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Q: 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 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 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.
(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 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 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 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
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 webcasters or noncommercial webcasters during the period
beginning on October 28, 1998, 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 decision by the Librarian of Congress. Any such
agreement for small commercial 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 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 commercial webcasters or noncommercial
webcasters. The receiving agent shall be under no obligation to
negotiate any such agreement. The receiving agent shall have no
obligation to any copyright owner of sound recordings or any other
person entitled 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. Thereafter, 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, definitions, 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
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 sound recordings and ephemeral
recordings, pursuant to sections 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
Revenue Service for exemption from taxation under section
501 of the Internal Revenue Code and has a commercially
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 DIGITAL 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 payments 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 parties; 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 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 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
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 performances subject
to licensing under section 112 and this section, including
those incurred in participating in negotiations 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
transmissions 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) 2/2\ 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 successor entity)
to be distributed to nonfeatured musicians (whether or not
members of the American Federation of Musicians) who have
performed on sound recordings.
''(C) 2/2\ 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 distributed to nonfeatured vocalists
(whether or not members of the 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.
A:
Small Webcaster Settlement Act of 2002 - (Sec. 3) Permits the suspension of certain payments by noncommercial webcasters. Defines webcasters as persons or entities with compulsory licenses under Federal copyright law to make eligible nonsubscription transmissions and ephemeral recordings. Defines noncommercial webcasters as webcasters who: (1) are exempt from taxation; (2) have applied for tax exemption and have a reasonable chance of obtaining it; or (3) are operated by a public body. Declares that all payments to be made by noncommercial webcasters under Federal copyright law for the digital performance of sound recordings and the making of ephemeral phonorecords during the period from October 28, 1998, to May 31, 2003, which have not already been paid, shall not be due until June 20, 2003.Allows a receiving agent (an agent designated by the Librarian of Congress to collect certain royalty payments that ultimately are given to copyright owners and performers) to delay the obligation of any one or more small commercial webcasters to make certain payments relating to sound recordings or ephemeral recordings for a period of time to allow negotiations to occur under this Act, except that any such period shall end no later than December 15, 2002.(Sec. 4) Authorizes a receiving agent to enter into agreements for the reproduction and performance of sound recordings by one or more small commercial webcasters or noncommercial webcasters during the period from October 28, 1998, to December 31, 2004. Declares that, once published in the Federal Register, such an agreement shall be binding on all copyright owners of sound recordings and other persons entitled to payment, in lieu of any determination by a copyright arbitration royalty panel or decision by the Librarian of Congress. Declares that any such agreement shall include provisions for payment of royalties on the basis of a percentage of revenue or expenses, or both, and a minimum fee. Permits other terms and conditions also to be included in such an agreement.Prohibits any such agreement or any of its provisions from being admissible as evidence or otherwise taken into account in any administrative, judicial, or government proceedings involving the setting or adjustment of royalties and related matters, including establishment of notice or recordkeeping requirements.Expresses the intent of Congress that any royalty rates, rate structure, definitions, terms, conditions, or notice and recordkeeping requirements included in such agreements shall be viewed as a unique compromise rather than as matters that would have been negotiated in the marketplace between a willing buyer and a willing seller.States that nothing in this Act or any agreement made under it 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 recordings and ephemeral recordings. Declares that the authority to make settlements under this Act shall expire on December 15, 2002, except that such authority for noncommercial webcasters shall expire on May 31, 2003.(Sec. 5) Authorizes a nonprofit agent designated to distribute receipts from the licensing of certain transmissions to deduct from any of its receipts, prior to their distribution to an entitled person, the reasonable costs of such agent incurred after November 1, 1995, for certain duties. Includes among such duties: (1) the administration of the collection, distribution, and calculation of the royalties, as well as settlement of related disputes; and (2) the licensing and enforcement of rights with respect to the making of ephemeral recordings and performances subject to licensing under this Act and other specified Federal law.Allows any agent designated to distribute receipts from the licensing of certain transmissions to deduct the reasonable costs with respect to 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.Modifies requirements for payments to artists. Shifts responsibility for distributing licensing receipts from the copyright owner to the designated agent. Adds the requirement that 50 percent of the licensing receipts be paid to the copyright owner of the exclusive right under Federal law to publicly perform a sound recording by means of a digital audio transmission.(Sec. 6) Directs the Comptroller General to study and report to specified congressional committees on the economic arrangements among small commercial webcasters covered by agreements entered into under this Act, and third parties, and the effect of those arrangements on royalty fees payable on a percentage of revenue or expense basis.