To amend title 17, United States Code, to safeguard the rights and expectations of consumers who lawfully obtain digital entertainment.

Summary: Benefit Authors without Limiting Advancement or Net Consumer Expectations (BALANCE) Act of 2003 - Amends Federal copyright law to: (1) include analog or digital transmissions of a copyrighted work within fair use protections; (2) provide that it is not a copyright infringement for a person who lawfully obtains or receives a transmission of a digital work to reproduce, store, adapt, or access it for archival purposes or to transfer it to a preferred digital media device in order to effect a non-public performance or display; (3) allow the owner of a particular copy of a digital work to sell or otherwise dispose of the work by means of a transmission to a single recipient, provided the owner does not retain his or her copy in a retrievable form and the work is sold or otherwise disposed of in its original format; and (4) permit circumvention of copyright encryption technology if it is necessary to enable a noninfringing use and the copyright owner fails to make publicly available the necessary means for circumvention without additional cost or burden to a person who has lawfully obtained a copy or phonorecord of a work, or lawfully received a transmission of it.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Benefit Authors without Limiting 
Advancement or Net Consumer Expectations (BALANCE) Act of 2003''.

SEC. 2. FINDINGS.

    The Congress makes the following findings:
            (1) The law of copyright is often described as a 
        ``difficult balance between the interests of authors . . . in 
        the control and exploitation of their writings . . . on the one 
        hand, and society's competing interest in the free flow of 
        ideas, information, and commerce on the other hand.'' Sony 
        Corp. v. Universal City Studios, Inc., 464 U.S. 417, 429 
        (1984).
            (2) Copyright seeks to encourage and reward creative 
        efforts by securing a fair return for an author's labor. 
        Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 
        (1975). At the same time, ``[f]rom the infancy of copyright 
        protection, some opportunity for fair use of copyrighted 
        materials has been thought necessary to fulfill copyright's 
        very purpose, `[t]o promote the Progress of Science and useful 
        Arts . . .''' Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 
        575 (1994).
            (3) ``[P]rivate motivation must ultimately serve the cause 
        of promoting broad public availability of literature, music, 
        and the other arts . . . When technological change has rendered 
        its literal terms ambiguous, the Copyright Act must be 
        construed in light of this basic purpose.'' Twentieth Century 
        Music Corp., 422 U.S. at 156.
            (4) Advances in technology have often prompted changes to 
        the copyright laws to maintain the balance. For example, the 
        development of player pianos preceded the enactment of the 
        Copyright Act of 1909. The development of cable television 
        prompted complex reforms to section 111 of title 17, United 
        States Code. Sony, 464 U.S. at 430-31.
            (5) The development of digital technology and the rise of 
        the Internet have once again altered the balance. On the one 
        hand, digital technology threatens the rights of copyright 
        holders. Perfect digital copies of songs and movies can be 
        publicly transmitted, without authorization, to thousands of 
        people at little or no cost. On the other hand, technological 
        control measures give copyright holders the capacity to limit 
        nonpublic performances and threaten society's interests in the 
        free flow of ideas, information, and commerce.
            (6) The Digital Millennium Copyright Act (``DMCA'') was 
        enacted as an attempt to safeguard the traditional balance in 
        the face of these new challenges. It gave copyright holders the 
        ability to fight digital piracy by employing technical 
        restrictions that prevent unlawful access and copying. In 
        practice, however, the DMCA also endangered the rights and 
        expectations of legitimate consumers.
            (7) Contrary to the intent of Congress, section 1201 of 
        title 17, United States Code, has been interpreted to prohibit 
        all users--even lawful ones--from circumventing technical 
        restrictions for any reason. As a result, the lawful consumer 
        cannot legally circumvent technological restrictions, even if 
        he or she is simply trying to exercise a fair use or to utilize 
        the work on a different digital media device. See, e.g., 
        Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294, 
        321-24 (S.D.N.Y. 2000) (DMCA failed to give consumers the 
        technical means to make fair uses of encrypted copyrighted 
        works).
            (8) The authors of the DMCA never intended to create such a 
        dramatic shift in the balance. As the report of the Committee 
        of the Judiciary of the House of Representatives accompanying 
        the DMCA stated: ``[A]n individual [should] not be able to 
        circumvent in order to gain unauthorized access to a work, but 
        [should] be able to do so in order to make fair use of a work 
        which he or she has acquired lawfully.'' House Report 105-551, 
        Part I, Section-by-Section Analysis of section 1201(a)(1).
            (9) It is now necessary to restore the traditional balance 
        between copyright holders and society, as intended by the 105th 
        Congress. Copyright laws in the digital age must prevent and 
        punish digital pirates without treating every consumer as one.

SEC. 3. PROTECTING FAIR USE AND CONSUMER EXPECTATIONS IN THE DIGITAL 
              WORLD.

    (a) Fair Use.--The first sentence of section 107 of title 17, 
United States Code, is amended by inserting after ``or by any other 
means specified in that section,'' the following: ``including by analog 
or digital transmissions,''.
    (b) Permissible Uses of Digital Works.--
            (1) In general.--Chapter 1 of title 17, United States Code, 
        is amended by adding after section 122 the following:
``Sec. 123. Limitations on exclusive rights; Permissible uses of 
              digital works
    ``(a) Use of Lawfully Obtained Digital Works.--Notwithstanding the 
provisions of section 106, it is not an infringement of copyright for a 
person who lawfully obtains a copy or phonorecord of a digital work, or 
who lawfully receives a transmission of a digital work, to reproduce, 
store, adapt, or access the digital work--
            ``(1) for archival purposes, if all such archival copies 
        are destroyed or rendered permanently inaccessible in the event 
        that continued possession of the work should cease to be 
        rightful; and
            ``(2) in order to perform or display the work, or an 
        adaptation of the work, on a digital media device, if the work 
        is not so performed or displayed publicly.
    ``(b) Effect of Licenses.--When a digital work is distributed to 
the public subject to nonnegotiable license terms, such terms shall not 
be enforceable under the common laws or statutes of any State to the 
extent that they restrict or limit any of the limitations on exclusive 
rights under this title.
    ``(c) Definitions.--As used in this section, the following terms 
have the following meanings:
            ``(1) A `digital work' is any literary work (except a 
        computer program), sound recording, musical work, dramatic 
        work, or motion picture or other audiovisual work, in whole or 
        in part in a digital or other nonanalog format.
            ``(2) A `digital media device' is any hardware or software 
        that converts copyrighted works in digital form into a format 
        whereby the images and sounds are visible or audible, or 
        retrieves or accesses copyrighted works in digital format and 
        transfers or makes available for transfer such works to such 
        hardware or software.
    ``(d) Construction.--Nothing in this section shall enlarge or 
diminish any of the other limitations on exclusive rights contained in 
this title, including any limitations that relate to archival 
activities by a library or an archives under sections 107 and 108.''.
            (2) Conforming amendment.--The table of sections for 
        chapter 1 of title 17, United States Code, is amended by adding 
        at the end the following new item:

``123. Limitations on exclusive rights; Permissible uses of digital 
                            works.''.

SEC. 4. DIGITAL FIRST SALE.

    Section 109 of title 17, United States Code, is amended by adding 
at the end the following:
    ``(f) The privileges prescribed by subsections (a) and (c) apply in 
a case in which the owner of a particular copy or phonorecord of a work 
in a digital or other nonanalog format, or any person authorized by 
such owner, sells or otherwise disposes of the work by means of a 
transmission to a single recipient, if the owner does not retain the 
copy or phonorecord in a retrievable form and the work is so sold or 
otherwise disposed of in its original format.''.

SEC. 5. PERMISSIBLE CIRCUMVENTION TO ENABLE FAIR USE AND CONSUMER 
              EXPECTATIONS.

    Section 1201 of title 17, United States Code, is amended--
            (1) by redesignating subsections (c) through (k) as 
        subsections (d) through (l), respectively; and
            (2) by inserting after subsection (b) the following:
    ``(c) Circumvention for Noninfringing Uses.--(1) Notwithstanding 
any other provision in this title, a person who lawfully obtains a copy 
or phonorecord of a work, or who lawfully receives a transmission of a 
work, may circumvent a technological measure that effectively controls 
access to the work or protects a right of the copyright holder under 
this title if--
            ``(A) such act is necessary to make a noninfringing use of 
        the work under this title; and
            ``(B) the copyright owner fails to make publicly available 
        the necessary means to make such noninfringing use without 
        additional cost or burden to such person.
    ``(2) Notwithstanding the provisions of subsections (a)(2) and (b), 
any person may manufacture, import, offer to the public, provide, or 
otherwise make available technological means to circumvent a 
technological measure that effectively controls access to a work 
protected under this title or protects a right of a copyright holder 
under this title, if--
            ``(A) such means are necessary to make a noninfringing use 
        under paragraph (1)(A);
            ``(B) such means are designed, produced, and marketed to 
        make a noninfringing use under paragraph (1)(A); and
            ``(C) the copyright owner fails to make available the 
        necessary means referred to in paragraph (1)(B).''.