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[House Report 115-651]
[From the U.S. Government Publishing Office]

115th Congress    }                                           {    Report
                         HOUSE OF REPRESENTATIVES
 2d Session       }                                           {   115-651

======================================================================

 
                        MUSIC MODERNIZATION ACT

                                _______
                                

 April 25, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Goodlatte, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 5447]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 5447) to modernize copyright law, and for other 
purposes, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for the Legislation..........................     2
Hearings.........................................................    18
Committee Consideration..........................................    18
Committee Votes..................................................    18
Committee Oversight Findings.....................................    19
New Budget Authority and Tax Expenditures........................    20
Congressional Budget Office Cost Estimate........................    20
Duplication of Federal Programs..................................    25
Disclosure of Directed Rule Makings..............................    25
Performance Goals and Objectives.................................    25
Advisory on Earmarks.............................................    25
Section-by-Section Analysis......................................    25
Changes in Existing Law Made by the Bill, as Reported............    31

                          Purpose and Summary

    H.R. 5447 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.

                Background and Need for the Legislation

 A. PRIOR JUDICIARY COMMITTEE EFFORTS ON REVIEWING MUSIC COPYRIGHT LAWS

    The Committee undertook a lengthy 20 hearing, 100 witness 
review of all of our nation's copyright laws over a five-year 
period. Two of these copyright review hearings in June 2014 
were focused specifically on music copyrights and the Committee 
received testimony from a total of 16 witnesses at these two 
hearings. Highlighting one of the many problems of the current 
music copyright law, Ms. Rosanne Cash, whose father Johnny Cash 
also testified before the Committee during the enactment of the 
Digital Millennium Copyright Act in September 1997, testified 
at the second music hearing that ``To put a personal 
perspective on this, if my father were alive today he would 
receive no payment for digital performances of his song `I Walk 
The Line,' written and recorded in 1956, but anyone who 
rerecorded that song WOULD receive a royalty. This makes 
absolutely no sense, and is patently unfair.'' In February 
2015, the Committee received a detailed study of the music 
licensing system from the Register of Copyrights titled 
``Copyright and the Music Marketplace,'' which identified a 
number of issues requiring Congressional attention. Following 
the release of this report, the Committee undertook a series of 
nationwide listening sessions on copyright law, travelling 
first to Nashville, TN on September 22, 2015, to hear from an 
additional twenty parties focused on music issues and to 
undertake several music related visits in the Nashville area. 
On January 26, 2018, the Committee further held a field hearing 
in New York City entitled ``Music Policy Issues: A Perspective 
from Those Who Make It'' during GRAMMYs weekend. The Committee 
also traveled to California in November 2015 to hear from 
technology and copyright industries on these and other 
copyright issues.
    As a result of this extensive review of music copyright, on 
April 10, 2018, Chairman Bob Goodlatte and Ranking Member 
Jerrold Nadler introduced H.R. 5447, the Music Modernization 
Act, which combined updated versions of four previously 
introduced bills. All four bills were the subject of the 
Committee field hearing in New York City on January 26, 2018. 
The three Titles of the legislation are based upon these 
previously introduced bills:
           Title I is an updated version of H.R. 4706, 
        the Music Modernization Act, introduced by Mr. Doug 
        Collins and Mr. Hakeem Jeffries, which currently has 65 
        cosponsors (the overall legislation now carries the 
        name of the original bill; Title I is now referred to 
        as the Musical Works Modernization Act). Title I also 
        has selected provisions of H.R. 1836, the Fair Play, 
        Fair Pay Act, introduced by Mr. Jerrold Nadler and Ms. 
        Marsha Blackburn, which currently has 31 cosponsors
           Title II is an updated version of H.R. 3301, 
        the Compensating Legacy Artists for their Songs, 
        Service, and Important Contributions to Society Act or 
        CLASSICS Act, introduced by Mr. Darrell Issa and Mr. 
        Jerrold Nadler, which currently has 44 cosponsors
           Title III of the Music Modernization Act is 
        an updated version of H.R. 881, the Allocation for 
        Music Producers, or AMP Act, introduced by Mr. Joseph 
        Crowley and Mr. Tom Rooney, which currently has 64 
        cosponsors

                               B. TITLE I

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 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 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 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 the next January 1 
following the expiration of the two-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 that work. 
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 
three 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 114(d)(2) and 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. Sec. 115(d) Blanket license for digital uses, mechanical 
        licensing collective, and digital licensee coordinator

    The majority of Title I creates a new Sec. 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 new Sec. 115(d) builds upon earlier industry 
discussions surrounding the Section 115 Reform Act of 2006, in 
which the same parties that came together to develop that 
legislation did so again, albeit with some significant changes, 
most notably with the creation of a single entity from which to 
seek a compulsory license, rather than a small number of such 
entities as contemplated under the earlier legislation, and 
that licensees will pay for the operation of the new entity, 
rather than the licensors.
    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. During the entire discussion of the legislation, it 
has been agreed to by all parties that songwriters should be 
responsible for identifying and choosing the songwriter 
representatives on the Board. The Committee strongly agrees 
with such an approach.
    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. 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 Sec. 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.
    The Register is allowed to re-designate an entity to serve 
as the collective every five years after the initial 
designation. Although there is no guarantee of a continued 
designation by the collective, the Committee believes that 
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 Sec. 115(d)(3)(B)(iii).

Reasonable cost shifting of the mechanical licensing collective

    The Committee welcomes the agreement of digital music 
services and musical works copyright owners 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 strongly rejects statements that copyright owners 
benefit from compulsory licenses or 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, ASCAP, and 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.
    The Committee expects 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.

Musical works database

    The Committee welcomes the creation of a new musical works 
database that is mandated by the legislation. 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. 
Testimony provided by Jim Griffin at the June 10, 2014 
Committee hearing highlighted the need for more robust metadata 
to accompany the payment and distribution of music royalties. 
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. The Committee believes that this 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, are 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 at least seven 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 how the 
collective operates, how royalties are collected and 
distributed, and the collective total costs for the preceding 
calendar year. The legislation does not specify in great detail 
the form of such report, but the Committee expects that the 
collective will create reports similar to that of other 
collectives. Since several other collectives engage in lobbying 
and other marketing activities that this collective will not 
undertake, reports of the mechanical licensing collective are 
likely to contain more substantive information than others.

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. 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 MMA 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 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.

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 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.
    The Committee expects 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

    The Committee expects 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.

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. The Committee welcomes such 
agreement since continued litigation generates unnecessary 
administrative costs, diverting royalties from artists. The 
Committee 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 General Accountability 
Office, for assistance in determining if artists are being 
properly compensated for their works.

Uniform rate standards

    Section 103(a) of the legislation creates a uniform willing 
buyer, willing seller rate standard in Sec. 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.'' The Committee finds 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 the Committee eliminates such 
discounts. Whatever justification for the discounts has long 
since vanished.
    Section 103(a) of the legislation repeals Sec. 114(i), a 
goal long sought by the Committee through such legislation as 
the Songwriter Equity Act. The Committee has been concerned 
that songwriters have not been adequately compensated for their 
contributions and Sec. 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 Sec. 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 when 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 
Sec. 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 Organization's (PRO) license fees. However, the original 
judge(s) who oversees 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 
PRO. This change is not a reflection upon any past actions by 
the Southern District of New York. The Committee simply 
believes that rate decisions should be assigned on a random 
basis to judges not involved in the underlying consent decree 
cases.

                              C. TITLE II

    The second title of H.R. 5447 is an amended version of H.R. 
3301, the ``Compensating Legacy Artists for their Songs, 
Service, and Important Contributions to Society, or 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 field 
hearing in New York City on January 26, 2018, from Ms. Dionne 
Warwick, 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, 
the Committee recognizes that music services have been able to 
successfully operate while paying royalties for post-72 works. 
Thus, the Committee believes that 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 
Sec. 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.
    Title II includes several limitations on remedies in the 
new Sec. 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. In the absence 
of full federalization of these pre-72 works, the new 
Sec. 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 within 180 days of 
enactment. Before this system is operating, the Copyright 
Office shall also be promulgated 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.

                              D. TITLE III

    The third title of H.R. 5447 is a modified version of H.R. 
881, the ``Allocation for Music Producers, or 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 Sec. 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. The Committee appreciates the culture of 
transparency that SoundExchange has brought to the music 
industry and hopes that this culture 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 Sec. 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.
    Congress expects SoundExchange to 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 
Sec. 114(f), also do so. Nothing in Sec. 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 Sec. 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, 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 objection process 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:
           50 percent of the receipts shall be paid to 
        the copyright owner of the exclusive right under 
        Sec. 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 Sec. 114(g)(6)(B).
    Similar to Sec. 114(g)(5)(B), section 303 of the 
legislation delays the effective date of the new 
Sec. 114(g)(6)(E) to January 1, 2020, to correspond both to the 
need for SoundExchange to update its internal systems and the 
alignment with the beginning of a calendar tax year.
    Section 302(c) makes several technical and conforming 
amendments to Sec. 114(g) that should have no operative impact 
upon any entity operating currently or in the future.

                                Hearings

    The Committee on the Judiciary held no hearings on H.R. 
5447, but held an oversight field hearing on the music issues 
addressed by H.R. 5447, on January 26, 2018. Testimony was 
received from Mr. Aloe Blacc, Musician, Singer, Songwriter; Mr. 
Mike Clink, Record Producer; Mr. Booker Jones, Songwriter, 
Record Producer, Artist, and Arranger; Mr. Tom Douglas, 
Songwriter; Mr. Neil Portnow, President, The Recording Academy; 
and, Ms. Dionne Warwick, Recording Artist.
    In addition, the Committee held two hearings in June 2014 
that were focused specifically on music licensing under Title 
17. Testimony was received from Mr. David Israelite, National 
Music Publishers Association; Mr. Neil Portnow, The Recording 
Academy; Mr. Michael O'Neill, BMI; Mr. Will Hoyt, TV Music 
License Committee; Mr. Lee Knife, Digital Media Association; 
Mr. Jim Griffin, OneHouse LLC; Mr. Lee Miller, Nashville 
Songwriters Association International; Mr. Michael Huppe, 
SoundExchange Inc.; Mr. Ed Christian, Radio Music License 
Committee Inc. (RMLC); Mr. Charles Warfield Jr., On Behalf of 
the National Association of Broadcasters (NAB); Mr. Chris 
Harrison, Pandora Media Inc.; Ms. Roseanne Cash, On Behalf of 
the Americana Music Association (AMA); Mr. Cary Sherman, 
Recording Industry of America (RIAA); Mr. David Frear, Sirius 
XM Holdings Inc.; Mr. Paul Williams, American Society of 
Composers, Authors and Publishers (ASCAP); and, Mr. Darius Van 
Arman, On Behalf of the American Association of Independent 
Music (A2IM).

                        Committee Consideration

    On April 11, 2018, the Committee met in open session and 
ordered the bill (H.R. 5447) favorably reported, without 
amendment, by a roll call vote of 32 to 0, a quorum being 
present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that that 
the following roll call votes occurred during the Committee's 
consideration of H.R. 5447.
    1. Motion to report H.R. 5447 favorably to the House. 
Approved 32 to 0.

                             ROLLCALL NO. 1
------------------------------------------------------------------------
                                                   Ayes    Nays
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman....................      X
Mr. Sensenbrenner, Jr. (WI).....................  ......
Mr. Smith (TX)..................................      X
Mr. Chabot (OH).................................  ......
Mr. Issa (CA)...................................  ......
Mr. King (IA)...................................  ......
Mr. Gohmert (TX)................................      X
Mr. Jordan (OH).................................      X
Mr. Poe (TX)....................................      X
Mr. Marino (PA).................................      X
Mr. Gowdy (SC)..................................      X
Mr. Labrador (ID)...............................  ......
Mr. Collins (GA)................................      X
Mr. DeSantis (FL)...............................      X
Mr. Buck (CO)...................................      X
Mr. Ratcliffe (TX)..............................      X
Ms. Roby (AL)...................................      X
Mr. Gaetz (FL)..................................      X
Mr. Johnson (LA)................................      X
Mr. Biggs (AZ)..................................      X
Mr. Rutherford (FL).............................      X
Ms. Handel (GA).................................      X
 
Mr. Nadler (NY), Ranking Member.................      X
Ms. Lofgren (CA)................................      X
Ms. Jackson Lee (TX)............................      X
Mr. Cohen (TN)..................................      X
Mr. Johnson (GA)................................      X
Mr. Deutch (FL).................................      X
Mr. Gutierrez (IL)..............................
Ms. Bass (CA)...................................
Mr. Richmond (LA)...............................      X
Mr. Jeffries (NY)...............................      X
Mr. Cicilline (RI)..............................      X
Mr. Swalwell (CA)...............................      X
Mr. Lieu (CA)...................................      X
Mr. Raskin (MD).................................      X
Ms. Jayapal (WA)................................      X
Mr. Schneider (IL)..............................      X
Ms. Demings (FL)................................      X
                                                 -----------------------
    Total.......................................     32
------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to H.R. 5447, 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, April 25, 2018.
Hon. Bob Goodlatte, Chairman
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5447, the Music 
Modernization Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Stephen 
Rabent and Jacob Fabian, who can be reached at 226-2860.
            Sincerely,
                                                        Keith Hall.
Enclosure

cc:
        Honorable Jerrold Nadler
            Ranking Member

                  H.R. 5447--Music Modernization Act.

 As ordered reported by the House Committee on the Judiciary on April 
                               11, 2018.

    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.
    H.R. 5447 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. H.R. 2447 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 H.R. 5447 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 less 
than $500,000 to implement the bill, subject to the 
availability of appropriated funds.
    Because enacting H.R. 5447 would affect direct spending and 
revenues, pay-as-you-go procedures apply.
    CBO estimates that enacting H.R. 5447 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.
    H.R. 5447 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 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 the effect on settlements due to copyright holders 
under the new dispute resolution process is uncertain, 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 H.R. 5447 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
 
Effect on the Deficit................................      0      0      0      1      5      6      6      7      7      7      8        13         47
--------------------------------------------------------------------------------------------------------------------------------------------------------
CBO estimates that discretionary spending to implement H.R. 5447 would total less than $500,000 over the 2019-2023 period, subject to the availability
  of appropriated funds.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
5447 will be enacted near the end of fiscal year 2018, that the 
necessary amounts will be appropriated each year, and that 
estimated spending will follow historical patterns for similar 
activities.
    Under H.R. 5447, 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.
---------------------------------------------------------------------------
    H.R. 5447 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

    H.R. 5447 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

    H.R. 5447 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 H.R. 5447 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 
H.R. 5447 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

    H.R. 5447 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. Using 
information from the Copyright Office, CBO estimates that those 
activities would cost the agency less than $500,000 over the 
2019-2023 period.
    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 H.R. 5447, THE MUSIC MODERNIZATION ACT, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON THE JUDICIARY ON APRIL
                                                                        11, 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 Impact.......................      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 H.R. 5447 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: H.R. 5447 would impose intergovernmental mandates 
as defined in UMRA by preempting state property laws. The bill 
would establish a new system, under the MLC, for collecting and 
distributing royalties that would preempt state laws governing 
unclaimed property. Under current state property laws, states 
may collect royalties that remain unclaimed for a certain 
period of time; H.R. 5447 would preempt those laws. Using 
information from music industry sources about current levels of 
unclaimed royalties and state efforts to claim them, CBO 
estimates that the amount of revenue that states might forego 
as a result of the preemptions would be small and below the 
threshold established in UMRA for intergovernmental mandates 
($80 million in 2018, adjusted annually for inflation).
    Further, the bill would establish federal copyright 
protections for musical works recorded prior to 1972 (which do 
not exist under current law), and would preempt state property 
laws that govern infringement claims regarding those works. 
Although the preemption would limit the application of state 
laws in these cases, it would impose no duty on states that 
would result in additional spending or a loss of revenues.
    The bill would impose private-sector mandates on companies 
that provide digital music services. Under current law, digital 
music services negotiate directly with copyright owners for the 
right to use musical works, or pay fees to the U.S. Copyright 
Office for the right to use music when the copyright owner 
cannot be identified. H.R. 5447 would direct those companies to 
pay fees instead to the MLC to administer a new blanket 
licensing system. Using information from the U.S. Copyright 
Office and music industry sources, CBO estimates that the total 
fees companies would pay to the MLC would range from $22 
million to $28 million per year over the 2019-2023 period and 
that companies would begin paying fees in 2021. (Those amounts 
include a small savings that would result from companies no 
longer paying fees to the U.S. Copyright Office for the covered 
services.)
    In order to be issued a blanket license for the use of 
digital music, the bill would require companies that provide 
digital music services to submit usage reports to the MLC 
detailing the artists and works that have been streamed each 
month. Because such companies already maintain and provide 
similar information under current law, CBO estimates that the 
costs of complying with this requirement 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 3 years preceding the suit (the 
federal statute of limitations on claims of copyright 
infringement); in exchange, digital music companies would 
receive liability protection as long as they make good-faith 
efforts to aid the MLC in matching works with their copyright 
owners and make timely payments of royalties that would be due.
    Similarly, in the case of lawsuits involving musical works 
recorded prior to 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 3 years' 
worth of back royalties; in exchange, music companies would 
receive protection from further claims.
    In substituting these new processes for rights of legal 
action that exist under current law (at the federal or state 
level), the bill would impose mandates on copyright holders by 
terminating their existing rights to make infringement claims. 
The costs of the mandates would be the foregone value of awards 
and settlements for those claims to the extent that the 
legislation results in compensation levels that are lower than 
what could have been collected under current law. CBO is 
uncertain about how the value of royalties claimed by copyright 
owners in lawsuits would be affected under the bill and how 
much those amounts might differ relative to current law. 
Consequently, CBO cannot determine whether the aggregate cost 
of mandates in the bill on private entities would exceed the 
annual threshold established in UMRA for private-sector 
mandates ($160 million in 2018, adjusted annually for 
inflation).
    Estimate prepared by: Federal Costs: Stephen Rabent and 
Jacob Fabian; Mandates: Jon Sperl.
    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.

                    Duplication of Federal Programs

    No provision of H.R. 5447 establishes or reauthorizes a 
program of the Federal government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee finds that H.R. 5447 contains no directed 
rule making within the meaning of 5 U.S.C. Sec. 551.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 5447 
is designed to update the nation's music copyright laws.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 5447 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
    Section 1. Short Title; Table of Contents. Section 1 sets 
forth the short title of the bill as the ``Music Modernization 
Act.''

                TITLE I. MUSICAL WORKS MODERNIZATION ACT

    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.
    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 
require 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 (MLC) 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 enjoys support from the 
        majority of musical works copyright owners as measured 
        over the preceding three years, and 3) able to 
        demonstrate that it has or will have prior to the 
        license availability date the necessary capabilities to 
        perform the required functions.
          Subparagraph B sets forth the initial process for 
        designation of the MLC 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 for the collective to 
        administer voluntary licenses, a restriction of 
        negotiating or granting licenses for public performance 
        rights, and a restriction on lobbying.
          Subparagraph D sets forth the governance of the 
        collective and a requirement for a public annual 
        report. Since the Board 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.
          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.
          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 distribute 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 is 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 MLC. 
        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 paragraph (11)(D) the collective is only liable for 
        gross negligence in these functions. 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 due 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 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 the collective, it is possible for the new 
blanket licensing system to proceed in the event a digital 
licensee coordinator cannot be chosen.
    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 nonblank 
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 in 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. Once the 
blanket license is available, any non-matched royalties must be 
turned over to the collective within 45 days, 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 limitations and 
common agent exemptions. The collective is not liable for good-
faith activities under a grossly negligent 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 or 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) makes a technical amendment to existing 
801(b) to clarify that the administrative assessment is to 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.
    Sec. 103. Amendments to section 114. Section 103 creates a 
uniform willing buyer, willing seller rate standard by amending 
17 U.S.C. Sec. 114(f), repealing 17 U.S.C. Sec. 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 recording under 17 U.S.C. 
Sec. 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.

  TITLE II. COMPENSATING LEGACY ARTISTS FOR THEIR SONGS, SERVICE, AND 
           IMPORTANT CONTRIBUTIONS TO SOCIETY (CLASSICS) 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, or 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, library use privileges in section 
108, 110(1), and 110(2) are available as a defense along with 
section 512. 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, or 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-1972 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 them before a set percentage of royalties (2% of all 
webcasting royalties from a particular work) are 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.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, 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):

                      TITLE 17, UNITED STATES CODE

Chap.                                                               Sec.
      Subject Matter and Scope of Copyright..........................101
     * * * * * * *
      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 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 
                the collective accepts a letter of direction 
                under subparagraph (A), 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), 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 of at least 
                                4 months, 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 of at least 4 months 
                        before the collective's first 
                        distribution to the person described in 
                        subparagraph (B), the collective 
                        attempted, 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 did not, as of the date 
                        that is 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 a written certification 
                        to the collective stating, under 
                        penalty of perjury, that the person 
                        meets the requirements in clauses (i) 
                        through (iii) and includes 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 a 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 does not preclude payment under 
                subparagraph (A) from the share of an artist 
                payee that does not so object.
  (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 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 its 
                                authorized distributor 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 within 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 within 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 
                pho-no-re-cords 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 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) In either case described in 
                        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 of this 
                title. 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) and 
                paragraph (2)(A) and chapter 8 of this title.
                  (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 and subparagraphs (E) and (F) 
                and paragraph (2)(A) and chapter 8 of this 
                title 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) 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) 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) 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.
                  (C) Infringement remedies.--
                          (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 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) 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 
                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.
                  (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 section 106(1) through 
                (5) 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 clause.
                  (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 subsection (b)(1), (b)(2)(A), or 
                (b)(3), 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. 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 one or more copyright owners and 
                one 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 
                        within 30 calendar days after receipt, 
                        the blanket license shall be effective 
                        as of the date 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 
                                within the past 3 years 
                                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 Federal district 
                        court. 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, 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 it 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
                          (iv) has been designated by the 
                        Register of Copyrights in accordance 
                        with subparagraph (B).
                  (B) Designation of mechanical licensing 
                collective.--
                          (i) Initial designation.--The 
                        Register of Copyrights shall initially 
                        designate the mechanical licensing 
                        collective within 9 months after the 
                        enactment date as follows:
                                  (I) Within 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 the 
                                identity of and contact 
                                information for the mechanical 
                                licensing collective.
                          (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:
                                  (I) The Register shall, 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, with any new 
                                designation to be effective as 
                                of the first day of a month 
                                that is no less than 6 months 
                                and no longer than 9 months 
                                after the date of publication 
                                of such notice, as specified by 
                                the Register.
                                  (II) If a new entity is 
                                designated as a mechanical 
                                licensing collective, the 
                                Register shall 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 its 
                                activities.
                                  (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 its 
                                activities and engage in and 
                                respond to audits described 
                                under this subsection.
                                  (XIII) Engage in such other 
                                activities as may be necessary 
                                or appropriate to fulfill its 
                                responsibilities under this 
                                subsection.
                          (ii) Additional administrative 
                        activities.--Subject to paragraph 
                        (11)(C) and clause (iii), 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 may, pursuant to 
                        clause (ii), provide administration 
                        services with respect to voluntary 
                        licenses that include the right of 
                        public performance in musical works, 
                        but may not itself negotiate or grant 
                        licenses for the right of public 
                        performance in musical works, and may 
                        not 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 to which songwriters 
                                have assigned exclusive rights 
                                of reproduction and 
                                distribution of musical works 
                                with respect to covered 
                                activities and no such music 
                                publisher member 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 over the preceding 3 
                                full calendar years.
                                  (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) Board meetings.--The board of 
                        directors shall meet no less than 2 
                        times per year and discuss matters 
                        pertinent to the operations, including 
                        the mechanical licensing collective 
                        budget.
                          (iii) Operations advisory 
                        committee.--The board of directors of 
                        the mechanical licensing collective 
                        shall establish an operations advisory 
                        committee consisting of no 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.
                          (iv) 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.
                          (v) Dispute resolution committee.--
                        The board of directors of the 
                        mechanical licensing collective shall 
                        establish and appoint a dispute 
                        resolution committee consisting of no 
                        fewer than 6 members, which committee 
                        shall include an equal number of 
                        representatives of musical work 
                        copyright owners and professional 
                        songwriters.
                          (vi) Mechanical licensing collective 
                        annual report.--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 at least 3 years, an annual 
                        report that sets forth how the 
                        collective operates, how royalties are 
                        collected and distributed, and the 
                        collective total costs for the 
                        preceding calendar year. At the time of 
                        posting, a copy of the report shall be 
                        provided to the Register of Copyrights.
                  (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 such owner's ownership 
                                percentage;
                                  (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, 
                                        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 such 
                                        owner's ownership 
                                        percentage;
                                          (dd) identifying 
                                        information for sound 
                                        recordings in which the 
                                        work is embodied, 
                                        including sound 
                                        recording name, 
                                        featured artist, sound 
                                        recording copyright 
                                        owner, 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 interest-bearing 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 of 
                        at least 3 years after the date on 
                        which the funds were received by the 
                        mechanical licensing collective, or at 
                        least 3 years after the date on which 
                        they 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 at 
                        the Federal, short-term rate, such 
                        interest to accrue for the benefit of 
                        copyright owners entitled to payment of 
                        such accrued royalties.
                  (I) Musical works claiming process.--The 
                mechanical licensing collective shall publicize 
                the existence of accrued royalties for 
                unmatched musical works (and shares of such 
                works) within 6 months of receiving a transfer 
                of accrued royalties for such works by publicly 
                listing the works and the procedures by which 
                copyright owners may identify themselves and 
                provide ownership, contact, and other relevant 
                information to the mechanical licensing 
                collective in order to receive payment of 
                accrued royalties. 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 its other records 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 paragraph (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 July 1 of the first full 
                                calendar year to commence after 
                                the license availability date, 
                                with at least one 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 by royalty payments 
                                made by digital music providers 
                                for covered activities for the 
                                periods in question, including, 
                                in addition to royalty payments 
                                made to the mechanical 
                                licensing collective, royalty 
                                payments made 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 royalties 
                                        received 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 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 
                        paragraph (3)(D)(iv) 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 (iv), subject to the 
                        approval of the board of directors of 
                        the mechanical licensing collective.
                          (iii) Advance notice of 
                        distributions.--The mechanical 
                        licensing collective shall publicize a 
                        pending distribution of unclaimed 
                        accrued royalties and accrued interest 
                        at least 90 calendar days in advance of 
                        such distribution.
                          (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 
                paragraph (3)(D)(v) shall address and resolve 
                in a timely and equitable manner disputes among 
                copyright owners relating to ownership 
                interests in musical works licensed under this 
                section and allocation and distribution of 
                royalties by the mechanical licensing 
                collective, according to a process approved by 
                the board of directors of the mechanical 
                licensing collective. Such process--
                          (i) shall include a mechanism to hold 
                        disputed funds in accordance with the 
                        requirements described in subparagraph 
                        (H)(ii) pending resolution of the 
                        dispute; and
                          (ii) except as provided in paragraph 
                        (11)(D), 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 prior 3 
                                calendar years, 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 within 
                                45 calendar days after receipt.
                                  (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, but 
                                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(s) 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 herein, but 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 its 
                        operations, including those relating to 
                        notices of license, the administration 
                        of its claims process, 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 no 
                        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 such owner or the owner's 
                        authorized representative.
          (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), but the monthly 
                        reporting shall be due 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 available to 
                                        the digital music 
                                        provider, 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 the sound 
                                        recordings embody;
                                          (bb) to the extent 
                                        reasonably available to 
                                        the digital music 
                                        provider, 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 work code; and
                                          (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 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 copyright owners of 
                sound recordings made available through the 
                service of such digital music provider--
                          (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) information concerning 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 no more than once in 
                                any 3-calendar-year period to 
                                cover a verification period of 
                                no 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 within 
                                45 calendar days after receipt.
                                  (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, but 
                                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 10 percent or more, 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 no 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 herein, but 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 one 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 one 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 60 calendar days or 
                                longer.
                          (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 
                                within 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 within the 60-day 
                                period referenced 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 Federal district 
                        court. 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 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 within 9 months 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 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 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 Register's 
                        determination 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) 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).
          (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 Federal district court 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 deems 
                        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 such voluntary contribution 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, but 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, 
                                but also, 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) The Copyright Royalty 
                                Judges shall commence a 
                                proceeding to establish the 
                                initial administrative 
                                assessment within 9 months 
                                after the enactment date by 
                                publishing a notice in the 
                                Federal Register seeking 
                                petitions to participate.
                                  (II) 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 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 they deem 
                                appropriate.
                                  (IV) The initial 
                                administrative assessment shall 
                                be determined, and such 
                                determination shall be 
                                published in the Federal 
                                Register by the Copyright 
                                Royalty Judges, within 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 (iii).
                          (iv) Adjustment of administrative 
                        assessment.--The administrative 
                        assessment may be adjusted by the 
                        Copyright Royalty Judges periodically, 
                        in accordance with the following 
                        procedures:
                                  (I) No 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 
                                October 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 November 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 
                                November 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), 
                        but 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 it 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, within 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 within 3 months 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), but either 
                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, within 3 months after 
                the rate and terms established by the Copyright 
                Royalty Judges become effective--
                          (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 one or more covered activities 
                with respect to a musical work, but the 
                foregoing 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) previously filed notices of 
                        intention will no longer be effective 
                        or provide license authority with 
                        respect to covered activities, but 
                        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) No 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 ownership 
                                        information, including 
                                        each songwriter and 
                                        publisher name, 
                                        percentage ownership 
                                        share, and 
                                        international standard 
                                        musical work code.
                                  (II) Employment of one or 
                                more bulk electronic matching 
                                processes that are available to 
                                the digital music provider 
                                through a third-party vendor on 
                                commercially reasonable terms, 
                                but a digital music provider 
                                may rely on its own bulk 
                                electronic matching process if 
                                it 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 no 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) within 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) within 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) Suspension of late fees.--A 
                        digital music provider that complies 
                        with the requirements of this paragraph 
                        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 to engage in covered activities that 
                accrued no more than 3 years prior to the 
                license availability date, such action may be 
                commenced within 3 years of the date the claim 
                accrued, or up to 2 years after the license 
                availability date, whichever is later.
                  (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) (except for the administrative 
                assessment referenced therein 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, 
                but the following conditions apply:
                          (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, ``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 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 described in subsection (e) shall 
                not extend to, limit, or otherwise affect any 
                right of public performance in a musical work.
  (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, 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 qualified 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 of this 
        title.
          (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 the next 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 them, 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.

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           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), 
        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.

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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.

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    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 recordings 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)(4)(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 such a license agreement 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 section 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) except in the case of 
                        transmissions that would have been 
                        exempt under section 114(d)(1), the 
                        transmitting entity, before the end of 
                        the 270-day period beginning on 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 section 
                        114(d)(2) and section 112(e)(1) during 
                        the 3 years prior to the date of the 
                        enactment of this section.
          (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.--The limitations on the 
        exclusive rights of a copyright owner described in 
        sections 107, 108, and 110(1) and (2) 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.
          (2) Actions.--The limitations on actions described in 
        section 507 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.
          (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) 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.--The Register of 
                        Copyrights shall, before the end of the 
                        180-day period beginning on the date of 
                        the enactment of this section, 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) Filing requirement.--The Register 
                        of Copyrights shall, before the end of 
                        the 30-day period beginning on the date 
                        of the enactment of this section, 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 accept 
                        filings under clause (i) only until the 
                        180th day after the date of the 
                        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), 
                                with respect to an unauthorized 
                                transmission by that entity of 
                                a sound recording under 
                                subsection (a) if the 
                                transmission is made before the 
                                end of the 90-day period 
                                beginning on 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).
          (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) shall be considered to be a ``law pertaining to 
intellectual property'' under subsection (e)(2) of such 
section.
  (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

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PART I--ORGANIZATION OF COURTS

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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 that 
                court's rules for the division of business 
                among district judges currently in effect or as 
                may be amended from time to time, 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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