Small Webcaster Settlement Act of 2002
PL 107-321 (H.R.5469), enacted 12/04/2002

116 STAT. 2780 
PUBLIC LAW 107-321—DEC. 4, 2002 
Public Law 107-321 
107th Congress 
An Act 
Dec. 4, 2002 
To amend title 17, United States Code, with respect to the statutory license for 
[H.R. 5469] 
webcasting, and for other purposes. 
Be it enacted by the Senate and House of Representatives 
of 
Small Webcaster 
the United States of America in Congress assembled, 
Settlement Act of 
2002. 
SECTION 1. SHORT TITLE. 
This Act may be cited as the "Small Webcaster Settlement 
Act of 2002". 
17 u s e 101 note. 
17 u s e 114 note. 
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 
copjright 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. 
PUBLIC LAW 107-321—DEC. 4, 2002 
116 STAT. 2781 
(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 cop5n"ight 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. 
17USC114note. 
(a) NONCOMMERCIAL WEBCASTERS.— 
(1) IN GENERAL.—^The pajonents to be made by noncommer- Deadline, 
cial webcastiers 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 COMMERCL^ WEBCASTERS.— 
(1) IN GENERAL.—^The receiving agent may, in a writing Expiration date, 
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, 
99-194O-03-12:QL3Part4 
116 STAT. 2782 
PUBLIC LAW 107-321—DEC. 4, 2002 
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 copjo-ight owner of sound 
recordings or any other person entitled to payment under this 
section for having entered into such agreement. 
Federal Register, 
"(B) The Copyright Office shall cause to be published in 
publication. 
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 
PUBLIC LAW 107-321—DEC. 4, 2002 
116 STAT. 2783 
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 
trsinsmissions and 
ephemeral 
recordings. 
"(F) The authority to make settlements pursuant to Expiration date, 
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— 
17 use 114 note. 
(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, £ind the fact that all of the 
interested parties have reached agreement, the voluntarily 
116 STAT. 2784 
PUBLIC LAW 107-321—DEC. 4, 2002 
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 copjo'ight 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 t^ 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) 2V2 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) 2V2 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 
PUBLIC LAW 107-321—DEC. 4, 2002 
116 STAT. 2785 
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. 
Deadline. 
17 u s e 114 note. 
Approved December 4, 2002. 
LEGISLATIVE HISTORY—H.R. 5469: 
CONGRESSIONAL RECORD, Vol. 148 (2002): 
Oct. 7, considered and passed House. 
Nov. 14, considered and passed Senate, amended. House concurred in Senate 
amendment.