‘‘(iv) The designated agent shall bear 
the costs of the examination, except that, 
if the licensee underpaid royalty fees by 10 
percent or more, the licensee shall bear the 
reasonable costs of the examination. 
‘‘(v) A licensee may not assert section 
507 of this title or any other Federal or 
State statute of limitations, doctrine of 
laches or estoppel, or similar provision to 
avoid a royalty examination under this 
subparagraph, or as a defense to a legal 
action arising from such a royalty exam-
ination, if the legal action is commenced 
within 18 months after the final deter-
mination by the designated agent of the 
claim (as stated in the written notice under 
clause (iii)) resulting from the examination 
that is the basis for such action. 
‘‘(C) FAILURE TO REPORT OR PAY ROYAL-
TIES.— 
‘‘(i) IN GENERAL.—If a licensee under 
this subsection— 
‘‘(I) fails to provide a quarterly 
report when due or fails to provide a 
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quarterly report in compliance with 
the error tolerance standard, or 
‘‘(II) fails to make all quarterly 
royalty payments when due or fails to 
pay royalties due for reported usage, 
the designated agent may provide written 
notice to the licensee describing the default 
under subclause (I) or (II) and providing 
that if the default is not remedied within 
30 days after receipt of the notice, the li-
cense will automatically terminate upon the 
expiration of that 30-day period. Upon 
such termination, the licensee will be sub-
ject to an infringement action as provided 
in subsection (c)(6) with respect to the 
uses of the musical works that are the sub-
ject of the default. 
‘‘(ii) FAILURE WITH RESPECT TO IN-
DIVIDUAL WORK.— 
‘‘(I) 
EXCLUSION
FROM
LI-
CENSE.—If a licensee with an other-
wise valid license under this sub-
section— 
‘‘(aa) has not made the re-
quired reports or royalty pay-
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ments under subparagraph (A)(i) 
for a musical work covered by the 
license, or 
‘‘(bb) upon being sent writ-
ten notice from the designated 
agent of a valid reporting or pay-
ment deficiency with respect to 
the use of a musical work, fails 
to remedy that deficiency within 
the specified cure period, 
that work is excluded from the scope 
of the license until such time as the li-
censee provides all the reports that 
are past due, and makes all royalty 
payments that are past due, to the 
designated agent for that work, or the 
designated agent otherwise identifies 
the work, determines the usage of the 
work, and has received from the li-
censee all royalty payments for the 
work that are past due. 
‘‘(II) 
SPECIFIED
CURE
PE-
RIOD.—For purposes of subclause 
(I)(bb), the ‘‘specified cure period’’ 
means, with respect to a licensee— 
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‘‘(aa) 90 days, during the 
first 12 month-period in which 
the licensee engages in activities 
under a license under this sub-
section; 
‘‘(bb) 60 days, during the 
succeeding 12-month period in 
which a licensee engages in ac-
tivities under a license under this 
subsection; and 
‘‘(cc) 30 days, during any 
period thereafter. 
‘‘(III) EXCEPTION.—If the li-
censee demonstrates to the designated 
agent with respect to a musical work 
that is the subject of a notice of defi-
ciency described in subclause (I)(bb) 
that the deficiency cannot be remedied 
because it is due to missing informa-
tion that, notwithstanding a diligent 
search by the licensee, is actually and 
objectively unobtainable by the li-
censee from any known source, then 
the license shall not be invalidated 
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with respect to that work, if all royal-
ties due for that work have been paid. 
‘‘(iii) OBTAINING
SUBSEQUENT
LI-
CENSES.—A licensee whose license is ter-
minated by a designated agent under 
clause (i) and who fully remedies the de-
fault within 60 days after the date on 
which the license terminates, may apply for 
and obtain a new license from that des-
ignated agent, if, during the 5-year period 
ending on the date of such termination, the 
licensee has not previously had a license 
terminated by the designated agent. In any 
other case in which a license is validly ter-
minated by a designated agent, the des-
ignated agent may require the licensee to 
meet reasonable credit or advance require-
ments or to demonstrate the capability to 
report and make royalty payments in com-
pliance with this subsection before obtain-
ing a new license. 
‘‘(11) 
DISTRIBUTION
OF
ROYALTIES, 
UN-
CLAIMED FUNDS, AND DISPUTE RESOLUTION.— 
‘‘(A) DISTRIBUTION OF ROYALTIES.—Each 
designated agent shall be responsible for dis-
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tributing royalties collected from licensees 
under this subsection to any copyright owner 
whom the designated agent represents and who 
has provided the designated agent with suffi-
cient information to identify and pay that copy-
right owner (or the copyright owner’s designee). 
‘‘(B) UNCLAIMED FUNDS.— 
‘‘(i) IN
GENERAL.—If a designated 
agent is unable, after a reasonably diligent 
search, to identify or locate a copyright 
owner entitled to receive royalties under 
subparagraph (A), the designated agent 
may deposit the undistributed royalties (in 
this subparagraph referred to as ‘un-
claimed funds’) into an unclaimed funds 
account 
that 
earns 
interest, 
accrued 
monthly, at the Federal short term rate 
determined under section 1274(d)(1)(C)(i) 
of the Internal Revenue Code of 1986. In-
terest accrued on unclaimed funds shall be 
payable to a copyright owner upon dis-
tribution of the unclaimed funds to such 
copyright owner. 
‘‘(ii) HOLDING AND DISTRIBUTION.— 
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‘‘(I) 
HOLDING.—A 
designated 
agent with unclaimed funds shall hold 
the funds for a period of at least 3 
years after the date on which the li-
censee paid the funds. The designated 
agent shall make reasonably diligent 
efforts to publicize the existence of the 
unclaimed funds and the procedures 
by which copyright owners may claim 
such funds from the designated agent. 
‘‘(II) LICENSING
ADMINISTRA-
TIVE COSTS.—At the end of the pe-
riod in which funds are held under 
subclause (I), the designated agent 
may apply the funds to offset licens-
ing administrative costs. 
‘‘(III) DISTRIBUTION
OF
RE-
MAINDER.—Any unclaimed funds not 
applied to offset licensing administra-
tive costs under subclause (II) shall 
be distributed as follows: 
‘‘(aa) The designated agent 
shall pay to every other des-
ignated agent its pro rata share 
of the unclaimed funds as deter-
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mined on the basis of the propor-
tionate distribution of royalties 
by each designated agent to copy-
right owners for the reporting pe-
riods during which the funds 
were collected. 
‘‘(bb) Each designated agent 
shall distribute, on an equitable 
basis, its pro rata share of the 
unclaimed funds to the copyright 
owners that the designated agent 
represents under this subsection 
(other than those that cannot be 
identified or located). 
‘‘(iii) PREEMPTION.—This subpara-
graph preempts any State law (including 
common law) that would otherwise apply 
concerning escheatment or abandoned or 
unclaimed property. 
‘‘(C) DISPUTES.—Each designated agent 
shall establish a committee that includes an 
equal number of— 
‘‘(i) representatives of music pub-
lishing entities represented by the des-
ignated agent, and 
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‘‘(ii) songwriters with musical works 
represented by the designated agent who 
are not members of the board of directors, 
governing body, or management of the des-
ignated agent, 
for the purpose of addressing any dispute raised 
by a copyright owner relating to the allocation 
and payment by the designated agent of royal-
ties to such copyright owner under a license ob-
tained from the designated agent under this 
subsection. The dispute resolution process shall 
not affect any other legal or equitable rights or 
remedies available to any copyright owner or 
the designated agent. 
‘‘(D) 
PROCEDURES.—The 
Register 
of 
Copyrights shall establish by regulation the pro-
cedures for the holding by a designated agent 
of unclaimed funds and royalties paid under 
this subsection that are attributable to musical 
works that are the subject of a legal dispute or 
proceeding. A designated agent that complies 
with the requirements of this paragraph and 
such regulations shall not be subject to a legal 
claim based upon or arising from unclaimed 
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funds or an ownership dispute or legal pro-
ceeding. 
‘‘(E) 
DOCUMENTATION.—A 
songwriter 
whose musical works (or shares thereof) are ad-
ministered by a music publisher for licensing 
under this subsection (including those rep-
resented through default representation pursu-
ant to paragraph (9)(E)(iv)) may request from 
a designated agent a copy of the relevant por-
tions of any royalty statement that the des-
ignated agent provided, within the preceding 4 
calendar years, to that publisher, and that 
shows all data provided by the designated agent 
to the publisher regarding the use and royalties 
distributed to the publisher in connection with 
those works (or shares thereof). A designated 
agent shall provide the information requested 
by the songwriter within a reasonable time after 
receiving the request. A songwriter may make 
such a request of a particular designated agent 
not more than once each calendar year. 
‘‘(F) WITHHOLDING OF INTERIM ROYAL-
TIES.—Each designated agent may withhold 
reasonable reserves from the distribution of in-
terim royalties collected under this subsection 
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to allow for the possibility of a lower final stat-
utory rate. Upon final determination of the 
statutory rate, to the extent such reserves are 
not required to be returned or credited to the 
licensee, the designated agent shall distribute to 
copyright owners such reserves with interest. 
‘‘(12) COST SHARING FEES.— 
‘‘(A) IN GENERAL.—The Copyright Roy-
alty Judges shall determine, under such proce-
dures as they may establish, an appropriate 
cost-sharing 
mechanism 
and 
cost-sharing 
amounts to be paid by licensees under this sub-
section to designated agents. Not later than 
February 1, 2007, the Copyright Royalty 
Judges shall initiate a proceeding to determine, 
not later than May 1, 2007, appropriate interim 
cost-sharing amounts to apply pending the es-
tablishment of final cost-sharing amounts. Any 
cost-sharing 
mechanism 
or 
cost-sharing 
amounts shall be equitably applied to all des-
ignated agents. In determining a cost-sharing 
mechanism or cost-sharing amount under this 
paragraph, the Copyright Royalty Judges shall 
consider— 
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‘‘(i)(I) the actual, reasonable costs of 
creating and maintaining an infrastructure 
for activities of designated agents under 
this subsection; 
‘‘(II) any nonmonetary contributions 
by the parties to such infrastructures, in-
cluding contributions of data and services; 
‘‘(III) the actual, reasonable costs to 
designated agents specifically associated 
with the administration of licenses under 
this subsection; 
‘‘(IV) the nature and value of any col-
lateral benefits that any party may realize 
from the blanket license and blanket li-
cense system created by this subsection; 
and 
‘‘(V) any other factors deemed rel-
evant by the Copyright Royalty Judges. 
‘‘(B) COST-SHARING
NOT
A
FACTOR
IN 
ROYALTY
RATES.—The 
Copyright 
Royalty 
Judges, in establishing royalty rates for statu-
tory licenses, may not take into account the 
cost-sharing 
mechanism 
or 
cost-sharing 
amounts under subparagraph (A). 
‘‘(13) EXCLUSION FROM BLANKET LICENSES.— 
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‘‘(A) IN
GENERAL.—A sound recording 
company may, by written notice to the appro-
priate designated agent, exclude a musical work 
from a compulsory license under paragraph (2) 
if the musical work is the subject of a contract 
described in subsection (c)(3)(E)(ii). 
‘‘(B) EXCLUSION ERRORS.— 
‘‘(i) NOT EXCLUDED.—In any case in 
which a musical work could have been ex-
cluded pursuant to subparagraph (A) but 
was not due to uncertainty concerning 
ownership of the copyright of the musical 
work or the application of a contract de-
scribed in subsection (c)(3)(E)(ii), or in 
any case in which a digital music provider 
makes payments to a designated agent for 
use of a musical work excluded under sub-
paragraph (A), the designated agent shall 
make payments to the appropriate person 
as if the exclusion under subparagraph (A) 
had applied on the date of the enactment 
of the Section 115 Reform Act of 2006, 
unless an agreement between the des-
ignated agent and the appropriate person 
provides otherwise. 
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‘‘(ii) EXCLUDED.—In any case in 
which a musical work was excluded pursu-
ant to subparagraph (A) in error— 
‘‘(I) a sound recording company 
acting in good faith with regards to 
the exclusion shall only be liable for 
the payment of amounts that other-
wise would have been payable under 
this subsection plus interest as de-
scribed in (10)(A)(iii)(II); and 
‘‘(II) a licensee acting in good 
faith with regards to the exclusion 
shall not be liable. 
‘‘(14) DEFINITIONS.—In this subsection: 
‘‘(A) ADMINISTRATIVE
FEES.—The term 
‘administrative fees’ means any fees that are 
collected or deducted by a designated agent to 
cover licensing administrative costs or other ad-
ministrative costs. 
‘‘(B) 
COPYRIGHT
OWNER.—The 
term 
‘copyright owner’ means a natural person or le-
gally recognized entity that owns or controls an 
interest in one or more copyrighted nondra-
matic musical works subject to licensing under 
this section. 
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‘‘(C) DIGITAL
MUSIC
PROVIDER.—The 
term ‘digital music provider’ means a person 
that— 
‘‘(i) with respect to a service engaging 
in activities licensed under this sub-
section— 
‘‘(I) contracts with or has a di-
rect economic relationship with the 
end users of the service, and controls 
what end users pay for the service; 
‘‘(II) controls how content is 
bundled and offered through the serv-
ice; 
‘‘(III) is able to fully report on 
all revenues and consideration gen-
erated by the service; and 
‘‘(IV) is able to fully report on all 
elements of music usage by the service 
(or procure such reporting); or 
‘‘(ii) makes and distributes a hybrid 
offering. 
‘‘(D) ERROR
TOLERANCE
STANDARD.— 
The term ‘error tolerance standard’ means the 
maximum percentage, of all data that a licensee 
is required to report under this subsection 
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under its license in any statutory reporting pe-
riod, that is permitted to be inaccurate, 
unreadable, or missing, or any combination 
thereof, as determined under regulations issued 
to carry out this subsection. 
‘‘(E) FULL
DOWNLOAD.—The term ‘full 
download’ means a digital phonorecord delivery 
of a sound recording of a musical work that is 
not limited in availability for listening by the 
end user either to a period of time or a number 
of times the sound recording can be played. 
‘‘(F) HYBRID OFFERING.—The term ‘hy-
brid offering’ means a reproduction or distribu-
tion of a phonorecord in physical form subject 
to a compulsory license under this section 
where— 
‘‘(i) a digital transmission of data by 
or under the authority of the licensee is re-
quired to render the sound recording em-
bodied on the phonorecord audible to the 
end user or to enable the continued ren-
dering of the sound recording after a finite 
period of time or a specified number of 
times rendered; or 
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‘‘(ii) the phonorecord is made by or 
under the authority of the licensee at the 
request of a user for distribution to that 
user or the user’s designee. 
‘‘(G) INTERACTIVE
STREAM.—The term 
‘interactive stream’— 
‘‘(i) means a stream of a sound re-
cording of a musical work that does not 
qualify for a statutory license under sec-
tion 114(d)(2) with respect to the sound 
recording embodied therein; and 
‘‘(ii) subject to clause (i), includes a 
stream of a particular sound recording of 
a musical work that an end user has se-
lected, and is transmitted to such end user, 
to listen to at or substantially at the time 
of making such selection or at some future 
time, whether or not as a part of a pro-
gram specially created for the end user. 
‘‘(H) 
LICENSING
ADMINISTRATIVE 
COSTS.—The term ‘licensing administrative 
costs’ means the actual costs to a designated 
agent that are attributable to the issuance and 
administration of licenses under this subsection, 
including— 
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‘‘(i) costs in connection with the col-
lection and distribution of royalties under 
this subsection; 
‘‘(ii) the costs of identifying and locat-
ing copyright owners and administering a 
claims system for unidentified copyright 
owners; 
‘‘(iii) the costs of royalty examinations 
and other royalty compliance efforts; and 
‘‘(iv) the costs of creating and main-
taining an infrastructure for the activities 
described in clauses (i), (ii), and (iii). 
‘‘(I) LIMITED DOWNLOAD.—the term ‘lim-
ited download’ means a digital phonorecord de-
livery of a sound recording of a musical work 
that is only available for listening for— 
‘‘(i) a definite period of time (includ-
ing a period of time defined by ongoing 
subscription payments made by an end 
user); or 
‘‘(ii) a specified number of times. 
‘‘(J) NONINTERACTIVE STREAMING.—The 
term ‘noninteractive streaming’ means the 
radio-style streaming of sound recordings of 
musical works for which a statutory license is 
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available with respect to the sound recordings 
under section 114(d)(2). 
‘‘(K) OTHER
ADMINISTRATIVE
COSTS.— 
The term ‘Other administrative costs’ means all 
expenses, expenditures, retained earnings, and 
reserves of a designated agent, other than li-
censing administrative costs, that are author-
ized by the board of directors of the designated 
agent. 
‘‘(L) SONGWRITER.—The term ‘songwriter’ 
means the author of a musical work. 
‘‘(M) SOUND RECORDING COMPANY.—The 
term ‘sound recording company’ means a per-
son who is— 
‘‘(i) a copyright owner or who has 
similar rights to a sound recording of a 
musical work under the common law or 
statues of any State with respect to a 
sound recording fixed before February 15, 
1972; 
‘‘(ii) an exclusive licensee of a sound 
recording of a musical work; or 
‘‘(iii) performing the functions of mar-
keting and authorizing the distribution of 
a sound recording of a musical work under 
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the authority of the copyright owner of the 
musical work. 
‘‘(N) STREAM.—(i) The term ‘stream’ 
means the digital transmission of a sound re-
cording embodying a musical work for one-time 
listening by the end user using technology such 
that the transmission is not intended or de-
signed to result in a substantially complete re-
production of the sound recording, other than 
an incidental reproduction made in the normal 
course of such activity, including a cached, net-
work, or RAM buffer reproduction, to permit 
such one-time listening. 
‘‘(ii) The term ‘streaming’ means the proc-
ess of making and distributing streams. 
‘‘(15) REGULATIONS.—The Register of Copy-
rights shall issue such regulations as are necessary 
to carry out this subsection, including— 
‘‘(A) specifying the requirements and pro-
cedures for reporting and making payments, 
and conducting royalty compliance examina-
tions, under paragraph (10); 
‘‘(B) specifying the procedures for expe-
dited 
proceedings 
under 
paragraph 
(8)(D)(ii)(II)(bb); 
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‘‘(C) specifying the form of a letter of di-
rection under paragraph (9)(I)(i); and 
‘‘(D) facilitating exclusions from the blan-
ket license under paragraph (13).’’. 
SEC. 3. PERFORMANCE RIGHT PRESERVED. 
Section 115 of title 17, United States Code, is 
amended by adding at the end the following new sub-
section: 
‘‘(f) PERFORMANCE RIGHT PRESERVED.—The rights 
granted under subsection (e) shall not include, limit, or 
otherwise affect any right of public performance of a musi-
cal work. The third sentence of subsection (e)(9)(E)(v) 
and the definitions contained in paragraph (14) of sub-
section (e) shall not be taken into account in any adminis-
trative, judicial, or other governmental proceeding to set 
or adjust the royalties payable to copyright owners of mu-
sical works for, the right of public performance of their 
works.’’. 
SEC. 4. INTERIM RATE PROCESS. 
Section 115(c) of title 17, United States Code, is 
amended by adding at the end the following new para-
graph: 
‘‘(7) INTERIM RATES.— 
‘‘(A) IN GENERAL.—For any activity for 
which a license is available under this section, 
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other than an activity for which a license is 
available under subsection (e), for which a rate 
and terms have not been determined, any per-
son shall, upon serving notice to the copyright 
owner, have a license under this subsection to 
engage in the activity, subject to subparagraph 
(B). 
‘‘(B) INTERIM RATES.—Upon the filing of 
an application under subparagraph (A)— 
‘‘(i) the parties may negotiate an in-
terim rate and terms that will apply to the 
activity under the license; or 
‘‘(ii) either party or both parties may 
apply to the Copyright Royalty Judges for 
an interim rate and terms, in which case— 
‘‘(I) 
the 
Copyright 
Royalty 
Judges shall, not later than 15 days 
after the application is made, publish 
notice of an expedited proceeding to 
determine the interim rate and terms; 
and 
‘‘(II) the Judges shall determine 
the interim rate and terms not less 
than 30 days and not more than 60 
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days after publishing the notice, 
through the expedited proceeding. 
‘‘(C) 
APPLICABILITY
OF
INTERIM 
RATES.—(i) Interim rates and terms negotiated 
under subparagraph (B)(i) or established under 
subparagraph (B)(ii) shall apply to the activity 
under the license concerned until a rate and 
terms for the activity are determined under 
paragraph (3)(C) and chapter 8, or as other-
wise agreed by the parties. 
‘‘(ii) Interim rates and terms described in 
subparagraph (A) with respect to an activity by 
an applicant shall not be treated as precedent 
in a final ratemaking proceeding. If the Copy-
right Royalty Judges have established an in-
terim rate and terms under subparagraph 
(B)(ii), subject to subparagraph (D), that rate 
and those terms shall apply to the same activity 
engaged in by any person, except as otherwise 
agreed to by the parties. 
‘‘(D) SINGLE PROCEEDING FOR EACH AC-
TIVITY.—Unless the Copyright Royalty Judges 
determine that there is good cause to review an 
interim rate or terms established under sub-
paragraph 
(B)(ii), 
the 
Copyright 
Royalty 
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Judges may conduct only 1 proceeding to deter-
mine an interim rate and terms for an activity 
for which a license is available under this sub-
section. 
‘‘(E) ADJUSTMENT OF INTERIM RATES.— 
After a final determination of rates and terms 
that will apply to an activity for which a license 
is available under this subsection has been 
made under paragraph (3)(C) and chapter 8, 
the final rate and terms shall be retroactive to 
the inception of the activity under a license be-
tween a person and a copyright owner to which 
the rate and terms apply, unless an agreement 
between the parties to the license provides oth-
erwise. Not later than 60 days after the deter-
mination of the final rate and terms becomes 
effective— 
‘‘(i) the person shall pay to the copy-
right owner any amounts due from under-
payment of fees by the person because the 
final rate exceeds the interim rate; or 
‘‘(ii) the copyright owner shall refund 
to the person the amounts of any overpay-
ment of fees by the person because the in-
terim rate exceed the final rate, or, at the 
VerDate Aug 31 2005 
00:34 Jun 10, 2006
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