I
107TH CONGRESS
1ST SESSION
H. R. 2724
To amend title 17, United States Code, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
AUGUST 2, 2001
Mr. CANNON (for himself and Mr. BOUCHER) introduced the following bill;
which was referred to the Committee on the Judiciary
A BILL
To amend title 17, United States Code, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Music Online Competi-
tion Act of 2001’’.
SEC. 2. EXEMPTION OF CERTAIN PERFORMANCES IN ON-
LINE AND PHYSICAL RETAIL ESTABLISH-
MENTS.
(a) EXEMPTION.—Section 110(7) of title 17, United
States Code, is amended—
(1) by striking ‘‘(7)’’ and inserting ‘‘(7)(A)’’;
(2) by striking ‘‘by a vending establishment’’
and inserting ‘‘or of a sound recording by digital
audio transmission, by or in a physical vending es-
tablishment’’; and
(3) by adding after the semicolon at the end the
following: ‘‘or
‘‘(B) performance of a sample of a nondra-
matic musical work or a sample of a sound re-
cording by digital audio transmission, by or
through a digital online service open to the pub-
lic at large without any direct or indirect admis-
sion charge, if—
‘‘(i) the purpose of the performance is
to promote the retail sale, distribution or
license, by or through the service, of copies
or phonorecords of the work, including by
digital phonorecord delivery as defined in
section 115(d)(1);
‘‘(ii) the transmitting entity transmits
the sample solely to the particular recipient
requesting the transmission; and,
‘‘(iii) the length of the sample does
not exceed 30 seconds or, in the case of a
sound recording of more than 5 minutes in
duration, 10 percent of that sound record-
ing not to exceed 60 seconds;’’.
(b) DEFINITION OF PERFORMANCE.—Section 110 of
title 17, United States Code, is amended by adding at the
end the following: ‘‘For purposes of paragraph (7), a ‘per-
formance’ includes a transmission made by a transmitting
organization to or on behalf of a vending establishment
or a digital online service.’’.
SEC. 3. EXEMPTION FOR EPHEMERAL RECORDINGS AND
FOR MULTIPLE EPHEMERAL RECORDINGS.
(a) EXEMPTION.—Section 112(a)(1) of title 17,
United States Code, is amended—
(1) in subparagraph (A), by striking ‘‘made it,
and’’ and inserting ‘‘made it and, except to facilitate
transmission of the performance,’’; and
(2) in subparagraph (C), by striking ‘‘public.’’
and inserting the following: ‘‘public, except that a
transmission program as set forth in section
114(d)(2)(B) or section 114(d)(2)(C)(iii) is not re-
quired to be destroyed by a transmitting organiza-
tion entitled to a statutory license under section
114(f).’’.
(b) MULTIPLE EPHEMERAL RECORDINGS EXEMP-
TION.—Section 112 of title 17, United States Code, is
amended—
(1) by striking subparagraph (C) of subsection
(e)(1) and redesignating subparagraph (D) as sub-
paragraph (C);
(2) by redesignating subsection (f) as sub-
section (g);
(3) by adding after subsection (e) the following:
‘‘(f) Notwithstanding the provisions of section 106,
and except in the case of a motion picture or other audio-
visual work, it is not an infringement of copyright for a
transmitting organization entitled to transmit to the pub-
lic a performance or display of a work, under a license,
including a statutory license under section 114(f), or
transfer of the copyright or under the limitations on exclu-
sive rights in sound recordings specified by section 114(a)
or for a transmitting organization that is a broadcast
radio or television station licensed as such by the Federal
Communications Commission and that makes a broadcast
transmission of a performance of a sound recording in a
digital format on a nonsubscription basis, to make one or
more copies or phonorecords of a work included in a sound
recording, if—
‘‘(1) each copy or phonorecord is retained and
used solely by the transmitting organization that
made it; and
‘‘(2) each copy or phonorecord is used solely for
the transmitting organization’s own transmissions
within its local service area, or for purposes of archi-
val preservation or security.’’
SEC. 4. LICENSING FOR TRANSMISSION.
(a) STATUTORY
PERFORMANCE
LICENSE
PAY-
MENTS.—Subsection (g) of section 114 of title 17, United
States Code, is amended—
(1) by striking paragraph (2), and
(2) by adding after paragraph (1) the following:
‘‘(2) Receipts from the statutory licensing of
public performances of sound recordings by digital
audio transmission in accordance with subsection (f)
shall be allocated and paid in the following manner:
‘‘(A) 45 percent of the receipts shall be
paid, on a per sound recording basis, to the re-
cording artist or artists featured on such sound
recording or to a designated collection and dis-
tribution organization on behalf of such fea-
tured recording artist or artists.
‘‘(B) 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 suc-
cessor entity) to be distributed to nonfeatured
musicians (whether or not such musicians are
members of the American Federation of Musi-
cians) who have performed on sound recordings.
‘‘(C) 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 distrib-
uted to nonfeatured vocalists (whether or not
such vocalists are members of the American
Federation of Television and Radio Artists) who
have performed on sound recordings.
‘‘(D) 50 percent of the receipts shall be
paid to a designated collection and distribution
organization on behalf of the copyright owner of
the exclusive right under section 106(6) of this
title to perform publicly the sound recording by
means of digital audio transmission under the
statutory license of subsection (f) of this sec-
tion.’’.
(b) LICENSING AFFILIATES.—
(1) IN
GENERAL.—Subsection (h) of section
114, title 17, United States Code, is amended—
(A) by striking paragraphs (1) and (2) and
inserting the following:
‘‘(1) If the copyright owner of a sound record-
ing licenses an affiliated entity the right to repro-
duce the copyrighted work, to distribute the copy-
righted work to the public by means of a digital pho-
norecord delivery or to perform the copyrighted work
publicly, the copyright owner shall make the licensed
sound recording available 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 num-
ber of subscribers served, or the duration, then the
copyright owner may establish different terms and
conditions for such other services, that such dif-
ferent terms and conditions—
‘‘(A) shall be limited to, and shall accu-
rately reflect any such material differences in
the scope of the requested license; and
‘‘(B) permitted under this paragraph, shall
be made available to all bona fide entities that
offer similar services.
‘‘(2)(A) Except as provided in subparagraph
(B), a copyright owner that licenses a sound record-
ing pursuant to paragraph (1) shall not mandate as
part of the terms and conditions of the license that
the licensee use any particular digital rights man-
agement technology.
‘‘(B) A copyright owner described in subpara-
graph (A) shall not be prevented from including in
the license a requirement that the licensee imple-
ment digital rights management technology that
meets reasonable and nondiscriminatory perform-
ance criteria the copyright owner has established to
protect a right of a copyright owner under this title
in a work or a portion thereof.
‘‘(3)(A) Except as provided in subparagraph
(B), a copyright owner that licenses a sound record-
ing pursuant to paragraph (1) shall not mandate as
part of the terms and conditions of the license that
the licensee use any particular digital music player.
‘‘(B) A copyright owner described in subpara-
graph (A) shall not be prevented from including in
the license a requirement that the licensee use a dig-
ital music player that meets reasonable and non-
discriminatory performance criteria the copyright
owner has established.
‘‘(4) ENFORCEMENT.—(A) The Attorney Gen-
eral may investigate an alleged violation of this sub-
section if an investigation begins not later than 2
years after an alleged violation occurred.
‘‘(B) If the date of an alleged violation is unknown,
the Attorney General may investigate to determine the
date of the alleged violation.
‘‘(C) If the Attorney General determines that a viola-
tion of this subsection has occurred, the Attorney General
has the power to seek to enforce the requirements of this
subsection through all appropriate means.
‘‘(D) Nothing contained in this paragraph shall be
construed to limit the authority of the Attorney General
under any other provision of law.
(2) DEFINITIONS.—Subsection (j) of section
114 of title 17, United States Code, is amended—
(A) by amending paragraph (1) to read as
follows:
‘‘(1) The term ‘affiliated entity’ means an enti-
ty, other than an entity that wholly owns or is whol-
ly owned by the licensor, engaging in digital audio
transmissions covered by section 106(6) or digital
phonorecord deliveries in which the licensor has any
direct or indirect partnership or any ownership in-
terest amounting to 5 percent or more of the out-
standing voting or nonvoting stock.’’;
(B) 
by 
redesignating 
paragraphs 
(6)
through (15) as paragraphs (9) through (18),
respectively;
(C) by inserting after paragraph (5) the
following:
‘‘(6) The term ‘digital music player’ means a
technology that renders audible the sounds in a
sound recording embodied in a digital audio trans-
mission or a digital phonorecord delivery.
‘‘(7) The term ‘digital phonorecord delivery’
shall have the meaning given such term in section
115(d)(1).
‘‘(8) The term ‘digital rights management tech-
nology’ means a technological measure used to limit
the uses of copyrighted work to those authorized by
the copyright owner or the law.’’.
SEC. 5. ELECTRONIC ADMINISTRATION OF THE COMPUL-
SORY LICENSE FOR MAKING AND DISTRIB-
UTING SOUND RECORDINGS.
(a) NOTICE OF INTENTION.—Section 115(b) of title
17, United States Code, is amended—
(1) by striking paragraph (1) and inserting the
following:
‘‘(1) NOTICE.—(A) Any person who wishes to
obtain a compulsory license under this section shall
do so by serving a notice of intention to make and
distribute phonorecords of the work.
‘‘(B) Such notice may be given by direct notice
served upon the copyright owner or by constructive
notice that does not identify the copyright owner
and that is to be served upon the Copyright Office.
‘‘(C) Notice shall be served before or within 30
days after making, and before distributing, any
phonorecords of the work, except that a notice of in-
tention to make digital phonorecord deliveries shall
be made within 30 days after enactment of this Act
or before the making of a digital phonorecord deliv-
ery of the work, whichever is later.
‘‘(D) Any notice of intention may identify more
than one work and a constructive notice also may
identify a work by one or more copyright owners.
‘‘(E) The notice shall comply, in form, content,
and manner of service, with requirements that the
Register of Copyrights shall prescribe by regula-
tion.’’;
(2) by redesignating paragraph (2) as para-
graph (3); and,
(3) by inserting after paragraph (1) the fol-
lowing:
‘‘(2) ROYALTY FEES.—Any person who obtains
a compulsory license under this section shall—
‘‘(A) pay royalty fees in accordance with
subsection (c); or
‘‘(B) if such royalty fees have not been de-
termined, agree to pay such royalty fees as
shall be determined in accordance with sub-
section (c).’’;
(4) in paragraph (3), as redesignated, by insert-
ing ‘‘or (2)’’ after ‘‘(1)’’.
(b) LIMITED DIGITAL PHONORECORD DELIVERY.—
Section 115(c) of title 17, United States Code, is
amended—
(1) in paragraph (3)—
(A) in subparagraph (C) by striking ‘‘and
(ii)’’ and inserting ‘‘(ii) limited digital phono-
record deliveries, and (iii)’’;
(B) in subparagraph (D)—
(i) by striking ‘‘and (ii)’’ and inserting
‘‘(ii) limited digital phonorecord deliveries,
and (iii)’’; and
(ii) by inserting after ‘‘as provided in
subparagraphs (B) and (C).’’ the following:
‘‘In setting royalty rates and terms for lim-
ited digital phonorecord deliveries under
this section, the copyright arbitration roy-
alty panel also shall consider the limita-
tions imposed upon the use of the limited
digital phonorecord delivery by a trans-
mission recipient in proportion to digital
phonorecord deliveries in general, the ex-
tent to which limited digital phonorecord
deliveries may promote or may substitute
for the sales of phonorecords or otherwise
may enhance or may interfere with the
copyright owner’s other streams of revenue
from its nondramatic musical works, and
the 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 a general dig-
ital phonorecord delivery that is payable by
a compulsory licensee under clause (2) and
under chapter 8.’’;
(4) by inserting in paragraph (5) after ‘‘next
preceding.’’ the following: ‘‘Payments for digital pho-
norecord deliveries shall be made to the copyright
owner or, if the notice of intention has been served
upon the Copyright Office, to either the copyright
owner or the Copyright Office.’’
(5) by inserting in paragraph (6) after ‘‘copy-
right owner’’ the following: ‘‘or, pursuant to para-
graph (5) the Copyright Office,’’.
(c) DEFINITIONS.—Section 115(d) of title 17, United
States Code, is amended—
(1) by striking the paragraph heading and in-
serting ‘‘DEFINITIONS.—’’
(2) by striking ‘‘term has the following mean-
ing’’ and inserting ‘‘terms have the following mean-
ings’’;
(3) by inserting after ‘‘meanings:’’ the fol-
lowing: ‘‘(1)’’;
(4) by inserting after paragraph (1) as so des-
ignated the following:
‘‘(2) A ‘limited digital phonorecord delivery’ is
a digital phonorecord delivery that uses a technology
that restricts the time or manner in which the trans-
mission recipient may render such sound recording
audible.’’.
(d) ELECTRONIC FILING
AND NOTICE
TO COPY-
RIGHT OWNERS.—
(1) DUTIES OF REGISTER.—Not later than 120
days after the date of enactment of this Act, the
Register of Copyrights shall—
(A) establish procedures by which the no-
tice of intention may be served electronically
upon the Copyright Office, and by which rea-
sonable notice of the filing of a notice of inten-
tion may be given to the owner of copyright in
the nondramatic musical work;
(B) prescribe by regulation the require-
ments for the form, content, and manner of
electronic service of the notice, including notices
that identify one or more works of a particular
copyright owner and notices that identify one or
more works of numerous copyright owners; and
(C) prescribe regulations for the appoint-
ment of a designated agent to receive royalty
fees and statements of account, to distribute
royalty fees to the copyright owner, and to ad-
minister royalty fees that have been submitted
for unknown copyright owners.
(2) REGULATIONS.—The Register of Copyrights
may prescribe regulations whereby royalty fees are
paid to an escrow account at the last established
rate in which the terms and rates for the then-cur-
rent period have not been determined, including for
the period prior to the date of enactment of this Act.
SEC. 6. LIMITATIONS ON EXCLUSIVE RIGHTS: INCIDENTAL
AND ARCHIVAL COPYING.
(a) TITLE.—The title heading of section 117 of title
17, United States Code, is amended to read as follows:
‘‘SEC. 117. LIMITATIONS ON EXCLUSIVE RIGHTS: COM-
PUTER PROGRAMS AND DIGITAL COPIES.’’;
(b) DIGITAL COPIES.—Section 117 of title 17, United
States Code, is amended—
(1) by redesignating subsection (d) as sub-
section (f), and
(2) by inserting after subsection (c) the fol-
lowing:
‘‘(d) Notwithstanding the provisions of section 106,
it is not an infringement to make or to authorize the mak-
ing of a copy or phonorecord of a sound recording or a
work included in a sound recording, in a digital format,
provided that such copy or phonorecord is created by and
is incidental to the operation of a device in the ordinary
course of the use of a work otherwise lawful under this
title.
‘‘(e) Notwithstanding the provisions of section 106,
it is not an infringement for the owner of a phonorecord
lawfully acquired by digital phonorecord delivery, or a copy
lawfully acquired by digital transmission of a literary work
embodied in that phonorecord, to make or authorize the
making of another phonorecord or copy of such works, if
such new phonorecord or copy is for archival purposes only
and that all archival phonorecord or copies are destroyed
in the event that continued possession of the phonorecord
or copy should cease to be rightful.’’.
SEC. 7. EVALUATION OF IMPACT OF CERTAIN STATUTORY
PERFORMANCE LICENSE CRITERIA ON PRO-
GRAMMING SERVICES.
(a) EVALUATION
BY
THE REGISTER
OF COPY-
RIGHTS.—The Register of Copyrights, in consultation with
the Assistant Secretary of the Office of Technology Policy
of the Department of Commerce, shall evaluate the effects,
under the statutory sound recording performance license
set forth in section 114(d)(2) of title 17, United States
Code, upon preexisting and emerging noninteractive dig-
ital audio transmission services of the criteria set forth
in sections 114(d)(2)(B) and 114(d)(2)(C)(i) and (ii) of
such title, with respect to—
(1) the economic costs of compliance with the
criteria;
(2) the effect of compliance with the criteria
upon the nature of the programming and the mar-
ketability of such services;
(3) whether any noninteractive digital audio
transmission service would be unable to comply with
the criteria and, therefore, to qualify for the statu-
tory license;
(4) whether any changes to the criteria, includ-
ing the elimination thereof, would enable additional
noninteractive digital audio transmission services to
qualify for the statutory license; and
(5) the likely impact upon copyright owners of
sound recordings of any such changes to the criteria.
(b) REPORT TO CONGRESS.—The Register of Copy-
rights shall, not later than 12 months after the date of
enactment of this Act, submit to the Congress a report
on the evaluation conducted under subsection (a), includ-
ing any legislative recommendations the Register may
have.
Æ