I 113th CONGRESS 1st Session H. R. 3219 IN THE HOUSE OF REPRESENTATIVES September 30, 2013 Mr. Watt introduced the following bill; which was referred to the Committee on the Judiciary A BILL To amend title 17, United States Code, to provide copyright owners in sound recordings with the exclusive right to negotiate in the marketplace the performance of their works to the public by means of an audio transmission, and for other purposes.

1. Short title This Act may be cited as the Free Market Royalty Act . 2. Broadcast performance right in sound recordings Section 106(6) of title 17, United States Code, is amended by striking a digital audio and inserting an audio . 3. Free market for licensing of public performances Section 114 of title 17, United States Code, is amended as follows: (1) Subsection (d) is amended— (A) in paragraph (1)— (i) in the matter preceding subparagraph (A), by striking a digital audio and inserting an audio ; (ii) by striking subparagraph (A); and (iii) by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively; (B) by striking paragraph (2); (C) in paragraph (3)— (i) in subparagraphs (A) and (B)(i), by striking of digital audio and inserting of an audio ; and (ii) in subparagraph (D), by striking a digital audio and inserting an audio ; (D) in paragraph (4), in subparagraphs (A) and (B)(i), by striking a digital audio and inserting an audio ; and (E) by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively. (2) Section 114 of title 17, United States Code, is amended by striking subsections (e), (f), and (g), and inserting the following: (e) Efficiency of licensing (1) Collective negotiation for noninteractive services Pursuant to section 106(6), and notwithstanding any other provision of law, any noninteractive services performing sound recordings publicly by means of an audio transmission may collectively negotiate and agree to royalty rates and license terms and conditions for the performance of such sound recordings. (2) One-stop licensing for noninteractive services (A) Negotiation of licenses by common agent Pursuant to section 106(6), and notwithstanding any other provision of law, for licenses for noninteractive audio transmissions, SoundExchange, Inc., or any successor entity is designated as the sole common agent to negotiate, agree to, pay, and receive payments under this section. If a license for noninteractive audio transmissions is agreed to by such common agent, copyright owners of sound recordings may subsequently negotiate and agree to royalty rates and license terms and conditions with any noninteractive services performing sound recordings publicly by means of an audio transmission for the performance of such sound recordings. (B) Direct payment and equal compensation The common agent under subparagraph (A) shall make distributions directly to the following recipients from payments collected under this section as follows: (i) 50 percent shall be paid to the copyright owner. (ii) 45 percent shall be paid to featured recording artists. (iii) 5 percent shall be paid to nonfeatured musicians and vocalists (through the American Federation of Musicians and Screen Actors Guild-American Federation of Television and Radio Artists Intellectual Property Rights Distribution Fund, or their successors). (f) Payments from individual licenses for noninteractive audio transmissions In the case of a license granted by the copyright owner of a sound recording to a noninteractive service performing sound recordings publicly by means of an audio transmission, such service shall pay to the common agent described in subsection (e) receipts from the licensing of such transmissions in an amount equal to 50 percent of the total royalties and other compensation that the service is required to pay for such transmissions under the applicable license agreement. Such common agent shall distribute such payments in proportion to the distributions provided in clauses (ii) and (iii) of subsection (e)(2)(B), and such payments shall be the sole payments to which featured and nonfeatured artists are entitled by reason of such transmissions under the license with that service. (g) Backstop for public and noncommercial stations (1) Establishment of rates and terms If royalty rates and license terms and conditions for the audio transmission or retransmission of a nonsubscription broadcast consisting solely of noncommercial educational and cultural radio programs are not negotiated and agreed upon collectively under subsection (e) between the common agent and 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. 396(k) ), a proceeding under chapter 8 of this title shall determine the rates and terms for such transmissions and retransmissions. The Copyright Royalty Judges shall establish such 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. (2) Payment of royalties All royalty payments under this subsection for over-the-air nonsubscription broadcast transmissions required to be paid by public broadcasting entities that are eligible to receive funding on the basis of the formula set forth in section 396(k)(6)(B) of the Communications Act of 1934 ( 47 U.S.C. 396(k)(6)(B) ) or that are authorized to transmit over-the-air nonsubscription broadcast performances of nondramatic musical works pursuant to arrangements negotiated or otherwise made by the Corporation for Public Broadcasting under section 118, shall first be made using funds made available pursuant to section 396(k)(3)(A)(I)(II) of the Communications Act of 1934. . (3) Subsection (h)(1) is amended by striking a digital audio and inserting an audio . (4) Subsection (j) is amended— (A) in paragraph (1), by striking digital audio and inserting audio ; (B) by striking paragraphs (2), (4), (5), (6), (8), (10), and (11); (C) by inserting after paragraph (1) the following: (2) An audio transmission is a transmission that embodies the transmission of a sound recording, and does not include the transmission of any audiovisual work. ; (D) by redesignating paragraph (7) as paragraph (4); (E) by inserting after paragraph (4), as redesignated, the following: (5) A noninteractive service is a service that would have been eligible for statutory licensing under subsection (d)(2) of this section, as such subsection was in effect on September 1, 2013 ; and (F) by redesignating paragraphs (9), (12), (13), (14), and (15) as paragraphs (6), (7), (8), (9), and (10) respectively. 4. Ephemeral recordings Section 112 of title 17, United States Code, is amended— (1) in subsection (a)(1), by striking including a statutory license under section 114(f) and inserting including a license to perform a sound recording under section 114 ; and (2) by striking subsection (e) and inserting the following: (e) Efficiency of licensing The provisions of subsections (e)(1), (e)(2)(A), and (g) of section 114 shall apply to licensing of the right to reproduce phonorecords of a sound recording under section 106(1)— (1) for use solely to make noninteractive audio transmissions licensable under such subsections of section 114, or (2) for use solely under the limitation on exclusive rights specified by section 114(d)(1)(B)(iv), under circumstances in which such reproductions would have been eligible for statutory licensing under this subsection, as this subsection was in effect on September 1, 2013. . 5. Chapter 8 proceedings of Copyright Royalty Judges; technical amendments (a) Functions Section 801(b) of title 17, United States Code, is amended— (1) in paragraph (1)— (A) by striking 112(e), 114, ; and (B) by striking sections 114(f)(1)(B), 115, and inserting sections 115 ; (2) in paragraph (3)(C), by striking 804(b)(8) and inserting 804(b)(7) ; (3) in paragraph (7)(B), by striking 112(e)(5), 114(f)(3), ; (4) by redesignating paragraph (8) as paragraph (9); and (5) by inserting after paragraph (7) the following: (8) To determine the rates and terms for transmissions under section 114(g) and reproductions under section 112(e). . (b) Proceedings Section 803 of title 17, United States Code, is amended— (1) in subsection (b)(1)(A)(i)— (A) by striking subclauses (II) and (III); (B) in subclause (IV), by striking 804(b)(8) and inserting 804(b)(7) ; and (C) by redesignating subclauses (IV) and (V) as subclauses (II) and (III), respectively; and (2) in subsection (c)(2)(E)(i), by striking on a specified date, then— and all that follows through as of the date of that determination. and inserting on a specified date, then the initial determination of the Copyright Royalty Judges that is the subject of the rehearing motion shall be effective as of the day following the date on which the rates and terms that were previously in effect expire. . (c) Judicial review Section 803(d)(2)(C)(ii) of title 17, United States Code, is amended by striking by the Copyright Royalty Judges and inserting under section 114(e)(2) or 112(e), or, in any other case, by the Copyright Royalty Judges, . (d) Institution of proceedings Section 804 of title 17, United States Code, is amended— (1) in subsection (a)— (A) in the first sentence, by striking 112, 114, ; and (B) by striking the last sentence; and (2) in subsection (b)— (A) by striking paragraph (2); (B) by striking paragraph (3) and inserting the following: (2) Certain sections 114 and 112 proceedings Proceedings under this chapter to determine terms and rates of royalty payments under section 114(g) or 112(e) may be commenced only pursuant to petitions filed after the end of the 6-month period beginning on the effective date of the Free Market Royalty Act. Thereafter, proceedings described in the preceding sentence may be commenced only pursuant to a petition filed at any time within 1 year after negotiated licenses authorized by section 114 or 112(e) (as the case may be) expire and are not replaced by subsequent agreements. For purposes of proceedings to determine terms and rates under this paragraph, the Copyright Royalty Judges shall make a determination as to whether the petitioner has a significant interest in the terms and rates in which a determination by the Judges 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. ; and (C) by redesignating paragraphs (4) through (8) as paragraphs (3) through (7), respectively. (e) Technical amendments Section 114 of title 17, United States Code, is amended as follows: (1) Subsection (a) is amended by striking clauses and inserting paragraphs . (2) Subsection (b) is amended— (A) by striking clause each place it appears and inserting paragraph ; (B) by striking clauses each place it appears and inserting paragraphs ; and (C) by striking section 397 of title 47 and inserting section 397 of the Communications Act of 1934 ( 47 U.S.C. 397 ) . 6. Study by Copyright Office The Register of Copyrights shall— (1) conduct a study on the protection of making available to the public copyrighted works under paragraph (3) of section 106 of title 17, United States Code, and communicating to the public copyrighted works under paragraph (4) of such section, and recommend any amendments to such paragraphs necessary to so protect the rights of making available to the public copyrighted works and communicating to the public copyrighted works; and (2) not later than 9 months after the date of the enactment of this Act, submit to the Committees on the Judiciary of the House of Representatives and the Senate a report on the results of the studies conducted under paragraph (1), including any recommendations under such paragraph. 7. Effective date (a) Phase-Out of statutory licenses The amendments made by sections 2, 3, 4, and 5— (1) shall take effect upon the expiration of the 1-year period beginning on the date of the enactment of this Act; and (2) shall apply with respect to audio transmissions of sound recordings that are made on or after the effective date under paragraph (1). (b) Other provisions Sections 1 and 6 shall take effect on the date of the enactment of this Act.