H. R. 5469
One Hundred Seventh Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the twenty-third day of January, two thousand and two
An Act
To amend title 17, United States Code, with respect to the statutory license for
webcasting, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Small Webcaster Settlement
Act of 2002’’.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Some small webcasters who did not participate in the
copyright arbitration royalty panel proceeding leading to the
July 8, 2002 order of the Librarian of Congress establishing
rates and terms for certain digital performances and ephemeral
reproductions 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 reservations about the fee struc-
ture set forth in such order, and have expressed their desire
for a fee based on a percentage of revenue.
(2) Congress has strongly encouraged representatives of
copyright owners of sound recordings and representatives of
the small webcasters to engage in negotiations to arrive at
an agreement that would include a fee based on a percentage
of revenue.
(3) The representatives have arrived at an agreement 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 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 approximates 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.
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(6) Congress likewise has made no determination as to
whether the July 8 order is reasonable or arbitrary, and nothing
in this Act shall be taken into account 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 otherwise taken into account in any government
proceeding involving the setting or adjustment of the royalties
payable to copyright owners of sound recordings for the public
performance or reproduction in ephemeral phonorecords or
copies of such works, the determination 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 noncommer-
cial 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 ‘‘noncommer-
cial 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 thereof, delay the obliga-
tion 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
negotiations as permitted in section 4 of this Act, except that
any such period shall end no later than December 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 published 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 provi-
sions 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 
webcasters 
or 
noncommercial
webcasters during the period beginning on October 28, 1998,
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and ending on December 31, 2004, 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 a copyright arbitration royalty panel or deci-
sion by the Librarian of Congress. Any such agreement for
small commercial webcasters shall include provisions for pay-
ment of royalties on the basis of a percentage of revenue or
expenses, or both, and include a minimum fee. Any such agree-
ment 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 small commer-
cial webcasters or noncommercial webcasters. The receiving
agent shall be under no obligation to negotiate any such agree-
ment. The receiving agent shall have no obligation to any
copyright owner of sound recordings or any other person enti-
tled 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. There-
after, the terms of such agreement shall be available, as an
option, to any small commercial webcaster or noncommercial
webcaster meeting the eligibility conditions of such agreement.
‘‘(C) Neither subparagraph (A) nor any provisions of any
agreement entered into pursuant to subparagraph (A),
including any rate structure, fees, terms, conditions, or notice
and recordkeeping requirements set forth therein, shall be
admissible as evidence or otherwise taken into account in any
administrative, judicial, or other government proceeding
involving the setting or adjustment of the royalties payable
for the public performance or reproduction in ephemeral
phonorecords or copies of sound recordings, the determination
of terms or conditions related thereto, or the establishment
of notice or recordkeeping requirements by the Librarian of
Congress under paragraph (4) or section 112(e)(4). It is the
intent of Congress that any royalty rates, rate structure, defini-
tions, terms, conditions, or notice and recordkeeping require-
ments, 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
negotiated 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
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sound recordings 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—
‘‘(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 Rev-
enue Service for exemption from taxation under section
501 of the Internal Revenue Code and has a commer-
cially 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 to make
eligible nonsubscription transmissions and ephemeral
recordings.
‘‘(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 DIG-
ITAL PERFORMANCES OF SOUND RECORDINGS.
(a) FINDINGS.—Congress finds that—
(1) in the case of royalty payments from the licensing
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 pay-
ments shall be made directly to featured recording artists and
the administrators of the accounts provided in subsection (g)(2)
of that section;
(2) such voluntarily negotiated payment arrangements have
been codified in regulations issued by the Librarian of Congress,
currently found in section 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 negotiated arrangements
by such parties concerning the 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 regulations issued
by the Librarian of Congress, and the fact that all of the
interested parties have reached agreement, the voluntarily
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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 accordance with sub-
section (f) may deduct from any of its receipts, prior to the
distribution of such receipts to any person or entity entitled
thereto other than copyright owners and performers who have
elected to receive royalties from another designated agent 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;
‘‘(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 perform-
ances subject to licensing under section 112 and this sec-
tion, including those incurred in participating in negotia-
tions or arbitration proceedings under section 112 and this
section, except that all costs incurred relating to the section
112 ephemeral recordings right may only be deducted from
the royalties received pursuant to section 112.
‘‘(4) Notwithstanding paragraph (3), any designated agent
designated to distribute receipts from the licensing of trans-
missions in accordance with subsection (f) may deduct from
any of its receipts, prior to the distribution of such receipts,
the reasonable costs identified in paragraph (3) of such agent
incurred after November 1, 1995, with respect to such copyright
owners and performers who have entered with such agent
a contractual relationship that specifies that such costs may
be deducted from such royalty receipts.’’.
(c) DIRECT PAYMENT TO ARTISTS.—Section 114(g)(2) of title 17,
United States Code, is amended to read as follows:
‘‘(2) An agent designated 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 adminis-
trator 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 Fed-
eration 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 adminis-
trator 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
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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).’’.
SEC. 6. REPORT TO CONGRESS.
By not later than June 1, 2004, the Comptroller General of
the United States, in consultation with the Register of Copyrights,
shall conduct and submit to the Committee on the Judiciary of
the House of Representatives and the Committee on the Judiciary
of the Senate a study concerning the economic arrangements among
small commercial webcasters covered by agreements entered into
pursuant to section 114(f)(5)(A) of title 17, United States Code,
as added by section 4 of this Act, and third parties, and the
effect of those arrangements on royalty fees payable on a percentage
of revenue or expense basis.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.