To amend title 17, United States Code, and for other purposes.

August 2, 2001

Mr. CANNON (for himself and Mr. BOUCHER) introduced the following bill; which was referred to the Committee on the Judiciary

To amend title 17, United States Code, 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 `Music Online Competition Act of 2001'.

SEC. 2. EXEMPTION OF CERTAIN PERFORMANCES IN ONLINE AND PHYSICAL RETAIL ESTABLISHMENTS.

(a) EXEMPTION- Section 110(7) of title 17, United States Code, is amended--

(1) by striking `(7)' and inserting `(7)(A)';

(2) by striking `by a vending establishment' and inserting `or of a sound recording by digital audio transmission, by or in a physical vending establishment'; and

(3) by adding after the semicolon at the end the following: `or

`(B) performance of a sample of a nondramatic musical work or a sample of a sound recording by digital audio transmission, by or through a digital online service open to the public at large without any direct or indirect admission charge, if--

`(i) the purpose of the performance is to promote the retail sale, distribution or license, by or through the service, of copies or phonorecords of the work, including by digital phonorecord delivery as defined in section 115(d)(1);

`(ii) the transmitting entity transmits the sample solely to the particular recipient requesting the transmission; and,

`(iii) the length of the sample does not exceed 30 seconds or, in the case of a sound recording of more than 5 minutes in duration, 10 percent of that sound recording not to exceed 60 seconds;'.

(b) DEFINITION OF PERFORMANCE- Section 110 of title 17, United States Code, is amended by adding at the end the following: `For purposes of paragraph (7), a `performance' includes a transmission made by a transmitting organization to or on behalf of a vending establishment or a digital online service.'.

SEC. 3. EXEMPTION FOR EPHEMERAL RECORDINGS AND FOR MULTIPLE EPHEMERAL RECORDINGS.

(a) EXEMPTION- Section 112(a)(1) of title 17, United States Code, is amended--

(1) in subparagraph (A), by striking `made it, and' and inserting `made it and, except to facilitate transmission of the performance,'; and

(2) in subparagraph (C), by striking `public.' and inserting the following: `public, except that a transmission program as set forth in section 114(d)(2)(B) or section 114(d)(2)(C)(iii) is not required to be destroyed by a transmitting organization entitled to a statutory license under section 114(f).'.

(b) MULTIPLE EPHEMERAL RECORDINGS EXEMPTION- Section 112 of title 17, United States Code, is amended--

(1) by striking subparagraph (C) of subsection (e)(1) and redesignating subparagraph (D) as subparagraph (C);

(2) by redesignating subsection (f) as subsection (g);

(3) by adding after subsection (e) the following:

`(f) Notwithstanding the provisions of section 106, and except in the case of a motion picture or other audiovisual work, it is not an infringement of copyright for a transmitting organization entitled to transmit to the public a performance or display of a work, under a license, including a statutory license under section 114(f), or transfer of the copyright or under the limitations on exclusive rights in sound recordings specified by section 114(a) or for a transmitting organization that is a broadcast radio or television station licensed as such by the Federal Communications Commission and that makes a broadcast transmission of a performance of a sound recording in a digital format on a nonsubscription basis, to make one or more copies or phonorecords of a work included in a sound recording, if--

`(1) each copy or phonorecord is retained and used solely by the transmitting organization that made it; and

`(2) each copy or phonorecord is used solely for the transmitting organization's own transmissions within its local service area, or for purposes of archival preservation or security.'

SEC. 4. LICENSING FOR TRANSMISSION.

(a) STATUTORY PERFORMANCE LICENSE PAYMENTS- Subsection (g) of section 114 of title 17, United States Code, is amended--

(1) by striking paragraph (2), and

(2) by adding after paragraph (1) the following:

`(2) Receipts from the statutory licensing of public performances of sound recordings by digital audio transmission in accordance with subsection (f) shall be allocated and paid in the following manner:

`(A) 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 to a designated collection and distribution organization on behalf of such featured recording artist or artists.

`(B) 2.5 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 such musicians are members of the American Federation of Musicians) who have performed on sound recordings.

`(C) 2.5 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 such vocalists are members of the American Federation of Television and Radio Artists) who have performed on sound recordings.

`(D) 50 percent of the receipts shall be paid to a designated collection and distribution organization on behalf of the copyright owner of the exclusive right under section 106(6) of this title to perform publicly the sound recording by means of digital audio transmission under the statutory license of subsection (f) of this section.'.

(b) LICENSING AFFILIATES-

(1) IN GENERAL- Subsection (h) of section 114, title 17, United States Code, is amended--

(A) by striking paragraphs (1) and (2) and inserting the following:

`(1) If the copyright owner of a sound recording licenses an affiliated entity the right to reproduce the copyrighted work, to distribute the copyrighted work to the public by means of a digital phonorecord delivery or to perform the copyrighted work publicly, the copyright owner shall make the licensed sound recording available on no less favorable terms and conditions to all bona fide entities that offer similar services, except that, if there are material differences in the scope of the requested license with respect to the type of service, the particular sound recordings licensed, the frequency of use, the number of subscribers served, or the duration, then the copyright owner may establish different terms and conditions for such other services, that such different terms and conditions--

`(A) shall be limited to, and shall accurately reflect any such material differences in the scope of the requested license; and

`(B) permitted under this paragraph, shall be made available to all bona fide entities that offer similar services.

`(2)(A) Except as provided in subparagraph (B), a copyright owner that licenses a sound recording pursuant to paragraph (1) shall not mandate as part of the terms and conditions of the license that the licensee use any particular digital rights management technology.

`(B) A copyright owner described in subparagraph (A) shall not be prevented from including in the license a requirement that the licensee implement digital rights management technology that meets reasonable and nondiscriminatory performance criteria the copyright owner has established to protect a right of a copyright owner under this title in a work or a portion thereof.

`(3)(A) Except as provided in subparagraph (B), a copyright owner that licenses a sound recording pursuant to paragraph (1) shall not mandate as part of the terms and conditions of the license that the licensee use any particular digital music player.

`(B) A copyright owner described in subparagraph (A) shall not be prevented from including in the license a requirement that the licensee use a digital music player that meets reasonable and nondiscriminatory performance criteria the copyright owner has established.

`(4) ENFORCEMENT- (A) The Attorney General may investigate an alleged violation of this subsection if an investigation begins not later than 2 years after an alleged violation occurred.

`(B) If the date of an alleged violation is unknown, the Attorney General may investigate to determine the date of the alleged violation.

`(C) If the Attorney General determines that a violation of this subsection has occurred, the Attorney General has the power to seek to enforce the requirements of this subsection through all appropriate means.

`(D) Nothing contained in this paragraph shall be construed to limit the authority of the Attorney General under any other provision of law.

(2) DEFINITIONS- Subsection (j) of section 114 of title 17, United States Code, is amended--

(A) by amending paragraph (1) to read as follows:

`(1) The term `affiliated entity' means an entity, other than an entity that wholly owns or is wholly owned by the licensor, engaging in digital audio transmissions covered by section 106(6) or digital phonorecord deliveries in which the licensor has any direct or indirect partnership or any ownership interest amounting to 5 percent or more of the outstanding voting or nonvoting stock.';

(B) by redesignating paragraphs (6) through (15) as paragraphs (9) through (18), respectively;

(C) by inserting after paragraph (5) the following:

`(6) The term `digital music player' means a technology that renders audible the sounds in a sound recording embodied in a digital audio transmission or a digital phonorecord delivery.

`(7) The term `digital phonorecord delivery' shall have the meaning given such term in section 115(d)(1).

`(8) The term `digital rights management technology' means a technological measure used to limit the uses of copyrighted work to those authorized by the copyright owner or the law.'.

SEC. 5. ELECTRONIC ADMINISTRATION OF THE COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING SOUND RECORDINGS.

(a) NOTICE OF INTENTION- Section 115(b) of title 17, United States Code, is amended--

(1) by striking paragraph (1) and inserting the following:

`(1) NOTICE- (A) Any person who wishes to obtain a compulsory license under this section shall do so by serving a notice of intention to make and distribute phonorecords of the work.

`(B) Such notice may be given by direct notice served upon the copyright owner or by constructive notice that does not identify the copyright owner and that is to be served upon the Copyright Office.

`(C) Notice shall be served before or within 30 days after making, and before distributing, any phonorecords of the work, except that a notice of intention to make digital phonorecord deliveries shall be made within 30 days after enactment of this Act or before the making of a digital phonorecord delivery of the work, whichever is later.

`(D) Any notice of intention may identify more than one work and a constructive notice also may identify a work by one or more copyright owners.

`(E) The notice shall comply, in form, content, and manner of service, with requirements that the Register of Copyrights shall prescribe by regulation.';

(2) by redesignating paragraph (2) as paragraph (3); and,

(3) by inserting after paragraph (1) the following:

`(2) ROYALTY FEES- Any person who obtains a compulsory license under this section shall--

`(A) pay royalty fees in accordance with subsection (c); or

`(B) if such royalty fees have not been determined, agree to pay such royalty fees as shall be determined in accordance with subsection (c).';

(4) in paragraph (3), as redesignated, by inserting `or (2)' after `(1)'.

(b) LIMITED DIGITAL PHONORECORD DELIVERY- Section 115(c) of title 17, United States Code, is amended--

(1) in paragraph (3)--

(A) in subparagraph (C) by striking `and (ii)' and inserting `(ii) limited digital phonorecord deliveries, and (iii)';

(B) in subparagraph (D)--

(i) by striking `and (ii)' and inserting `(ii) limited digital phonorecord deliveries, and (iii)'; and

(ii) by inserting after `as provided in subparagraphs (B) and (C).' the following: `In setting royalty rates and terms for limited digital phonorecord deliveries under this section, the copyright arbitration royalty panel also shall consider the limitations imposed upon the use of the limited digital phonorecord delivery by a transmission recipient in proportion to digital phonorecord deliveries in general, the extent to which limited digital phonorecord deliveries may promote or may substitute for the sales of phonorecords or otherwise may enhance or may interfere with the copyright owner's other streams of revenue from its nondramatic musical works, and the proportion of the revenue received by the compulsory licensee from every such act of distribution of the phonorecord under this clause equal to the proportion of the revenue received by the compulsory licensee from distribution of a general digital phonorecord delivery that is payable by a compulsory licensee under clause (2) and under chapter 8.';

(4) by inserting in paragraph (5) after `next preceding.' the following: `Payments for digital phonorecord deliveries shall be made to the copyright owner or, if the notice of intention has been served upon the Copyright Office, to either the copyright owner or the Copyright Office.'

(5) by inserting in paragraph (6) after `copyright owner' the following: `or, pursuant to paragraph (5) the Copyright Office,'.

(c) DEFINITIONS- Section 115(d) of title 17, United States Code, is amended--

(1) by striking the paragraph heading and inserting `DEFINITIONS- '

(2) by striking `term has the following meaning' and inserting `terms have the following meanings';

(3) by inserting after `meanings:' the following: `(1)';

(4) by inserting after paragraph (1) as so designated the following:

`(2) A `limited digital phonorecord delivery' is a digital phonorecord delivery that uses a technology that restricts the time or manner in which the transmission recipient may render such sound recording audible.'.

(d) ELECTRONIC FILING AND NOTICE TO COPYRIGHT OWNERS-

(1) DUTIES OF REGISTER- Not later than 120 days after the date of enactment of this Act, the Register of Copyrights shall--

(A) establish procedures by which the notice of intention may be served electronically upon the Copyright Office, and by which reasonable notice of the filing of a notice of intention may be given to the owner of copyright in the nondramatic musical work;

(B) prescribe by regulation the requirements for the form, content, and manner of electronic service of the notice, including notices that identify one or more works of a particular copyright owner and notices that identify one or more works of numerous copyright owners; and

(C) prescribe regulations for the appointment of a designated agent to receive royalty fees and statements of account, to distribute royalty fees to the copyright owner, and to administer royalty fees that have been submitted for unknown copyright owners.

(2) REGULATIONS- The Register of Copyrights may prescribe regulations whereby royalty fees are paid to an escrow account at the last established rate in which the terms and rates for the then-current period have not been determined, including for the period prior to the date of enactment of this Act.

SEC. 6. LIMITATIONS ON EXCLUSIVE RIGHTS: INCIDENTAL AND ARCHIVAL COPYING.

(a) TITLE- The title heading of section 117 of title 17, United States Code, is amended to read as follows:

`SEC. 117. LIMITATIONS ON EXCLUSIVE RIGHTS: COMPUTER PROGRAMS AND DIGITAL COPIES.';

(b) DIGITAL COPIES- Section 117 of title 17, United States Code, is amended--

(1) by redesignating subsection (d) as subsection (f), and

(2) by inserting after subsection (c) the following:

`(d) Notwithstanding the provisions of section 106, it is not an infringement to make or to authorize the making of a copy or phonorecord of a sound recording or a work included in a sound recording, in a digital format, provided that such copy or phonorecord is created by and is incidental to the operation of a device in the ordinary course of the use of a work otherwise lawful under this title.

`(e) Notwithstanding the provisions of section 106, it is not an infringement for the owner of a phonorecord lawfully acquired by digital phonorecord delivery, or a copy lawfully acquired by digital transmission of a literary work embodied in that phonorecord, to make or authorize the making of another phonorecord or copy of such works, if such new phonorecord or copy is for archival purposes only and that all archival phonorecord or copies are destroyed in the event that continued possession of the phonorecord or copy should cease to be rightful.'.

SEC. 7. EVALUATION OF IMPACT OF CERTAIN STATUTORY PERFORMANCE LICENSE CRITERIA ON PROGRAMMING SERVICES.

(a) EVALUATION BY THE REGISTER OF COPYRIGHTS- The Register of Copyrights, in consultation with the Assistant Secretary of the Office of Technology Policy of the Department of Commerce, shall evaluate the effects, under the statutory sound recording performance license set forth in section 114(d)(2) of title 17, United States Code, upon preexisting and emerging noninteractive digital audio transmission services of the criteria set forth in sections 114(d)(2)(B) and 114(d)(2)(C)(i) and (ii) of such title, with respect to--

(1) the economic costs of compliance with the criteria;

(2) the effect of compliance with the criteria upon the nature of the programming and the marketability of such services;

(3) whether any noninteractive digital audio transmission service would be unable to comply with the criteria and, therefore, to qualify for the statutory license;

(4) whether any changes to the criteria, including the elimination thereof, would enable additional noninteractive digital audio transmission services to qualify for the statutory license; and

(5) the likely impact upon copyright owners of sound recordings of any such changes to the criteria.

(b) REPORT TO CONGRESS- The Register of Copyrights shall, not later than 12 months after the date of enactment of this Act, submit to the Congress a report on the evaluation conducted under subsection (a), including any legislative recommendations the Register may have.

END