
continual litigation.
Copyright Office regulations
Pursuant to paragraph (12) of subsection (d), the Register
is expected to promulgate the necessary regulations required by
the legislation in a manner that balances the need to protect
the public's interest with the need to let the new collective
operate without over-regulation. The Copyright Office has the
knowledge and expertise regarding music licensing through its
past rulemakings and recent assistance to the Committee during
the drafting of this legislation. Although the legislation
provides specific criteria for the collective to operate, it is
to be expected that situations will arise that were not
contemplated by the legislation. The Office is expected to use
its best judgement in determining the appropriate steps in
those situations. The Register of Copyrights can also turn to
another legislative branch agency, the Government
Accountability Office, for assistance in determining if artists
are being properly compensated for their works.
Copyright Office activities
The legislation requires the Register to engage in public
outreach and educational activities. The legislation also
requires the Register, after soliciting and reviewing comments
and relevant information from music industry stakeholders, to
submit a report to the Judiciary Committees of the Senate and
House recommending best practices that the collective may
implement in order to identify and locate musical work
copyright owners with unclaimed accrued royalties held by the
collective, to encourage musical work copyright owners to claim
their royalties, and to reduce the incidence of unclaimed
royalties. The collective shall carefully consider and give
substantial weight to the Register's recommendations when
establishing procedures relative to these issues.
Uniform rate standards
Section 103(a) of the legislation creates a uniform willing
buyer, willing seller rate standard in section 114(f). This
fair standard for sound recordings ensures that copyright
owners are appropriately compensated for their works using a
standard that most approximates the rates that would have been
negotiated in a free market. It has long been a goal of the
Committee to move towards such a standard and move beyond
earlier unfair standards, such as the now unnecessary discount
for so-called ``pre-existing services.'' There is no current
justification for such 40-year old discounts that harm
copyright owners as well as competitors of such pre-existing
services. It is also in the interest of facilitating greater
competition in these areas that such discounts are eliminated.
Whatever justification for the discounts has long since
vanished.
Section 103(a) of the legislation repeals section 114(i),
to address the longstanding concern that songwriters have not
been adequately compensated for their contributions and section
114(i) prevents songwriters from introducing potentially
relevant evidence in rate court proceedings. Section 103(a)
creates a specific exception for taking into account license
fees payable for the public performance of sound recordings
under section 106(6) related to certain transmissions by
broadcasters although these new definitions are not to be given
effect in interpreting other provisions in Title 17. In
addition, the repeal shall not be taken into account in
proceedings to determine royalties for sound recordings and has
no impact upon the past precedents of such proceedings.
Furthermore, as used in this section of the legislation, the
term ``digital audio transmission'' is intended to incorporate
the definition of that term found in section 114(j)(5).
Therefore, as used in this section, the term ``digital audio
transmission'' does not include the transmission of any
audiovisual work.
Consent decree rate proceedings
Section 104 of the legislation modifies the selection of
rate court judges and related proceedings for performing rights
societies subject to a consent decree, currently ASCAP and BMI.
In lieu of the current system, the district court shall use a
random process, commonly known as the wheel, to determine which
judge shall hear rate setting cases involving a performing
rights society's license fees. However, the original judge(s)
who oversee(s) the interpretation of the consent decree(s)
shall not be permitted to oversee any rate proceedings. Under
the present situation, this would mean that the two judges who
oversee the ASCAP and the BMI consent decrees would not hear
any rate proceedings involving either performing rights
society. This change is not a reflection upon any past actions
by the Southern District of New York--rather, it is believed
that rate decisions should be assigned on a random basis to
judges not involved in the underlying consent decree cases.
Consent decree review
In April 2018, the Antitrust Division of the Department of
Justice announced its intention to review over 1300 ``legacy''
consent decrees, including those governing ASCAP and BMI.
Collectively, ASCAP and BMI license over 90 percent of musical
works to licensees that publicly perform music, including
restaurants, retail stores, bars, radio and television
broadcasters, and digital music services.
Since the 1940s, ASCAP and BMI have been subject to consent
decrees with the U.S. Department of Justice to address
antitrust concerns arising from an entity collectively
licensing works from competitors and offering them at a single
price. As a result, the ASCAP and BMI consent decrees have
fundamentally shaped the marketplace for licensing public
performance rights in musical works for nearly 80 years and
entire industries have developed around them. In 2016, the
Department of Justice concluded a multi-year review of these
decrees, determined that they still serve the public interest,
and declined to modify the decrees.
There is serious concern that terminating the ASCAP and BMI
decrees without a clear alternative framework in place would
result in serious disruption in the marketplace, harming
creators, copyright owners, licensees, and consumers. In fact,
sections of the legislation assume the continued existence of
the decrees and alter the rate-setting system established by
the decrees, including what evidence may be submitted in a rate
dispute and how judges will be assigned to such disputes.
The legislation will improve how music is licensed and how
songwriters, recording artists, record producers, engineers and
copyright owners are paid. Enacting the legislation only to see
the Department of Justice move forward with seeking termination
of the decrees without a workable alternative framework could
displace the legislation's improvements to the marketplace with
new questions and uncertainties for songwriters, copyright
owners, licensees and consumers.
Given these ongoing concerns, section 105 of the
legislation creates a formal role for Congress during any
review by the Department of Justice of a consent decree with a
performing rights society, such as ASCAP or BMI. During any
review of such a decree, the Department of Justice shall
provide upon request timely briefings to any Member of the
Senate and House Judiciary Committees regarding the status of
such review. The Department of Justice shall also share with
such Members detailed and timely information and pertinent
documents related to the review, subject to confidentiality and
rules of agency deliberative process.
Additionally, section 105 of the legislation requires the
Department of Justice to notify Members of the Senate and House
Judiciary Committees before filing a motion to terminate,
including a motion to terminate after a specified period of
time, also referred to as ``sunsetting'', any consent decree
with a performing rights society and provide information
regarding the impact of the proposed termination on the market
for licensing the public performance for musical works should
the motion be granted.
The Department of Justice is required to submit such
notification in writing to the Chairmen and Ranking Members of
the Senate and House Judiciary Committees not later than 90
days prior to filing such motion. This notification shall
include a written report setting forth an explanation of the
process used by the Department of Justice to review the decree,
a summary of the public comments received by the Department of
Justice during its review, and any other information requested
by Congress.
This section applies only to the Department of Justice's
review of and potential motion to terminate consent decrees
governing performing rights societies. Nothing in this section
broadly impacts the Department of Justice's independent
authority to seek whatever modifications to a consent decree,
including termination, it determines are within the public
interest. Moreover, nothing in this section changes the process
a district court would use to review a motion to modify or
terminate a consent decree between the United States and a
performing rights society.
2. Title II--Compensating Legacy Artists for Their Songs, Service, and
Important Contributions to Society
The second title of S. 2823 is an amended version of S.
2393, the ``Compensating Legacy Artists for their Songs,
Service, and Important Contributions to Society', or the
``CLASSICS Act.'' The legislation amends Title 17 to create
royalties for so-called ``pre-72 works'' using the same rates
and distribution system for royalties already applicable to
post-72 works. These sound recordings that were fixed prior to
February 15, 1972 generate no royalties for older artists who
have highlighted the negative impact upon their ability to
survive economically as they increasingly enter their
retirement years, including from testimony received at the
Committee hearing on May 15, 2018, from Mr. Smokey Robinson, a
pre-72 recording artist. Among the few options artists with
pre-72 works have for generating income from such works are
grueling touring schedules that older artists are increasingly
less able to undertake. In contrast, artists with post-72 works
face lesser burdens since they are able to earn royalties for
such works outside of touring.
Despite this discrepancy in royalties payable for works,
music services have been able to successfully operate while
paying royalties for post-72 works. Thus, these same services
should be able to continue to successfully operate with a
statutory requirement to pay royalties for pre-72 works to
enable older artists and their families to benefit financially
from their creativity.
There have been several class action suits regarding pre-72
royalties in states including California, Florida, and New York
with varying outcomes. A benefit of the CLASSICS Act is that,
in addition to providing for financial income for older
artists, it will end the need for state litigation by extending
the existing federal royalty payment system for eligible,
authorized digital transmissions, as defined in new section
1401(b), for works fixed between January 1, 1923, and February
15, 1972, while pre-empting state laws for common law copyright
or equivalent rights under the laws of any State that would
conflict with these provisions. The legislation also leaves
those existing settlements untouched.
Section 1401(d)(1)(C)(ii)(II) provides there should be no
liability under state laws protecting pre-1972 (and post-1922)
recordings for voluntary agreements between rights owners and
digital music services reached before the enactment of the
CLASSICS Act if the voluntary agreement 1) either licenses the
service to make, or releases the service from liability for,
digital audio transmissions or reproductions that would
otherwise have been eligible for statutory licensing, and 2)
the service complies with the terms of the agreement. This
would be the effect of such a license or settlement under state
contract law, but the provison was included to remove any doubt
about potential liability.
Title II includes several limitations on remedies in the
new section 1401(e), including fair use; certain uses by
libraries, archives, and educational institutions; section 507;
section 512; section 230 safe harbors; and a new filing
requirement for obtaining statutory damages and attorneys'
fees. This new filing requirement is designed to operate in
place of a formal registration requirement that normally
applies to claims involving statutory damages.
Section 1401(e)(1)(B) clarifies the application of section
108 of the Copyright Act to a claim against unauthorized
performances of pre-1972 (and post-1922) sound recordings by a
library or archive under new section 1401(a). Specifically,
section 108(h) allows libraries and archives to make certain
uses of published works during the last 20 years of the
copyright term of those works, if certain conditions are met.
The CLASSICS Act does not provide a term of copyright for pre-
1972 recordings; rather, it provides a special federal sui
generis form of protection for digital performances that aligns
with the term of other state law pre-1972 recording rights. In
the absence of a federal copyright term that would dictate when
the limitation would apply, section 180(h) should apply
commencing with the date of enactment of the CLASSICS Act.
Section 108(h) does not apply to other uses of pre-1972
recordings, including public performance of a pre-1923
recording by means of a digital audio transmission by a library
or archive, because such uses remain solely subject to state
law.
In the absence of full federalization of these pre-72
works, the new section 1401(e)(5) requires that the copyright
owners file a schedule of works subject to potential claims of
statutory damages or attorneys' fees with the Copyright Office
under regulations that it will promulgate not later than 180
days after the date of enactment of this section. Before this
system is operating, the Copyright Office shall also promulgate
regulations within 30 days of enactment for the filing of
contact information for transmitting entities. This contact
information database will operate up to 180 days after
enactment after which the database of works by copyright owners
will control whether statutory damages and attorneys' fees are
available. Copyright owners must provide a 90-day notice to
transmitting entities about a claim for royalties up to 180
days after enactment after which time transmitting entities
must search the new database established by the Copyright
Office for such works.
To ensure that works currently in the public domain remain
in the public domain, works fixed prior to January 1, 1923, are
specifically excluded from the payment of any royalties under
this provision.
3. Title III--Allocation for Music Producers
The third title of S. 2823 is a modified version of S.
2625, the ``Allocation for Music Producers,'' or the ``AMP
Act.'' Currently, the provisions included in this title would
only impact the one collective designated by the Copyright
Royalty Judges to distribute royalties under section 114(f),
SoundExchange. SoundExchange has gained widespread industry
support with its efforts to efficiently distribute webcasting
royalties to copyright owners and artists that proactively
identify themselves as due such royalties or, in the absence of
such identification, can be identified through the efforts of
SoundExchange. It is hoped that the culture of transparency
that SoundExchange has brought to the music industry will be
duplicated elsewhere, including in the new mechanical licensing
collective established by the first title of this legislation.
In order to pay certain creators, such as producers,
mixers, and sound engineers, who were not by statute receiving
royalties under section 114, SoundExchange has had a policy
since 2004 of honoring ``letters of direction'' to pay these
creators a portion of the featured performer's royalties.
According to information supplied by SoundExchange,
approximately 2,000 active letters of direction are on file
with them generating royalties for these creators, although
more such letters of direction that do not have any royalty
payments due are on file with them. SoundExchange has received
only a limited number of letter of direction submissions that
do not meet its conditions for execution and has worked with
the interested parties to ensure proper execution of them once
corrected by the creators.
It is expected that SoundExchange will continue to
implement such policies in a transparent and efficient manner,
and to the extent that any other distribution collective
designated in the future by the Copyright Royalty Judges for
the distribution of receipts from the licensing of
transmissions in accordance with section 114(f), also do so.
Nothing in section 114(g)(5) requires that SoundExchange modify
any of its current policies in place for letters of direction
for recordings fixed on or after November 1, 1995. Section
114(g)(5) simply makes the provision of the letter of direction
system a statutory requirement while giving SoundExchange, and
any future designated distribution collective, the discretion
necessary to operate such a system. The effective date of
section 114(g)(5)(B) is set as January 1, 2020, by Section 303
of the legislation to correspond both to the need for
SoundExchange to update its internal systems and the alignment
with the beginning of a calendar tax year.
Although Section 302(a) creates a brief statutory framework
for a SoundExchange system already in operation, section 302(b)
creates a more detailed statutory framework for a letter of
direction system for works fixed before November 1, 1995, which
was the date of enactment of P.L. 104-39, the Digital
Performance Right in Sound Recordings Act of 1995. Prior to
this date, producers, mixers, and sound engineers would not
have contemplated or predicted the payment of digital royalties
in their contracts with an artist. The legislation identifies
the manner in which a letter of direction for two percent of
total royalties can be submitted for such works; what
additional efforts the collective and qualifying person must
make over a four-month period to notify the featured performers
in advance of any royalty distribution to one or more
producers, mixers, or sound engineers; and the process for
objecting to such letters of direction. After a valid letter of
direction for a specific work goes into effect, the payout of
total royalties through SoundExchange or another collective
designated in the future for such distributions would be
allocated as follows:
50 percent of the receipts shall be paid to
the copyright owner of the exclusive right under
section 106(6) to publicly perform a sound recording by
means of a digital audio transmission.
2.5 percent of the receipts shall be
deposited in an escrow account managed by an
independent administrator jointly appointed by
copyright owners of sound recordings and the American
Federation of Musicians (or any successor entity) to be
distributed to nonfeatured musicians (whether or not
members of the American Federation of Musicians) who
have performed on sound recordings.
2.5 percent of the receipts shall be
deposited in an escrow account managed by an
independent administrator jointly appointed by
copyright owners of sound recordings and the American
Federation of Television and Radio Artists (or any
successor entity) to be distributed to nonfeatured
vocalists (whether or not members of the American
Federation of Television and Radio Artists) who have
performed on sound recordings.
43 percent of the receipts shall be paid, on
a per sound recording basis, to the recording artist or
artists featured on such sound recording (or the
persons conveying rights in the artists' performance in
the sound recordings).
2 percent of the receipts shall be paid, on
a per sound recording basis, to those eligible for
payment(s) identified in section 114(g)(6)(B).
Similar to section 114(g)(5)(B), section 303 of the
legislation delays the effective date of the new section
114(g)(6)(E) to January 1, 2020, to accomodate the need for
SoundExchange to update its internal systems and align with the
beginning of a calendar tax year.
Section 302(c) makes several technical and conforming
amendments to section 114(g) that should have no operative
impact upon any entity operating currently or in the future.
II. History of the Bill and Committee Consideration
A. INTRODUCTION OF THE BILL
On March 15, 2018, the Senate Judiciary Committee hosted a
bipartisan staff briefing led by Judiciary Committee staff to
discuss pending music legislation. Briefers included Mr. David
Israelite, President and CEO, National Music Publishers
Association; Mr. Bart Herbison, Executive Director, Nashville
Songwriters Association International; Mr. Chris Harrison, CEO,
Digital Media Association; Ms. Clara Kim, General Counsel,
American Society of Composers, Authors and Publishers; Mr. Stu
Rosen, General Counsel, Broadcast Music, Inc.; Mr. Michael
Lewan, Director of Government Relations, Recording Academy; Mr.
Mitch Glazier, President, Recording Industry Association of
America; Mr. Michael Beckerman, CEO, Internet Association; Ms.
Paula Calhoun, Executive Vice President and General Counsel,
Music Choice; Ms. Cynthia Greer, Vice President and Associate
General Counsel, SiriusXM; Ms. Meredith Rose, Policy Counsel,
Public Knowledge; and Mr. Curtis LeGeyt, Executive Vice
President-Government Relations, National Association of
Broadcasters.
On May 10, 2018, Mr. Hatch introduced S. 2823, the Music
Modernization Act. Senators Grassley, Whitehouse, Alexander,
Coons, Kennedy, Harris, Corker, Durbin, Isakson, Leahy, Crapo,
Jones, Tillis, Perdue, Capito, Nelson and Blunt were original
cosponsors. The bill was referred to the Committee on the
Judiciary.
On May 15, 2018, the Committee on the Judiciary held a
hearing entitled ``Protecting and Promoting Music Creation for
the 21st Century.'' Testimony regarding S. 2823 was received
from Mr. Smokey Robinson, Recording Artist, Songwriter, and
Producer; Mr. David Israelite, President and CEO, National
Music Publishers Association; Ms. Meredith Rose, Policy
Counsel, Public Knowledge; Mr. Justin Roberts, GRAMMY-Nominated
Singer/Songwriter, Trustee, Recording Academy; Mr. Chris
Harrison, CEO, Digital Media Association, Mr. Dave Del Beccaro,
CEO, Music Choice; Mr. Mitch Glazier, President, Recording
Industry Association of America; and, Mr. Josh Kear,
Songwriter.
B. COMMITTEE CONSIDERATION
The Committee on the Judiciary considered S. 2823 on June
28, 2018. Mr. Grassley offered a substitute amendment which was
adopted by unanimous consent. The Committee voted to report S.
2823 as amended, favorably to the Senate, by a voice vote.
III. Section-by-Section Summary of the Bill
The following discussion describes the bill as reported by
the Committee.
TITLE I. MUSICAL LICENSING MODERNIZATION
Section 101. Short Title
Section 101 sets forth the short title of Title I as the
``Musical Works Modernization Act.''
Sec. 102. Blanket license for digital uses and mechanical licensing
collective.
Section 102 comprises the vast majority of the overall
legislation.
The first part of Section 102 updates existing 17 U.S.C.
Sec. 115 (a)-(c), partly to accommodate the new provisions
added by 115(d).
Subsection 115(a) is amended to clarify what requirements
for obtaining a compulsory license exist for digital music
providers, and it specifies when a person may seek a license
for the duplication of a sound recording.
Subsection 115(b) is amended by removing the ability of
persons seeking to make digital phonorecord deliveries to file
a notice of intent with the Copyright Office and instead
requiring such notice to be filed with the copyright owner. In
the event that a party does not file such notice for non-
digital phonorecord deliveries, that party is permanently
ineligible for the compulsory licenses, although they may
obtain voluntary licenses from the copyright owner(s). In the
case of digital phonorecord deliveries, the failure to obtain a
license forecloses the ability of a party to obtain such
license for three years.
Subsection 115(c) is amended to account for the new blanket
licensing system created by the new legislation in 115(d).
The latter part of section 102 strikes the existing
subsection 115(d) of Title 17 that currently contains only one
definition and replaces it with a significantly expanded
subsection to create a new compulsory blanket licensing system
as follows:
Paragraph 1 of the new subsection 115(d) defines the scope
of the new compulsory license and how it interacts with other
existing licenses, such as a voluntary license. By obtaining
and complying with the terms of such license, a digital music
provider is not subject to an infringement action under
paragraphs (1) and (3) of section 106.
Paragraph 2 sets forth the availability of the blanket
license, including related Copyright Office regulations, its
effective date, and dispute resolution in federal district
court.
Paragraph 3 creates the framework of the new mechanical
licensing collective created by the legislation beginning with
subparagraph A that identifies the requirement for a new
``mechanical licensing collective'' that shall meet specified
minimum criteria including being: (1) a nonprofit single
entity, (2) endorsed by and enjoying support from the majority
of musical works copyright owners as measured over the
preceding three years, (3) able to demonstrate that it has or
will have prior to the license availability date the necessary
capabilities to perform the required functions, and (4)
designated by the Register of Copyrights, with the approval of
the Librarian of Congress pursuant to section 702.
Subparagraph B sets forth the initial process for
designation of the collective by the Register as well as
periodic opportunities every five years for re-designation. The
Register is authorized to choose a closest alternate
designation in case every condition set forth in subparagraph
(A) is not met. However, before an initial designation is made,
all members of the Board of Directors and the various
committees, along with contact information for the collective,
are required to be identified with their affiliations so that
interested parties can submit comments to the Register on
whether the parties meet the requirements set forth in
subparagraph (D) of the bill. This requirement is not waivable
by the Register and is not subject to the alternate designation
language.
Subparagraph C identifies the authorities and functions of
the collective along with three specific provisions: the
ability of the collective to administer voluntary licenses, a
restriction on negotiating or granting licenses for public
performance rights, and a restriction on lobbying.
Subparagraph D sets forth the governance of the collective.
The collective's Board of Directors will consist of 14 voting
members and 3 nonvoting members, and will establish bylaws that
will be available to the public. The Board of Directors will
meet no less than twice a year. The Board of Directors will
establish an operations advisory committee, an unclaimed
royalties oversight committee, and a dispute resolution
committee. The collective is also required to produce a public
annual report, in addition to an independent officers
requirement providing that individuals serving as officers of
the collective may not, at the same time, also be an employee
or agent of any member of the Board of Directors or any entity
represented by a member of the Board of Directors. Since the
Board of Directors and committee member requirements along with
the annual report are statutory in nature, these requirements
are not waivable by the Register or subject to modification by
the Board of Directors. The subparagraph also requires the
collective to ensure that its policies and practices are
transparent and accountable, identify a point of contact for
inquiries and complaints, and establish an anti-comingling
policy. Finally the subparagraph requires that an audit be
conducted, beginning in the fourth full calendar year after the
initial designation of the collective by the Register and in
every fifth year thereafter, to examine the implementation and
efficacy of the collective's procedures on royalty funds, how
well the collective guards against fraud, abuse, waste, and the
unreasonable use of funds, and how it protects the
confidentiality of financial, proprietary and other sensitive
information. The audit will be made available to the Register
and the public.
Subparagraph E explains in detail the fields in the new
musical works database that the collective is required to
create based upon information provided to them by digital music
services and under what conditions the information is made
available to others, including the public. The required
information in the database depends upon whether a work is
considered matched or unmatched. To the extent that information
is missing, musical works copyright owners with works in the
database are required to undertake commercially reasonable
efforts to deliver the names of the sound recording in which
their works are embodied. The database ought also to be
accessible.
Subparagraph F requires the collective to maintain publicly
accessible lists of blanket and significant nonblanket
licensees.
Subparagraph G sets forth how royalties are collected and
then distributed along with efforts to collect royalties from
bankrupt licensees.
Subparagraph H clarifies that any unmatched royalties shall
be held by the collective for at least three years after they
were first accrued and must be kept in an interest bearing
account.
Subparagraph I sets forth the claiming process for works
that are originally deemed unmatched. The collective is
required to undertake a process to publicize the existence of a
searchable database. Once a work is claimed, the royalties and
accrued interest for such work shall be paid out and the
musical works database shall be updated for future matching.
Subparagraph J determines how unclaimed royalties are
distributed on a market share basis after the holding period
specified in subparagraph H. The unclaimed royalties oversight
committee shall establish policies and procedures for such
distributions subject to the approval of the Board of Directors
of the collective. The collective shall maintain a publicly
accessible online facility with contact information listing
unmatched musical works (and shares of works), through which a
copyright owner may assert an ownership claim with respect to
such a work (and share of such work), and engage in good faith
efforts to publicize the existence of the collective and
ability to claim unclaimed royalties, the procedures by which
copyright owners may receive royalties, and information on
transfers of accrued royalties and pending unclaimed royalties.
The collective shall also participate in music industry
conferences and events to publicize these matters. Unclaimed
royalties are to be distributed based upon market share data
that is confidentially provided to the collective by copyright
owners. Ninety calendar days notice is required for such
distributions and songwriters must be credited at least 50
percent of the royalty paid to their publisher.
Subparagraph K sets forth the functions of the dispute
resolution committee concerning ownership disputes among
musical works copyright owners. Pursuant to subparagraph (D)
the collective is only liable for gross negligence in these
functions. It will hold disputed funds in accordance with
subparagraph (H)(ii). However, a copyright owner has the
ultimate right to seek redress in a federal district court
pursuant to paragraph (10)(E).
Subparagraph L sets forth the verification and audit
process for copyright owners to audit the collective, although
parties may agree on alternate procedures.
Subparagraph M concerns the ability of copyright owners and
their agents to access the records of the collective subject to
confidentiality agreements prescribed by the Register.
Paragraph 4 specifies the terms and conditions for a
blanket license.
Subparagraph A identifies the data that must be reported to
the collective by a digital music provider along with its
royalty payments not later than 45 calendar days after the end
of a monthly reporting period. The Register shall specify
information technology requirements of such reports along with
the maintenance of the records of use.
Subparagraph B requires digital music providers to engage
in good-faith, commercially reasonable efforts to obtain
information from sound recording copyright owners for use by
the collective, including in its database.
Subparagraph C requires digital music providers and
significant nonblanket licensees to pay the administrative
assessment established under paragraph (7)(D).
Subparagraph D sets forth the verification and audit
process for the collective to audit the digital music
providers, although the parties may agree on alternate
procedures.
Subparagraph E identifies the conditions by which a digital
music provider may be considered in default and the
consequences of such default. A digital music provider may seek
review of such default on a de novo basis in a federal district
court of competent jurisdiction.
Paragraph 5 identifies the role of the digital licensee
coordinator, its initial designation and potential
redesignation, as well as its authorities and functions. Like
the collective, the coordinator is prohibited from lobbying.
However, unlike as would be the case with the collective, it is
possible for the new blanket licensing system to proceed in the
event a digital licensee coordinator cannot be chosen. The
coordinator is authorized to perform a number of functions,
including assisting the mechanical licensing collective in
publicizing the existence of the collective and the ability of
copyright owners to claim royalties for unmatched musical
works.
Paragraph 6 sets forth the requirements for significant
nonblanket licensees as defined in subsection (e)(31),
including reporting requirements and payment of the
administrative assessment. Should a significant nonblanket
licensee fail to pay the assessment or submit the required
reports, either is actionable in a federal district court for
damages up to three times the amount of the unpaid assessment,
injunctive relief, costs, and attorneys' fees.
Paragraph 7 details the funding of the new collective by
the digital music providers and significant nonblanket
licensees through a combination of voluntary contributions and
an administrative assessment determined by the Copyright
Royalty Judges in a separate proceeding. The fee shall be
determined on either a percentage of royalties basis or other
usage-based formula with a minimum amount due that covers the
reasonable costs of the collective. Timelines for the adoption
of the initial and future administrative assessments are
established in this paragraph along with granting the Copyright
Royalty Judges continuing authority to amend their decisions.
Paragraph 8 provides guidance to the Copyright Royalty
Judges as to how interim rates should be established as well as
the new late fee for nonpayment of royalties to the collective
under the blanket license. Neither the mechanical licensing
collective nor the digital licensee coordinator may participate
in such rate setting activities except to provide information
to other parties in the proceeding.
Paragraph 9 identifies the process to transfer the existing
licensing system to the blanket system. Existing compulsory
licenses will automatically become blanket licenses on the
license availability date and existing voluntary licenses will
continue unchanged until they expire or parties agree to amend
or discontinue them. Immediately after enactment of the
legislation, the Copyright Office shall discontinue accepting
notices of intention with regards to works that would be
covered by the new blanket license. However, prior to the
license availability date, liability is waived if a valid
notice was filed prior to the enactment date.
Paragraph 10 provides for a limitation on liability for
prior unlicensed uses that have occurred after January 1, 2018,
so long as digital music providers engage in at least monthly
good-faith efforts to locate copyright owners and pay their
royalties prior to the license availability date. Not later
than 45 days after the blanket license is available, any non-
matched royalties must be turned over to the collective, along
with as much information about usage and ownership information
as possible. Late fees and infringement causes of action are
also limited subject to these conditions. Two savings clauses
are included to clarify that nothing in this paragraph limits
or alters any existing right of action and that any aggrieved
party may seek an action in federal district court if there is
an issue that is not adequately resolved by the Board.
Paragraph 11 details the legal protections for various
licensing activities, including antitrust exemptions and common
agent exemptions. The collective is not liable for good-faith
activities under a gross negligence standard, but none of its
activities are immune from suit in federal district court. Due
to the distribution of unclaimed royalties to other copyright
owners, state laws on abandoned property are preempted.
Paragraph 12 gives the Register authority to conduct
proceedings and adopt any necessary regulations as necessary or
appropriate with the exception of the administrative assessment
that is to be determined by the Copyright Royalty Judges. Among
the regulations required to be established are those necessary
to govern business confidentiality. All such regulations are
subject to judicial review.
Paragraph 13 contains two savings clauses for limiting the
scope of the blanket license and making clear that rights of
public performance are not affected.
A new subsection 115(e) is created that contains 36 new
definitions.
Section 102(b) amends the existing 801(b) standard such
that the administrative assessment will henceforth be
determined under the provisions created by this legislation,
rather than the procedures of existing law.
Section 102(c) sets the effective date of certain new
provisions.
Section 102(d) directs the Copyright Royalty Judges to
update their regulations within nine months to be consistent
with the legislation.
Section 102(e) requires the Register to engage in public
outreach and educational activities.
Section 102(f) requires the Register to submit to the
Senate and House Judiciary Committees a report recommending
best practices for the collective to implement regarding
identification and location of musical work copyright owners,
claims of royalties, and reduction of unclaimed royalties.
Sec. 103. Amendments to section 114
Section 103 creates a uniform willing buyer, willing seller
rate standard by amending 17 U.S.C. 114(f), repealing 17 U.S.C.
114(i), and modifying 801(b), while ensuring that certain
transmissions by a broadcaster shall not take into account
license fees for public performances of sound recordings under
17 U.S.C. 106(6). The discounted ``pre-existing services'' rate
standard established in 1976 is removed in order to equalize
the rate setting process for all licensees. Further, it is
clarified that the repeal of 114(i) shall not be taken into
account for the setting of rates for sound recordings under
section 112(e) or 114(f). A series of additional technical and
conforming amendments rearranges several other provisions in
response to these changes.
Sec. 104. Random assignment of rate court proceedings
Section 104 creates an updated system to randomly assign
ASCAP and BMI rate court cases to judges of the Southern
District of New York other than the two judges who oversee the
consent decrees. These two judges will no longer hear rate
court proceedings.
Sec. 105. Performing rights society consent decrees
Section 105 requires the Department of Justice to provide
timely briefings upon request of any Member of the Senate and
House Judiciary Committees regarding the status of any review
of a consent decree with a performing rights society, such as
ASCAP or BMI. The Department of Justice shall also share with
such Members detailed and timely information and pertinent
documents related to the review, subject to rules of
confidentiality and agency deliberative process. Before filing
a motion to terminate a consent decree between the United
States and a performing rights society, the Department of
Justice is required to notify such Members and provide them
with information regarding the impact of the proposed
termination on the market for licensing the public performance
of musical works should the motion be granted. The notification
will be provided in writing to the Chairmen and Ranking Members
of the Senate and House Judiciary Committees not later than 90
days prior to the filing of the motion, and will include an
explanation of the process used to review the decree, a summary
of the public comments, and any other information requested by
Congress. This section only applies to consent decrees between
the United States and a performing rights society.
Sec. 106. Effective date
Section 106 provides that Title I and the amendments made
by this Title shall take effect on the date of enactment of
this Act.
TITLE II. COMPENSATING LEGACY ARTISTS FOR THEIR SONGS, SERVICE, AND
IMPORTANT CONTRIBUTIONS TO SOCIETY ACT
Section 201. Short title
Section 201 designates the short title of this Title of the
bill as the ``Compensating Legacy Artists for Their Songs,
Service, and Important Contributions to Society Act'' or the
``CLASSICS Act.''
Sec. 202. Unauthorized digital performance of pre-1972 sound recordings
Section 202 amends Title 17 by adding a new Chapter 14
concerning pre-1972 works titled ``Chapter 14--Unauthorized
Digital Performance of Pre-1972 Sound Recordings'' as follows:
Chapter 14 creates a remedy under section 502 through 505
for the use of works fixed between January 1, 1923, and
February 14, 1972, when no federal right existed. However,
should a transmitting entity make such transmissions as they do
for those works fixed on or after February 15, 1972, including
statutory royalties equivalent to those works, these
transmissions are considered authorized. Direct licensing of
such works from the copyright owners is recognized so long as
the collective that receives and distributes such payments is
paid 50% of the proceeds with 50% of the performance royalties
credited as payments due under the license. State common law
copyrights or other equivalent rights are preempted as are
claims under them. Fair use and library use privileges in
sections 108, 110(1), and 110(2) are available as a defense
along with section 512. A rule of construction for section
108(h) provides that with respect to the application of setion
108(h) to a claim for unauthorized performance of a sound
recording first fixed on or after January 1, 1923, and before
February 15, 1972, under subsection (a) of this section, the
phrase ``during the last 20 years of any term of copyright of a
published work'' in such section 108(h) shall be construed to
mean at any time after the effective date of this section. In
order to obtain statutory damages, a copyright owner must file
a schedule of pre-1972 works for which the copyright owner is
seeking royalties. No suits may arise until 90 days have passed
since the works are first indexed into the public records of
the Copyright Office. Transmitting entities must also submit
their contact information to the Copyright Office so that
copyright owners can identify which services are transmitting
their works and send them a notice to stop using such works in
the event they choose not to receive webcasting royalties. Such
notice will prevent an award of statutory damages or attorney's
fees from being imposed for activities within the first 90 days
a notice is sent to the transmitter. In case the notice is
undeliverable, the 90-day period begins on the date of the
attempted delivery. Section 230 safe harbors also apply in the
use of such works.
Sec. 203. Effective date
Section 203 sets the effective date of Title II as the date
of enactment of the overall bill.
TITLE III. ALLOCATION FOR MUSIC PRODUCERS (AMP) ACT
Section 301. Short title
Section 301 designates the short title of this section of
the bill as the ``Allocation for Music Producers Act'' or the
``AMP Act.''
Sec. 302. Payment of statutory performance royalties
Section 302(a) codifies an existing practice of
SoundExchange to accept letters of direction in order to pay
producers, sound engineers, and mixers a portion of the
webcasting royalties that it collects. Section 302(b) expands
this program to cover new royalties for pre-1995 works that
will be received by SoundExchange due to enactment of Title II.
The new program requires, in the absence of a letter of
direction, at least four months' notice to a copyright owner
with no objections from the copyright owner before a set
percentage of royalties (2% of all webcasting royalties from a
particular work) is then paid to producers, sound engineers,
and mixers.
Sec. 303. Effective date
Section 303 sets the effective date of all three Titles of
the bill as the date of enactment with the exception of certain
changes to 114(g) made in Title III.
IV. Congressional Budget Office Cost Estimate
The Committee sets forth, with respect to the bill, S.
2823, the following estimate and comparison prepared by the
Director of the Congressional Budget Office under section 402
of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 17, 2018.
Hon. Chuck Grassley,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed revised cost estimate for S. 2823, the
Music Modernization Act. This cost estimate supersedes the
estimate for S. 2823 that CBO transmitted on August 13, 2018.
The earlier cost estimate did not have the correct short title
for S. 2823. This cost estimate corrects that error.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Raben.
Sincerely,
Keith Hall,
Director.
Enclosure.
S. 2823--Music Modernization Act
Summary: Under current law, a digital music provider (such
as Spotify, Apple Music, or Pandora) must pay the copyright
owner a royalty fee to use a protected work of music. If it
does not otherwise have a voluntary license agreement with the
copyright owner to use the work, the music provider must file a
notice of intent--on a song-by-song or record-by-record basis--
with the copyright owner or the U.S. Copyright Office when it
seeks to use any copyrighted digital musical work.
S. 2823 would eliminate notice-of-intent licensing for
digital musical works and direct the Copyright Office to
designate a nonprofit entity--a mechanical licensing
collective, or MLC--to administer a new blanket-licensing
system. Under such a license, a digital music provider could
use certain copyrighted musical works without filing a notice
of intent to do so. S. 2823 also would require the MLC to
collect royalties from digital music providers using the
blanket license and distribute them to copyright owners.
CBO estimates that enacting S. 2823 would increase deficits
by $47 million over the 2021-2028 period. That amount comprises
an increase in direct spending of $222 million and an increase
in revenues of $175 million. In addition, CBO estimates that,
over the 2019-2023 period, it would cost $1 million to
implement the bill, subject to the availability of appropriated
funds.
Because enacting S. 2823 would affect direct spending and
revenues, pay-as-you-go procedures apply.
CBO estimates that enacting S. 2823 would not increase net
direct spending by more than $2.5 billion or on-budget deficits
by more than $5 billion in any of the four consecutive 10-year
periods beginning in 2029.
S. 2823 would impose intergovernmental mandates, as defined
in the Unfunded Mandates Reform Act (UMRA), in the form of
preemptions of state laws, but CBO estimates that the costs of
those mandates would fall well below the threshold established
in UMRA for intergovernmental mandates ($80 million in 2018,
adjusted annually for inflation).
The bill would impose private-sector mandates on companies
that provide digital music services by:
Requiring those companies to pay higher fees
when they apply for licenses issued by the MLC to cover
the administrative costs of the organization;
Requiring those companies to provide usage
reports to the MLC each month detailing the artists and
works that have been streamed; and
Changing the processes used to resolve
disputes over claims of copyright infringement in
certain cases.
Because of the uncertainty in determining the effect on
settlements due to copyright holders under the new dispute
resolution process, CBO cannot determine whether the aggregate
cost of the mandates on private entities would exceed the
annual threshold established in UMRA for private-sector
mandates ($160 million in 2018, adjusted annually for
inflation).
Estimated cost to the Federal Government: The estimated
budgetary effect of S. 2823 is shown in the following table.
The costs of the legislation fall within budget function 370
(commerce and housing credit).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-2023 2019-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
INCREASES IN DIRECT SPENDING
Estimated Budget Authority........................... 0 0 0 20 28 28 29 29 30 31 31 76 227
Estimated Outlays.................................... 0 0 0 17 27 28 29 29 30 31 31 72 222
INCREASES IN REVENUES
Estimated Revenues................................... 0 0 0 16 22 22 22 23 23 23 24 59 175
NET INCREASE IN THE DEFICIT FROM INCREASES IN DIRECT SPENDING AND REVENUES
Impact on Deficit.................................... 0 0 0 1 5 6 6 7 7 7 8 13 47
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components may not sum to totals because of rounding.
CBO estimates that discretionary spending to implement S. 2823 would total $1 million over the 2019-2023 period, subject to the availability of
appropriated funds.
Basis of estimate: For this estimate, CBO assumes that S.
2823 will be enacted near the end of fiscal year 2018 and that
the necessary amounts will be available each year. Estimated
outlays are based on historical patterns for similar
activities.
Under S. 2823, the Copyright Office would designate an
entity to act as the MLC and the judges of the Copyright
Royalty Board would establish an administrative assessment to
be paid by users of the blanket license and by certain other
large users of copyrighted digital musical works. That
assessment would be designed to cover the costs of
establishing, maintaining, and operating the MLC. Payment of
the assessment would be compulsory and could be enforced
through a court order. In CBO's view, in keeping with guidance
in the 1967 Report of the President's Commission on Budget
Concepts, the cash flows from the assessment and subsequent
spending should be recorded in the federal budget.\1\ Under the
bill, the initial administrative assessment would be effective
on January 1 two years after the date of enactment of the
legislation and CBO expects that collections would begin in
fiscal year 2021.
---------------------------------------------------------------------------
\1\For more information, see Congressional Budget Office, How CBO
Determines Whether to Classify an Activity as Governmental When
Estimating Its Budgetary Effects (June 2017), www.cbo.gov/publication/
52803.
---------------------------------------------------------------------------
S. 2823 would make several changes to royalty rates and to
protections for certain copyright holders of sound recordings
and musical works. Because royalty amounts collected by the
U.S. Copyright Office or its designated agents and later
distributed to copyright owners are not recorded in the federal
budget, CBO estimates that implementing those provisions would
have no budgetary effect.
Direct Spending
S. 2823 would authorize the MLC to spend amounts collected
under the administrative assessment levied by the Copyright
Royalty Judges, without further appropriation, to cover the
MLC's costs. Such expenditures would be considered direct
spending. For this estimate, CBO expects that the Copyright
Royalty Judges would estimate the operating costs of the MLC
accurately and set an assessment rate to equal those costs each
year. Using information from industry experts and the
administrative costs to operate entities that engage in similar
activities, CBO estimates that expenditures by the MLC would
average $30 million annually and would total $227 million over
the 2021-2028 period.
Revenues
S. 2823 would authorize the Copyright Royalty Judges to
levy an assessment on digital music providers with blanket
licenses and on certain other digital music providers that
instead obtain voluntary licenses to use specific copyrighted
musical works. The assessment would be based on the entities'
use of musical works and set at a rate intended to fund the
operations of the MLC. For this estimate, CBO expects that the
assessment would be set to recover all of the allowable costs
of the MLC and would be collected in full in each year;
therefore, CBO estimates that collections would average about
$30 million annually. Those amounts would be recorded in the
budget as revenues. CBO estimates that enacting S. 2823 would
increase gross revenues by $227 million over the 2021-2028
period.
Because excise taxes and other indirect business taxes
(like the bill's proposed assessment) reduce the base of income
and payroll taxes, the amounts collected would lead to
reductions in revenues from income and payroll taxes.\2\ As a
result, the gross assessments under the bill would be partially
offset by a loss of receipts of 22 percent to 24 percent of
that gross amount each year. Thus, CBO estimates that enacting
S. 2823 would increase net revenues by $175 million over the
2021-2028 period.
---------------------------------------------------------------------------
\2\See Congressional Budget Office, The Role of the 25 Percent
Revenue Offset in Estimating the Budgetary Effects of Legislation
(January 2009), www.cbo.gov/publication/20110.
---------------------------------------------------------------------------
Spending Subject to Appropriation
S. 2823 would require the Copyright Office and Copyright
Royalty Judges to make rules that create the MLC, establish a
digital licensee coordinator, establish a blanket-licensing
system, and set new rates for royalty payments. Under the bill,
the Copyright Office also would be required to engage in
outreach efforts regarding changes to the copyright royalty
system and to complete a report with recommendations to the MLC
to identify copyright owners with unclaimed royalties and to
reduce the incidence of unclaimed royalties. Using information
from the Copyright Office, CBO estimates that those activities
would cost the agency $1 million over the 2019-2023 period.
S. 2823 also would require the Department of Justice (DOJ)
to provide briefings upon request to members of the House and
Senate Committees on the Judiciary regarding the status of its
review of consent decrees between the U.S. government and a
performing- rights society. DOJ also would be required to
notify and provide certain information to members of Congress
before filing a motion to terminate such a consent decree. CBO
estimates that any administrative costs associated with such
briefings and notifications would be insignificant and would be
subject to the availability of appropriated funds.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 2823, THE MUSIC MODERNIZATION ACT, AS ORDERED REPORTED BY THE SENATE COMMITTEE ON THE JUDICIARY ON JUNE 28,
2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2018-2023 2018-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT
Statutory Pay-As-You-Go Effect....................... 0 0 0 1 5 6 6 6 7 7 8 13 47
Memorandum:
Changes in Outlays............................... 0 0 0 17 27 28 29 29 30 31 31 72 222
Changes in Revenues.............................. 0 0 0 16 22 22 22 23 23 23 24 59 175
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in long-term direct spending and deficits: CBO
estimates that enacting S. 2823 would not increase net direct
spending by more than $2.5 billion or on-budget deficits by
more than $5 billion in any of the four consecutive 10-year
periods beginning in 2029.
Mandates: S. 2823 would impose intergovernmental and
private-sector mandates as defined in UMRA. CBO estimates that,
in the aggregate, the cost of mandates imposed on public
entities would not exceed the annual threshold established in
that act ($80 million in 2018, adjusted annually for
inflation). CBO cannot determine whether the aggregate cost of
mandates on private entities would exceed the annual threshold
established in UMRA for private-sector mandates ($160 million
in 2018, adjusted annually for inflation).
Mandates That Apply to State Governments Only
S. 2823 would impose intergovernmental mandates as defined
in UMRA by preempting state laws. In establishing a new system
for collecting and distributing royalties through the MLC, S.
2823 would preempt state laws that allow states to collect
royalties that remain unclaimed for a certain period. Using
information from music industry sources about current unclaimed
royalties and the efforts states make to claim them, CBO
estimates that the amount of revenue that states might forgo as
a result of the preemption would be small.
S. 2823 also would establish federal copyright protections
for musical works recorded before 1972 and would preempt state
property laws that govern infringement claims regarding those
works. Although the preemption would limit the application of
state laws, it would impose no duty on states that would result
in additional spending or a loss of revenues.
In addition, S. 2823 would give producers, mixers, and
sound engineers a statutory right to seek payment of their
royalties through a nonprofit collective designated by the
Copyright Royalty Judges. The nonprofit collective would adopt
and implement a policy to provide for royalty distributions
that would supersede and preempt any state law, including
common law, concerning abandoned property. CBO estimates that
the preemption would not affect the budgets or revenues of
state governments.
Mandates That Apply to Private Entities
S. 2823 would impose private-sector mandates on companies
that provide digital music services. Under current law, digital
music providers negotiate directly with copyright owners for
the right to use musical works or, when the copyright owner
cannot be identified, pay fees to the Copyright Office for the
right to use the music. S. 2823 would direct those companies to
pay fees instead to the MLC to administer a new blanket-
licensing system. Using information from the Copyright Office
and music industry sources, CBO estimates that the fees
companies would pay to the MLC would range from $22 million to
$28 million annually, beginning in 2021. (Those amounts include
a small savings that would result from companies' no longer
paying fees to the Copyright Office for the covered services.)
As a condition of receiving a blanket license, companies
that provide digital music services would be required to submit
reports to the MLC detailing the artists and works streamed
each month. Because such companies already maintain and provide
similar information under current law, CBO estimates that the
costs of compliance would not be significant.
Finally, the bill would establish new processes for
settling legal disputes over the infringement of copyrights for
musical works by ending outstanding--or prohibiting future--
lawsuits by copyright owners in certain cases. In the case of
lawsuits alleging copyright infringement filed after January 1,
2018, the bill would terminate those lawsuits. In lieu of
settlement under the terminated lawsuits, copyright owners
would be entitled to royalties under the rates set by the MLC
for music streamed during the three years preceding the suit
(the period of the federal statute of limitations on claims of
copyright infringement); in exchange, digital music companies
would receive liability protection as long as they made good-
faith efforts to aid the MLC in matching works with their
copyright owners and to make timely payments of royalties.
Similarly, in the case of lawsuits involving musical works
recorded before 1972 and brought under state law, the bill
would nullify those claims and substitute a federal process
under which copyright holders would be entitled to three years'
worth of back royalties; in exchange, music companies would
receive protection from further claims.
In substituting those new processes for rights of legal
action under current federal or state law, S. 2823 would impose
mandates on copyright holders by terminating their existing
rights to make infringement claims. The costs of the mandates
would be the forgone value of awards and settlements for those
claims to the extent that the legislation resulted in lower
compensation than under current law. CBO is uncertain how the
value of royalties claimed by copyright owners in lawsuits
would be affected under the bill or how much those amounts
might differ relative to current law.
Previous CBO estimate: On April 25, 2018, CBO transmitted a
cost estimate for H.R. 5447, the Music Modernization Act, as
ordered reported by the House Committee on the Judiciary on
April 11, 2018. The estimated increases in direct spending and
revenues are the same for both pieces of legislation. S. 2823
includes provisions that would direct the Copyright Office to
engage in additional outreach efforts and to complete a report.
S. 2823 also includes provisions requiring DOJ to provide
briefings and additional information to members of Congress.
CBO's cost estimates for the two pieces of legislation reflect
those differences.
This estimate supersedes the cost estimate for S. 2823 that
CBO transmitted on August 13, 2018. The earlier cost estimate
did not have the correct short title for S. 2823. This cost
estimate corrects that error.
Estimate prepared by: Federal costs: Stephen Rabent and
Jacob Fabian; Mandates: Rachel Austin.
Estimate reviewed by: Kim P. Cawley, Chief, Natural and
Physical Resources Cost Estimates Unit; Susan Willie, Chief,
Mandates Unit; H. Samuel Papenfuss, Deputy Assistant Director
for Budget Analysis.
V. Regulatory Impact Evaluation
In compliance with rule XXVI of the Standing Rules of the
Senate, the Committee finds that no significant regulatory
impact will result from the enactment of S. 2823.
VI. Conclusion
The Music Modernization Act, S. 2823, will update music
copyright laws and improve the ability of artists and
professionals to receive compensation for their music
creativity.
VII. Changes to Existing Law made by the Bill, as Reported
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 2823, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
UNITED STATES CODE
TITLE 17--COPYRIGHTS
Chap. Sec.
101bject Matter and Scope of Copyright..........................
* * * * * * *
14. Unauthorized digital performance of pre-1972 sound recordings. 1401
CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT
* * * * * * *
Sec. 114. Scope of exclusive rights in sound recordings
(a) The exclusive rights of the owner of copyright in a
sound recording are limited to the rights specified by clauses
(1), (2), (3) and (6) of section 106, and do not include any
right of performance under section 106(4).
(b) The exclusive right of the owner of copyright in a
sound recording under clause (1) of section 106 is limited to
the right to duplicate the sound recording in the form of
phonorecords or copies that directly or indirectly recapture
the actual sounds fixed in the recording. The exclusive right
of the owner of copyright in a sound recording under clause (2)
of section 106 is limited to the right to prepare a derivative
work in which the actual sounds fixed in the sound recording
are rearranged, remixed, or otherwise altered in sequence or
quality. The exclusive rights of the owner of copyright in a
sound recording under clauses (1) and (2) of section 106 do not
extend to the making or duplication of another sound recording
that consists entirely of an independent fixation of other
sounds, even though such sounds imitate or simulate those in
the copyrighted sound recording. The exclusive rights of the
owner of copyright in a sound recording under clauses (1), (2),
and (3) of section 106 do not apply to sound recordings
included in educational television and radio programs (as
defined in section 397 of title 47) distributed or transmitted
by or through public broadcasting entities (as defined by
section 118(f)): Provided, That copies or phonorecords of said
programs are not commercially distributed by or through public
broadcasting entities to the general public.
(c) This section does not limit or impair the exclusive
right to perform publicly, by means of a phonorecord, any of
the works specified by section 106(4).
(d) Limitations on Exclusive Right.--Notwithstanding the
provisions of section 106(6)--
(1) Exempt transmissions and retransmissions.--The
performance of a sound recording publicly by means of a
digital audio transmission, other than as a part of an
interactive service, is not an infringement of section
106(6) if the performance is part of--
(A) a nonsubscription broadcast transmission;
(B) a retransmission of a nonsubscription
broadcast transmission: Provided, That, in the
case of a retransmission of a radio station's
broadcast transmission--
(i) the radio station's broadcast
transmission is not willfully or
repeatedly retransmitted more than a
radius of 150 miles from the site of
the radio broadcast transmitter,
however--
(I) the 150 mile limitation
under this clause shall not
apply when a nonsubscription
broadcast transmission by a
radio station licensed by the
Federal Communications
Commission is retransmitted on
a nonsubscription basis by a
terrestrial broadcast station,
terrestrial translator, or
terrestrial repeater licensed
by the Federal Communications
Commission; and
(II) in the case of a
subscription retransmission of
a nonsubscription broadcast
retransmission covered by
subclause (I), the 150 mile
radius shall be measured from
the transmitter site of such
broadcast retransmitter;
(ii) the retransmission is of radio
station broadcast transmissions that
are--
(I) obtained by the
retransmitter over the air;
(II) not electronically
processed by the retransmitter
to deliver separate and
discrete signals; and
(III) retransmitted only
within the local communities
served by the retransmitter;
(iii) the radio station's broadcast
transmission was being retransmitted to
cable systems (as defined in section
111(f)) by a satellite carrier on
January 1, 1995, and that
retransmission was being retransmitted
by cable systems as a separate and
discrete signal, and the satellite
carrier obtains the radio station's
broadcast transmission in an analog
format: Provided, That the broadcast
transmission being retransmitted may
embody the programming of no more than
one radio station; or
(iv) the radio station's broadcast
transmission is made by a noncommercial
educational broadcast station funded on
or after January 1, 1995, under section
396(k) of the Communications Act of
1934 (47 U.S.C. 396(k)), consists
solely of noncommercial educational and
cultural radio programs, and the
retransmission, whether or not
simultaneous, is a nonsubscription
terrestrial broadcast retransmission;
or
(C) a transmission that comes within any of
the following categories--
(i) a prior or simultaneous
transmission incidental to an exempt
transmission, such as a feed received
by and then retransmitted by an exempt
transmitter: Provided, That such
incidental transmissions do not include
any subscription transmission directly
for reception by members of the public;
(ii) a transmission within a business
establishment, confined to its premises
or the immediately surrounding
vicinity;
(iii) a retransmission by any
retransmitter, including a multichannel
video programming distributor as
defined in section 602(12) of the
Communications Act of 1934 (47 U.S.C.
522(12)), of a transmission by a
transmitter licensed to publicly
perform the sound recording as a part
of that transmission, if the
retransmission is simultaneous with the
licensed transmission and authorized by
the transmitter; or
(iv) a transmission to a business
establishment for use in the ordinary
course of its business: Provided, That
the business recipient does not
retransmit the transmission outside of
its premises or the immediately
surrounding vicinity, and that the
transmission does not exceed the sound
recording performance complement.
Nothing in this clause shall limit the
scope of the exemption in clause (ii).
(2) Statutory licensing of certain transmissions.--
The performance of a sound recording publicly by means
of a subscription digital audio transmission not exempt
under paragraph (1), an eligible nonsubscription
transmission, or a transmission not exempt under
paragraph (1) that is made by a preexisting satellite
digital audio radio service shall be subject to
statutory licensing, in accordance with subsection (f)
if--
(A)(i) the transmission is not part of an
interactive service;
(ii) except in the case of a transmission to
a business establishment, the transmitting
entity does not automatically and intentionally
cause any device receiving the transmission to
switch from one program channel to another; and
(iii) except as provided in section 1002(e),
the transmission of the sound recording is
accompanied, if technically feasible, by the
information encoded in that sound recording, if
any, by or under the authority of the copyright
owner of that sound recording, that identifies
the title of the sound recording, the featured
recording artist who performs on the sound
recording, and related information, including
information concerning the underlying musical
work and its writer;
(B) in the case of a subscription
transmission not exempt under paragraph (1)
that is made by a preexisting subscription
service in the same transmission medium used by
such service on July 31, 1998, or in the case
of a transmission not exempt under paragraph
(1) that is made by a preexisting satellite
digital audio radio service--
(i) the transmission does not exceed
the sound recording performance
complement; and
(ii) the transmitting entity does not
cause to be published by means of an
advance program schedule or prior
announcement the titles of the specific
sound recordings or phonorecords
embodying such sound recordings to be
transmitted; and
(C) in the case of an eligible
nonsubscription transmission or a subscription
transmission not exempt under paragraph (1)
that is made by a new subscription service or
by a preexisting subscription service other
than in the same transmission medium used by
such service on July 31, 1998--
(i) the transmission does not exceed
the sound recording performance
complement, except that this
requirement shall not apply in the case
of a retransmission of a broadcast
transmission if the retransmission is
made by a transmitting entity that does
not have the right or ability to
control the programming of the
broadcast station making the broadcast
transmission, unless--
(I) the broadcast station
makes broadcast transmissions--
(aa) in digital
format that regularly
exceed the sound
recording performance
complement; or
(bb) in analog
format, a substantial
portion of which, on a
weekly basis, exceed
the sound recording
performance complement;
and
(II) the sound recording
copyright owner or its
representative has notified the
transmitting entity in writing
that broadcast transmissions of
the copyright owner's sound
recordings exceed the sound
recording performance
complement as provided in this
clause;
(ii) the transmitting entity does not
cause to be published, or induce or
facilitate the publication, by means of
an advance program schedule or prior
announcement, the titles of the
specific sound recordings to be
transmitted, the phonorecords embodying
such sound recordings, or, other than
for illustrative purposes, the names of
the featured recording artists, except
that this clause does not disqualify a
transmitting entity that makes a prior
announcement that a particular artist
will be featured within an unspecified
future time period, and in the case of
a retransmission of a broadcast
transmission by a transmitting entity
that does not have the right or ability
to control the programming of the
broadcast transmission, the requirement
of this clause shall not apply to a
prior oral announcement by the
broadcast station, or to an advance
program schedule published, induced, or
facilitated by the broadcast station,
if the transmitting entity does not
have actual knowledge and has not
received written notice from the
copyright owner or its representative
that the broadcast station publishes or
induces or facilitates the publication
of such advance program schedule, or if
such advance program schedule is a
schedule of classical music programming
published by the broadcast station in
the same manner as published by that
broadcast station on or before
September 30, 1998;
(iii) the transmission--
(I) is not part of an
archived program of less than 5
hours duration;
(II) is not part of an
archived program of 5 hours or
greater in duration that is
made available for a period
exceeding 2 weeks;
(III) is not part of a
continuous program which is of
less than 3 hours duration; or
(IV) is not part of an
identifiable program in which
performances of sound
recordings are rendered in a
predetermined order, other than
an archived or continuous
program, that is transmitted
at--
(aa) more than 3
times in any 2-week
period that have been
publicly announced in
advance, in the case of
a program of less than
1 hour in duration, or
(bb) more than 4
times in any 2-week
period that have been
publicly announced in
advance, in the case of
a program of 1 hour or
more in duration,
except that the requirement of
this subclause shall not apply
in the case of a retransmission
of a broadcast transmission by
a transmitting entity that does
not have the right or ability
to control the programming of
the broadcast transmission,
unless the transmitting entity
is given notice in writing by
the copyright owner of the
sound recording that the
broadcast station makes
broadcast transmissions that
regularly violate such
requirement;
(iv) the transmitting entity does not
knowingly perform the sound recording,
as part of a service that offers
transmissions of visual images
contemporaneously with transmissions of
sound recordings, in a manner that is
likely to cause confusion, to cause
mistake, or to deceive, as to the
affiliation, connection, or association
of the copyright owner or featured
recording artist with the transmitting
entity or a particular product or
service advertised by the transmitting
entity, or as to the origin,
sponsorship, or approval by the
copyright owner or featured recording
artist of the activities of the
transmitting entity other than the
performance of the sound recording
itself;
(v) the transmitting entity
cooperates to prevent, to the extent
feasible without imposing substantial
costs or burdens, a transmission
recipient or any other person or entity
from automatically scanning the
transmitting entity's transmissions
alone or together with transmissions by
other transmitting entities in order to
select a particular sound recording to
be transmitted to the transmission
recipient, except that the requirement
of this clause shall not apply to a
satellite digital audio service that is
in operation, or that is licensed by
the Federal Communications Commission,
on or before July 31, 1998;
(vi) the transmitting entity takes no
affirmative steps to cause or induce
the making of a phonorecord by the
transmission recipient, and if the
technology used by the transmitting
entity enables the transmitting entity
to limit the making by the transmission
recipient of phonorecords of the
transmission directly in a digital
format, the transmitting entity sets
such technology to limit such making of
phonorecords to the extent permitted by
such technology;
(vii) phonorecords of the sound
recording have been distributed to the
public under the authority of the
copyright owner or the copyright owner
authorizes the transmitting entity to
transmit the sound recording, and the
transmitting entity makes the
transmission from a phonorecord
lawfully made under the authority of
the copyright owner, except that the
requirement of this clause shall not
apply to a retransmission of a
broadcast transmission by a
transmitting entity that does not have
the right or ability to control the
programming of the broadcast
transmission, unless the transmitting
entity is given notice in writing by
the copyright owner of the sound
recording that the broadcast station
makes broadcast transmissions that
regularly violate such requirement;
(viii) the transmitting entity
accommodates and does not interfere
with the transmission of technical
measures that are widely used by sound
recording copyright owners to identify
or protect copyrighted works, and that
are technically feasible of being
transmitted by the transmitting entity
without imposing substantial costs on
the transmitting entity or resulting in
perceptible aural or visual degradation
of the digital signal, except that the
requirement of this clause shall not
apply to a satellite digital audio
service that is in operation, or that
is licensed under the authority of the
Federal Communications Commission, on
or before July 31, 1998, to the extent
that such service has designed,
developed, or made commitments to
procure equipment or technology that is
not compatible with such technical
measures before such technical measures
are widely adopted by sound recording
copyright owners; and
(ix) the transmitting entity
identifies in textual data the sound
recording during, but not before, the
time it is performed, including the
title of the sound recording, the title
of the phonorecord embodying such sound
recording, if any, and the featured
recording artist, in a manner to permit
it to be displayed to the transmission
recipient by the device or technology
intended for receiving the service
provided by the transmitting entity,
except that the obligation in this
clause shall not take effect until 1
year after the date of the enactment of
the Digital Millennium Copyright Act
and shall not apply in the case of a
retransmission of a broadcast
transmission by a transmitting entity
that does not have the right or ability
to control the programming of the
broadcast transmission, or in the case
in which devices or technology intended
for receiving the service provided by
the transmitting entity that have the
capability to display such textual data
are not common in the marketplace.
(3) Licenses for transmissions by interactive
services.--
(A) No interactive service shall be granted
an exclusive license under section 106(6) for
the performance of a sound recording publicly
by means of digital audio transmission for a
period in excess of 12 months, except that with
respect to an exclusive license granted to an
interactive service by a licensor that holds
the copyright to 1,000 or fewer sound
recordings, the period of such license shall
not exceed 24 months: Provided, however, That
the grantee of such exclusive license shall be
ineligible to receive another exclusive license
for the performance of that sound recording for
a period of 13 months from the expiration of
the prior exclusive license.
(B) The limitation set forth in subparagraph
(A) of this paragraph shall not apply if--
(i) the licensor has granted and
there remain in effect licenses under
section 106(6) for the public
performance of sound recordings by
means of digital audio transmission by
at least 5 different interactive
services: Provided, however, That each
such license must be for a minimum of
10 percent of the copyrighted sound
recordings owned by the licensor that
have been licensed to interactive
services, but in no event less than 50
sound recordings; or
(ii) the exclusive license is granted
to perform publicly up to 45 seconds of
a sound recording and the sole purpose
of the performance is to promote the
distribution or performance of that
sound recording.
(C) Notwithstanding the grant of an exclusive
or nonexclusive license of the right of public
performance under section 106(6), an
interactive service may not publicly perform a
sound recording unless a license has been
granted for the public performance of any
copyrighted musical work contained in the sound
recording: Provided, That such license to
publicly perform the copyrighted musical work
may be granted either by a performing rights
society representing the copyright owner or by
the copyright owner.
(D) The performance of a sound recording by
means of a retransmission of a digital audio
transmission is not an infringement of section
106(6) if--
(i) the retransmission is of a
transmission by an interactive service
licensed to publicly perform the sound
recording to a particular member of the
public as part of that transmission;
and
(ii) the retransmission is
simultaneous with the licensed
transmission, authorized by the
transmitter, and limited to that
particular member of the public
intended by the interactive service to
be the recipient of the transmission.
(E) For the purposes of this paragraph--
(i) a ``licensor'' shall include the
licensing entity and any other entity
under any material degree of common
ownership, management, or control that
owns copyrights in sound recordings;
and
(ii) a ``performing rights society''
is an association or corporation that
licenses the public performance of
nondramatic musical works on behalf of
the copyright owner, such as the
American Society of Composers, Authors
and Publishers, Broadcast Music, Inc.,
and SESAC, Inc.
(4) Rights not otherwise limited.--
(A) Except as expressly provided in this
section, this section does not limit or impair
the exclusive right to perform a sound
recording publicly by means of a digital audio
transmission under section 106(6).
(B) Nothing in this section annuls or limits
in any way--
(i) the exclusive right to publicly
perform a musical work, including by
means of a digital audio transmission,
under section 106(4);
(ii) the exclusive rights in a sound
recording or the musical work embodied
therein under sections 106(1), 106(2)
and 106(3); or
(iii) any other rights under any
other clause of section 106, or
remedies available under this title, as
such rights or remedies exist either
before or after the date of enactment
of the Digital Performance Right in
Sound Recordings Act of 1995.
(C) Any limitations in this section on the
exclusive right under section 106(6) apply only
to the exclusive right under section 106(6) and
not to any other exclusive rights under section
106. Nothing in this section shall be construed
to annul, limit, impair or otherwise affect in
any way the ability of the owner of a copyright
in a sound recording to exercise the rights
under sections 106(1), 106(2) and 106(3), or to
obtain the remedies available under this title
pursuant to such rights, as such rights and
remedies exist either before or after the date
of enactment of the Digital Performance Right
in Sound Recordings Act of 1995.
(e) Authority for Negotiations.--
(1) Notwithstanding any provision of the antitrust
laws, in negotiating statutory licenses in accordance
with subsection (f), any copyright owners of sound
recordings and any entities performing sound recordings
affected by this section may negotiate and agree upon
the royalty rates and license terms and conditions for
the performance of such sound recordings and the
proportionate division of fees paid among copyright
owners, and may designate common agents on a
nonexclusive basis to negotiate, agree to, pay, or
receive payments.
(2) For licenses granted under section 106(6), other
than statutory licenses, such as for performances by
interactive services or performances that exceed the
sound recording performance complement--
(A) copyright owners of sound recordings
affected by this section may designate common
agents to act on their behalf to grant licenses
and receive and remit royalty payments:
Provided, That each copyright owner shall
establish the royalty rates and material
license terms and conditions unilaterally, that
is, not in agreement, combination, or concert
with other copyright owners of sound
recordings; and
(B) entities performing sound recordings
affected by this section may designate common
agents to act on their behalf to obtain
licenses and collect and pay royalty fees:
Provided, That each entity performing sound
recordings shall determine the royalty rates
and material license terms and conditions
unilaterally, that is, not in agreement,
combination, or concert with other entities
performing sound recordings.
(f) Licenses for Certain Nonexempt Transmissions.--
[(1)(A) Proceedings under chapter 8 shall determine
reasonable rates and terms 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 5-year period beginning on January 1
of the second year following the year in which the
proceedings are to be commenced, except in the case of
a different transitional period provided under section
6(b)(3) of the Copyright Royalty and Distribution
Reform Act of 2004, 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 Copyright Royalty Judges licenses
covering such subscription transmissions with respect
to such sound recordings. The parties to each
proceeding shall bear their own costs.
[(B) The schedule of reasonable rates and terms
determined by the Copyright Royalty Judges shall,
subject to paragraph (3), 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), a
transitional period provided under section 6(b)(3) of
the Copyright Royalty and Distribution Reform Act of
2004, or such other period 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 Royalty
Judges may consider the rates and terms for comparable
types of subscription digital audio transmission
services and comparable circumstances under voluntary
license agreements described in subparagraph (A).
[(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) Proceedings under chapter 8 shall determine
reasonable rates and terms of royalty payments for
public performances of sound recordings by means of
eligible nonsubscription transmission services and new
subscription services specified by subsection (d)(2)
during the 5-year period beginning on January 1 of the
second year following the year in which the proceedings
are to be commenced, except in the case of a different
transitional period provided under section 6(b)(3) of
the Copyright Royalty and Distribution Reform Act of
2004, 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
Copyright Royalty Judges licenses covering such
eligible nonsubscription transmissions and new
subscription services with respect to such sound
recordings. The parties to each proceeding shall bear
their own costs.
[(B) The schedule of reasonable rates and terms
determined by the Copyright Royalty Judges shall,
subject to paragraph (3), 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), a
transitional period provided under section 6(b)(3) of
the Copyright Royalty and Distribution Act of 2004, 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 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 Royalty Judges shall base their
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
Royalty Judges may consider the rates and terms for
comparable types of digital audio transmission services
and comparable circumstances under voluntary license
agreements described in subparagraph (A).
[(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 eligible nonsubscription services
and new subscription 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.]
(1)(A) Proceedings under chapter 8 shall determine
reasonable rates and terms of royalty payments for
transmissions subject to statutory licensing under
subsection (d)(2) during the 5-year period beginning on
January 1 of the second year following the year in
which the proceedings are to be commenced pursuant to
subparagraph (A) or (B) of section 804(b)(3), as the
case may be, or such other period as the parties may
agree. The parties to each proceeding shall bear their
own costs.
(B) The schedule of reasonable rates and terms
determined by the Copyright Royalty Judges shall,
subject to paragraph (2), 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 period as the parties may agree. Such rates and
terms shall distinguish among the different types of
services then in operation and shall include a minimum
fee for each such type of service, such differences to
be based on criteria including 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. The
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 Royalty
Judges--
(i) shall base their 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 the copyright
owner's 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; and
(ii) may consider the rates and terms for
comparable types of audio transmission services
and comparable circumstances under voluntary
license agreements.
(C) The procedures under subparagraphs (A) and (B)
shall also be initiated pursuant to a petition filed by
any sound recording copyright owner or any transmitting
entity indicating that a new type of 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
eligible nonsubscription services and new subscription
services, or preexisting subscription services and
preexisting satellite digital audio radio 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)] (2) 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
decision by the Librarian of Congress or determination
by the Copyright Royalty Judges.
[(4)] (3)(A) The 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. The notice and
recordkeeping rules in effect on the day before the
effective date of the Copyright Royalty and
Distribution Reform Act of 2004 shall remain in effect
unless and until new regulations are promulgated by the
Copyright Royalty Judges. If new regulations are
promulgated under this subparagraph, the Copyright
Royalty Judges shall take into account the substance
and effect of the rules in effect on the day before the
effective date of the Copyright Royalty and
Distribution Reform Act of 2004 and shall, to the
extent practicable, avoid significant disruption of the
functions of any designated agent authorized to collect
and distribute royalty fees.
(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 Copyright Royalty Judges
shall prescribe by regulation and by paying
royalty fees in accordance with this
subsection; or
(ii) if such royalty fees have not been set,
by agreeing to pay such royalty fees as shall
be determined in accordance with this
subsection.
(C) Any royalty payments in arrears shall be made on
or before the twentieth day of the month next
succeeding the month in which the royalty fees are set.
[(5)] (4)(A) Notwithstanding section 112(e) and the
other provisions of this subsection, the receiving
agent may enter into agreements for the reproduction
and performance of sound recordings under section
112(e) and this section by any 1 or more commercial
webcasters or noncommercial webcasters for a period of
not more than 11 years beginning on January 1, 2005,
that, once published in the Federal Register pursuant
to subparagraph (B), shall be binding on all copyright
owners of sound recordings and other persons entitled
to payment under this section, in lieu of any
determination by the Copyright Royalty Judges. Any such
agreement for commercial webcasters may include
provisions for payment of royalties on the basis of a
percentage of revenue or expenses, or both, and include
a minimum fee. Any such agreement may include other
terms and conditions, including requirements by which
copyright owners may receive notice of the use of their
sound recordings and under which records of such use
shall be kept and made available by commercial
webcasters or noncommercial webcasters. The receiving
agent shall be under no obligation to negotiate any
such agreement. The receiving agent shall have no
obligation to any copyright owner of sound recordings
or any other person entitled to payment under this
section in negotiating any such agreement, and no
liability to any copyright owner of sound recordings or
any other person entitled to payment under this section
for having entered into such agreement.
(B) The Copyright Office shall cause to be published
in the Federal Register any agreement entered into
pursuant to subparagraph (A). Such publication shall
include a statement containing the substance of
subparagraph (C). Such agreements shall not be included
in the Code of Federal Regulations. Thereafter, the
terms of such agreement shall be available, as an
option, to any commercial webcaster or noncommercial
webcaster meeting the eligibility conditions of such
agreement.
(C) Neither subparagraph (A) nor any provisions of
any agreement entered into pursuant to subparagraph
(A), including any rate structure, fees, terms,
conditions, or notice and recordkeeping requirements
set forth therein, shall be admissible as evidence or
otherwise taken into account in any administrative,
judicial, or other government proceeding involving the
setting or adjustment of the royalties payable for the
public performance or reproduction in ephemeral
phonorecords or copies of sound recordings, the
determination of terms or conditions related thereto,
or the establishment of notice or recordkeeping
requirements by the Copyright Royalty Judges [under
paragraph (4)] under paragraph (3) or section
112(e)(4). It is the intent of Congress that any
royalty rates, rate structure, definitions, terms,
conditions, or notice and recordkeeping requirements,
included in such agreements shall be considered as a
compromise motivated by the unique business, economic
and political circumstances of webcasters, copyright
owners, and performers rather than as matters that
would have been negotiated in the marketplace between a
willing buyer and a willing seller, or otherwise meet
the objectives set forth in section 801(b). This
subparagraph shall not apply to the extent that the
receiving agent and a webcaster that is party to an
agreement entered into pursuant to subparagraph (A)
expressly authorize the submission of the agreement in
a proceeding under this subsection.
(D) Nothing in the Webcaster Settlement Act of 2008,
the Webcaster Settlement Act of 2009, or any agreement
entered into pursuant to subparagraph (A) shall be
taken into account by the United States Court of
Appeals for the District of Columbia Circuit in its
review of the determination by the Copyright Royalty
Judges of May 1, 2007, of rates and terms for the
digital performance of sound recordings and ephemeral
recordings, pursuant to sections 112 and 114.
(E) As used in this paragraph--
(i) the term ``noncommercial webcaster''
means a webcaster that--
(I) is exempt from taxation under
section 501 of the Internal Revenue
Code of 1986 (26 U.S.C. 501);
(II) has applied in good faith to the
Internal Revenue Service for exemption
from taxation under section 501 of the
Internal Revenue Code and has a
commercially reasonable expectation
that such exemption shall be granted;
or
(III) is operated by a State or
possession or any governmental entity
or subordinate thereof, or by the
United States or District of Columbia,
for exclusively public purposes;
(ii) the term ``receiving agent'' shall have
the meaning given that term in section 261.2 of
title 37, Code of Federal Regulations, as
published in the Federal Register on July 8,
2002; and
(iii) the term ``webcaster'' means a person
or entity that has obtained a compulsory
license under section 112 or 114 and the
implementing regulations therefor.
(F) The authority to make settlements pursuant to
subparagraph (A) shall expire at 11:59 p.m. Eastern
time on the 30th day after the date of the enactment of
the Webcaster Settlement Act of 2009.
(g) Proceeds From Licensing of Transmissions.--
(1) Except in the case of a transmission licensed
under a statutory license in accordance with subsection
(f) of this section--
(A) a featured recording artist who performs
on a sound recording that has been licensed for
a transmission shall be entitled to receive
payments from the copyright owner of the sound
recording in accordance with the terms of the
artist's contract; and
(B) a nonfeatured recording artist who
performs on a sound recording that has been
licensed for a transmission shall be entitled
to receive payments from the copyright owner of
the sound recording in accordance with the
terms of the nonfeatured recording artist's
applicable contract or other applicable
agreement.
(2) [An agent designated] Except as provided for in
paragraph (6), a nonprofit collective designated by the
Copyright Royalty Judges to distribute receipts from
the licensing of transmissions in accordance with
subsection (f) shall distribute such receipts as
follows:
(A) 50 percent of the receipts shall be paid
to the copyright owner of the exclusive right
under section 106(6) of this title to publicly
perform a sound recording by means of a digital
audio transmission.
(B) 2\1/2\ percent of the receipts shall be
deposited in an escrow account managed by an
independent administrator jointly appointed by
copyright owners of sound recordings and the
American Federation of Musicians (or any
successor entity) to be distributed to
nonfeatured musicians (whether or not members
of the American Federation of Musicians) who
have performed on sound recordings.
(C) 2\1/2\ percent of the receipts shall be
deposited in an escrow account managed by an
independent administrator jointly appointed by
copyright owners of sound recordings and the
American Federation of Television and Radio
Artists (or any successor entity) to be
distributed to nonfeatured vocalists (whether
or not members of the American Federation of
Television and Radio Artists) who have
performed on sound recordings.
(D) 45 percent of the receipts shall be paid,
on a per sound recording basis, to the
recording artist or artists featured on such
sound recording (or the persons conveying
rights in the artists' performance in the sound
recordings).
(3) A [nonprofit agent designated] nonprofit
collective designated by the Copyright Royalty Judges
to distribute receipts from the licensing of
transmissions in accordance with subsection (f) may
deduct from any of its receipts, prior to the
distribution of such receipts to any person or entity
entitled thereto other than copyright owners and
performers who have elected to receive royalties from
[another designated agent] another designated nonprofit
collective and have notified such nonprofit [agent]
collective in writing of such election, the reasonable
costs of such [agent] collective incurred after
November 1, 1995, in--
(A) the administration of the collection,
distribution, and calculation of the royalties;
(B) the settlement of disputes relating to
the collection and calculation of the
royalties; and
(C) the licensing and enforcement of rights
with respect to the making of ephemeral
recordings and performances subject to
licensing under section 112 and this section,
including those incurred in participating in
negotiations or arbitration proceedings under
section 112 and this section, except that all
costs incurred relating to the section 112
ephemeral recordings right may only be deducted
from the royalties received pursuant to section
112.
(4) Notwithstanding paragraph (3), any [designated
agent] nonprofit collective designated to distribute
receipts from the licensing of transmissions in
accordance with subsection (f) may deduct from any of
its receipts, prior to the distribution of such
receipts, the reasonable costs identified in paragraph
(3) of such [agent] collective incurred after November
1, 1995, with respect to such copyright owners and
performers who have entered with such [agent]
collective a contractual relationship that specifies
that such costs may be deducted from such royalty
receipts.
(5) Letter of Direction.--
(A) In general.--A nonprofit collective
designated by the Copyright Royalty Judges to
distribute receipts from the licensing of
transmissions in accordance with subsection (f)
shall adopt and reasonably implement a policy
that provides, in circumstances determined by
the collective to be appropriate, for
acceptance of instructions from an artist payee
identified under subparagraph (A) or (D) of
paragraph (2) to distribute, to a producer,
mixer, or sound engineer who was part of the
creative process that created a sound
recording, a portion of the payments to which
the artist payee would otherwise be entitled
from the licensing of transmissions of the
sound recording. In this section, such
instructions shall be referred to as a ``letter
of direction''.
(B) Acceptance of letter.--To the extent that
a collective described in subparagraph (A)
accepts a letter of direction under that
subparagraph, the person entitled to payment
pursuant to the letter of direction shall,
during the period in which the letter of
direction is in effect and carried out by the
collective, be treated for all purposes as the
owner of the right to receive such payment, and
the artist payee providing the letter of
direction to the collective shall be treated as
having no interest in such payment.
(C) Authority of collective.--This paragraph
shall not be construed in such a manner so that
the collective is not authorized to accept or
act upon payment instructions in circumstances
other than those to which this paragraph
applies.
(6) Sound Recordings Fixed Before November 1, 1995.--
(A) Payment absent letter of direction.--A
nonprofit collective designated by the
Copyright Royalty Judges to distribute receipts
from the licensing of transmissions in
accordance with subsection (f) (in this
paragraph referred to as the ``collective'')
shall adopt and reasonably implement a policy
that provides, in circumstances determined by
the collective to be appropriate, for the
deduction of 2 percent of all the receipts that
are collected from the licensing of
transmissions of a sound recording fixed before
November 1, 1995, but which is withdrawn from
the amount otherwise payable under paragraph
(2)(D) to the recording artist or artists
featured on the sound recording (or the persons
conveying rights in the artists' performance in
the sound recording), and the distribution of
such amount to one or more persons described in
subparagraph (B) of this paragraph, after
deduction of costs described in paragraph (3)
or (4), as applicable, if each of the following
requirements is met:
(i) Certification of attempt to obtain a
letter of direction.--The person described in
subparagraph (B) who is to receive the
distribution has certified to the collective,
under penalty of perjury, that--
(I) for a period not less
than 120 days, that person made
reasonable efforts to contact
the artist payee for such sound
recording to request and obtain
a letter of direction
instructing the collective to
pay to that person a portion of
the royalties payable to the
featured recording artist or
artists; and
(II) during the period
beginning on the date that
person began the reasonable
efforts described in subclause
(I) and ending on the date of
that person's certification to
the collective, the artist
payee did not affirm or deny in
writing the request for a
letter of direction.
(ii) Collective attempt to contact
artist.--After receipt of the
certification described in clause (i)
and for a period not less than 120 days
before the first distribution by the
collective to the person described in
subparagraph (B), the collective
attempts, in a reasonable manner as
determined by the collective, to notify
the artist payee of the certification
made by the person described in
subparagraph (B).
(iii) No objection received.--The
artist payee does not, as of the date
that was 10 business days before the
date on which the first distribution is
made, submit to the collective in
writing an objection to the
distribution.
(B) Eligibility for payment.--A person shall
be eligible for payment under subparagraph (A)
if the person--
(i) is a producer, mixer, or sound
engineer of the sound recording;
(ii) has entered into a written
contract with a record company involved
in the creation or lawful exploitation
of the sound recording, or with the
recording artist or artists featured on
the sound recording (or the persons
conveying rights in the artists'
performance in the sound recording),
under which the person seeking payment
is entitled to participate in royalty
payments that are based on the
exploitation of the sound recording and
are payable from royalties otherwise
payable to the recording artist or
artists featured on the sound recording
(or the persons conveying rights in the
artists' performance in the sound
recording);
(iii) made a creative contribution to
the creation of the sound recording;
and (iv) submits to the collective--
(I) a written certification
stating, under penalty of
perjury, that the person meets
the requirements in clauses (i)
through (iii); and
(II) a true copy of the
contract described in clause
(ii).
(C) Multiple certifications.--Subject to
subparagraph (D), in a case in which more than
one person described in subparagraph (B) has
met the requirements for a distribution under
subparagraph (A) with respect to a sound
recording as of the date that is 10 business
days before the date on which the distribution
is made, the collective shall divide the 2
percent distribution equally among all such
persons.
(D) Objection to payment.--Not later than 10
business days after the date on which the
collective receives from the artist payee a
written objection to a distribution made
pursuant to subparagraph (A), the collective
shall cease making any further payment relating
to such distribution. In any case in which the
collective has made one or more distributions
pursuant to subparagraph (A) to a person
described in subparagraph (B) before the date
that is 10 business days after the date on
which the collective receives from the artist
payee an objection to such distribution, the
objection shall not affect that person's
entitlement to any distribution made before the
collective ceases such distribution under this
subparagraph.
(E) Ownership of the right to receive
payments.--To the extent that the collective
determines that a distribution will be made
under subparagraph (A) to a person described in
subparagraph (B), such person shall, during the
period covered by such distribution, be treated
for all purposes as the owner of the right to
receive such payments, and the artist payee to
whom such payments would otherwise be payable
shall be treated as having no interest in such
payments.
(F) Artist payee defined.--In this paragraph,
the term ``artist payee'' means a person, other
than a person described in subparagraph (B),
who owns the right to receive all or part of
the receipts payable under paragraph (2)(D)
with respect to a sound recording. In a case in
which there are multiple artist payees with
respect to a sound recording, an objection by
one such payee shall apply only to that payee's
share of the receipts payable under paragraph
(2)(D), and shall not preclude payment under
subparagraph (A) from the share of an artist
payee that does not so object.
(7) Preemption of state property laws.--The holding
and distribution of receipts under section 112 and this
section by a nonprofit collective designated by the
Copyright Royalty Judges in accordance with this
subsection and regulations adopted by the Copyright
Royalty Judges shall supersede and preempt any State
law (including common law) concerning escheatment or
abandoned property, or any analogous provision, that
might otherwise apply.
(h) Licensing to Affiliates.--
(1) If the copyright owner of a sound recording
licenses an affiliated entity the right to publicly
perform a sound recording by means of a digital audio
transmission under section 106(6), the copyright owner
shall make the licensed sound recording available under
section 106(6) on no less favorable terms and
conditions to all bona fide entities that offer similar
services, except that, if there are material
differences in the scope of the requested license with
respect to the type of service, the particular sound
recordings licensed, the frequency of use, the number
of subscribers served, or the duration, then the
copyright owner may establish different terms and
conditions for such other services.
(2) The limitation set forth in paragraph (1) of this
subsection shall not apply in the case where the
copyright owner of a sound recording licenses--
(A) an interactive service; or
(B) an entity to perform publicly up to 45
seconds of the sound recording and the sole
purpose of the performance is to promote the
distribution or performance of that sound
recording.
[(i) No Effect on Royalties for Underlying Works.--License
fees payable for the public performance of sound recordings
under section 106(6) shall not be taken into account in any
administrative, judicial, or other governmental proceeding to
set or adjust the royalties payable to copyright owners of
musical works for the public performance of their works. It is
the intent of Congress that royalties payable to copyright
owners of musical works for the public performance of their
works shall not be diminished in any respect as a result of the
rights granted by section 106(6).]
(j) Definitions.--As used in this section, the following
terms have the following meanings:
(1) An ``affiliated entity'' is an entity engaging in
digital audio transmissions covered by section 106(6),
other than an interactive service, in which the
licensor has any direct or indirect partnership or any
ownership interest amounting to 5 percent or more of
the outstanding voting or non-voting stock.
(2) An ``archived program'' is a predetermined
program that is available repeatedly on the demand of
the transmission recipient and that is performed in the
same order from the beginning, except that an archived
program shall not include a recorded event or broadcast
transmission that makes no more than an incidental use
of sound recordings, as long as such recorded event or
broadcast transmission does not contain an entire sound
recording or feature a particular sound recording.
(3) A ``broadcast'' transmission is a transmission
made by a terrestrial broadcast station licensed as
such by the Federal Communications Commission.
(4) A ``continuous program'' is a predetermined
program that is continuously performed in the same
order and that is accessed at a point in the program
that is beyond the control of the transmission
recipient.
(5) A ``digital audio transmission'' is a digital
transmission as defined in section 101, that embodies
the transmission of a sound recording. This term does
not include the transmission of any audiovisual work.
(6) An ``eligible nonsubscription transmission'' is a
noninteractive nonsubscription digital audio
transmission not exempt under subsection (d)(1) that is
made as part of a service that provides audio
programming consisting, in whole or in part, of
performances of sound recordings, including
retransmissions of broadcast transmissions, if the
primary purpose of the service is to provide to the
public such audio or other entertainment programming,
and the primary purpose of the service is not to sell,
advertise, or promote particular products or services
other than sound recordings, live concerts, or other
music-related events.
(7) An ``interactive service'' is one that enables a
member of the public to receive a transmission of a
program specially created for the recipient, or on
request, a transmission of a particular sound
recording, whether or not as part of a program, which
is selected by or on behalf of the recipient. The
ability of individuals to request that particular sound
recordings be performed for reception by the public at
large, or in the case of a subscription service, by all
subscribers of the service, does not make a service
interactive, if the programming on each channel of the
service does not substantially consist of sound
recordings that are performed within 1 hour of the
request or at a time designated by either the
transmitting entity or the individual making such
request. If an entity offers both interactive and
noninteractive services (either concurrently or at
different times), the noninteractive component shall
not be treated as part of an interactive service.
(8) A ``new subscription service'' is a service that
performs sound recordings by means of noninteractive
subscription digital audio transmissions and that is
not a preexisting subscription service or a preexisting
satellite digital audio radio service.
(9) A ``nonsubscription'' transmission is any
transmission that is not a subscription transmission.
(10) A ``preexisting satellite digital audio radio
service'' is a subscription satellite digital audio
radio service provided pursuant to a satellite digital
audio radio service license issued by the Federal
Communications Commission on or before July 31, 1998,
and any renewal of such license to the extent of the
scope of the original license, and may include a
limited number of sample channels representative of the
subscription service that are made available on a
nonsubscription basis in order to promote the
subscription service.
(11) A ``preexisting subscription service'' is a
service that performs sound recordings by means of
noninteractive audio-only subscription digital audio
transmissions, which was in existence and was making
such transmissions to the public for a fee on or before
July 31, 1998, and may include a limited number of
sample channels representative of the subscription
service that are made available on a nonsubscription
basis in order to promote the subscription service.
(12) A ``retransmission'' is a further transmission
of an initial transmission, and includes any further
retransmission of the same transmission. Except as
provided in this section, a transmission qualifies as a
``retransmission'' only if it is simultaneous with the
initial transmission. Nothing in this definition shall
be construed to exempt a transmission that fails to
satisfy a separate element required to qualify for an
exemption under section 114(d)(1).
(13) The ``sound recording performance complement''
is the transmission during any 3-hour period, on a
particular channel used by a transmitting entity, of no
more than--
(A) 3 different selections of sound
recordings from any one phonorecord lawfully
distributed for public performance or sale in
the United States, if no more than 2 such
selections are transmitted consecutively; or
(B) 4 different selections of sound
recordings--
(i) by the same featured recording
artist; or
(ii) from any set or compilation of
phonorecords lawfully distributed
together as a unit for public
performance or sale in the United
States,
if no more than three such selections are
transmitted consecutively:
Provided, That the transmission of selections in excess
of the numerical limits provided for in clauses (A) and
(B) from multiple phonorecords shall nonetheless
qualify as a sound recording performance complement if
the programming of the multiple phonorecords was not
willfully intended to avoid the numerical limitations
prescribed in such clauses.
(14) A ``subscription'' transmission is a
transmission that is controlled and limited to
particular recipients, and for which consideration is
required to be paid or otherwise given by or on behalf
of the recipient to receive the transmission or a
package of transmissions including the transmission.
(15) A ``transmission'' is either an initial
transmission or a retransmission.
Sec. 115. Scope of exclusive rights in nondramatic musical works:
Compulsory license for making and distributing
phonorecords
In the case of nondramatic musical works, the exclusive
rights provided by clauses (1) and (3) of section 106, to make
and to distribute phonorecords of such works, are subject to
compulsory licensing under the conditions specified by this
section.
(A) Availability and Scope of Compulsory License in
General.--
[(1) When phonorecords of a nondramatic musical work
have been distributed to the public in the United
States under the authority of the copyright owner, any
other person, including those who make phonorecords or
digital phonorecord deliveries, may, by complying with
the provisions of this section, obtain a compulsory
license to make and distribute phonorecords of the
work. A person may obtain a compulsory license only if
his or her primary purpose in making phonorecords is to
distribute them to the public for private use,
including by means of a digital phonorecord delivery. A
person may not obtain a compulsory license for use of
the work in the making of phonorecords duplicating a
sound recording fixed by another, unless: (i) such
sound recording was fixed lawfully; and (ii) the making
of the phonorecords was authorized by the owner of
copyright in the sound recording or, if the sound
recording was fixed before February 15, 1972, by any
person who fixed the sound recording pursuant to an
express license from the owner of the copyright in the
musical work or pursuant to a valid compulsory license
for use of such work in a sound recording.]
(1) Eligibility for compulsory license.--
(A) Conditions for compulsory license.--A
person may by complying with the provisions of
this section obtain a compulsory license to
make and distribute phonorecords of a
nondramatic musical work, including by means of
digital phonorecord delivery. A person may
obtain a compulsory license only if the primary
purpose in making phonorecords of the musical
work is to distribute them to the public for
private use, including by means of digital
phonorecord delivery, and--
(i) phonorecords of such musical work
have previously been distributed to the
public in the United States under the
authority of the copyright owner of the
work, including by means of digital
phonorecord delivery; or
(ii) in the case of a digital music
provider seeking to make and distribute
digital phonorecord deliveries of a
sound recording embodying a musical
work under a compulsory license for
which clause (i) does not apply--
(I) the first fixation of
such sound recording was made
under the authority of the
musical work copyright owner,
and the sound recording
copyright owner has the
authority of the musical work
copyright owner to make and
distribute digital phonorecord
deliveries embodying such work
to the public in the United
States; and
(II) the sound recording
copyright owner, or the
authorized distributor of the
sound recording copyright
owner, has authorized the
digital music provider to make
and distribute digital
phonorecord deliveries of the
sound recording to the public
in the United States.
(B) Duplication of sound recording.--A person
may not obtain a compulsory license for the use
of the work in the making of phonorecords
duplicating a sound recording fixed by another,
including by means of digital phonorecord
delivery, unless--
(i) such sound recording was fixed
lawfully; and
(ii) the making of the phonorecords
was authorized by the owner of the
copyright in the sound recording or, if
the sound recording was fixed before
February 15, 1972, by any person who
fixed the sound recording pursuant to
an express license from the owner of
the copyright in the musical work or
pursuant to a valid compulsory license
for use of such work in a sound
recording.
(2) [A compulsory license] Musical arrangement.--A
compulsory license includes the privilege of making a
musical arrangement of the work to the extent necessary
to conform it to the style or manner of interpretation
of the performance involved, but the arrangement shall
not change the basic melody or fundamental character of
the work, and shall not be subject to protection as a
derivative work under this title, except with the
express consent of the copyright owner.
[(b) Notice of Intention to Obtain Compulsory License.--
[(1) Any person who wishes to obtain a compulsory
license under this section shall, before or within
thirty days after making, and before distributing any
phonorecords of the work, serve notice of intention to
do so on the copyright owner. If the registration or
other public records of the Copyright Office do not
identify the copyright owner and include an address at
which notice can be served, it shall be sufficient to
file the notice of intention in the Copyright Office.
The notice shall comply, in form, content, and manner
of service, with requirements that the Register of
Copyrights shall prescribe by regulation.
[(2) Failure to serve or file the notice required by
clause (1) forecloses the possibility of a compulsory
license and, in the absence of a negotiated license,
renders the making and distribution of phonorecords
actionable as acts of infringement under section 501
and fully subject to the remedies provided by sections
502 through 506 and 509.
[(c) Royalty Payable Under Compulsory License.--
[(1) To be entitled to receive royalties under a
compulsory license, the copyright owner must be
identified in the registration or other public records
of the Copyright Office. The owner is entitled to
royalties for phonorecords made and distributed after
being so identified, but is not entitled to recover for
any phonorecords previously made and distributed.
[(2) Except as provided by clause (1), the royalty
under a compulsory license shall be payable for every
phonorecord made and distributed in accordance with the
license. For this purpose, and other than as provided
in paragraph (3), a phonorecord is considered
``distributed'' if the person exercising the compulsory
license has voluntarily and permanently parted with its
possession. With respect to each work embodied in the
phonorecord, the royalty shall be either two and three-
fourths cents, or one-half of one cent per minute of
playing time or fraction thereof, whichever amount is
larger.
[(3)(A) A compulsory license under this section
includes the right of the compulsory licensee to
distribute or authorize the distribution of a
phonorecord of a nondramatic musical work by means of a
digital transmission which constitutes a digital
phonorecord delivery, regardless of whether the digital
transmission is also a public performance of the sound
recording under section 106(6) of this title or of any
nondramatic musical work embodied therein under section
106(4) of this title. For every digital phonorecord
delivery by or under the authority of the compulsory
licensee--
[(i) on or before December 31, 1997, the
royalty payable by the compulsory licensee
shall be the royalty prescribed under paragraph
(2) and chapter 8 of this title; and
[(ii) on or after January 1, 1998, the
royalty payable by the compulsory licensee
shall be the royalty prescribed under
subparagraphs (B) through (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
section and the proportionate division of fees paid
among copyright owners, and may designate common agents
on a nonexclusive basis to negotiate, agree to, pay or
receive 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 this subparagraph and subparagraphs
(C) through (E) and chapter 8 of this title shall next
be determined.
[(C) Proceedings under chapter 8 shall determine
reasonable rates and terms of royalty payments for the
activities specified by this section during the period
beginning with the effective date of such rates and
terms, but not earlier than January 1 of the second
year following the year in which the petition
requesting the proceeding is filed, and ending on the
effective date of successor rates and terms, 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 Copyright Royalty
Judges licenses covering such activities. The parties
to each proceeding shall bear their own costs.
[(D) The schedule of reasonable rates and terms
determined by the Copyright Royalty Judges shall,
subject to subparagraph (E), 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), 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 Royalty Judges may consider rates
and terms under voluntary license agreements described
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 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 and
Copyright Royalty Judges. Subject to clause (ii), the
royalty rates determined pursuant to subparagraph (C)
and (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) and (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) and (D) for the number of
musical works within the scope of the contract
as of June 22, 1995; and
[(II) a contract entered into after the date
that the sound recording is fixed in a tangible
medium of expression substantially in a form
intended for commercial release, if at the time
the contract is entered into, the recording
artist retains the right to grant licenses as
to the musical work under paragraphs (1) and
(3) of section 106.
[(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.
[(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, unless--
[(I) the digital phonorecord delivery has
been authorized by the copyright owner of the
sound recording; and
[(II) the owner of the copyright in the sound
recording or the entity making the digital
phonorecord delivery has obtained a compulsory
license under this section or has otherwise
been authorized by the copyright owner of the
musical work to distribute or authorize the
distribution, by means of a digital phonorecord
delivery, of each musical work embodied in the
sound recording.
[(ii) Any cause of action under this subparagraph
shall be in addition to those available to the owner of
the copyright in the nondramatic musical work under
subsection (c)(6) and section 106(4) and the owner of
the copyright in the sound recording under section
106(6).
[(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.
[(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.
[(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.
[(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.
[(4) A compulsory license under this section includes
the right of the maker of a phonorecord of a
nondramatic musical work under subsection (a)(1) to
distribute or authorize distribution of such
phonorecord by rental, lease, or lending (or by acts or
practices in the nature of rental, lease, or lending).
In addition to any royalty payable under clause (2) and
chapter 8 of this title, a royalty shall be payable by
the compulsory licensee for every act of distribution
of a phonorecord by or in the nature of rental, lease,
or lending, by or under the authority of the compulsory
licensee. With respect to each nondramatic musical work
embodied in the phonorecord, the royalty shall be a
proportion of the revenue received by the compulsory
licensee from every such act of distribution of the
phonorecord under this clause equal to the proportion
of the revenue received by the compulsory licensee from
distribution of the phonorecord under clause (2) that
is payable by a compulsory licensee under that clause
and under chapter 8. The Register of Copyrights shall
issue regulations to carry out the purpose of this
clause.
[(5) Royalty payments shall be made on or before the
twentieth day of each month and shall include all
royalties for the month next preceding. Each monthly
payment shall be made under oath and shall comply with
requirements that the Register of Copyrights shall
prescribe by regulation. The Register shall also
prescribe regulations under which detailed cumulative
annual statements of account, certified by a certified
public accountant, shall be filed for every compulsory
license under this section. The regulations covering
both the monthly and the annual statements of account
shall prescribe the form, content, and manner of
certification with respect to the number of records
made and the number of records distributed.
[(6) If the copyright owner does not receive the
monthly payment and the monthly and annual statements
of account when due, the owner may give written notice
to the licensee that, unless the default is remedied
within thirty days from the date of the notice, the
compulsory license will be automatically terminated.
Such termination renders either the making or the
distribution, or both, of all phonorecords for which
the royalty has not been paid, actionable as acts of
infringement under section 501 and fully subject to the
remedies provided by sections 502 through 506.
[(d) Definition.--As used in this section, the following
term has the following meaning: A ``digital phonorecord
delivery'' is each individual delivery of a phonorecord by
digital transmission of a sound recording which results in a
specifically identifiable reproduction by or for any
transmission recipient of a phonorecord of that sound
recording, regardless of whether the digital transmission is
also a public performance of the sound recording or any
nondramatic musical work embodied therein. A digital
phonorecord delivery does not result from a real-time, non-
interactive subscription transmission of a sound recording
where no reproduction of the sound recording or the musical
work embodied therein is made from the inception of the
transmission through to its receipt by the transmission
recipient in order to make the sound recording audible.]
(b) Procedures to Obtain a Compulsory License.--
(1) Phonorecords other than digital phonorecord
deliveries.--A person who seeks to obtain a compulsory
license under subsection (a) to make and distribute
phonorecords of a musical work other than by means of
digital phonorecord delivery shall, before or not later
than 30 calendar days after making, and before
distributing, any phonorecord of the work, serve notice
of intention to do so on the copyright owner. If the
registration or other public records of the Copyright
Office do not identify the copyright owner and include
an address at which notice can be served, it shall be
sufficient to file the notice of intention with the
Copyright Office. The notice shall comply, in form,
content, and manner of service, with requirements that
the Register of Copyrights shall prescribe by
regulation.
(2) Digital phonorecord deliveries.--A person who
seeks to obtain a compulsory license under subsection
(a) to make and distribute phonorecords of a musical
work by means of digital phonorecord delivery--
(A) prior to the license availability date,
shall, before or not later than 30 calendar
days after first making any such digital
phonorecord delivery, serve a notice of
intention to do so on the copyright owner (but
may not file the notice with the Copyright
Office, even if the public records of the
Office do not identify the owner or the owner's
address), and such notice shall comply, in
form, content, and manner of service, with
requirements that the Register of Copyrights
shall prescribe by regulation; or
(B) on or after the license availability
date, shall, before making any such digital
phonorecord delivery, follow the procedure
described in subsection (d)(2), except as
provided in paragraph (3).
(3) Record company individual download licenses.--
Notwithstanding paragraph (2)(B), a record company may,
on or after the license availability date, obtain an
individual download license in accordance with the
notice requirements described in paragraph (2)(A)
(except for the requirement that notice occur prior to
the license availability date). A record company that
obtains an individual download license as permitted
under this paragraph shall provide statements of
account and pay royalties as provided in subsection
(c)(2)(I).
(4) Failure to obtain license.--
(A) Phonorecords other than digital
phonorecord deliveries.--In the case of
phonorecords made and distributed other than by
means of digital phonorecord delivery, the
failure to serve or file the notice of
intention required by paragraph (1) forecloses
the possibility of a compulsory license under
paragraph (1). In the absence of a voluntary
license, the failure to obtain a compulsory
license renders the making and distribution of
phonorecords actionable as acts of infringement
under section 501 and subject to the remedies
provided by sections 502 through 506.
(B) Digital phonorecord deliveries.--
(i) In general.--In the case of
phonorecords made and distributed by
means of digital phonorecord delivery:
(I) The failure to serve the
notice of intention required by
paragraph (2)(A) or paragraph
(3), as applicable, forecloses
the possibility of a compulsory
license under such paragraph.
(II) The failure to comply
with paragraph (2)(B)
forecloses the possibility of a
blanket license for a period of
3 years after the last calendar
day on which the notice of
license was required to be
submitted to the mechanical
licensing collective under such
paragraph.
(ii) Effect of failure.--In either
case described in subclause (I) or (II)
of clause (i), in the absence of a
voluntary license, the failure to
obtain a compulsory license renders the
making and distribution of phonorecords
by means of digital phonorecord
delivery actionable as acts of
infringement under section 501 and
subject to the remedies provided by
sections 502 through 506.
(c) General Conditions Applicable to Compulsory License.--
(1) Royalty Payable Under Compulsory License.--
(A) Identification requirement.--To be
entitled to receive royalties under a
compulsory license obtained under subsection
(b)(1) the copyright owner must be identified
in the registration or other public records of
the Copyright Office. The owner is entitled to
royalties for phonorecords made and distributed
after being so identified, but is not entitled
to recover for any phonorecords previously made
and distributed.
(B) Royalty for phonorecords other than
digital phonorecord deliveries.--Except as
provided by subparagraph (A), for every
phonorecord made and distributed under a
compulsory license under subsection (a) other
than by means of digital phonorecord delivery,
with respect to each work embodied in the
phonorecord, the royalty shall be the royalty
prescribed under subparagraphs (D) through (F)
and paragraph (2)(A) and chapter 8. For
purposes of this subparagraph, a phonorecord is
considered ``distributed'' if the person
exercising the compulsory license has
voluntarily and permanently parted with its
possession.
(C) Royalty for digital phonorecord
deliveries.--For every digital phonorecord
delivery of a musical work made under a
compulsory license under this section, the
royalty payable shall be the royalty prescribed
under subparagraphs (D) through (F) paragraph
(2)(A) and chapter 8.
(D) Authority to negotiate.--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) may negotiate and
agree upon the terms and rates of royalty
payments under this section and the
proportionate division of fees paid among
copyright owners, and may designate common
agents on a nonexclusive basis to negotiate,
agree to, pay or receive 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
this subparagraph, subparagraphs (E) and (F),
paragraph (2)(A) and chapter 8 shall next be
determined.
(E) Determination of reasonable rates and
terms.--Proceedings under chapter 8 shall
determine reasonable rates and terms of royalty
payments for the activities specified by this
section during the period beginning with the
effective date of such rates and terms, but not
earlier than January 1 of the second year
following the year in which the petition
requesting the proceeding is filed, and ending
on the effective date of successor rates and
terms, or such other period as the parties may
agree. Any copyright owners of nondramatic
musical works and any persons entitled to
obtain a compulsory license under subsection
(a) may submit to the Copyright Royalty Judges
licenses covering such activities. The parties
to each proceeding shall bear their own costs.
(F) Schedule of reasonable rates.--The
schedule of reasonable rates and terms
determined by the Copyright Royalty Judges
shall, subject to paragraph (2)(A), be binding
on all copyright owners of nondramatic musical
works and persons entitled to obtain a
compulsory license under subsection (a) during
the period specified in subparagraph (E), such
other period as may be determined pursuant to
subparagraphs (D) and (E), or such other period
as the parties may agree. The 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 for digital
phonorecord deliveries, the Copyright Royalty
Judges shall base their decision on economic,
competitive, and programming information
presented by the parties, including--
(i) whether use of the compulsory
licensee's service may substitute for
or may promote the sales of
phonorecords or otherwise may interfere
with or may enhance the musical work
copyright owner's other streams of
revenue from its musical works; and
(ii) the relative roles of the
copyright owner and the compulsory
licensee in the copyrighted work and
the service made available to the
public with respect to the relative
creative contribution, technological
contribution, capital investment, cost,
and risk.
(2) Additional terms and conditions.--
(A) Voluntary licenses and contractual
royalty rates.--
(i) In general.--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)
shall be given effect in lieu of any
determination by the Copyright Royalty
Judges. Subject to clause (ii), the
royalty rates determined pursuant to
subparagraphs (E) and (F) of paragraph
(1) 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) Applicability.--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
subparagraphs (E) and (F) of
paragraph (1) 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
subparagraphs (E) and (F) of
paragraph (1) for the number of
musical works within the scope
of the contract as of June 22,
1995; and
(II) a contract entered into
after the date that the sound
recording is fixed in a
tangible medium of expression
substantially in a form
intended for commercial
release, if at the time the
contract is entered into, the
recording artist retains the
right to grant licenses as to
the musical work under
paragraphs (1) and (3) of
section 106.
(B) Sound recording information.--Except as
provided in section 1002(e), 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.
(C) Infringement remedies.--
(i) In general.--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, unless--
(I) the digital phonorecord
delivery has been authorized by
the sound recording copyright
owner; and
(II) the entity making the
digital phonorecord delivery
has obtained a compulsory
license under subsection (a) or
has otherwise been authorized
by the musical work copyright
owner, or by a record company
pursuant to an individual
download license, to make and
distribute phonorecords of each
musical work embodied in the
sound recording by means of
digital phonorecord delivery.
(ii) Other remedies.--Any cause of
action under this subparagraph shall be
in addition to those available to the
owner of the copyright in the
nondramatic musical work under
subparagraph (J) and section 106(4) and
the owner of the copyright in the sound
recording under section 106(6).
(D) Liability of sound recording owners.--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.
(E) Recording devices and media.--Nothing in
section 1008 shall be construed to prevent the
exercise of the rights and remedies allowed by
this paragraph, subparagraph (J), 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.
(F) Preservation of rights.--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 paragraphs
(4) and (6) of section 106;
(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 paragraphs (1) and (3) of
section 106, 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 before,
on, or after the date of enactment of
the Digital Performance Right in Sound
Recordings Act of 1995.
(G) Exempt transmissions and
retransmissions.--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 paragraphs (1) through
(5) of section 106 with respect to such
transmissions and retransmissions.
(H) Distribution by rental, lease, or
lending.--A compulsory license obtained under
subsection (b)(1) to make and distribute
phonorecords includes the right of the maker of
such a phonorecord to distribute or authorize
distribution of such phonorecord, other than by
means of a digital phonorecord delivery, by
rental, lease, or lending (or by acts or
practices in the nature of rental, lease, or
lending). With respect to each nondramatic
musical work embodied in the phonorecord, the
royalty shall be a proportion of the revenue
received by the compulsory licensee from every
such act of distribution of the phonorecord
under this clause equal to the proportion of
the revenue received by the compulsory licensee
from distribution of the phonorecord under
subsection (a)(1)(A)(ii)(II) that is payable by
a compulsory licensee under that clause and
under chapter 8. The Register of Copyrights
shall issue regulations to carry out the
purpose of this subparagraph.
(I) Payment of royalties and statements of
account.--Except as provided in paragraphs
(4)(A)(i) and (10)(B) of subsection (d),
royalty payments shall be made on or before the
twentieth day of each month and shall include
all royalties for the month next preceding.
Each monthly payment shall be made under oath
and shall comply with requirements that the
Register of Copyrights shall prescribe by
regulation. The Register shall also prescribe
regulations under which detailed cumulative
annual statements of account, certified by a
certified public accountant, shall be filed for
every compulsory license under subsection (a).
The regulations covering both the monthly and
the annual statements of account shall
prescribe the form, content, and manner of
certification with respect to the number of
records made and the number of records
distributed.
(J) Notice of default and termination of
compulsory license.--In the case of a license
obtained under paragraph (1), (2)(A), or (3) of
subsection (b), if the copyright owner does not
receive the monthly payment and the monthly and
annual statements of account when due, the
owner may give written notice to the licensee
that, unless the default is remedied not later
than 30 days after the date on which the notice
is sent, the compulsory license will be
automatically terminated. Such termination
renders either the making or the distribution,
or both, of all phonorecords for which the
royalty has not been paid, actionable as acts
of infringement under section 501 and fully
subject to the remedies provided by sections
502 through 506. In the case of a license
obtained under subsection (b)(2)(B), license
authority under the compulsory license may be
terminated as provided in subsection (d)(4)(E).
(d) Blanket License for Digital Uses, Mechanical Licensing
Collective, and Digital Licensee Coordinator.--
(1) Blanket license for digital uses.--
(A) In general.--A digital music provider
that qualifies for a compulsory license under
subsection (a) may, by complying with the terms
and conditions of this subsection, obtain a
blanket license from copyright owners through
the mechanical licensing collective to make and
distribute digital phonorecord deliveries of
musical works through one or more covered
activities.
(B) Included activities.--A blanket license--
(i) covers all musical works (or
shares of such works) available for
compulsory licensing under this section
for purposes of engaging in covered
activities, except as provided in
subparagraph (C);
(ii) includes the making and
distribution of server, intermediate,
archival, and incidental reproductions
of musical works that are reasonable
and necessary for the digital music
provider to engage in covered
activities licensed under this
subsection, solely for the purpose of
engaging in such covered activities;
and
(iii) does not cover or include any
rights or uses other than those
described in clauses (i) and (ii).
(C) Other licenses.--A voluntary license for
covered activities entered into by or under the
authority of 1 or more copyright owners and 1
or more digital music providers, or authority
to make and distribute permanent downloads of a
musical work obtained by a digital music
provider from a sound recording copyright owner
pursuant to an individual download license,
shall be given effect in lieu of a blanket
license under this subsection with respect to
the musical works (or shares thereof) covered
by such voluntary license or individual
download authority and the following conditions
apply:
(i) Where a voluntary license or
individual download license applies,
the license authority provided under
the blanket license shall exclude any
musical works (or shares thereof)
subject to the voluntary license or
individual download license.
(ii) An entity engaged in covered
activities under a voluntary license or
authority obtained pursuant to an
individual download license that is a
significant nonblanket licensee shall
comply with paragraph (6)(A).
(iii) The rates and terms of any
voluntary license shall be subject to
the second sentence of clause (i) and
clause (ii) of subsection (c)(2)(A) and
paragraph (9)(C), as applicable.
(D) Protection against infringement
actions.--A digital music provider that obtains
and complies with the terms of a valid blanket
license under this subsection shall not be
subject to an action for infringement of the
exclusive rights provided by paragraphs (1) and
(3) of section 106 under this title arising
from use of a musical work (or share thereof)
to engage in covered activities authorized by
such license, subject to paragraph (4)(E).
(E) Other requirements and conditions
apply.--Except as expressly provided in this
subsection, each requirement, limitation,
condition, privilege, right, and remedy
otherwise applicable to compulsory licenses
under this section shall apply to compulsory
blanket licenses under this subsection.
(2) Availability of blanket license.--
(A) Procedure for obtaining license.--A
digital music provider may obtain a blanket
license by submitting a notice of license to
the mechanical licensing collective that
specifies the particular covered activities in
which the digital music provider seeks to
engage, as follows:
(i) The notice of license shall
comply in form and substance with
requirements that the Register of
Copyrights shall establish by
regulation.
(ii) Unless rejected in writing by
the mechanical licensing collective not
later than 30 calendar days after the
date on which the mechanical licensing
collective receives the notice, the
blanket license shall be effective as
of the date on which the notice of
license was sent by the digital music
provider as shown by a physical or
electronic record.
(iii) A notice of license may only be
rejected by the mechanical licensing
collective if--
(I) the digital music
provider or notice of license
does not meet the requirements
of this section or applicable
regulations, in which case the
requirements at issue shall be
specified with reasonable
particularity in the notice of
rejection; or
(II) the digital music
provider has had a blanket
license terminated by the
mechanical licensing collective
during the 3-year period
preceding the date on which the
mechanical licensing collectice
receives the notice pursuant to
paragraph (4)(E).
(iv) If a notice of license is
rejected under clause (iii)(I), the
digital music provider shall have 30
calendar days after receipt of the
notice of rejection to cure any
deficiency and submit an amended notice
of license to the mechanical licensing
collective. If the deficiency has been
cured, the mechanical licensing
collective shall so confirm in writing,
and the license shall be effective as
of the date that the original notice of
license was provided by the digital
music provider.
(v) A digital music provider that
believes a notice of license was
improperly rejected by the mechanical
licensing collective may seek review of
such rejection in an appropriate
district court of the United States.
The district court shall determine the
matter de novo based on the record
before the mechanical licensing
collective and any additional evidence
presented by the parties.
(B) Blanket license effective date.--Blanket
licenses shall be made available by the
mechanical licensing collective on and after
the license availability date. No such license
shall be effective prior to the license
availability date.
(3) Mechanical licensing collective.--
(A) In general.--The mechanical licensing
collective shall be a single entity that--
(i) is a nonprofit entity, not owned
by any other entity, that is created by
copyright owners to carry out
responsibilities under this subsection;
(ii) is endorsed by and enjoys
substantial support from musical work
copyright owners that together
represent the greatest percentage of
the licensor market for uses of such
works in covered activities, as
measured over the preceding 3 full
calendar years;
(iii) is able to demonstrate to the
Register of Copyrights that the entity
has, or will have prior to the license
availability date, the administrative
and technological capabilities to
perform the required functions of the
mechanical licensing collective under
this subsection and that is governed by
a board of directors in accordance with
subparagraph (D)(i); and
(iv) has been designated by the
Register of Copyrights, with the
approval of the Librarian of Congress
pursuant to section 702, in accordance
with subparagraph (B).
(B) Designation of mechanical licensing
collective.--
(i) Initial designation.--Not later
than 270 days after the enactment date,
the Register of Copyrights shall
initially designate the mechanical
licensing collective as follows:
(I) Not later than 90
calendar days after the
enactment date, the Register
shall publish notice in the
Federal Register soliciting
information to assist in
identifying the appropriate
entity to serve as the
mechanical licensing
collective, including the name
and affiliation of each member
of the board of directors
described under subparagraph
(D)(i) and each committee
established pursuant to clauses
(iii), (iv), and (v) of
subparagraph (D).
(II) After reviewing the
information requested under
subclause (I) and making a
designation, the Register shall
publish notice in the Federal
Register setting forth--
(aa) the identity of
and contact information
for the mechanical
licensing collective;
and
(bb) the reasons for
the designation.
(ii) Periodic review of
designation.--Following the initial
designation of the mechanical licensing
collective, the Register shall, every 5
years, beginning with the fifth full
calendar year to commence after the
initial designation, publish notice in
the Federal Register in the month of
January soliciting information
concerning whether the existing
designation should be continued, or a
different entity meeting the criteria
described in clauses (i) through (iii)
of subparagraph (A) shall be
designated. Following publication of
such notice, the Register shall--
(I) after reviewing the
information submitted and
conducting additional
proceedings as appropriate,
publish notice in the Federal
Register of a continuing
designation or new designation
of the mechanical licensing
collective, as the case may be,
and the reasons for such a
designation with any new
designation to be effective as
of the first day of a month
that is not less than 6 months
and not longer than 9 months
after the date on which the
Register publishes the notice,
as specified by the Register;
and
(II) if a new entity is
designated as the mechanical
licensing collective, adopt
regulations to govern the
transfer of licenses, funds,
records, data, and
administrative responsibilities
from the existing mechanical
licensing collective to the new
entity.
(iii) Closest alternative
designation.--If the Register is unable
to identify an entity that fulfills
each of the qualifications set forth in
clauses (i) through (iii) of
subparagraph (A), the Register shall
designate the entity that most nearly
fulfills such qualifications for
purposes of carrying out the
responsibilities of the mechanical
licensing collective.
(C) Authorities and functions.--
(i) In general.--The mechanical
licensing collective is authorized to
perform the following functions,
subject to more particular requirements
as described in this subsection:
(I) Offer and administer
blanket licenses, including
receipt of notices of license
and reports of usage from
digital music providers.
(II) Collect and distribute
royalties from digital music
providers for covered
activities.
(III) Engage in efforts to
identify musical works (and
shares of such works) embodied
in particular sound recordings,
and to identify and locate the
copyright owners of such
musical works (and shares of
such works).
(IV) Maintain the musical
works database and other
information relevant to the
administration of licensing
activities under this section.
(V) Administer a process by
which copyright owners can
claim ownership of musical
works (and shares of such
works), and a process by which
royalties for works for which
the owner is not identified or
located are equitably
distributed to known copyright
owners.
(VI) Administer collections
of the administrative
assessment from digital music
providers and significant
nonblanket licensees, including
receipt of notices of
nonblanket activity.
(VII) Invest in relevant
resources, and arrange for
services of outside vendors and
others, to support the
activities of the mechanical
licensing collective.
(VIII) Engage in legal and
other efforts to enforce rights
and obligations under this
subsection, including by filing
bankruptcy proofs of claims for
amounts owed under licenses,
and acting in coordination with
the digital licensee
coordinator.
(IX) Initiate and participate
in proceedings before the
Copyright Royalty Judges to
establish the administrative
assessment under this
subsection.
(X) Initiate and participate
in proceedings before the
Copyright Office with respect
to activities under this
subsection.
(XI) Gather and provide
documentation for use in
proceedings before the
Copyright Royalty Judges to set
rates and terms under this
section.
(XII) Maintain records of the
activities of the mechanical
licensing collective and engage
in and respond to audits
described in this subsection.
(XIII) Engage in such other
activities as may be necessary
or appropriate to fulfill the
responsibilities of the
mechanical licensing
collectuive under this
subsection.
(ii) Additional administrative
activities.--Subject to clause (iii)
and paragraph (11)(C), the mechanical
licensing collective may also
administer, or assist in administering,
voluntary licenses issued by or
individual download licenses obtained
from copyright owners for uses of
musical works, for which the mechanical
licensing collective shall charge
reasonable fees for such services.
(iii) Restriction concerning public
performance rights.--The mechanical
licensing collective--
(I) may, pursuant to clause
(ii), provide administration
services with respect to
voluntary licenses that include
the right of public performance
in musical works; and
(II) may not--
(aa) negotiate or
grant licenses for the
right of public
performance in musical
works; or
(bb) be the exclusive
or nonexclusive
assignee or grantee of
the right of public
performance in musical
works.
(iv) Restriction on lobbying.--The
mechanical licensing collective may not
engage in government lobbying
activities, but may engage in the
activities described in subclauses
(IX), (X), and (XI) of clause (i).
(D) Governance.--
(i) Board of directors.--The
mechanical licensing collective shall
have a board of directors consisting of
14 voting members and 3 nonvoting
members, as follows:
(I) Ten voting members shall
be representatives of music
publishers--
(aa) to which
songwriters have
assigned exclusive
rights of reproduction
and distribution of
musical works with
respect to covered
activities; and
(bb) none of which
may be owned by, or
under common control
with, any other board
member.
(II) Four voting members
shall be professional
songwriters who have retained
and exercise exclusive rights
of reproduction and
distribution with respect to
covered activities with respect
to musical works they have
authored.
(III) One nonvoting member
shall be a representative of
the nonprofit trade association
of music publishers that
represents the greatest
percentage of the licensor
market for uses of musical
works in covered activities, as
measured for the 3-year period
preceding the date on which the
member is appointed.
(IV) One nonvoting member
shall be a representative of
the digital licensee
coordinator, provided that a
digital licensee coordinator
has been designated pursuant to
paragraph (5)(B). Otherwise,
the nonvoting member shall be
the nonprofit trade association
of digital licensees that
represents the greatest
percentage of the licensee
market for uses of musical
works in covered activities, as
measured over the preceding 3
full calendar years.
(V) One nonvoting member
shall be a representative of a
nationally recognized nonprofit
trade association whose primary
mission is advocacy on behalf
of songwriters in the United
States.
(ii) Bylaws.--
(I) Establishment.--Not later
than 1 year after the date on
which the mechanical licensing
collective is initially
designated by the Register of
Copyrights under subparagraph
(B)(i), the collective shall
establish bylaws to determine
issues relating to the
governance of the collective,
including, but not limited to--
(aa) the length of
the term for each
member of the board of
directors;
(bb) the staggering
of the terms of the
members of the board of
directors;
(cc) a process for
filling a seat on the
board of directors that
is vacated before the
end of the term with
respect to that seat;
(dd) a process for
electing a member to
the board of directors;
and
(ee) a management
structure for daily
operations of the
collective.
(II) Public availability.--
The mechanical licesing
collective shall make the
bylaws established under
subclause (I) available to the
public.
(iii) Board meetings.--The board of
directors shall meet not less
frequently than biannually and discuss
matters pertinent to the operations of
the mechanical licensing collective,
including the mechanical licensing
collective budget.
(iv) Operations advisory committee.--
The board of directors of the
mechanical licensing collective shall
establish an operations advisory
committee consisting of not fewer than
6 members to make recommendations to
the board of directors concerning the
operations of the mechanical licensing
collective, including the efficient
investment in and deployment of
information technology and data
resources. Such committee shall have an
equal number of members of the
committee who are--
(I) musical work copyright
owners who are appointed by the
board of directors of the
mechanical licensing
collective; and
(II) representatives of
digital music providers who are
appointed by the digital
licensee coordinator.
(v) Unclaimed royalties oversight
committee.--The board of directors of
the mechanical licensing collective
shall establish and appoint an
unclaimed royalties oversight committee
consisting of 10 members, 5 of which
shall be musical work copyright owners
and 5 of which shall be professional
songwriters whose works are used in
covered activities.
(vi) Dispute resolution committee.--
The board of directors of the
mechanical licensing collective shall
establish and appoint a dispute
resolution committee that shall
(I) consist of not fewer than
6 members; and
(II) include an equal number
of representatives of musical
work copyright owners and
professional songwriters.
(vii) Mechanical licensing collective
annual report.--
(I) In general.--Not later
than June 30 of each year
commencing after the license
availability date, the
mechanical licensing collective
shall post, and make available
online for a period of not less
than 3 years, an annual report
that sets forth information
regarding--
(aa) the operational
and licensing practices
of the collective;
(bb) how royalties
are collected and
distributed, and ;
(cc) budgeting and
expenditures;
(dd) the collective
total costs for the
preceding calendar
year;
(ee) the projected
annual mechanical
licensing collective
budget;
(ff) aggregated
royalty receipts and
payments;
(gg) expenses that
are more than 10
percent of the annual
mechanical licensing
collective budget; and
(hh) the efforts of
the collective to
locate and identify
copyright owners of
unmatched musical works
(and shares of works).
(II) Submission.--On the date
on which the mechanical
licensing collective posts each
report required under subclause
(I), the collective shall
provide a copy of the report to
the Register of Copyrights.
(viii) Independent officers.--An
individual serving as an officer of the
mechanical licensing collective may
not, at the same time, also be an
employee or agent of any member of the
board of directors of the collective or
any entity represented by a member of
the board of directors, as described in
clause (i).
(ix) Oversight and accountability.--
(I) In general.--The
mechanical licensing collective
shall--
(aa) ensure that the
policies and practices
of the collective are
transparent and
accountable;
(bb) identify a point
of contact for
publisher inquiries and
complaints with timely
redress; and
(cc) establish an
anti-comingling policy
for funds not collected
under this section and
royalties collected
under this section.
(II) Audits.--
(aa) In general.--
Beginning in the fourth
full calendar year that
begins after the
initial designation of
the mechanical
licensing collective by
the Register of
Copyrights under
subparagraph (B)(i),
and in every fifth
calendar year
thereafter, the
collective shall retain
a qualified auditor
that shall--
(AA) examine
the books,
records, and
operations of
the collective;
(BB) prepare
a report for
the board of
directors of
the collective
with respect to
the matters
described in
item (bb); and
(CC) not
later than
December 31 of
the year in
which the
qualified
auditor is
retained,
deliver the
report
described in
subitem (BB) to
the board of
directors of
the collective.
(bb) Matters
addressed.--Each report
prepared under item
(aa) shall address the
implementation and
efficacy of procedures
of the mechanical
licensing collective--
(AA) for the
receipt,
handling, and
distribution of
royalty funds,
including any
amounts held as
unclaimed
royalties;
(BB) to guard
against fraud,
abuse, waste,
and the
unreasonable
use of funds;
and
(CC) to
protect the
confidentiality
of financial,
proprietary,
and other
sensitive
information.
(cc) Public
availability.--With
respect to each report
prepared under item
(aa), the mechanical
licensing collective
shall--
(AA) submit
the report to
the Register of
Copyrights; and
(BB) make the
report
available to
the public.
(E) Musical works database.--
(i) Establishment and maintenance of
database.--The mechanical licensing
collective shall establish and maintain
a database containing information
relating to musical works (and shares
of such works) and, to the extent
known, the identity and location of the
copyright owners of such works (and
shares thereof) and the sound
recordings in which the musical works
are embodied. In furtherance of
maintaining such database, the
mechanical licensing collective shall
engage in efforts to identify the
musical works embodied in particular
sound recordings, as well as to
identify and locate the copyright
owners of such works (and shares
thereof), and update such data as
appropriate.
(ii) Matched works.--With respect to
musical works (and shares thereof) that
have been matched to copyright owners,
the musical works database shall
include--
(I) the title of the musical
work;
(II) the copyright owner of
the work (or share thereof),
and the ownership percentage of
that owner;
(III) contact information for
such copyright owner;
(IV) to the extent reasonably
available to the mechanical
licensing collective--
(aa) the
international standard
musical work code for
the work; and
(bb) identifying
information for sound
recordings in which the
musical work is
embodied, including the
name of the sound
recording, featured
artist, sound recording
copyright owner,
producer, international
standard recording
code, and other
information commonly
used to assist in
associating sound
recordings with musical
works; and
(V) such other information as
the Register of Copyrights may
prescribe by regulation.
(iii) Unmatched works.--With respect
to unmatched musical works (and shares
of works) in the database, the musical
works database shall include--
(I) to the extent reasonably
available to the mechanical
licensing collective--
(aa) the title of the
musical work;
(bb) the ownership
percentage for which an
owner has not been
identified;
(cc) if a copyright
owner has been
identified but not
located, the identity
of such owner and the
ownership percentage of
that owner;
(dd) identifying
information for sound
recordings in which the
work is embodied,
including sound
recording name,
featured artist, sound
recording copyright
owner, producer,
international standard
recording code, and
other information
commonly used to assist
in associating sound
recordings with musical
works; and
(ee) any additional
information reported to
the mechanical
licensing collective
that may assist in
identifying the work;
and
(II) such other information relating
to the identity and ownership of
musical works (and shares of such
works) as the Register of Copyrights
may prescribe by regulation.
(iv) Sound recording information.--
Each musical work copyright owner with
any musical work listed in the musical
works database shall engage in
commercially reasonable efforts to
deliver to the mechanical licensing
collective, including for use in the
musical works database, to the extent
such information is not then available
in the database, information regarding
the names of the sound recordings in
which that copyright owner's musical
works (or shares thereof) are embodied,
to the extent practicable.
(v) Accessibility of database.--The
musical works database shall be made
available to members of the public in a
searchable, online format, free of
charge. The mechanical licensing
collective shall make such database
available in a bulk, machine-readable
format, through a widely available
software application, to the following
entities:
(I) Digital music providers
operating under the authority
of valid notices of license,
free of charge.
(II) Significant nonblanket
licensees in compliance with
their obligations under
paragraph (6), free of charge.
(III) Authorized vendors of
the entities described in
subclauses (I) and (II), free
of charge.
(IV) The Register of
Copyrights, free of charge (but
the Register shall not treat
such database or any
information therein as a
Government record).
(V) Any member of the public,
for a fee not to exceed the
marginal cost to the mechanical
licensing collective of
providing the database to such
person.
(vi) Additional requirements.--The
Register of Copyrights shall establish
requirements by regulations to ensure
the usability, interoperability, and
usage restrictions of the musical works
database.
(F) Notices of license and nonblanket
activity.--
(i) Notices of licenses.--The
mechanical licensing collective shall
receive, review, and confirm or reject
notices of license from digital music
providers, as provided in paragraph
(2)(A). The collective shall maintain a
current, publicly accessible list of
blanket licenses that includes contact
information for the licensees and the
effective dates of such licenses.
(ii) Notices of nonblanket
activity.--The mechanical licensing
collective shall receive notices of
nonblanket activity from significant
nonblanket licensees, as provided in
paragraph (6)(A). The collective shall
maintain a current, publicly accessible
list of notices of nonblanket activity
that includes contact information for
significant nonblanket licensees and
the dates of receipt of such notices.
(G) Collection and distribution of
royalties.--
(i) In general.--Upon receiving
reports of usage and payments of
royalties from digital music providers
for covered activities, the mechanical
licensing collective shall--
(I) engage in efforts to--
(aa) identify the
musical works embodied
in sound recordings
reflected in such
reports, and the
copyright owners of
such musical works (and
shares thereof);
(bb) confirm uses of
musical works subject
to voluntary licenses
and individual download
licenses, and the
corresponding pro rata
amounts to be deducted
from royalties that
would otherwise be due
under the blanket
license; and
(cc) confirm proper
payment of royalties
due;
(II) distribute royalties to
copyright owners in accordance
with the usage and other
information contained in such
reports, as well as the
ownership and other information
contained in the records of the
collective; and
(III) deposit into an
interest-bearing account, as
provided in subparagraph
(H)(ii), royalties that cannot
be distributed due to--
(aa) an inability to
identify or locate a
copyright owner of a
musical work (or share
thereof); or
(bb) a pending
dispute before the
dispute resolution
committee of the
mechanical licensing
collective.
(ii) Other collection efforts.--Any
royalties recovered by the mechanical
licensing collective as a result of
efforts to enforce rights or
obligations under a blanket license,
including through a bankruptcy
proceeding or other legal action, shall
be distributed to copyright owners
based on available usage information
and in accordance with the procedures
described in subclauses (I) and (II) of
clause (i), on a pro rata basis in
proportion to the overall percentage
recovery of the total royalties owed,
with any pro rata share of royalties
that cannot be distributed deposited in
an interestbearing account as provided
in subparagraph (H)(ii).
(H) Holding of accrued royalties.--
(i) Holding period.--The mechanical
licensing collective shall hold accrued
royalties associated with particular
musical works (and shares of works)
that remain unmatched for a period not
less than 3 years after the date on
which the funds were received by the
mechanical licensing collective, or not
less than 3 years after the date on
which the funds were accrued by a
digital music provider that
subsequently transferred such funds to
the mechanical licensing collective
pursuant to paragraph (10)(B),
whichever period expires sooner.
(ii) Interest-bearing account.--
Accrued royalties for unmatched works
(and shares thereof) shall be
maintained by the mechanical licensing
collective in an interest-bearing
account that earns monthly interest--
(I) at the Federal, short-
term rate; and
(II) that accrues for the
benefit of copyright owners
entitled to payment of such
accrued royalties.
(I) Musical works claiming process.--When a
copyright owner of an unmatched work (or share
of a work) has been identified and located in
accordance with the procedures of the
mechanical licensing collective, the collective
shall--
(i) update the musical works database
and the other records of the collective
accordingly; and
(ii) provided that accrued royalties
for the musical work (or share thereof)
have not yet been included in a
distribution pursuant to subparagraph
(J)(i), pay such accrued royalties and
a proportionate amount of accrued
interest associated with that work (or
share thereof) to the copyright owner,
accompanied by a cumulative statement
of account reflecting usage of such
work and accrued royalties based on
information provided by digital music
providers to the mechanical licensing
collective.
(J) Distribution of unclaimed accrued
royalties.--
(i) Distribution procedures.--After
the expiration of the prescribed
holding period for accrued royalties
provided in subparagraph (H)(i), the
mechanical licensing collective shall
distribute such accrued royalties,
along with a proportionate share of
accrued interest, to copyright owners
identified in the records of the
collective, subject to the following
requirements, and in accordance with
the policies and procedures established
under clause (ii):
(I) The first such
distribution shall occur on or
after January 1 of the second
full calendar year to commence
after the license availability
date, with not less than 1 such
distribution to take place
during each calendar year
thereafter.
(II) Copyright owners'
payment shares for unclaimed
accrued royalties for
particular reporting periods
shall be determined in a
transparent and equitable
manner based on data indicating
the relative market shares of
such copyright owners as
reflected in reports of usage
provided by digital music
providers for covered
activities for the periods in
question, including, in
addition to usage data provided
to the mechanical licensing
collective, usage data provided
to copyright owners under
voluntary licenses and
individual download licenses
for covered activities, to the
extent such information is
available to the mechanical
licensing collective. In
furtherance of the
determination of equitable
market shares under this
subparagraph--
(aa) the mechanical
licensing collective
may require copyright
owners seeking
distributions of
unclaimed accrued
royalties to provide,
or direct the provision
of, information
concerning the usage of
musical works under
voluntary licenses and
individual download
licenses for covered
activities, and
(bb) the mechanical
licensing collective
shall take appropriate
steps to safeguard the
confidentiality and
security of usage,
financial and other
sensitive data used to
compute market shares
in accordance with the
confidentiality
provisions prescribed
by the Register of
Copyrights under
paragraph (12)(C).
(ii) Establishment of distribution
policies.--The unclaimed royalties
oversight committee established under
subparagraph (D)(v) shall establish
policies and procedures for the
distribution of unclaimed accrued
royalties and accrued interest in
accordance with this subparagraph,
including the provision of usage data
to copyright owners to allocate
payments and credits to songwriters
pursuant to clause (v) subject to the
approval of the board of directors of
the mechanical licensing collective.
(iii) Public notice of unclaimed
accrued royalties.--The mechanical
licensing collective shall--
(I) maintain a publicly
accessible online facility with
contact information for the
collective that lists unmatched
musical works (and shares of
works), through which a
copyright owner may assert an
ownership claim with respect to
such a work (and a share of
such a work);
(II) engage in diligent,
good-faith efforts to
publicize, throughout the music
industry--
(aa) the existence of
the collective and the
ability to claim
unclaimed accrued
royalties for unmatched
musical works (and
shares of such works)
held by the collective;
(bb) the procedures
by which copyright
owners may identify
themselves and provide
contact, ownership, and
other relevant
information to the
collective in order to
receive payments of
accrued royalties;
(cc) any transfer of
accrued royalties for
musical works under
paragraph (10)(B), not
later than 180 days
after the date on which
the transfer is
received; and
(dd) any pending
distribution of
unclaimed accrued
royalties and accrued
interest, not less than
90 days before the date
on which the
distribution is made;
and
(III) as appropriate,
participate in music industry
conferences and events for the
purpose of publicizing the
matters described in subclause
(II).
(iv) Songwriter payments.--Copyright
owners that receive a distribution of
unclaimed accrued royalties and accrued
interest shall pay or credit a portion
to songwriters (or the authorized
agents of songwriters) on whose behalf
the copyright owners license or
administer musical works for covered
activities, in accordance with
applicable contractual terms, but
notwithstanding any agreement to the
contrary--
(I) such payments and credits
to songwriters shall be
allocated in proportion to
reported usage of individual
musical works by digital music
providers during the reporting
periods covered by the
distribution from the
mechanical licensing
collective; and
(II) in no case shall the
payment or credit to an
individual songwriter be less
than 50 percent of the payment
received by the copyright owner
attributable to usage of
musical works (or shares of
works) of that songwriter.
(K) Dispute resolution.--The dispute
resolution committee established under
subparagraph (D)(vi) shall establish policies
and procedures--
(i) for compyright owners to address
in a timely and equitable manner
disputes relating to ownership
interests in musical works licensed
under this section and allocation and
distribution of royalties by the
mechanical licensing collective,
subject to the approval of the board of
directors of the mechanical licensing
collective.--
(ii) that shall include a mechanism
to hold disputed funds in accordance
with the requirements described in
subparagraph (H)(ii) pending resolution
of the dispute; and
(iii) except as provided in paragraph
(11)(D), that shall not affect any
legal or equitable rights or remedies
available to any copyright owner or
songwriter concerning ownership of, and
entitlement to royalties for, a musical
work.
(L) Verification of payments by mechanical
licensing collective.--
(i) Verification process.--A
copyright owner entitled to receive
payments of royalties for covered
activities from the mechanical
licensing collective may, individually
or with other copyright owners, conduct
an audit of the mechanical licensing
collective to verify the accuracy of
royalty payments by the mechanical
licensing collective to such copyright
owner, as follows:
(I) A copyright owner may
audit the mechanical licensing
collective only once in a year
for any or all of the 3
calendar years preceding the
year in which the audit is
commenced, and may not audit
records for any calendar year
more than once.
(II) The audit shall be
conducted by a qualified
auditor, who shall perform the
audit during the ordinary
course of business by examining
the books, records, and data of
the mechanical licensing
collective, according to
generally accepted auditing
standards and subject to
applicable confidentiality
requirements prescribed by the
Register of Copyrights under
paragraph (12)(C).
(III) The mechanical
licensing collective shall make
such books, records, and data
available to the qualified
auditor and respond to
reasonable requests for
relevant information, and shall
use commercially reasonable
efforts to facilitate access to
relevant information maintained
by third parties.
(IV) To commence the audit,
any copyright owner shall file
with the Copyright Office a
notice of intent to conduct an
audit of the mechanical
licensing collective,
identifying the period of time
to be audited, and shall
simultaneously deliver a copy
of such notice to the
mechanical licensing
collective. The Register of
Copyrights shall cause the
notice of audit to be published
in the Federal Register not
later than 45 calendar days
after the date on which the
notice is received.
(V) The qualified auditor
shall determine the accuracy of
royalty payments, including
whether an underpayment or
overpayment of royalties was
made by the mechanical
licensing collective to each
auditing copyright owner,
except that before providing a
final audit report to any such
copyright owner, the qualified
auditor shall provide a
tentative draft of the report
to the mechanical licensing
collective and allow the
mechanical licensing collective
a reasonable opportunity to
respond to the findings,
including by clarifying issues
and correcting factual errors.
(VI) The auditing copyright
owner or owners shall bear the
cost of the audit. In case of
an underpayment to any
copyright owner, the mechanical
licensing collective shall pay
the amounts of any such
underpayment to such auditing
copyright owner, as
appropriate. In case of an
overpayment by the mechanical
licensing collective, the
mechanical licensing collective
may debit the account of the
auditing copyright owner or
owners for such overpaid
amounts, or such owner or
owners shall refund overpaid
amounts to the mechanical
licensing collective, as
appropriate.
(ii) Alternative verification
procedures.--Nothing in this
subparagraph shall preclude a copyright
owner and the mechanical licensing
collective from agreeing to audit
procedures different from those
described in this subparagraph, except
that, a notice of the audit shall be
provided to and published by the
Copyright Office as described in clause
(i)(IV).
(M) Records of mechanical licensing
collective.--
(i) Records maintenance.--The
mechanical licensing collective shall
ensure that all material records of the
operations of the mechanical licensing
collective, including those relating to
notices of license, the administration
of the claims process of the mechanical
licensing collective, reports of usage,
royalty payments, receipt and
maintenance of accrued royalties,
royalty distribution processes, and
legal matters, are preserved and
maintained in a secure and reliable
manner, with appropriate commercially
reasonable safeguards against
unauthorized access, copying, and
disclosure, and subject to the
confidentiality requirements prescribed
by the Register of Copyrights under
paragraph (12)(C) for a period of not
less than 7 years after the date of
creation or receipt, whichever occurs
later.
(ii) Records access.--The mechanical
licensing collective shall provide
prompt access to electronic and other
records pertaining to the
administration of a copyright owner's
musical works upon reasonable written
request of the owner or the authorized
representative of the owner.
(4) Terms and conditions of blanket license.--A
blanket license is subject to, and conditioned upon,
the following requirements:
(A) Royalty reporting and payments.--
(i) Monthly reports and payment.--A
digital music provider shall report and
pay royalties to the mechanical
licensing collective under the blanket
license on a monthly basis in
accordance with clause (ii) and
subsection (c)(2)(I), except that the
monthly reporting shall be due on the
date that is 45 calendar days, rather
than 20 calendar days, after the end of
the monthly reporting period.
(ii) Data to be reported.--In
reporting usage of musical works to the
mechanical licensing collective, a
digital music provider shall provide
usage data for musical works used under
the blanket license and usage data for
musical works used in covered
activities under voluntary licenses and
individual download licenses. In the
report of usage, the digital music
provider shall--
(I) with respect to each
sound recording embodying a
musical work--
(aa) provide
identifying information
for the sound
recording, including
sound recording name,
featured artist, and,
to the extent
reasonably acquired by
the digital music
provider in connection
with its use of sound
recordings of musical
works to engage in
covered activities,
including pursuant to
subparagraph (B), sound
recording copyright
owner, producer,
international standard
recording code, and
other information
commonly used in the
industry to identify
sound recordings and
match them to the
musical works the sound
recordings embody;
(bb) to the extent
reasonably acquired by
the digital music
provider in the
metadata provided by
sound recording
copyright owners or
other licensors of
sound recordings in
connection with the use
of sound recordings of
musical works to engage
in covered activities,
including pursuant to
subparagraph (B),
provide information
concerning authorship
and ownership of the
applicable rights in
the musical work
embodied in the sound
recording (including
each songwriter,
publisher name, and
respective ownership
share) and the
international standard
musical workcode;
(cc) provide the
number of digital
phonorecord deliveries
of the sound recording,
including limited
downloads and
interactive streams;
(II) identify and provide
contact information for all
musical work copyright owners
for works embodied in sound
recordings as to which a
voluntary license, rather than
the blanket license, is in
effect with respect to the uses
being reported; and
(III) provide such other
information as the Register of
Copyrights shall require by
regulation.
(iii) Format and maintenance of
reports.--Reports of usage provided by
digital music providers to the
mechanical licensing collective shall
be in a machine-readable format that is
compatible with the information
technology systems of the mechanical
licensing collective and meets the
requirements of regulations adopted by
the Register of Copyrights. The
Register shall also adopt regulations
setting forth requirements under which
records of use shall be maintained and
made available to the mechanical
licensing collective by digital music
providers engaged in covered activities
under a blanket license.
(iv) Adoption of regulations.--The
Register of Copyrights shall adopt
regulations--
(I) setting forth
requirements under which
records of use shall be
maintained and made available
to the mechanical licensing
collective by digital music
providers engaged in covered
activities under a blanket
license; and
(II) regarding adjustments to
reports of usage by digital
music providers, including
mechanisms to account for
overpayment and underpayment of
royalties in prior periods.
(B) Collection of sound recording
information.--A digital music provider shall
engage in good-faith, commercially reasonable
efforts to obtain from sound recording
copyright owners and other licensors of sound
recordings made available through the service
of such digital music provider information
concerning--
(i) sound recording copyright owners,
international standard recording codes,
and other information commonly used in
the industry to identify sound
recordings and match them to the
musical works the sound recordings
embody; and
(ii) the authorship and ownership of
musical works, including songwriters,
publisher names, ownership shares, and
international standard musical work
codes.
(C) Payment of administrative assessment.--A
digital music provider and any significant
nonblanket licensee shall pay the
administrative assessment established under
paragraph (7)(D) in accordance with this
subsection and applicable regulations.
(D) Verification of payments by digital music
providers.--
(i) Verification process.--The
mechanical licensing collective may
conduct an audit of a digital music
provider operating under the blanket
license to verify the accuracy of
royalty payments by the digital music
provider to the mechanical licensing
collective as follows:
(I) The mechanical licensing
collective may commence an
audit of a digital music
provider not more frequently
than once in any 3-calendar-
year period to cover a
verification period of not more
than the 3 full calendar years
preceding the date of
commencement of the audit, and
such audit may not audit
records for any such 3-year
verification period more than
once.
(II) The audit shall be
conducted by a qualified
auditor, who shall perform the
audit during the ordinary
course of business by examining
the books, records, and data of
the digital music provider,
according to generally accepted
auditing standards and subject
to applicable confidentiality
requirements prescribed by the
Register of Copyrights under
paragraph (12)(C).
(III) The digital music
provider shall make such books,
records, and data available to
the qualified auditor and
respond to reasonable requests
for relevant information, and
shall use commercially
reasonable efforts to provide
access to relevant information
maintained with respect to a
digital music provider by third
parties.
(IV) To commence the audit,
the mechanical licensing
collective shall file with the
Copyright Office a notice of
intent to conduct an audit of
the digital music provider,
identifying the period of time
to be audited, and shall
simultaneously deliver a copy
of such notice to the digital
music provider. The Register of
Copyrights shall cause the
notice of audit to be published
in the Federal Register not
later than 45 calendar days
after the date on which notice
is received.
(V) The qualified auditor
shall determine the accuracy of
royalty payments, including
whether an underpayment or
overpayment of royalties was
made by the digital music
provider to the mechanical
licensing collective, except
that before providing a final
audit report to the mechanical
licensing collective, the
qualified auditor shall provide
a tentative draft of the report
to the digital music provider
and allow the digital music
provider a reasonable
opportunity to respond to the
findings, including by
clarifying issues and
correcting factual errors.
(VI) The mechanical licensing
collective shall pay the cost
of the audit, unless the
qualified auditor determines
that there was an underpayment
by the digital music provider
of not less than 10 percent, in
which case the digital music
provider shall bear the
reasonable costs of the audit,
in addition to paying the
amount of any underpayment to
the mechanical licensing
collective. In case of an
overpayment by the digital
music provider, the mechanical
licensing collective shall
provide a credit to the account
of the digital music provider.
(VII) A digital music
provider may not assert section
507 or any other Federal or
State statute of limitations,
doctrine of laches or estoppel,
or similar provision as a
defense to a legal action
arising from an audit under
this subparagraph if such legal
action is commenced not more
than 6 years after the
commencement of the audit that
is the basis for such action.
(ii) Alternative verification
procedures.--Nothing in this
subparagraph shall preclude the
mechanical licensing collective and a
digital music provider from agreeing to
audit procedures different from those
described in this subparagraph, except
that a notice of the audit shall be
provided to and published by the
Copyright Office as described in clause
(i)(IV).
(E) Default under blanket license.--
(i) Conditions of default.--A digital
music provider shall be in default
under a blanket license if the digital
music provider--
(I) fails to provide 1 or
more monthly reports of usage
to the mechanical licensing
collective when due;
(II) fails to make a monthly
royalty or late fee payment to
the mechanical licensing
collective when due, in all or
material part;
(III) provides 1 or more
monthly reports of usage to the
mechanical licensing collective
that, on the whole, is or are
materially deficient as a
result of inaccurate, missing,
or unreadable data, where the
correct data was available to
the digital music provider and
required to be reported under
this section and applicable
regulations;
(IV) fails to pay the
administrative assessment as
required under this subsection
and applicable regulations; or
(V) after being provided
written notice by the
mechanical licensing
collective, refuses to comply
with any other material term or
condition of the blanket
license under this section for
a period of not less than 60
calendar days.
(ii) Notice of default and
termination.--In case of a default by a
digital music provider, the mechanical
licensing collective may proceed to
terminate the blanket license of the
digital music provider as follows:
(I) The mechanical licensing
collective shall provide
written notice to the digital
music provider describing with
reasonable particularity the
default and advising that
unless such default is cured
not later than 60 calendar days
after the date of the notice,
the blanket license will
automatically terminate at the
end of that period.
(II) If the digital music
provider fails to remedy the
default before the end of the
60-day period described in
subclause (I), the license
shall terminate without any
further action on the part of
the mechanical licensing
collective. Such termination
renders the making of all
digital phonorecord deliveries
of all musical works (and
shares thereof) covered by the
blanket license for which the
royalty or administrative
assessment has not been paid
actionable as acts of
infringement under section 501
and subject to the remedies
provided by sections 502
through 506.
(iii) Notice to copyright owners.--
The mechanical licensing collective
shall provide written notice of any
termination under this subparagraph to
copyright owners of affected works.
(iv) Review by federal district
court.--A digital music provider that
believes a blanket license was
improperly terminated by the mechanical
licensing collective may seek review of
such termination in an appropriate
district court of the United States.
The district court shall determine the
matter de novo based on the record
before the mechanical licensing
collective and any additional
supporting evidence presented by the
parties.
(5) Digital licensee coordinator.--
(A) In general.--The digital licensee
coordinator shall be a single entity that--
(i) is a nonprofit, not owned by any
other entity, that is created to carry
out responsibilities under this
subsection;
(ii) is endorsed by and enjoys
substantial support from digital music
providers and significant nonblanket
licensees that together represent the
greatest percentage of the licensee
market for uses of musical works in
covered activities, as measured over
the preceding 3 calendar years;
(iii) is able to demonstrate that it
has, or will have prior to the license
availability date, the administrative
capabilities to perform the required
functions of the digital licensee
coordinator under this subsection; and
(iv) has been designated by the
Register of Copyrights, with the
approval of the Librarian of Congress
pursuant to section 702, in accordance
with subparagraph (B).
(B) Designation of digital licensee
coordinator.--
(i) Initial designation.--The
Register of Copyrights shall initially
designate the digital licensee
coordinator not later than 270 days
after the enactment date, in accordance
with the same procedure described for
designation of the mechanical licensing
collective in paragraph (3)(B)(i).
(ii) Periodic review of
designation.--Following the initial
designation of the digital licensee
coordinator, the Register of Copyrights
shall, every 5 years, beginning with
the fifth full calendar year to
commence after the initial designation,
determine whether the existing
designation should be continued, or a
different entity meeting the criteria
described in clauses (i) through (iii)
of subparagraph (A) should be
designated, in accordance with the same
procedure described for the mechanical
licensing collective in paragraph
(3)(B)(ii).
(iii) Inability to designate.--If the
Register of Copyrights is unable to
identify an entity that fulfills each
of the qualifications described in
clauses (i) through (iii) of
subparagraph (A) to serve as the
digital licensee coordinator, the
Register may decline to designate a
digital licensee coordinator. The
determination of the Register not to
designate a digital licensee
coordinator shall not negate or
otherwise affect any provision of this
subsection except to the limited extent
that a provision references the digital
licensee coordinator. In such case, the
reference to the digital licensee
coordinator shall be without effect
unless and until a new digital licensee
coordinator is designated.
(C) Authorities and functions.--
(i) In general.--The digital licensee
coordinator is authorized to perform
the following functions, subject to
more particular requirements as
described in this subsection:
(I) Establish a governance
structure, criteria for
membership, and any dues to be
paid by its members.
(II) Engage in efforts to
enforce notice and payment
obligations with respect to the
administrative assessment,
including by receiving
information from and
coordinating with the
mechanical licensing
collective.
(III) Initiate and
participate in proceedings
before the Copyright Royalty
Judges to establish the
administrative assessment under
this subsection.
(IV) Initiate and participate
in proceedings before the
Copyright Office with respect
to activities under this
subsection.
(V) Gather and provide
documentation for use in
proceedings before the
Copyright Royalty Judges to set
rates and terms under this
section.
(VI) Maintain records of its
activities.
(VII) Assist in publicizing
the existence of the mechanical
licensing collective and the
ability of copyright owners to
claim royalites for unmatched
musical works (and shares of
works) through the collective
(VIII) Engage in such other
activities as may be necessary
or appropriate to fulfill its
responsibilities under this
subsection.
(ii) Restriction on lobbying.--The
digital licensee coordinator may not
engage in government lobbying
activities, but may engage in the
activities described in subclauses
(III), (IV), and (V) of clause (i).
(iii) Assistance with publicity for
unclaimed royalties.--The digital
licensee coordinator shall make
reasonable, good-faith efforts to
assist the mechanical licensing
collective in the efforts of the
collective to locate and identify
copyright owners of unmatched musical
works (and shares of such works) by
encouraging digital music providers to
publicize the existence of the
collective and the ability of copyright
owners to claim unclaimed accrued
royalties, including by--
(I) posting contact
information for the collective
at reasonably prominent
locations on digital music
provider websites and
applications; and
(II) conducting in-person
outreach activities with
songwriters.
(6) Requirements for significant nonblanket
licensees.--
(A) In general.--
(i) Notice of activity.--Not later
than 45 calendar days after the license
availability date, or 45 calendar days
after the end of the first full
calendar month in which an entity
initially qualifies as a significant
nonblanket licensee, whichever occurs
later, a significant nonblanket
licensee shall submit a notice of
nonblanket activity to the mechanical
licensing collective. The notice of
nonblanket activity shall comply in
form and substance with requirements
that the Register of Copyrights shall
establish by regulation, and a copy
shall be made available to the digital
licensee coordinator.
(ii) Reporting and payment
obligations.--The notice of nonblanket
activity submitted to the mechanical
licensing collective shall be
accompanied by a report of usage that
contains the information described in
paragraph (4)(A)(ii), as well as any
payment of the administrative
assessment required under this
subsection and applicable regulations.
Thereafter, subject to clause (iii), a
significant nonblanket licensee shall
continue to provide monthly reports of
usage, accompanied by any required
payment of the administrative
assessment, to the mechanical licensing
collective. Such reports and payments
shall be submitted not later than 45
calendar days after the end of the
calendar month being reported.
(iii) Discontinuation of
obligations.--An entity that has
submitted a notice of nonblanket
activity to the mechanical licensing
collective that has ceased to qualify
as a significant nonblanket licensee
may so notify the collective in
writing. In such case, as of the
calendar month in which such notice is
provided, such entity shall no longer
be required to provide reports of usage
or pay the administrative assessment,
but if such entity later qualifies as a
significant nonblanket licensee, such
entity shall again be required to
comply with clauses (i) and (ii).
(B) Reporting by mechanical licensing
collective to digital licensee coordinator.--
(i) Monthly reports of noncompliant
licensees.--The mechanical licensing
collective shall provide monthly
reports to the digital licensee
coordinator setting forth any
significant nonblanket licensees of
which the collective is aware that have
failed to comply with subparagraph (A).
(ii) Treatment of confidential
information.--The mechanical licensing
collective and digital licensee
coordinator shall take appropriate
steps to safeguard the confidentiality
and security of financial and other
sensitive data shared under this
subparagraph, in accordance with the
confidentiality requirements prescribed
by the Register of Copyrights under
paragraph (12)(C).
(C) Legal enforcement efforts.--
(i) Federal court action.--Should the
mechanical licensing collective or
digital licensee coordinator become
aware that a significant nonblanket
licensee has failed to comply with
subparagraph (A), either may commence
an action in an appropriate district
court of the United States for damages
and injunctive relief. If the
significant nonblanket licensee is
found liable, the court shall, absent a
finding of excusable neglect, award
damages in an amount equal to three
times the total amount of the unpaid
administrative assessment and,
notwithstanding anything to the
contrary in section 505, reasonable
attorney's fees and costs, as well as
such other relief as the court
determines appropriate. In all other
cases, the court shall award relief as
appropriate. Any recovery of damages
shall be payable to the mechanical
licensing collective as an offset to
the collective total costs.
(ii) Statute of limitations for
enforcement action.--Any action
described in this subparagraph shall be
commenced within the time period
described in section 507(b).
(iii) Other rights and remedies
preserved.--The ability of the
mechanical licensing collective or
digital licensee coordinator to bring
an action under this subparagraph shall
in no way alter, limit or negate any
other right or remedy that may be
available to any party at law or in
equity.
(7) Funding of mechanical licensing collective.--
(A) In general.--The collective total costs
shall be funded by--
(i) an administrative assessment, as
such assessment is established by the
Copyright Royalty Judges pursuant to
subparagraph (D) from time to time, to
be paid by--
(I) digital music providers
that are engaged, in all or in
part, in covered activities
pursuant to a blanket license;
and
(II) significant nonblanket
licensees; and
(ii) voluntary contributions from
digital music providers and significant
nonblanket licensees as may be agreed
with copyright owners.
(B) Voluntary contributions.--
(i) Agreements concerning
contributions.--Except as provided in
clause (ii), voluntary contributions by
digital music providers and significant
nonblanket licensees shall be
determined by private negotiation and
agreement, and the following conditions
apply:
(I) The date and amount of
each voluntary contribution to
the mechanical licensing
collective shall be documented
in a writing signed by an
authorized agent of the
mechanical licensing collective
and the contributing party.
(II) Such agreement shall be
made available as required in
proceedings before the
Copyright Royalty Judges to
establish or adjust the
administrative assessment in
accordance with applicable
statutory and regulatory
provisions and rulings of the
Copyright Royalty Judges.
(ii) Treatment of contributions.--
Each voluntary contribution described
in clause (i) shall be treated for
purposes of an administrative
assessment proceeding as an offset to
the collective total costs that would
otherwise be recovered through the
administrative assessment. Any
allocation or reallocation of voluntary
contributions between or among
individual digital music providers or
significant nonblanket licensees shall
be a matter of private negotiation and
agreement among such parties and
outside the scope of the administrative
assessment proceeding.
(C) Interim application of accrued
royalties.--In the event that the
administrative assessment, together with any
funding from voluntary contributions as
provided in subparagraphs (A) and (B), is
inadequate to cover current collective total
costs, the collective, with approval of its
board of directors, may apply unclaimed accrued
royalties on an interim basis to defray such
costs, subject to future reimbursement of such
royalties from future collections of the
assessment.
(D) Determination of administrative
assessment.--
(i) Administrative assessment to
cover collective total costs.--The
administrative assessment shall be used
solely and exclusively to fund the
collective total costs.
(ii) Separate proceeding before
copyright royalty judges.--The amount
and terms of the administrative
assessment shall be determined and
established in a separate and
independent proceeding before the
Copyright Royalty Judges, according to
the procedures described in clauses
(iii) and (iv). The administrative
assessment determined in such
proceeding shall--
(I) be wholly independent of
royalty rates and terms
applicable to digital music
providers, which shall not be
taken into consideration in any
manner in establishing the
administrative assessment;
(II) be established by the
Copyright Royalty Judges in an
amount that is calculated to
defray the reasonable
collective total costs;
(III) be assessed based on
usage of musical works by
digital music providers and
significant nonblanket
licensees in covered activities
under both compulsory and
nonblanket licenses;
(IV) may be in the form of a
percentage of royalties payable
under this section for usage of
musical works in covered
activities (regardless of
whether a different rate
applies under a voluntary
license), or any other usage-
based metric reasonably
calculated to equitably
allocate the collective total
costs across digital music
providers and significant
nonblanket licensees engaged in
covered activities, and shall
include as a component a
minimum fee for all digital
music providers and significant
nonblanket licensees; and
(V) take into consideration
anticipated future collective
total costs and collections of
the administrative assessment,
including, as applicable--
(aa) any portion of
past actual collective
total costs of the
mechanical licensing
collective not funded
by previous collections
of the administrative
assessment or voluntary
contributions because
such collections or
contributions together
were insufficient to
fund such costs;
(bb) any past
collections of the
administrative
assessment and
voluntary contributions
that exceeded past
actual collective total
costs, resulting in a
surplus; and
(cc) the amount of
any voluntary
contributions by
digital music providers
or significant
nonblanket licensees in
relevant periods,
described in
subparagraphs (A) and
(B) of paragraph (7).
(iii) Initial administrative
assessment.--The procedure for
establishing the initial administrative
assessment shall be as follows:
(I) Not later than 270 days
after the enactment of the
date, the Copyright Royalty
Judges shall commence a
proceeding to establish the
initial administrative
assessment by publishing a
notice in the Federal Register
seeking petitions to
participate.
(II) The mechanical licensing
collective and digital licensee
coordinator shall participate
in the proceeding described in
subclause (I), along with any
interested copyright owners,
digital music providers or
significant nonblanket
licensees that have notified
the Copyright Royalty Judges of
their desire to participate.
(III) The Copyright Royalty
Judges shall establish a
schedule for submission by the
parties of information that may
be relevant to establishing the
administrative assessment,
including actual and
anticipated collective total
costs of the mechanical
licensing collective, actual
and anticipated collections
from digital music providers
and significant nonblanket
licensees, and documentation of
voluntary contributions, as
well as a schedule for further
proceedings, which shall
include a hearing, as the
Copyright Royalty Judges
determine appropriate.
(IV) The initial
administrative assessment shall
be determined, and such
determination shall be
published in the Federal
Register by the Copyright
Royalty Judges, not later than
1 year after commencement of
the proceeding described in
this clause. The determination
shall be supported by a written
record. The initial
administrative assessment shall
be effective as of the license
availability date, and shall
continue in effect unless and
until an adjusted
administrative assessment is
established pursuant to an
adjustment proceeding under
clause (iv).
(iv) Adjustment of administrative
assessment.--The administrative
assessment may be adjusted by the
Copyright Royalty Judges periodically,
in accordance with the following
procedures:
(I) Not earlier than one year
after the most recent
publication of a determination
of the administrative
assessment by the Copyright
Royalty Judges, the mechanical
licensing collective, the
digital licensee coordinator,
or one or more interested
copyright owners, digital music
providers, or significant
nonblanket licensees, may file
a petition with the Copyright
Royalty Judges in the month of
May to commence a proceeding to
adjust the administrative
assessment.
(II) Notice of the
commencement of such proceeding
shall be published in the
Federal Register in the month
of June following the filing of
any petition, with a schedule
of requested information and
additional proceedings, as
described in clause (iii)(III).
The mechanical licensing
collective and digital licensee
coordinator shall participate
in such proceeding, along with
any interested copyright
owners, digital music
providers, or significant
nonblanket licensees that have
notified the Copyright Royalty
Judges of their desire to
participate.
(III) The determination of
the adjusted administrative
assessment, which shall be
supported by a written record,
shall be published in the
Federal Register during June of
the calendar year following the
commencement of the proceeding.
The adjusted administrative
assessment shall take effect
January 1 of the year following
such publication.
(v) Adoption of voluntary
agreements.--In lieu of reaching their
own determination based on evaluation
of relevant data, the Copyright Royalty
Judges shall approve and adopt a
negotiated agreement to establish the
amount and terms of the administrative
assessment that has been agreed to by
the mechanical licensing collective and
the digital licensee coordinator (or if
none has been designated, interested
digital music providers and significant
nonblanket licensees representing more
than half of the market for uses of
musical works in covered activities),
except that the Copyright Royalty
Judges shall have the discretion to
reject any such agreement for good
cause shown. An administrative
assessment adopted under this clause
shall apply to all digital music
providers and significant nonblanket
licensees engaged in covered activities
during the period the administrative
assessment is in effect.
(vi) Continuing authority to amend.--
The Copyright Royalty Judges shall
retain continuing authority to amend a
determination of an administrative
assessment to correct technical or
clerical errors, or modify the terms of
implementation, for good cause, with
any such amendment to be published in
the Federal Register.
(vii) Appeal of administrative
assessment.--The determination of an
administrative assessment by the
Copyright Royalty Judges shall be
appealable, not later than 30 calendar
days after publication in the Federal
Register, to the Court of Appeals for
the District of Columbia Circuit by any
party that fully participated in the
proceeding. The administrative
assessment as established by the
Copyright Royalty Judges shall remain
in effect pending the final outcome of
any such appeal, and the mechanical
licensing collective, digital licensee
coordinator, digital music providers,
and significant nonblanket licensees
shall implement appropriate financial
or other measures not later than 90
days after any modification of the
assessment to reflect and account for
such outcome.
(viii) Regulations.--The Copyright
Royalty Judges may adopt regulations to
govern the conduct of proceedings under
this paragraph.
(8) Establishment of rates and terms under blanket
license.--
(A) Restrictions on ratesetting
participation.--Neither the mechanical
licensing collective nor the digital licensee
coordinator shall be a party to a proceeding
described in subsection (c)(1)(E), except that
the mechanical licensing collective or the
digital licensee coordinator may gather and
provide financial and other information for the
use of a party to such a proceeding and comply
with requests for information as required under
applicable statutory and regulatory provisions
and rulings of the Copyright Royalty Judges.
(B) Application of late fees.--In any
proceeding described in subparagraph (A) in
which the Copyright Royalty Judges establish a
late fee for late payment of royalties for uses
of musical works under this section, such fee
shall apply to covered activities under blanket
licenses, as follows:
(i) Late fees for past due royalty
payments shall accrue from the due date
for payment until payment is received
by the mechanical licensing collective.
(ii) The availability of late fees
shall in no way prevent a copyright
owner or the mechanical licensing
collective from asserting any other
rights or remedies to which such
copyright owner or the mechanical
licensing collective may be entitled
under this title.
(C) Interim rate agreements in general.--For
any covered activity for which no rate or terms
have been established by the Copyright Royalty
Judges, the mechanical licensing collective and
any digital music provider may agree to an
interim rate and terms for such activity under
the blanket license, and any such rate and
terms--
(i) shall be treated as
nonprecedential and not cited or relied
upon in any ratesetting proceeding
before the Copyright Royalty Judges or
any other tribunal; and
(ii) shall automatically expire upon
the establishment of a rate and terms
for such covered activity by the
Copyright Royalty Judges, under
subsection (c)(1)(E).
(D) Adjustments for interim rates.--The rate
and terms established by the Copyright Royalty
Judges for a covered activity to which an
interim rate and terms have been agreed under
subparagraph (C) shall supersede the interim
rate and terms and apply retroactively to the
inception of the activity under the blanket
license. In such case, not later than 90 days
after the effective date of the rate and terms
established by the Copyright Royalty Judges--
(i) if the rate established by the
Copyright Royalty Judges exceeds the
interim rate, the digital music
provider shall pay to the mechanical
licensing collective the amount of any
underpayment of royalties due; or
(ii) if the interim rate exceeds the
rate established by the Copyright
Royalty Judges, the mechanical
licensing collective shall credit the
account of the digital music provider
for the amount of any overpayment of
royalties due.
(9) Transition to blanket licenses.--
(A) Substitution of blanket license.--On the
license availability date, a blanket license
shall, without any interruption in license
authority enjoyed by such digital music
provider, be automatically substituted for and
supersede any existing compulsory license
previously obtained under this section by the
digital music provider from a copyright owner
to engage in 1 or more covered activities with
respect to a musical work, except that such
substitution shall not apply to any authority
obtained from a record company pursuant to a
compulsory license to make and distribute
permanent downloads unless and until such
record company terminates such authority in
writing to take effect at the end of a monthly
reporting period, with a copy to the mechanical
licensing collective.
(B) Expiration of existing licenses.--Except
to the extent provided in subparagraph (A), on
and after the license availability date,
licenses other than individual download
licenses obtained under this section for
covered activities prior to the license
availability date shall no longer continue in
effect.
(C) Treatment of voluntary licenses.--A
voluntary license for a covered activity in
effect on the license availability date will
remain in effect unless and until the voluntary
license expires according to the terms of the
voluntary license, or the parties agree to
amend or terminate the voluntary license. In a
case where a voluntary license for a covered
activity entered into before the license
availability date incorporates the terms of
this section by reference, the terms so
incorporated (but not the rates) shall be those
in effect immediately prior to the license
availability date, and those terms shall
continue to apply unless and until such
voluntary license is terminated or amended, or
the parties enter into a new voluntary license.
(D) Further acceptance of notices for covered
activities by copyright office.--On and after
the enactment date--
(i) the Copyright Office shall no
longer accept notices of intention with
respect to covered activities; and
(ii) notices of intention filed
before the enactment date will no
longer be effective or provide license
authority with respect to covered
activities, except that before the
license availability date there shall
be no liability under section 501 for
the reproduction or distribution of a
musical work (or share thereof) in
covered activities if a valid notice of
intention was filed for such work (or
share) before the enactment date.
(10) Prior unlicensed uses.--
(A) Limitation on liability in general.--A
copyright owner that commences an action under
section 501 on or after January 1, 2018,
against a digital music provider for the
infringement of the exclusive rights provided
by paragraph (1) or (3) of section 106 arising
from the unauthorized reproduction or
distribution of a musical work by such digital
music provider in the course of engaging in
covered activities prior to the license
availability date, shall, as the copyright
owner's sole and exclusive remedy against the
digital music provider, be eligible to recover
the royalty prescribed under subsection
(c)(1)(C) and chapter 8 of this title, from the
digital music provider, provided that such
digital music provider can demonstrate
compliance with the requirements of
subparagraph (B), as applicable. In all other
cases the limitation on liability under this
subparagraph shall not apply.
(B) Requirements for limitation on
liability.--The following requirements shall
apply on the enactment date and through the end
of the period that expires 90 days after the
license availability date to digital music
providers seeking to avail themselves of the
limitation on liability described in
subparagraph (A):
(i) Not later than 30 calendar days
after first making a particular sound
recording of a musical work available
through its service via one or more
covered activities, or 30 calendar days
after the enactment date, whichever
occurs later, a digital music provider
shall engage in good-faith,
commercially reasonable efforts to
identify and locate each copyright
owner of such musical work (or share
thereof). Such required matching
efforts shall include the following:
(I) Good-faith, commercially
reasonable efforts to obtain
from the owner of the
corresponding sound recording
made available through the
digital music provider's
service the following
information:
(aa) Sound recording
name, featured artist,
sound recording
copyright owner,
international standard
recording code, and
other information
commonly used in the
industry to identify
sound recordings and
match them to the
musical works they
embody.
(bb) Any available
musical work
ownershipinformation,
including each
songwriter and
publisher name,
percentage ownership
share, and
international standard
musical work code.
(II) Employment of 1 or more
bulk electronic matching
processes that are available to
the digital music provider
through a third-party vendor on
commercially reasonable terms,
except that a digital music
provider may rely on its own
bulk electronic matching
process if that process has
capabilities comparable to or
better than those available
from a third-party vendor on
commercially reasonable terms.
(ii) The required matching efforts
shall be repeated by the digital music
provider not less than once per month
for so long as the copyright owner
remains unidentified or has not been
located.
(iii) If the required matching
efforts are successful in identifying
and locating a copyright owner of a
musical work (or share thereof) by the
end of the calendar month in which the
digital music provider first makes use
of the work, the digital music provider
shall provide statements of account and
pay royalties to such copyright owner
in accordance with this section and
applicable regulations.
(iv) If the copyright owner is not
identified or located by the end of the
calendar month in which the digital
music provider first makes use of the
work, the digital music provider shall
accrue and hold royalties calculated
under the applicable statutory rate in
accordance with usage of the work, from
initial use of the work until the
accrued royalties can be paid to the
copyright owner or are required to be
transferred to the mechanical licensing
collective, as follows:
(I) Accrued royalties shall
be maintained by the digital
music provider in accordance
with generally accepted
accounting principles.
(II) If a copyright owner of
an unmatched musical work (or
share thereof) is identified
and located by or to the
digital music provider before
the license availability date,
the digital music provider
shall--
(aa) not later than
45 calendar days after
the end of the calendar
month during which the
copyright owner was
identified and located,
pay the copyright owner
all accrued royalties,
such payment to be
accompanied by a
cumulative statement of
account that includes
all of the information
that would have been
provided to the
copyright owner had the
digital music provider
been providing monthly
statements of account
to the copyright owner
from initial use of the
work in accordance with
this section and
applicable regulations,
including the requisite
certification under
subsection (c)(2)(I);
(bb) beginning with
the accounting period
following the calendar
month in which the
copyright owner was
identified and located,
and for all other
accounting periods
prior to the license
availability date,
provide monthly
statements of account
and pay royalties to
the copyright owner as
required under this
section and applicable
regulations; and
(cc) beginning with
the monthly royalty
reporting period
commencing on the
license availability
date, report usage and
pay royalties for such
musical work (or share
thereof) for such
reporting period and
reporting periods
thereafter to the
mechanical licensing
collective, as required
under this subsection
and applicable
regulations.
(III) If a copyright owner of
an unmatched musical work (or
share thereof) is not
identified and located by the
license availability date, the
digital music provider shall--
(aa) not later than
45 calendar days after
the license
availability date,
transfer all accrued
royalties to the
mechanical licensing
collective, such
payment to be
accompanied by a
cumulative statement of
account that includes
all of the information
that would have been
provided to the
copyright owner had the
digital music provider
been serving monthly
statements of account
on the copyright owner
from initial use of the
work in accordance with
this section and
applicable regulations,
including the requisite
certification under
subsection (c)(2)(I),
and accompanied by an
additional
certification by a duly
authorized officer of
the digital music
provider that the
digital music provider
has fulfilled the
requirements of clauses
(i) and (ii) of
subparagraph (B) but
has not been successful
in locating or
identifying the
copyright owner; and
(bb) beginning with
the monthly royalty
reporting period
commencing on the
license availability
date, report usage and
pay royalties for such
musical work (or share
thereof) for such
period and reporting
periods thereafter to
the mechanical
licensing collective,
as required under this
subsection and
applicable regulations.
(v) A digital music provider that
complies with the requirements of this
subparagraph with respect to unmatched
musical works (or shares of works)
shall not be liable for or accrue late
fees for late payments of royalties for
such works until such time as the
digital music provider is required to
begin paying monthly royalties to the
copyright owner or the mechanical
licensing collective, as applicable.
(C) Adjusted statute of limitations.--
Notwithstanding anything to the contrary in
section 507(b), with respect to any claim of
infringement of the exclusive rights provided
by paragraphs (1) and (3) of section 106
against a digital music provider arising from
the unauthorized reproduction or distribution
of a musical work by such digital music
provider in the course of engaging in covered
activities that accrued not more than 3 years
prior to the license availability date, such
action may be commenced not later than the
later of--
(i) 3 years after the date on which
the claim accrued; or
(ii) 2 years after the license
availability date.
(D) Other rights and remedies preserved.--
Except as expressly provided in this paragraph,
nothing in this paragraph shall be construed to
alter, limit, or negate any right or remedy of
a copyright owner with respect to unauthorized
use of a musical work.
(E) Remedy in federal district court.--A
person may bring a claim in a Federal district
court of competent jurisdiction for an issue
that is not adequately resolved by the board of
directors or a committee of the mechanical
licensing collective, as applicable.
(11) Legal protections for licensing activities.--
(A) Exemption for compulsory license
activities.--The antitrust exemption described
in subsection (c)(1)(D) shall apply to
negotiations and agreements between and among
copyright owners and persons entitled to obtain
a compulsory license for covered activities,
and common agents acting on behalf of such
copyright owners or persons, including with
respect to the administrative assessment
established under this subsection.
(B) Limitation on common agent exemption.--
Notwithstanding the antitrust exemption
provided in subsection (c)(1)(D) and
subparagraph (A) of this paragraph (except for
the administrative assessment referenced in
such subpargraph (A) and except as provided in
paragraph (8)(C)), neither the mechanical
licensing collective nor the digital licensee
coordinator shall serve as a common agent with
respect to the establishment of royalty rates
or terms under this section.
(C) Antitrust exemption for administrative
activities.--Notwithstanding any provision of
the antitrust laws, copyright owners and
persons entitled to obtain a compulsory license
under this section may designate the mechanical
licensing collective to administer voluntary
licenses for the reproduction or distribution
of musical works in covered activities on
behalf of such copyright owners and persons,
subject to the following conditions:
(i) Each copyright owner shall
establish the royalty rates and
material terms of any such voluntary
license individually and not in
agreement, combination, or concert with
any other copyright owner.
(ii) Each person entitled to obtain a
compulsory license under this section
shall establish the royalty rates and
material terms of any such voluntary
license individually and not in
agreement, combination, or concert with
any other digital music provider.
(iii) The mechanical licensing
collective shall maintain the
confidentiality of the voluntary
licenses in accordance with the
confidentiality provisions prescribed
by the Register of Copyrights under
paragraph (12)(C).
(D) Liability for good-faith activities.--The
mechanical licensing collective shall not be
liable to any person or entity based on a claim
arising from its good-faith administration of
policies and procedures adopted and implemented
to carry out the responsibilities described in
subparagraphs (J) and (K) of paragraph (3),
except to the extent of correcting an
underpayment or overpayment of royalties as
provided in paragraph (3)(L)(i)(VI), but the
collective may participate in a legal
proceeding as a stakeholder party if the
collective is holding funds that are the
subject of a dispute between copyright owners.
For purposes of this subparagraph, the term
``good-faith administration'' means
administration in a manner that is not grossly
negligent.
(E) Preemption of state property laws.--The
holding and distribution of funds by the
mechanical licensing collective in accordance
with this subsection shall supersede and
preempt any State law (including common law)
concerning escheatment or abandoned property,
or any analogous provision, that might
otherwise apply.
(12) Regulations.--
(A) Adoption by register of copyrights and
copyright royalty judges.--The Register of
Copyrights may conduct such proceedings and
adopt such regulations as may be necessary or
appropriate to effectuate the provisions of
this subsection, except for regulations
concerning proceedings before the Copyright
Royalty Judges to establish the administrative
assessment, which shall be adopted by the
Copyright Royalty Judges.
(B) Judicial review of regulations.--Except
as provided in paragraph (7)(D)(vii),
regulations adopted under this subsection shall
be subject to judicial review pursuant to
chapter 7 of title 5.
(C) Protection of confidential information.--
The Register of Copyrights shall adopt
regulations to provide for the appropriate
procedures to ensure that confidential,
private, proprietary, or privileged information
contained in the records of the mechanical
licensing collective and digital licensee
coordinator is not improperly disclosed or
used, including through any disclosure or use
by the board of directors or personnel of
either entity, and specifically including the
unclaimed royalties oversight committee and the
dispute resolution committee of the mechanical
licensing collective.
(13) Savings clauses.--
(A) Limitation on activities and rights
covered.--This subsection applies solely to
uses of musical works subject to licensing
under this section. The blanket license shall
not be construed to extend or apply to
activities other than covered activities or to
rights other than the exclusive rights of
reproduction and distribution licensed under
this section, or serve or act as the basis to
extend or expand the compulsory license under
this section to activities and rights not
covered by this section on the day before the
enactment date.
(B) Rights of public performance not
affected.--The rights, protections, and
immunities granted under this subsection, the
data concerning musical works collected and
made available under this subsection, and the
definitions under subsection (e) shall not
extend to, limit, or otherwise affect any right
of public performance in a musical work; and
(5) by adding at the end the following
(e) Definitions.--As used in this section:
(1) Accrued interest.--The term ``accrued interest''
means interest accrued on accrued royalties, as
described in subsection (d)(3)(H)(ii).
(2) Accrued royalties.--The term ``accrued
royalties'' means royalties accrued for the
reproduction or distribution of a musical work (or
share thereof) in a covered activity, calculated in
accordance with the applicable royalty rate under this
section.
(3) Administrative assessment.--The term
``administrative assessment'' means the fee established
pursuant to subsection (d)(7)(D).
(4) Audit.--The term ``audit'' means a royalty
compliance examination to verify the accuracy of
royalty payments, or the conduct of such an
examination, as applicable.
(5) Blanket license.--The term ``blanket license''
means a compulsory license described in subsection
(d)(1)(A) to engage in covered activities.
(6) Collective total costs.--The term ``collective
total costs''--
(A) means the total costs of establishing,
maintaining, and operating the mechanical
licensing collective to fulfill its statutory
functions, including--
(i) startup costs;
(ii) financing, legal, audit, and
insurance costs;
(iii) investments in information
technology, infrastructure, and other
long-term resources;
(iv) outside vendor costs;
(v) costs of licensing, royalty
administration, and enforcement of
rights;
(vi) costs of bad debt; and
(vii) costs of automated and manual
efforts to identify and locate
copyright owners of musical works (and
shares of such musical works) and match
sound recordings to the musical works
the sound recordings embody; and
(B) does not include any added costs incurred
by the mechanical licensing collective to
provide services under voluntary licenses.
(7) Covered activity.--The term ``covered activity''
means the activity of making a digital phonorecord
delivery of a musical work, including in the form of a
permanent download, limited download, or interactive
stream, where such activity qualifies for a compulsory
license under this section.
(8) Digital music provider.--The term ``digital music
provider'' means a person (or persons operating under
the authority of that person) that, with respect to a
service engaged in covered activities--
(A) has a direct contractual, subscription,
or other economic relationship with end users
of the service, or, if no such relationship
with end users exists, exercises direct control
over the provision of the service to end users;
(B) is able to fully report on any revenues
and consideration generated by the service; and
(C) is able to fully report on usage of sound
recordings of musical works by the service (or
procure such reporting).
(9) Digital licensee coordinator.--The term ``digital
licensee coordinator'' means the entity most recently
designated pursuant to subsection (d)(5).
(10) Digital phonorecord delivery.--The term
``digital phonorecord delivery'' means each individual
delivery of a phonorecord by digital transmission of a
sound recording that results in a specifically
identifiable reproduction by or for any transmission
recipient of a phonorecord of that sound recording,
regardless of whether the digital transmission is also
a public performance of the sound recording or any
musical work embodied therein, and includes a permanent
download, a limited download, or an interactive stream.
A digital phonorecord delivery does not result from a
real-time, noninteractive subscription transmission of
a sound recording where no reproduction of the sound
recording or the musical work embodied therein is made
from the inception of the transmission through to its
receipt by the transmission recipient in order to make
the sound recording audible. A digital phonorecord
delivery does not include the digital transmission of
sounds accompanying a motion picture or other
audiovisual work as defined in section 101.
(11) Enactment date.--The term ``enactment date''
means the date of the enactment of the Musical Works
Modernization Act.
(12) Individual download license.--The term
``individual download license'' means a compulsory
license obtained by a record company to make and
distribute, or authorize the making and distribution
of, permanent downloads embodying a specific individual
musical work.
(13) Interactive stream.--The term ``interactive
stream'' means a digital transmission of a sound
recording of a musical work in the form of a stream,
where the performance of the sound recording by means
of such transmission is not exempt under section
114(d)(1) and does not in itself, or as a result of a
program in which it is included, qualify for statutory
licensing under section 114(d)(2). An interactive
stream is a digital phonorecord delivery.
(14) Interested.--The term ``interested'', as applied
to a party seeking to participate in a proceeding under
subsection (d)(7)(D), is a party as to which the
Copyright Royalty Judges have not determined that the
party lacks a significant interest in such proceeding.
(15) License availability date.--The term ``license
availability date'' means January 1 following the
expiration of the two-year period beginning on the
enactment date.
(16) Limited download.--The term ``limited download''
means a digital transmission of a sound recording of a
musical work in the form of a download, where such
sound recording is accessible for listening only for a
limited amount of time or specified number of times.
(17) Matched.--The term ``matched'', as applied to a
musical work (or share thereof), means that the
copyright owner of such work (or share thereof) has
been identified and located.
(18) Mechanical licensing collective.--The term
``mechanical licensing collective'' means the entity
most recently designated as such by the Register of
Copyrights under subsection (d)(3).
(19) Mechanical licensing collective budget.--The
term ``mechanical licensing collective budget'' means a
statement of the financial position of the mechanical
licensing collective for a fiscal year or quarter
thereof based on estimates of expenditures during the
period and proposals for financing those expenditures,
including a calculation of the collective total costs.
(20) Musical works database.--The term ``musical
works database'' means the database described in
subsection (d)(3)(E).
(21) Nonprofit.--The term ``nonprofit'' means a
nonprofit created or organized in a State.
(22) Notice of license.--The term ``notice of
license'' means a notice from a digital music provider
provided under subsection (d)(2)(A) for purposes of
obtaining a blanket license.
(23) Notice of nonblanket activity.--The term
``notice of nonblanket activity'' means a notice from a
significant nonblanket licensee provided under
subsection (d)(6)(A) for purposes of notifying the
mechanical licensing collective that the licensee has
been engaging in covered activities.
(24) Permanent download.--The term ``permanent
download'' means a digital transmission of a sound
recording of a musical work in the form of a download,
where such sound recording is accessible for listening
without restriction as to the amount of time or number
of times it may be accessed.
(25) Qualified auditor.--The term ``qualified
auditor'' means an independent, certified public
accountant with experience performing music royalty
audits.
(26) Record company.--The term ``record company''
means an entity that invests in, produces, and markets
sound recordings of musical works, and distributes such
sound recordings for remuneration through multiple
sales channels, including a corporate affiliate of such
an entity engaged in distribution of sound recordings.
(27) Report of usage.--The term ``report of usage''
means a report reflecting an entity's usage of musical
works in covered activities described in subsection
(d)(4)(A).
(28) Required matching efforts.--The term ``required
matching efforts'' means efforts to identify and locate
copyright owners of musical works as described in
subsection (d)(10)(B)(i).
(29) Service.--The term ``service'', as used in
relation to covered activities, means any site,
facility, or offering by or through which sound
recordings of musical works are digitally transmitted
to members of the public.
(30) Share.--The term ``share'', as applied to a
musical work, means a fractional ownership interest in
such work.
(31) Significant nonblanket licensee.--The term
``significant nonblanket licensee''--
(A) means an entity, including a group of
entities under common ownership or control
that, acting under the authority of one or more
voluntary licenses or individual download
licenses, offers a service engaged in covered
activities, and such entity or group of
entities--
(i) is not currently operating under
a blanket license and is not obligated
to provide reports of usage reflecting
covered activities under subsection
(d)(4)(A);
(ii) has a direct contractual,
subscription, or other economic
relationship with end users of the
service or, if no such relationship
with end users exists, exercises direct
control over the provision of the
service to end users; and
(iii) either--
(I) on any day in a calendar
month, makes more than 5,000
different sound recordings of
musical works available through
such service; or
(II) derives revenue or other
consideration in connection
with such covered activities
greater than $50,000 in a
calendar month, or total
revenue or other consideration
greater than $500,000 during
the preceding 12 calendar
months; and
(B) does not include--
(i) an entity whose covered activity
consists solely of free-to-the-user
streams of segments of sound recordings
of musical works that do not exceed 90
seconds in length, are offered only to
facilitate a licensed use of musical
works that is not a covered activity,
and have no revenue directly
attributable to such streams
constituting the covered activity; or
(ii) a ``public broadcasting entity''
as defined in section 118(f).
(32) Songwriter.--The term ``songwriter'' means the
author of all or part of a musical work, including a
composer or lyricist.
(33) State.--The term ``State'' means each State of
the United States, the District of Columbia, and each
territory or possession of the United States.
(34) Unclaimed accrued royalties.--The term
``unclaimed accrued royalties'' means accrued royalties
eligible for distribution under subsection (d)(3)(J).
(35) Unmatched.--The term ``unmatched'', as applied
to a musical work (or share thereof), means that the
copyright owner of such work (or share thereof) has not
been identified or located.
(36) Voluntary license.--The term ``voluntary
license'' means a license for use of a musical work (or
share thereof) other than a compulsory license obtained
under this section.
* * * * * * *
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 1 of the
3 as the Chief Copyright Royalty Judge. The Librarian shall
make appointments to such positions after consultation 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
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 ensure 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)(A) 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.
(B) In cases where the Copyright Royalty Judges
determine that controversy exists, the Copyright
Royalty Judges shall determine the distribution of such
fees, including partial distributions, in accordance
with section 111, 119, or 1007, as the case may be.
(C) Notwithstanding section 804(b)(8), the Copyright
Royalty Judges, at any time after the filing of claims
under section 111, 119, or 1007, may, upon motion of
one or more of the claimants and after publication in
the Federal Register of a request for responses to the
motion from interested claimants, make a partial
distribution of such fees, if, based upon all responses
received during the 30-day period beginning on the date
of such publication, the Copyright Royalty Judges
conclude that no claimant entitled to receive such fees
has stated a reasonable objection to the partial
distribution, and all such claimants--
(i) agree to the 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 (B);
(iii) file the agreement with the Copyright
Royalty Judges; and
(iv) agree that such funds are available for
distribution.
(D) The Copyright Royalty Judges and any other
officer or employee acting in good faith in
distributing funds under subparagraph (C) shall not be
held liable for the payment of any excess fees under
subparagraph (C). 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
sections 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 a 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 those that would be bound by the
terms, rates, or other determination set by any
agreement in a proceeding to determine royalty
rates an opportunity to comment on the
agreement and shall provide to participants in
the proceeding under section 803(b)(2) that
would be bound by the terms, rates, or other
determination set by the agreement an
opportunity to comment on the agreement and
object to its adoption as a basis for statutory
terms and rates; and
(ii) the Copyright Royalty Judges may decline
to adopt the agreement as a basis for statutory
terms and rates for participants that are not
parties to the agreement, if any participant
described in clause (i) objects to the
agreement and the Copyright Royalty Judges
conclude, based on the record before them if
one exists, that the agreement does not provide
a reasonable basis for setting statutory terms
or rates.
(B) License agreements voluntarily negotiated
pursuant to section 112(e)(5), [114(f)(3)] 114(f)(2),
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) Interested parties may negotiate and agree to,
and the Copyright Royalty Judges may adopt, an
agreement that specifies as terms notice and
recordkeeping requirements that apply in lieu of those
that would otherwise apply under regulations.
(8) To determine the administrative assessment to be
paid by digital music providers under section 115(d).
The provisions of section 115(d) shall apply to the
conduct of proceedings by the Copyright Royalty Judges
under section 115(d) and not the procedures described
in this section, or section 803, 804, or 805.
[(8)] (9) To perform other duties, as assigned by the
Register of Copyrights within the Library of Congress,
except as provided in section 802(g), at times when
Copyright Royalty Judges are not engaged in performing
the other duties set forth in this section.
(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.
(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.
(f) Effective date of actions.--On and after the date of
the enactment of the Copyright Royalty and Distribution Reform
Act of 2004, in any case in which time limits are prescribed
under this title for performance of an action with or by the
Copyright Royalty Judges, and in which the last day of the
prescribed period falls on a Saturday, Sunday, holiday, or
other nonbusiness day within the District of Columbia or the
Federal Government, the action may be taken on the next
succeeding business day, and is effective as of the date when
the period expired.
* * * * * * *
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 the
Librarian of Congress, and on the basis of a written
record, prior determinations and interpretations of the
Copyright Royalty Tribunal, Librarian of Congress, the
Register of Copyrights, copyright arbitration royalty
panels (to the extent those detrminations are not
inconsistent with a decision of the Librarian of
Congress or the Register of Copyrights), and the
Copyright Royalty Judges (to the extent those
determinations are not inconsistent with a decision of
the Register of Copyrights that was timely delivered to
the Copyright Royalty Judges pursuant to section
802(f)(1) (A) or (B), or with a decision of the
Register of Copyrights pursuant to section
802(f)(1)(D)), under this chapter, and decisions of the
court of appeals under this chapter before, on, or
after the effective date of the Copyright Royalty and
Distribution Reform Act of 2004.
* * * * * * *
(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 intitial
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)] 114(f)(3)(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.
* * * * * * *
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, 119, 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 2004, 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 for such
determination, 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 2015 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 2004,
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 2015, and each fifth calendar year thereafter,
in accordance with the provisions in section
801(b)(2)(B) or (C), as the case may be. A petition for
adjustment of rates established by section 111(d)(1)(B)
as a result of a change in the rules and regulations of
the Federal Communications Commission shall set forth
the change on which the petition is based.
(C) Any adjustment of royalty rates under section 111
shall take effect as of the first accounting period
commencing after the publication of the determination
of the Copyright Royalty Judges in the Federal
Register, or on such other date as is specified in that
determination.
(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 date of enactment of the
Copyright Royalty and Distribution Reform Act
of 2004 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 section
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 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 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)] 114(f)(3)(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, 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.
* * * * * * *
CHAPTER 14--UNAUTHORIZED DIGITAL PERFORMANCE OF PRE-1972 SOUND
RECORDINGS
Sec.
1401. Unauthorized Digital Performance of Pre-1972 Sound Recordings.
Sec. 1401. Unauthorized Digital Performance of Pre-1972 Sound
Recordings
(a) Unauthorized Acts.--Anyone who, before February 15,
2067, and without the consent of the rights owner, performs
publicly, by means of a digital audio transmission, a sound
recording fixed on or after January 1, 1923, and before
February 15, 1972, shall be subject to the remedies provided in
sections 502 through 505 to the same extent as an infringer of
copyright.
(b) Certain Authorized Transmissions.--A digital audio
transmission of a sound recording fixed on or after January 1,
1923, and before February 15, 1972, shall, for purposes of
subsection (a), be considered to be authorized and made with
the consent of the rights owner if--
(1) the transmission is made by a transmitting entity
that is publicly performing sound recordings fixed on
or after February 15, 1972, by means of digital audio
transmissions subject to section 114;
(2) the transmission would satisfy the requirements
for statutory licensing under section 114(d)(2), or
would be exempt under section 114(d)(1), if the sound
recording were fixed on or after February 15, 1972;
(3) in the case of a transmission that would not be
exempt under section 114(d)(1) as described in
paragraph (2), the transmitting entity pays statutory
royalties and provides notice of its use of the
relevant sound recording in the same manner as is
required by regulations adopted by the Copyright
Royalty Judges for sound recordings fixed on or after
February 15, 1972; and
(4) in the case of a transmission that would not be
exempt under section 114(d)(1) as described in
paragraph (2), the transmitting entity otherwise
satisfies the requirements for statutory licensing
under section 114(f)(3)(B).
(c) Transmissions by Direct Licensing of Statutory
Services.--
(1) In general.--A transmission of a sound recording
fixed on or after January 1, 1923, and before February
15, 1972, shall, for purposes of subsection (a), be
considered to be authorized and made with the consent
of the rights owner if such transmission is included in
a license agreement voluntarily negotiated at any time
between the rights owner and the entity performing the
sound recording.
(2) Payment of royalties to nonprofit collective.--To
the extent that a license agreement described in
paragraph (1) and entered into on or after the date of
the enactment of this section extends to digital audio
transmissions of a sound recording fixed on or after
January 1, 1923, and before February 15, 1972, that
meet the conditions of subsection (b), the licensee
shall pay, to the collective designated to distribute
receipts from the licensing of transmissions in
accordance with section 114(f), 50 percent of the
performance royalties for the transmissions due under
the license, with such royalties fully credited as
payments due under the license.
(3) Distribution of royalties by collective.--The
collective described in paragraph (2) shall, in
accordance with subparagraphs (B) through (D) of
section 114(g)(2), and paragraphs (5) and (6) of
section 114(g)), distribute the royalties received
under paragraph (2) under the license described in
paragraph (2). Such payments shall be the only payments
to which featured and nonfeatured artists are entitled
by virtue of the transmissions described in paragraph
(2) under the license.
(4) Rule of construction.--This subsection does not
prohibit any other license from directing the licensee
to pay other royalties due to featured and nonfeatured
artists for such transmissions to the collective
designated to distribute receipts from the licensing of
transmissions in accordance with section 114(f).
(d) Relationship to State Law.--
(1) In general.--Nothing in this section shall be
construed to annul or limit any rights or remedies
under the common law or statutes of any State for sound
recordings fixed before February 15, 1972, except,
notwithstanding section 301(c), for the following:
(A) This section preempts any claim of common
law copyright or equivalent right under the
laws of any State arising from any digital
audio transmission that is made, on and after
the date of the enactment of this section, of a
sound recording fixed on or after January 1,
1923, and before February 15, 1972.
(B) This section preempts any claim of common
law copyright or equivalent right under the
laws of any State arising from any reproduction
that is made, on and after the date of the
enactment of this section, of a sound recording
fixed on or after January 1, 1923, and before
February 15, 1972, and that would satisfy the
requirements for statutory licensing under
paragraphs (1) and (6) of section 112(e), if
the sound recording were fixed on or after
February 15, 1972.
(C) This section preempts any claim of common
law copyright or equivalent right under the
laws of any State arising from any digital
audio transmission or reproduction that is
made, before the date of the enactment of this
section, of a sound recording fixed on or after
January 1, 1923, and before February 15, 1972,
if--
(i) the digital audio transmission
would have satisfied the requirements
for statutory licensing under section
114(d)(2) or been exempt under section
114(d)(1), or the reproduction would
have satisfied the requirements of
section 112(e)(1), as the case may be,
if the sound recording were fixed on or
after February 15, 1972; and
(ii) either--
(I) except in the case of a
transmission that would have
been exempt under section
114(d)(1), the transmitting
entity, not later than 270 days
after the date of the enactment
of this section, pays statutory
royalties and provides notice
of the use of the relevant
sound recordings in the same
manner as is required by
regulations adopted by the
Copyright Royalty Judges for
sound recordings that are
protected under this title for
all the digital audio
transmissions and reproductions
satisfying the requirements for
statutory licensing under
sections 112(e)(1) and
114(d)(2) during the 3 year
period ending on the date of
the enactment of this section;
or
(II) an agreement voluntarily
negotiated between the rights
owner and the entity performing
the sound recording authorizes
or waives liability for any
such transmission or
reproduction and the
transmitting entity has
complied with all provisions of
such agreement for any such
transmission or reproduction.
(2) Rule of construction for common law copyright.--
For purposes of subparagraphs (A) through (C) of
paragraph (1), a claim of common law copyright or
equivalent right under the laws of any State includes a
claim that characterizes conduct subject to such
subparagraphs as an unlawful distribution, act of
record piracy, or similar violation.
(3) Rule of construction for public performance
rights.--Nothing in this section shall be construed to
recognize or negate the existence of public performance
rights in sound recordings under the laws of any State.
(e) Limitations on Remedies.--
(1) Fair use; uses by libraries, archives, and
educational institutions.--
``(A) In general.--The limitations on the
exclusive rights of a copyright owner described
in sections 107, 108, and 110 shall apply to a
claim under subsection (a) of this section for
the unauthorized performance of a sound
recording fixed on or after January 1, 1923,
and before February 15, 1972.
(B) Rule of construction for section
108(h).--With respect to the application of
section 108(h) to a claim for unauthorized
performance of a sound recording first fixed on
or after January 1, 1923, and before February
15, 1972, under subsection (a) of this section,
the phrase `during the last 20 years of any
term of copyright of a published work' in such
section 108(h) shall be construed to mean at
any time after the effective date of this
section.
(2) Actions.--The limitations on actions described in
section 507 shall apply to a claim under subsection (a)
of this section for the unauthorized performance of a
sound recording fixed on or after January 1, 1923, and
before February 15, 1972.
(3) Material online.--Section 512 shall apply to a
claim under subsection (a) for the unauthorized
performance of a sound recording fixed on or after
January 1, 1923, and before February 15, 1972.
(4) Principles of equity.--Principles of equity apply
to remedies for a violation of this section to the same
extent as such principles apply to remedies for
infringement of copyright.
(5) Filing requirement for statutory damages and
attorneys' fees.--
(A) Filing of information on sound
recordings.--
(i) Filing requirement.--Except in
the case of a transmitting entity that
has filed contact information for that
transmitting entity under subparagraph
(B), in any action under this section,
an award of statutory damages or of
attorneys' fees under section 504 or
505 may be made with respect to an
unauthorized transmission of a sound
recording under subsection (a) of this
section only if--
(I) the rights owner has
filed with the Copyright Office
a schedule that specifies the
title, artist, and rights owner
of the sound recording and
contains such other
information, as practicable, as
the Register of Copyrights
prescribes by regulation; and
(II) the transmission is made
after the end of the 90-day
period beginning on the date on
which the information filed
under subclause (I) is indexed
into the public records of the
Copyright Office.
(ii) Regulations.--Not later than 180
days after the date of enactment of
this section, the Register of
Copyrights shall issue regulations
establishing the form, content, and
procedures for the filing of schedules
under clause (i). Such regulations
shall provide that persons may request
that they receive timely notification
of such filings, and shall set forth
the manner in which such requests may
be made.
(B) Filing of contact information for
transmitting entities.--
(i) Requirement.--Not later than 30
days after the date of enactment of
this section, the Register of
Copyrights shall issue regulations
establishing the form, content, and
procedures for the filing, by any
entity that, as of the date of the
enactment of this section, performs
sound recordings fixed before February
15, 1972, by means of digital audio
transmissions, of contact information
for such entity.
(ii) Time limit on filings.--The
Register of Copyrights may not accept
filings under clause (i) after the date
that is 180 days after the date of
enactment of this section.
(iii) Limitation on statutory damages
and attorneys' fees.--
(I) Limitation.--An award of
statutory damages or of
attorneys' fees under section
504 or 505 may not be made,
against an entity that has
filed contact information for
that entity under clause (i) of
this subparagraph, with respect
to an unauthorized transmission
by that entity of a sound
recording under subsection (a)
of this section if the
transmission is made not later
than 90 days after the date on
which the entity receives a
notice that--
(aa) is sent by or on
behalf of the rights
owner of the sound
recording;
(bb) states that the
entity is not legally
authorized to transmit
that sound recording
under subsection (a);
and
(cc) identifies the
sound recording in a
schedule conforming to
the requirements
prescribed by the
regulations issued
under subparagraph
(A)(ii).
(II) Undeliverable Notices.--
In any case in which a notice
under subclause (I) is sent to
an entity by mail or courier
service and the notice is
returned to the sender because
the entity either is no longer
located at the address provided
in the contact information
filed under clause (i) or has
refused to accept delivery, or
the notice is sent by
electronic mail and is
undeliverable, the 90-day
period under subclause (I)
shall begin on the date of the
attempted delivery.
(C) Section 412.--Section 412 shall not limit
an award of statutory damages under section
504(c) or attorneys' fees under section 505
with respect to an unauthorized transmission of
a sound recording under subsection (a) of this
section.
(6) Applicability of other provisions.--
(A) In general.--Subject to subparagraph (B),
no provision of this title shall apply to or
limit the remedies available under this section
except as otherwise provided in this section.
(B) Applicability of definitions.--Any term
used in this section that is defined in section
101 shall have the meaning given that term in
section 101.
(f) Application of section 230 safe harbor.--For purposes
of section 230 of the Communications Act of 1934 (47 U.S.C.
230), subsection (a) of this section shall be considered to be
a ``law pertaining to intellectual property'' under subsection
(e)(2) of such section 230.
(g) Rights owner defined.--In this section, the term
``rights owner'' means the person who has the exclusive right
to reproduce a sound recording under the laws of any State.
TITLE 28, UNITED STATES CODE
* * * * * * *
PART I--ORGANIZATION OF COURTS
* * * * * * *
CHAPTER 5--DISTRICT COURTS
* * * * * * *
Sec. 137. Division of business among district judges
[The business] (a) In General.--The business of a court
having more than one judge shall be divided among the judges as
provided by the rules and orders of the court.
The chief judge of the district court shall be responsible
for the observance of such rules and orders, and shall divide
the business and assign the cases so far as such rules and
orders do not otherwise prescribe.
If the district judges in any district are unable to agree
upon the adoption of rules or orders for that purpose the
judicial council of the circuit shall make the necessary
orders.
(b) Random Assignment of Rate Court Proceedings.--
(1) In general.--
(A) Determination of license fee.--Except as
provided in subparagraph (B), in the case of
any performing rights society subject to a
consent decree, any application for the
determination of a license fee for the public
performance of music in accordance with the
applicable consent decree shall be made in the
district court with jurisdiction over that
consent decree and randomly assigned to a judge
of that district court according to the rules
of that court for the division of business
among district judges, provided that any such
application shall not be assigned to--
(i) a judge to whom continuing
jurisdiction over any performing rights
society for any performing rights
society consent decree is assigned or
has previously been assigned; or
(ii) a judge to whom another
proceeding concerning an application
for the determination of a reasonable
license fee is assigned at the time of
the filing of the application.
(B) Exception.--Subparagraph (A) does not
apply to an application to determine reasonable
license fees made by individual proprietors
under section 513 of title 17.
(2) Rule of construction.--Nothing in paragraph (1)
shall modify the rights of any party to a consent
decree or to a proceeding to determine reasonable
license fees, to make an application for the
construction of any provision of the applicable consent
decree. Such application shall be referred to the judge
to whom continuing jurisdiction over the applicable
consent decree is currently assigned. If any such
application is made in connection with a rate
proceeding, such rate proceeding shall be stayed until
the final determination of the construction
application. Disputes in connection with a rate
proceeding about whether a licensee is similarly
situated to another licensee shall not be subject to
referral to the judge with continuing jurisdiction over
the applicable consent decree.
* * * * * * *
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