To amend title 17, United States Code, with respect to the statutory license for webcasting.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Webcaster Settlement Act of 
2002''.

SEC. 2. FINDINGS.

    Congress finds the following:
        (1) Some small webcasters who did not participate in the 
    copyright arbitration royalty panel proceeding leading to the July 
    8, 2002 order of the Librarian of Congress establishing rates and 
    terms for certain digital performances and ephemeral reproductions 
    of sound recordings, as provided in part 261 of the Code of Federal 
    Regulations (published in the Federal Register on July 8, 2002) 
    (referred to in this section as ``small webcasters''), have 
    expressed reservations about the fee structure set forth in such 
    order, and have expressed their desire for a fee based on a 
    percentage of revenue.
        (2) Congress has strongly encouraged representatives of 
    copyright owners of sound recordings and representatives of the 
    small webcasters to engage in negotiations to arrive at an 
    agreement that would include a fee based on a percentage of 
    revenue.
        (3) The representatives have arrived at an agreement that they 
    can accept in the extraordinary and unique circumstances here 
    presented, specifically as to the small webcasters, their belief in 
    their inability to pay the fees due pursuant to the July 8 order, 
    and as to the copyright owners of sound recordings and performers, 
    the strong encouragement of Congress to reach an accommodation with 
    the small webcasters on an expedited basis.
        (4) The representatives have indicated that they do not believe 
    the agreement provides for or in any way approximates fair or 
    reasonable royalty rates and terms, or rates and terms that would 
    have been negotiated in the marketplace between a willing buyer and 
    a willing seller.
        (5) Congress has made no determination as to whether the 
    agreement provides for or in any way approximates fair or 
    reasonable fees and terms, or rates and terms that would have been 
    negotiated in the marketplace between a willing buyer and a willing 
    seller.
        (6) Congress likewise has made no determination as to whether 
    the July 8 order is reasonable or arbitrary, and nothing in this 
    Act shall be taken into account by the United States Court of 
    Appeals for the District of Columbia Circuit in its review of such 
    order.
        (7) It is, nevertheless, in the public interest for the parties 
    to be able to enter into such an agreement without fear of 
    liability for deviating from the fees and terms of the July 8 
    order, if it is clear that the agreement will not be admissible as 
    evidence or otherwise taken into account in any government 
    proceeding involving the setting or adjustment of the royalties 
    payable to copyright owners of sound recordings for the public 
    performance or reproduction in ephemeral phonorecords or copies of 
    such works, the determination of terms or conditions related 
    thereto, or the establishment of notice or recordkeeping 
    requirements.

SEC. 3. SUSPENSION OF CERTAIN PAYMENTS.

    (a) Noncommercial Webcasters.--
        (1) In general.--The payments to be made by noncommercial 
    webcasters for the digital performance of sound recordings under 
    section 114 of title 17, United States Code, and the making of 
    ephemeral phonorecords under section 112 of title 17, United States 
    Code, during the period beginning on October 28, 1998, and ending 
    on May 31, 2003, which have not already been paid, shall not be due 
    until June 20, 2003.
        (2) Definition.--In this subsection, the term ``noncommercial 
    webcaster'' has the meaning given that term in section 
    114(f)(5)(E)(i) of title 17, United States Code, as added by 
    section 4 of this Act.
    (b) Small Commercial Webcasters.--
        (1) In general.--The receiving agent may, in a writing signed 
    by an authorized representative thereof, delay the obligation of 
    any 1 or more small commercial webcasters to make payments pursuant 
    to sections 112 and 114 of title 17, United States Code, for a 
    period determined by such entity to allow negotiations as permitted 
    in section 4 of this Act, except that any such period shall end no 
    later than December 15, 2002. The duration and terms of any such 
    delay shall be as set forth in such writing.
        (2) Definitions.--In this subsection--
            (A) the term ``webcaster'' has the meaning given that term 
        in section 114(f)(5)(E)(iii) of title 17, United States Code, 
        as added by section 4 of this Act; and
            (B) 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.

SEC. 4. AUTHORIZATION FOR SETTLEMENTS.

    Section 114(f) of title 17, United States Code, is amended by 
adding after paragraph (4) the following:
        ``(5)(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 small 
    commercial webcasters or noncommercial webcasters during the period 
    beginning on October 28, 1998, and ending on December 31, 2004, 
    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 a copyright arbitration 
    royalty panel or decision by the Librarian of Congress. Any such 
    agreement for small commercial webcasters shall 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 small 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 
    small 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 Librarian of Congress under paragraph (4) 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 small 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).
        ``(D) Nothing in the Small Webcaster Settlement Act of 2002 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 Librarian of Congress of July 8, 2002, 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 to make eligible 
        nonsubscription transmissions and ephemeral recordings.
        ``(F) The authority to make settlements pursuant to 
    subparagraph (A) shall expire December 15, 2002, except with 
    respect to noncommercial webcasters for whom the authority shall 
    expire May 31, 2003.''.

SEC. 5. DEDUCTIBILITY OF COSTS AND EXPENSES OF AGENTS AND DIRECT 
              PAYMENT TO ARTISTS OF ROYALTIES FOR DIGITAL PERFORMANCES 
              OF SOUND RECORDINGS.

    (a) Findings.--Congress finds that--
        (1) in the case of royalty payments from the licensing of 
    digital transmissions of sound recordings under subsection (f) of 
    section 114 of title 17, United States Code, the parties have 
    voluntarily negotiated arrangements under which payments shall be 
    made directly to featured recording artists and the administrators 
    of the accounts provided in subsection (g)(2) of that section;
        (2) such voluntarily negotiated payment arrangements have been 
    codified in regulations issued by the Librarian of Congress, 
    currently found in section 261.4 of title 37, Code of Federal 
    Regulations, as published in the Federal Register on July 8, 2002;
        (3) other regulations issued by the Librarian of Congress were 
    inconsistent with the voluntarily negotiated arrangements by such 
    parties concerning the deductibility of certain costs incurred for 
    licensing and arbitration, and Congress is therefore restoring 
    those terms as originally negotiated among the parties; and
        (4) in light of the special circumstances described in this 
    subsection, the uncertainty created by the regulations issued by 
    the Librarian of Congress, and the fact that all of the interested 
    parties have reached agreement, the voluntarily negotiated 
    arrangements agreed to among the parties are being codified.
    (b) Deductibility.--Section 114(g) of title 17, United States Code, 
is amended by adding after paragraph (2) the following:
        ``(3) A nonprofit agent 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 to any person or entity entitled thereto other than 
    copyright owners and performers who have elected to receive 
    royalties from another designated agent and have notified such 
    nonprofit agent in writing of such election, the reasonable costs 
    of such agent 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 
    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 incurred 
    after November 1, 1995, with respect to such copyright owners and 
    performers who have entered with such agent a contractual 
    relationship that specifies that such costs may be deducted from 
    such royalty receipts.''.
    (c) Direct Payment to Artists.--Section 114(g)(2) of title 17, 
United States Code, is amended to read as follows:
        ``(2) An agent designated 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).''.

SEC. 6. REPORT TO CONGRESS.

    By not later than June 1, 2004, the Comptroller General of the 
United States, in consultation with the Register of Copyrights, shall 
conduct and submit to the Committee on the Judiciary of the House of 
Representatives and the Committee on the Judiciary of the Senate a 
study concerning the economic arrangements among small commercial 
webcasters covered by agreements entered into pursuant to section 
114(f)(5)(A) of title 17, United States Code, as added by section 4 of 
this Act, and third parties, and the effect of those arrangements on 
royalty fees payable on a percentage of revenue or expense basis.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.

Summary: Small Webcaster Settlement Act of 2002 - Permits the suspension of certain payments by noncommercial webcasters. Defines webcasters as persons or entities with compulsory licenses under Federal copyright law to make eligible nonsubscription transmissions and ephemeral recordings. Defines noncommercial webcasters as webcasters who: (1) are exempt from taxation. (2) have applied for tax exemption and have a reasonable chance of obtaining it. Or (3) are operated by a public body. Declares that all payments to be made by noncommercial webcasters under Federal copyright law for the digital performance of sound recordings and the making of ephemeral phonorecords during the period from October 28, 1998, to May 31, 2003, which have not already been paid, shall not be due until June 20, 2003. Allows a receiving agent to delay the obligation of any one or more small commercial webcasters to make certain payments relating to sound recordings or ephemeral recordings for a period of time to allow negotiations to occur under this Act, except that any such period shall end no later than December 15, 2002. Authorizes a receiving agent to enter into agreements for the reproduction and performance of sound recordings by one or more small commercial webcasters or noncommercial webcasters during the period from October 28, 1998, to December 31, 2004. Declares that, once published in the Federal Register, such an agreement shall be binding on all copyright owners of sound recordings and other persons entitled to payment, in lieu of any determination by a copyright arbitration royalty panel or decision by the Librarian of Congress. Declares that any such agreement shall include provisions for payment of royalties on the basis of a percentage of revenue or expenses, or both, and a minimum fee. Permits other terms and conditions also to be included in such an agreement. Prohibits any such agreement or any of its provisions from being admissible as evidence or otherwise taken into account in any administrative, judicial, or government proceedings involving the setting or adjustment of royalties and related matters, including establishment of notice or recordkeeping requirements. Expresses the intent of Congress that any royalty rates, rate structure, definitions, terms, conditions, or notice and recordkeeping requirements included in such agreements shall be viewed as a unique compromise rather than as matters that would have been negotiated in the marketplace between a willing buyer and a willing seller. States that nothing in this Act or any agreement made under it 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 Librarian of Congress of July 8, 2002, of rates and terms for the digital performance of sound recordings and ephemeral recordings. Declares that the authority to make settlements under this Act shall expire on December 15, 2002, except that such authority for noncommercial webcasters shall expire on May 31, 2003. Authorizes a nonprofit agent designated to distribute receipts from the licensing of certain transmissions to deduct from any of its receipts, prior to their distribution to an entitled person, the reasonable costs of such agent incurred after November 1, 1995, for certain duties. Includes among such duties: (1) the administration of the collection, distribution, and calculation of the royalties, as well as settlement of related disputes. And (2) the licensing and enforcement of rights with respect to the making of ephemeral recordings and performances subject to licensing under this Act and other specified Federal law. Allows any agent designated to distribute receipts from the licensing of certain transmissions to deduct the reasonable costs with respect to copyright owners and performers who have entered with such agent a contractual relationship that specifies that such costs may be deducted from such royalty receipts. Modifies requirements for payments to artists. Shifts responsibility for distributing licensing receipts from the copyright owner to the designated agent. Adds the requirement that 50 percent of the licensing receipts be paid to the copyright owner of the exclusive right under Federal law to publicly perform a sound recording by means of a digital audio transmission. Directs the Comptroller General to study and report to specified congressional committees on the economic arrangements among small commercial webcasters covered by agreements entered into under this Act, and third parties, and the effect of those arrangements on royalty fees payable on a percentage of revenue or expense basis.