To amend the Federal Trade Commission Act to provide that the advertising or sale of a mislabeled copy-protected music disc is an unfair method of competition and an unfair and deceptive act or practice, and for other purposes.

SECTION 1. SHORT TITLE.

     This Act may be cited as the ``Digital Media Consumers' Rights Act 
of 2003''.

SEC. 2. FINDINGS.

     Congress finds the following:
            (1) The limited introduction into commerce of ``copy-
        protected compact discs'' has caused consumer confusion and 
        placed increased, unwarranted burdens on retailers, consumer 
        electronics manufacturers, and personal computer manufacturers 
        responding to consumer complaints, conditions which will worsen 
        as larger numbers of such discs are introduced into commerce.
            (2) Recording companies introducing new forms of copy 
        protection should have the freedom to innovate, but should also 
        be responsible for providing adequate notice to consumers about 
        restrictions on the playability and recordability of ``copy-
        protected compact discs''.
            (3) The Federal Trade Commission should be empowered and 
        directed to ensure the adequate labeling of prerecorded digital 
        music disc products.

SEC. 3. INADEQUATELY LABELED COPY-PROTECTED COMPACT DISCS.

    The Federal Trade Commission Act (15 U.S.C. 41 et seq.) is amended 
by inserting after section 24 the following new section:

``SEC. 24A. INADEQUATELY LABELED COPY-PROTECTED COMPACT DISCS.

    ``(a) Definitions.--In this section:
            ``(1) The term `Commission' means the Federal Trade 
        Commission.
            ``(2) The term `audio compact disc' means a substrate 
        packaged as a commercial prerecorded audio product, containing 
        a sound recording or recordings, that conforms to all 
        specifications and requirements for Red Book Audio and bears a 
        duly licensed and authorized `Compact disc Digital Audio' logo.
            ``(3) The term `prerecorded digital music disc product' 
        means a commercial audio product comprised of a substrate in 
        the form of a disc in which is recorded a sound recording or 
        sound recordings generally in accordance with Red Book Audio 
        specifications but that does not conform to all licensed 
        requirements for Red Book Audio: Provided, That a substrate 
        containing a prerecorded sound recording that conforms to the 
        licensing requirements applicable to a DVD-Audio disc or a 
        Super Audio Compact Disc is not a prerecorded digital music 
        disc product.
            ``(4) The term `Red Book Audio' means audio data digitized 
        at 44,100 samples per second (44.1 kHz) with a range of 65,536 
        possible values as defined in the `Compact Disc-Digital Audio 
        System Description' (first published in 1980 by Philips N.V. 
        and Sony Corporation, as updated from time to time.
    ``(b) Prohibited Acts.--
            ``(1) The introduction into commerce, sale, offering for 
        sale, or advertising for sale of a prerecorded digital music 
        disc product which is mislabeled or falsely or deceptively 
        advertised or invoiced, within the meaning of this section or 
        any rules or regulations prescribed by the Commission pursuant 
        to subsection (d), is unlawful and shall be deemed an unfair 
        method of competition and an unfair and deceptive act or 
        practice in commerce under section 5(a)(1).
            ``(2) Prior to the time a prerecorded digital music disc 
        product is sold and delivered to the ultimate consumer, it 
        shall be unlawful to remove or mutilate, or cause or 
        participate in the removal or mutilation of, any label required 
        by this section or any rules or regulations prescribed by the 
        Commission pursuant to subsection (d) to be affixed to such 
        prerecorded digital music disc product. Any person violating 
        this subsection shall be deemed to have engaged in an unfair 
        method of competition and an unfair and deceptive act or 
        practice in commerce under this Act.
    ``(c) Mislabeled Discs.--For purposes of this section, a 
prerecorded digital music disc product shall be considered to be 
mislabeled if it--
            ``(1) bears any logo or marking which, in accordance with 
        common practice, identifies it as an audio compact disc;
            ``(2) fails to bear a label on the packaging in which it is 
        sold at retail in words that are prominent and plainly legible 
        on the front of the packaging that--
                    ``(A) it is not an audio compact disc;
                    ``(B) it might not play properly in all devices 
                capable of playing an audio compact disc; and
                    ``(C) it might not be recordable on a personal 
                computer or other device capable of recording content 
                from an audio compact disc; or
            ``(3) fails to provide the following information on the 
        packaging in which it is sold at retail in words that are 
        prominent and plainly legible--
                    ``(A) any minimum recommended software requirements 
                for playback or recordability on a personal computer;
                    ``(B) any restrictions on the number of times song 
                files may be downloaded to the hard drive of a personal 
                computer; and
                    ``(C) the applicable return policy for consumers 
                who find that the prerecorded digital music disc 
                product does not play properly in a device capable of 
                playing an audio compact disc.
    ``(d) Rulemaking.--(1) The Commission may develop such rules and 
regulations as it deems appropriate to prevent the prohibited acts set 
forth in subsection (b) and to require the proper labeling of 
prerecorded digital music disc products under subsection (c).
    ``(2)(A) The Commission may develop such additional rules and 
regulations as it deems necessary to establish appropriate labeling 
requirements applicable to new audio discs, using new playback formats 
(including DVD-Audio discs and Super Audio Compact Discs), if the 
Commission finds, with respect to a particular type of disc, that
            ``(i) the manner in which the discs are displayed at 
        retail, packaged, or marketed results in substantial consumer 
        confusion about the playability and recordability of such 
        discs;
            ``(ii) the discs are not appropriately labeled with respect 
        to their playability on standard audio compact disc playback 
        devices; and
            ``(iii)(I) the discs are not recordable on a personal 
        computer; or
            ``(II) if the discs are recordable, a recording made from 
        such a disc is bound to a particular device.
    ``(B) To the maximum extent practicable, the Commission shall seek 
to ensure that any rules and regulations developed under this paragraph 
impose labeling requirements comparable to the requirements imposed 
under the rules and regulations developed under paragraph (1).''.

SEC. 4. REPORT TO CONGRESS.

     Not later than 2 years after the date of enactment of this Act, 
the Federal Trade Commission shall submit to Congress a report 
detailing the following:
            (1) The extent to which prerecorded digital music disc 
        products (as defined in section 24A of the Federal Trade 
        Commission Act, as added by section 3 of this Act) have entered 
        the market over the preceding 2 years.
            (2) The extent to which the Commission has received 
        complaints from consumers about the implementation of return 
        policies for consumers who find that a prerecorded digital 
        music disc product does not play properly in a device capable 
        of playing an audio compact disc (as defined in section 24A of 
        such Act).
            (3) The extent to which manufacturers and retailers have 
        been burdened by consumer returns of devices unable to play 
        prerecorded digital music disc products.
            (4) The number of enforcement actions taken by the 
        Commission pursuant to section 24A of such Act.
            (5) The number of convictions or settlements achieved as a 
        result of enforcement actions taken by the Commission pursuant 
        to section 24A of such Act.
            (6) Any proposed changes to this Act, with respect to 
        prerecorded digital music disc products, that the Commission 
        believes would enhance enforcement, eliminate consumer 
        confusion, or otherwise address concerns raised by consumers 
        with the Commission.

SEC. 5. FAIR USE AMENDMENTS.

    (a) Scientific Research.--Subsections (a)(2)(A) and (b)(1)(A) of 
section 1201 of title 17, United States Code, are each amended by 
inserting after ``title'' in subsection (a)(2)(A) and after ``thereof'' 
in subsection (b)(1)(A) the following: ``unless the person is acting 
solely in furtherance of scientific research into technological 
protection measures''.
    (b) Fair Use Restoration.--Section 1201(c) of title 17, United 
States Code, is amended--
            (1) in paragraph (1), by inserting before the period at the 
        end the following: ``and it is not a violation of this section 
        to circumvent a technological measure in connection with access 
        to, or the use of, a work if such circumvention does not result 
        in an infringement of the copyright in the work''; and
            (2) by adding at the end the following new paragraph:
            ``(5) It shall not be a violation of this title to 
        manufacture, distribute, or make noninfringing use of a 
        hardware or software product capable of enabling significant 
        noninfringing use of a copyrighted work.''.

Summary: Digital Media Consumers' Rights Act of 2003 - Amends the Federal Trade Commission Act to prohibit: (1) introduction into commerce of prerecorded digital music disc products that are mislabeled, or falsely, or deceptively advertised or invoiced. And (2) removal or mutilation of any label required by either this Act or any rules or regulations prescribed by the Federal Trade Commission before the time a prerecorded digital music disc product is sold and delivered to the ultimate consumer. States that such transactions constitute either an unfair method of competition, or an unfair and deceptive act or practice in commerce. Authorizes the Commission to develop rules and regulations governing such transactions. Amends Federal copyright law to exempt from its prohibitions against circumvention of copyright protection systems any persons acting solely in furtherance of scientific research into technological protection measures. Declares it is not a violation of copyright law, but fair use, to: (1) circumvent a technological measure in connection with access to, or the use of, a work if such circumvention does not result in an infringement of the copyright in the work. Or (2) manufacture, distribute, or make noninfringing use of a hardware or software product capable of enabling significant noninfringing use of a copyrighted work.