79–006 

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 proVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR651.XXX HR651
2 

ducers, 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 

3 

• 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. 

4 

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 twoyear 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. 

5 

17 U.S.C. § 115(d) Blanket license for digital uses, mechanical licensing collective, and digital licensee coordinator 

The majority of Title I creates a new § 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 § 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 § 115(d)(11)(D). Since the Register has 

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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 § 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 

7 

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 

8 

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 

9 

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 

10 

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 

11 

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. 

12 

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. 

13 

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, diVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR651.XXX HR651
14 

verting 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 § 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 § 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 § 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 § 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 § 114(j)(5). Therefore, as used in this secVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00014 Fmt 6659 Sfmt 6602 E:\HR\OC\HR651.XXX HR651
15 

tion, 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 § 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 

16 

that would conflict with these provisions. The legislation also 

leaves those existing settlements untouched. 

Title II includes several limitations on remedies in the new 

§ 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 

§ 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 § 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 

§ 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 interVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6602 E:\HR\OC\HR651.XXX HR651
17 

ested 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 § 114(f), also do 

so. Nothing in § 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 § 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 § 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 

18 

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 

§ 114(g)(6)(B). 

Similar to § 114(g)(5)(B), section 303 of the legislation delays the 

effective date of the new § 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 § 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. 

19 

ROLLCALL NO. 1 

Ayes Nays 1 

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. 

20 

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. 

21 

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. 

22 

1For 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. 

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. 

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 

23 

2See 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. 

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. 

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-asyou-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 

24 

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 

25 

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. § 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. § 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 

26 

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. 

27 

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. 

28 

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 

29 

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. § 114(f), repealing 17 U.S.C. § 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. § 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. 

30 

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 

31 

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. 

1 Subject Matter and Scope of Copyright .................................................... 101 

* * * * * * * 

14. Unauthorized digital performance of pre-1972 sound recordings ............ 1401 

CHAPTER 1—SUBJECT MATTER AND SCOPE OF 

COPYRIGHT 

* * * * * * * 

§ 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 

32 

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. 

33 

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; 

34 

(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 reVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00034 Fmt 6659 Sfmt 6601 E:\HR\OC\HR651.XXX HR651
35 

quirement 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 

36 

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 measVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00036 Fmt 6659 Sfmt 6601 E:\HR\OC\HR651.XXX HR651
37 

ures 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 SERV- ICES.— (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 

38 

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 

39 

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.— ø(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. 

ø(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), 

40 

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). 

ø(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. 

ø(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. 

ø(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 

41 

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— 

ø(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 

ø(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). 

ø(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 

42 

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. 

ø(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. 

ø(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, 

43 

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. 

ø(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. 

44 

(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 

øunder 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. 

45 

(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) øAn 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) 21⁄2 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) 21⁄2 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 ønonprofit 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 øanother designated agent¿ another designated nonprofit collective and have notified such 

46 

nonprofit øagent¿ collective in writing of such election, the reasonable costs of such øagent¿ 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 ødesignated 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 øagent¿ collective incurred after November 1, 1995, with 

respect to such copyright owners and performers who have entered with such øagent¿ 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.— 

47 

(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 payVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00047 Fmt 6659 Sfmt 6603 E:\HR\OC\HR651.XXX HR651
48 

ment 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.— 

49 

(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. 

ø(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. 

50 

(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 simultaVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00050 Fmt 6659 Sfmt 6601 E:\HR\OC\HR651.XXX HR651
51 

neous 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. 

§ 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.— 

ø(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 

52 

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) øA 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 inVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00052 Fmt 6659 Sfmt 6601 E:\HR\OC\HR651.XXX HR651
53 

volved, 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. 

ø(b) NOTICE OF INTENTION TO OBTAIN COMPULSORY LICENSE.— ø(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. 

ø(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. 

ø(c) ROYALTY PAYABLE UNDER COMPULSORY LICENSE.— ø(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. 

ø(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. 

ø(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— 

ø(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 

ø(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. 

54 

ø(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. 

ø(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. 

ø(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 

55 

made available by persons making digital phonorecord deliveries. 

ø(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. 

ø(ii) The second sentence of clause (i) shall not apply to— 

ø(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 

ø(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. 

ø(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. 

ø(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— 

ø(I) the digital phonorecord delivery has been authorized 

by the copyright owner of the sound recording; and 

ø(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 

56 

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. 

ø(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). 

ø(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. 

ø(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. 

ø(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. 

ø(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. 

ø(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 muVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00056 Fmt 6659 Sfmt 6601 E:\HR\OC\HR651.XXX HR651
57 

sical 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. 

ø(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. 

ø(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. 

ø(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 

58 

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 

59 

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 LI- CENSE.— 

(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 

60 

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. 

61 

(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 

62 

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 

63 

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 AC- COUNT.—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 COMPUL- SORY 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 

64 

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 

65 

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.— 

66 

(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, subVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00066 Fmt 6659 Sfmt 6603 E:\HR\OC\HR651.XXX HR651
67 

ject 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 

68 

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. 

69 

(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. 

70 

(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 

71 

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); 

72 

(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 interestbearing 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 

73 

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 

74 

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— 

75 

(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 LICENS- ING 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 

76 

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. 

77 

(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— 

78 

(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 relVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00078 Fmt 6659 Sfmt 6603 E:\HR\OC\HR651.XXX HR651
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evant 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— 

80 

(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 mechanVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00080 Fmt 6659 Sfmt 6603 E:\HR\OC\HR651.XXX HR651
81 

ical 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: 

82 

(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 LICENS- EES.— (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 

83 

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— 

84 

(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 COLLEC- TIVE 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 adminisVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00084 Fmt 6659 Sfmt 6603 E:\HR\OC\HR651.XXX HR651
85 

trative 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. 

86 

(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. 

87 

(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 LI- CENSE.— 

(A) RESTRICTIONS ON RATESETTING PARTICIPATION.—Neither the mechanical licensing collective nor the digital licensee coordinator shall be a party to a proceeding deVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00087 Fmt 6659 Sfmt 6603 E:\HR\OC\HR651.XXX HR651
88 

scribed 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 

89 

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 

90 

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 

91 

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 

92 

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 

93 

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 

94 

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. 

95 

(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 

96 

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 

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97 

blanket 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— 

98 

(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. 

* * * * * * * 

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. 

§ 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. øThe rates applicable 

under sections 114(f)(1)(B), 115, and 116 shall be calculated to 

achieve the following objectives:¿ 

ø(A) To maximize the availability of creative works to 

the public. 

ø(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. 

99 

ø(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. 

ø(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— 

100 

(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 

101 

(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. 

ø(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 

102 

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. 

* * * * * * * 

§ 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 

103 

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 DIG- ITAL 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 

104 

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) øand 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 

ø114(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) øor 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 exVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00104 Fmt 6659 Sfmt 6601 E:\HR\OC\HR651.XXX HR651
105 

pired 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. 

* * * * * * * 

CHAPTER 14—UNAUTHORIZED DIGITAL PERFORMANCE 

OF PRE-1972 SOUND RECORDINGS 

Sec. 

1401. Unauthorized digital performance of pre-1972 sound recordings. 

§ 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 

106 

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 SERV- ICES.— 

(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 arisVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00106 Fmt 6659 Sfmt 6603 E:\HR\OC\HR651.XXX HR651
107 

ing 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. 

108 

(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 AT- TORNEYS’ 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 ATTOR- NEYS’ 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 conVerDate Sep 11 2014 06:51 Apr 26, 2018 Jkt 079006 PO 00000 Frm 00108 Fmt 6659 Sfmt 6603 E:\HR\OC\HR651.XXX HR651
109 

tact 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 

* * * * * * * 

PART I—ORGANIZATION OF COURTS 

* * * * * * * 

110 

CHAPTER 5—DISTRICT COURTS 

* * * * * * * 

§ 137. Division of business among district judges 

øThe 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 

111 

not be subject to referral to the judge with continuing jurisdiction over the applicable consent decree. 

* * * * * * * 

Æ