In the Senate of the United States,
November 14, 2002.
Resolved, That the bill from the House of Representa-
tives (H.R. 5469) entitled ‘‘An Act to amend title 17, United
States Code, with respect to the statutory license for
webcasting, and for other purposes.’’, do pass with the fol-
lowing
AMENDMENT:
Strike out all after the enacting clause and insert:
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Small Webcaster Settle-
ment Act of 2002’’.
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SEC. 2. FINDINGS.
Congress finds the following:
(1) Some small webcasters who did not partici-
pate in the copyright arbitration royalty panel pro-
ceeding leading to the July 8, 2002 order of the Li-
brarian of Congress establishing rates and terms for
certain digital performances and ephemeral reproduc-
tions of sound recordings, as provided in part 261 of
the Code of Federal Regulations (published in the
Federal Register on July 8, 2002) (referred to in this
section as ‘‘small webcasters’’), have expressed reserva-
tions about the fee structure set forth in such order,
and have expressed their desire for a fee based on a
percentage of revenue.
(2) Congress has strongly encouraged representa-
tives of copyright owners of sound recordings and rep-
resentatives of the small webcasters to engage in nego-
tiations to arrive at an agreement that would include
a fee based on a percentage of revenue.
(3) The representatives have arrived at an agree-
ment that they can accept in the extraordinary and
unique circumstances here presented, specifically as to
the small webcasters, their belief in their inability to
pay the fees due pursuant to the July 8 order, and
as to the copyright owners of sound recordings and
performers, the strong encouragement of Congress to
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reach an accommodation with the small webcasters on
an expedited basis.
(4) The representatives have indicated that they
do not believe the agreement provides for or in any
way approximates fair or reasonable royalty rates
and terms, or rates and terms that would have been
negotiated in the marketplace between a willing buyer
and a willing seller.
(5) Congress has made no determination as to
whether the agreement provides for or in any way ap-
proximates fair or reasonable fees and terms, or rates
and terms that would have been negotiated in the
marketplace between a willing buyer and a willing
seller.
(6) Congress likewise has made no determination
as to whether the July 8 order is reasonable or arbi-
trary, and nothing in this Act shall be taken into ac-
count by the United States Court of Appeals for the
District of Columbia Circuit in its review of such
order.
(7) It is, nevertheless, in the public interest for
the parties to be able to enter into such an agreement
without fear of liability for deviating from the fees
and terms of the July 8 order, if it is clear that the
agreement will not be admissible as evidence or other-
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wise taken into account in any government pro-
ceeding involving the setting or adjustment of the roy-
alties payable to copyright owners of sound recordings
for the public performance or reproduction in ephem-
eral phonorecords or copies of such works, the deter-
mination of terms or conditions related thereto, or the
establishment of notice or recordkeeping requirements.
SEC. 3. SUSPENSION OF CERTAIN PAYMENTS.
(a) NONCOMMERCIAL WEBCASTERS.—
(1) IN GENERAL.—The payments to be made by
noncommercial webcasters for the digital performance
of sound recordings under section 114 of title 17,
United States Code, and the making of ephemeral
phonorecords under section 112 of title 17, United
States Code, during the period beginning on October
28, 1998, and ending on May 31, 2003, which have
not already been paid, shall not be due until June 20,
2003.
(2) DEFINITION.—In this subsection, the term
‘‘noncommercial webcaster’’ has the meaning given
that term in section 114(f)(5)(E)(i) of title 17, United
States Code, as added by section 4 of this Act.
(b) SMALL COMMERCIAL WEBCASTERS.—
(1) IN GENERAL.—The receiving agent may, in
a writing signed by an authorized representative
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thereof, delay the obligation of any 1 or more small
commercial webcasters to make payments pursuant to
sections 112 and 114 of title 17, United States Code,
for a period determined by such entity to allow nego-
tiations as permitted in section 4 of this Act, except
that any such period shall end no later than Decem-
ber 15, 2002. The duration and terms of any such
delay shall be as set forth in such writing.
(2) DEFINITIONS.—In this subsection—
(A) the term ‘‘webcaster’’ has the meaning
given that term in section 114(f)(5)(E)(iii) of
title 17, United States Code, as added by section
4 of this Act; and
(B) the term ‘‘receiving agent’’ shall have
the meaning given that term in section 261.2 of
title 37, Code of Federal Regulations, as pub-
lished in the Federal Register on July 8, 2002.
SEC. 4. AUTHORIZATION FOR SETTLEMENTS.
Section 114(f) of title 17, United States Code, is
amended by adding after paragraph (4) the following:
‘‘(5)(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 small commercial
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webcasters or noncommercial webcasters during the
period beginning on October 28, 1998, and ending on
December 31, 2004, that, once published in the Fed-
eral Register pursuant to subparagraph (B), shall be
binding on all copyright owners of sound recordings
and other persons entitled to payment under this sec-
tion, in lieu of any determination by a copyright ar-
bitration royalty panel or decision by the Librarian
of Congress. Any such agreement for small commer-
cial webcasters shall 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 condi-
tions, including requirements by which copyright
owners may receive notice of the use of their sound re-
cordings and under which records of such use shall be
kept and made available by small commercial
webcasters or noncommercial webcasters. The receiv-
ing agent shall be under no obligation to negotiate
any such agreement. The receiving agent shall have
no obligation to any copyright owner of sound record-
ings or any other person entitled to payment under
this section in negotiating any such agreement, and
no liability to any copyright owner of sound record-
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ings or any other person entitled to payment under
this section for having entered into such agreement.
‘‘(B) The Copyright Office shall cause to be pub-
lished 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 in-
cluded in the Code of Federal Regulations. Thereafter,
the terms of such agreement shall be available, as an
option, to any small commercial webcaster or non-
commercial webcaster meeting the eligibility condi-
tions of such agreement.
‘‘(C) Neither subparagraph (A) nor any provi-
sions of any agreement entered into pursuant to sub-
paragraph (A), including any rate structure, fees,
terms, conditions, or notice and recordkeeping re-
quirements set forth therein, shall be admissible as
evidence or otherwise taken into account in any ad-
ministrative, 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 there-
to, or the establishment of notice or recordkeeping re-
quirements by the Librarian of Congress under para-
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graph (4) or section 112(e)(4). It is the intent of Con-
gress that any royalty rates, rate structure, defini-
tions, 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
small webcasters, copyright owners, and performers
rather than as matters that would have been nego-
tiated in the marketplace between a willing buyer and
a willing seller, or otherwise meet the objectives set
forth in section 801(b).
‘‘(D) Nothing in the Small Webcaster Settlement
Act of 2002 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 Librarian of Congress of July 8, 2002, of rates
and terms for the digital performance of sound re-
cordings and ephemeral recordings, pursuant to sec-
tions 112 and 114.
‘‘(E) As used in this paragraph—
‘‘(i) the term ‘noncommercial webcaster’
means a webcaster that—
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‘‘(I) is exempt from taxation under sec-
tion 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 In-
ternal Revenue Code and has a commer-
cially reasonable expectation that such ex-
emption shall be granted; or
‘‘(III) is operated by a State or posses-
sion or any governmental entity or subordi-
nate thereof, or by the United States or Dis-
trict 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 pub-
lished 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 to make eligible nonsubscrip-
tion transmissions and ephemeral recordings.
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‘‘(F) The authority to make settlements pursuant
to subparagraph (A) shall expire December 15, 2002,
except with respect to noncommercial webcasters for
whom the authority shall expire May 31, 2003.’’.
SEC. 5. DEDUCTIBILITY OF COSTS AND EXPENSES OF
AGENTS AND DIRECT PAYMENT TO ARTISTS
OF ROYALTIES FOR DIGITAL PERFORMANCES
OF SOUND RECORDINGS.
(a) FINDINGS.—Congress finds that—
(1) in the case of royalty payments from the li-
censing of digital transmissions of sound recordings
under subsection (f) of section 114 of title 17, United
States Code, the parties have voluntarily negotiated
arrangements under which payments shall be made
directly to featured recording artists and the adminis-
trators of the accounts provided in subsection (g)(2)
of that section;
(2) such voluntarily negotiated payment ar-
rangements have been codified in regulations issued
by the Librarian of Congress, currently found in sec-
tion 261.4 of title 37, Code of Federal Regulations, as
published in the Federal Register on July 8, 2002;
(3) other regulations issued by the Librarian of
Congress were inconsistent with the voluntarily nego-
tiated arrangements by such parties concerning the
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deductibility of certain costs incurred for licensing
and arbitration, and Congress is therefore restoring
those terms as originally negotiated among the par-
ties; and
(4) in light of the special circumstances described
in this subsection, the uncertainty created by the reg-
ulations issued by the Librarian of Congress, and the
fact that all of the interested parties have reached
agreement, the voluntarily negotiated arrangements
agreed to among the parties are being codified.
(b) DEDUCTIBILITY.—Section 114(g) of title 17,
United States Code, is amended by adding after paragraph
(2) the following:
‘‘(3) A nonprofit agent designated to distribute
receipts from the licensing of transmissions in accord-
ance 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 copy-
right owners and performers who have elected to re-
ceive royalties from another designated agent and
have notified such nonprofit agent in writing of such
election, the reasonable costs of such agent incurred
after November 1, 1995, in—
‘‘(A) the administration of the collection,
distribution, and calculation of the royalties;