Free Market Royalty Act

Summary: Free Market Royalty Act - Amends federal copyright law to provide a public performance right for all audio transmissions of sound recordings, thereby extending such right to require terrestrial AM/FM broadcast radio stations to pay royalties for non-digital audio transmissions. (Currently, a performance right for sound recordings is provided only with respect to digital transmissions by cable, satellite, and Internet radio stations.) Eliminates statutory licensing royalty rates set by Copyright Royalty Judges (CRJs) for the public performance of sound recordings by noninteractive digital audio services. Allows any noninteractive services performing sound recordings publicly by means of an audio transmission (including cable, satellite, Internet, and AM/FM broadcasters) to collectively negotiate royalty rates for such performances. Designates SoundExchange, Inc. (an independent, nonprofit organization that collects and distributes royalties), or any successor entity, as the sole common agent to negotiate, agree to, pay, and receive royalty payments. Authorizes copyright owners of sound recordings, if a license is agreed to by the common agent, to subsequently negotiate and agree to royalty rates and license terms and conditions with any noninteractive services for the performance of such sound recordings (thus allows copyright owners to opt-out of rates or conditions negotiated by the common agent and to instead negotiate direct licenses for their recordings). Sets forth the royalty payment distributions to be made by the common agent to copyright owners, featured recording artists, and non-featured musicians and vocalists. Establishes procedures for CRJs to set rates and terms for nonsubscription broadcasts consisting solely of noncommercial educational and cultural radio programs when such rates and terms are not negotiated and agreed upon collectively between the common agent and the noncommercial educational broadcast station.  Modifies ephemeral recording requirements (licenses to reproduce phonorecords to facilitate transmissions) to account for the removal of statutory licensing procedures.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Free Market Royalty Act''.

SEC. 2. BROADCAST PERFORMANCE RIGHT IN SOUND RECORDINGS.

    Section 106(6) of title 17, United States Code, is amended by 
striking ``a digital audio'' and inserting ``an audio''.

SEC. 3. FREE MARKET FOR LICENSING OF PUBLIC PERFORMANCES.

    Section 114 of title 17, United States Code, is amended as follows:
            (1) Subsection (d) is amended--
                    (A) in paragraph (1)--
                            (i) in the matter preceding subparagraph 
                        (A), by striking ``a digital audio'' and 
                        inserting ``an audio'';
                            (ii) by striking subparagraph (A); and
                            (iii) by redesignating subparagraphs (B) 
                        and (C) as subparagraphs (A) and (B), 
                        respectively;
                    (B) by striking paragraph (2);
                    (C) in paragraph (3)--
                            (i) in subparagraphs (A) and (B)(i), by 
                        striking ``of digital audio'' and inserting 
                        ``of an audio''; and
                            (ii) in subparagraph (D), by striking ``a 
                        digital audio'' and inserting ``an audio'';
                    (D) in paragraph (4), in subparagraphs (A) and 
                (B)(i), by striking ``a digital audio'' and inserting 
                ``an audio''; and
                    (E) by redesignating paragraphs (3) and (4) as 
                paragraphs (2) and (3), respectively.
            (2) Section 114 of title 17, United States Code, is amended 
        by striking subsections (e), (f), and (g), and inserting the 
        following:
    ``(e) Efficiency of Licensing.--
            ``(1) Collective negotiation for noninteractive services.--
        Pursuant to section 106(6), and notwithstanding any other 
        provision of law, any noninteractive services performing sound 
        recordings publicly by means of an audio transmission may 
        collectively negotiate and agree to royalty rates and license 
        terms and conditions for the performance of such sound 
        recordings.
            ``(2) One-stop licensing for noninteractive services.--
                    ``(A) Negotiation of licenses by common agent.--
                Pursuant to section 106(6), and notwithstanding any 
                other provision of law, for licenses for noninteractive 
                audio transmissions, SoundExchange, Inc., or any 
                successor entity is designated as the sole common agent 
                to negotiate, agree to, pay, and receive payments under 
                this section. If a license for noninteractive audio 
                transmissions is agreed to by such common agent, 
                copyright owners of sound recordings may subsequently 
                negotiate and agree to royalty rates and license terms 
                and conditions with any noninteractive services 
                performing sound recordings publicly by means of an 
                audio transmission for the performance of such sound 
                recordings.
                    ``(B) Direct payment and equal compensation.--The 
                common agent under subparagraph (A) shall make 
                distributions directly to the following recipients from 
                payments collected under this section as follows:
                            ``(i) 50 percent shall be paid to the 
                        copyright owner.
                            ``(ii) 45 percent shall be paid to featured 
                        recording artists.
                            ``(iii) 5 percent shall be paid to 
                        nonfeatured musicians and vocalists (through 
                        the American Federation of Musicians and Screen 
                        Actors Guild-American Federation of Television 
                        and Radio Artists Intellectual Property Rights 
                        Distribution Fund, or their successors).
    ``(f) Payments From Individual Licenses for Noninteractive Audio 
Transmissions.--In the case of a license granted by the copyright owner 
of a sound recording to a noninteractive service performing sound 
recordings publicly by means of an audio transmission, such service 
shall pay to the common agent described in subsection (e) receipts from 
the licensing of such transmissions in an amount equal to 50 percent of 
the total royalties and other compensation that the service is required 
to pay for such transmissions under the applicable license agreement. 
Such common agent shall distribute such payments in proportion to the 
distributions provided in clauses (ii) and (iii) of subsection 
(e)(2)(B), and such payments shall be the sole payments to which 
featured and nonfeatured artists are entitled by reason of such 
transmissions under the license with that service.
    ``(g) Backstop for Public and Noncommercial Stations.--
            ``(1) Establishment of rates and terms.--If royalty rates 
        and license terms and conditions for the audio transmission or 
        retransmission of a nonsubscription broadcast consisting solely 
        of noncommercial educational and cultural radio programs are 
        not negotiated and agreed upon collectively under subsection 
        (e) between the common agent and 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)), a proceeding under chapter 8 of this title shall 
        determine the rates and terms for such transmissions and 
        retransmissions. The Copyright Royalty Judges shall establish 
        such 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.
            ``(2) Payment of royalties.--All royalty payments under 
        this subsection for over-the-air nonsubscription broadcast 
        transmissions required to be paid by public broadcasting 
        entities that are eligible to receive funding on the basis of 
        the formula set forth in section 396(k)(6)(B) of the 
        Communications Act of 1934 (47 U.S.C. 396(k)(6)(B)) or that are 
        authorized to transmit over-the-air nonsubscription broadcast 
        performances of nondramatic musical works pursuant to 
        arrangements negotiated or otherwise made by the Corporation 
        for Public Broadcasting under section 118, shall first be made 
        using funds made available pursuant to section 
        396(k)(3)(A)(I)(II) of the Communications Act of 1934.''.
            (3) Subsection (h)(1) is amended by striking ``a digital 
        audio'' and inserting ``an audio''.
            (4) Subsection (j) is amended--
                    (A) in paragraph (1), by striking ``digital audio'' 
                and inserting ``audio'';
                    (B) by striking paragraphs (2), (4), (5), (6), (8), 
                (10), and (11);
                    (C) by inserting after paragraph (1) the following:
            ``(2) An `audio transmission' is a transmission that 
        embodies the transmission of a sound recording, and does not 
        include the transmission of any audiovisual work.'';
                    (D) by redesignating paragraph (7) as paragraph 
                (4);
                    (E) by inserting after paragraph (4), as 
                redesignated, the following:
            ``(5) A `noninteractive service' is a service that would 
        have been eligible for statutory licensing under subsection 
        (d)(2) of this section, as such subsection was in effect on 
        September 1, 2013''; and
                    (F) by redesignating paragraphs (9), (12), (13), 
                (14), and (15) as paragraphs (6), (7), (8), (9), and 
                (10) respectively.

SEC. 4. EPHEMERAL RECORDINGS.

    Section 112 of title 17, United States Code, is amended--
            (1) in subsection (a)(1), by striking ``including a 
        statutory license under section 114(f)'' and inserting 
        ``including a license to perform a sound recording under 
        section 114''; and
            (2) by striking subsection (e) and inserting the following:
    ``(e) Efficiency of Licensing.--The provisions of subsections 
(e)(1), (e)(2)(A), and (g) of section 114 shall apply to licensing of 
the right to reproduce phonorecords of a sound recording under section 
106(1)--
            ``(1) for use solely to make noninteractive audio 
        transmissions licensable under such subsections of section 114, 
        or
            ``(2) for use solely under the limitation on exclusive 
        rights specified by section 114(d)(1)(B)(iv),
under circumstances in which such reproductions would have been 
eligible for statutory licensing under this subsection, as this 
subsection was in effect on September 1, 2013.''.

SEC. 5. CHAPTER 8 PROCEEDINGS OF COPYRIGHT ROYALTY JUDGES; TECHNICAL 
              AMENDMENTS.

    (a) Functions.--Section 801(b) of title 17, United States Code, is 
amended--
            (1) in paragraph (1)--
                    (A) by striking ``112(e), 114,''; and
                    (B) by striking ``sections 114(f)(1)(B), 115,'' and 
                inserting ``sections 115'';
            (2) in paragraph (3)(C), by striking ``804(b)(8)'' and 
        inserting ``804(b)(7)'';
            (3) in paragraph (7)(B), by striking ``112(e)(5), 
        114(f)(3),'';
            (4) by redesignating paragraph (8) as paragraph (9); and
            (5) by inserting after paragraph (7) the following:
            ``(8) To determine the rates and terms for transmissions 
        under section 114(g) and reproductions under section 112(e).''.
    (b) Proceedings.--Section 803 of title 17, United States Code, is 
amended--
            (1) in subsection (b)(1)(A)(i)--
                    (A) by striking subclauses (II) and (III);
                    (B) in subclause (IV), by striking ``804(b)(8)'' 
                and inserting ``804(b)(7)''; and
                    (C) by redesignating subclauses (IV) and (V) as 
                subclauses (II) and (III), respectively; and
            (2) in subsection (c)(2)(E)(i), by striking ``on a 
        specified date, then--'' and all that follows through ``as of 
        the date of that determination.'' and inserting ``on a 
        specified date, then the initial determination of the Copyright 
        Royalty Judges that is the subject of the rehearing motion 
        shall be effective as of the day following the date on which 
        the rates and terms that were previously in effect expire.''.
    (c) Judicial Review.--Section 803(d)(2)(C)(ii) of title 17, United 
States Code, is amended by striking ``by the Copyright Royalty Judges'' 
and inserting ``under section 114(e)(2) or 112(e), or, in any other 
case, by the Copyright Royalty Judges,''.
    (d) Institution of Proceedings.--Section 804 of title 17, United 
States Code, is amended--
            (1) in subsection (a)--
                    (A) in the first sentence, by striking ``112, 
                114,''; and
                    (B) by striking the last sentence; and
            (2) in subsection (b)--
                    (A) by striking paragraph (2);
                    (B) by striking paragraph (3) and inserting the 
                following:
            ``(2) Certain sections 114 and 112 proceedings.--
        Proceedings under this chapter to determine terms and rates of 
        royalty payments under section 114(g) or 112(e) may be 
        commenced only pursuant to petitions filed after the end of the 
        6-month period beginning on the effective date of the Free 
        Market Royalty Act. Thereafter, proceedings described in the 
        preceding sentence may be commenced only pursuant to a petition 
        filed at any time within 1 year after negotiated licenses 
        authorized by section 114 or 112(e) (as the case may be) expire 
        and are not replaced by subsequent agreements. For purposes of 
        proceedings to determine terms and rates under this paragraph, 
        the Copyright Royalty Judges shall make a determination as to 
        whether the petitioner has a significant interest in the terms 
        and rates in which a determination by the Judges 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.''; and
                    (C) by redesignating paragraphs (4) through (8) as 
                paragraphs (3) through (7), respectively.
    (e) Technical Amendments.--Section 114 of title 17, United States 
Code, is amended as follows:
            (1) Subsection (a) is amended by striking ``clauses'' and 
        inserting ``paragraphs''.
            (2) Subsection (b) is amended--
                    (A) by striking ``clause'' each place it appears 
                and inserting ``paragraph'';
                    (B) by striking ``clauses'' each place it appears 
                and inserting ``paragraphs''; and
                    (C) by striking ``section 397 of title 47'' and 
                inserting ``section 397 of the Communications Act of 
                1934 (47 U.S.C. 397)''.

SEC. 6. STUDY BY COPYRIGHT OFFICE.

    The Register of Copyrights shall--
            (1) conduct a study on the protection of making available 
        to the public copyrighted works under paragraph (3) of section 
        106 of title 17, United States Code, and communicating to the 
        public copyrighted works under paragraph (4) of such section, 
        and recommend any amendments to such paragraphs necessary to so 
        protect the rights of making available to the public 
        copyrighted works and communicating to the public copyrighted 
        works; and
            (2) not later than 9 months after the date of the enactment 
        of this Act, submit to the Committees on the Judiciary of the 
        House of Representatives and the Senate a report on the results 
        of the studies conducted under paragraph (1), including any 
        recommendations under such paragraph.

SEC. 7. EFFECTIVE DATE.

    (a) Phase-Out of Statutory Licenses.--The amendments made by 
sections 2, 3, 4, and 5--
            (1) shall take effect upon the expiration of the 1-year 
        period beginning on the date of the enactment of this Act; and
            (2) shall apply with respect to audio transmissions of 
        sound recordings that are made on or after the effective date 
        under paragraph (1).
    (b) Other Provisions.--Sections 1 and 6 shall take effect on the 
date of the enactment of this Act.