[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5553 Introduced in House (IH)]








109th CONGRESS
  2d Session
                                H. R. 5553

 To amend section 115 of title 17, United States Code, to provide for 
licensing of digital delivery of musical works, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              June 8, 2006

    Mr. Smith of Texas (for himself and Mr. Berman) introduced the 
  following bill; which was referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
 To amend section 115 of title 17, United States Code, to provide for 
licensing of digital delivery of musical works, 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 ``Section 115 Reform Act of 2006''.

SEC. 2. STATUTORY LICENSES FOR DIGITAL DELIVERY OF MUSICAL WORKS.

    Section 115 of title 17, United States Code, is amended by adding 
at the end the following new subsection:
    ``(e) Licenses for Digital Uses of Musical Works.--
            ``(1) In general.--The compulsory license for digital 
        phonorecord deliveries and hybrid offerings shall be governed 
        by this subsection, in addition to subsections (a), (c), and 
        (d). The license under this subsection covers--
                    ``(A) the making and distribution of general and 
                incidental digital phonorecord deliveries in the form 
                of full downloads, limited downloads, interactive 
                streams, and any other form constituting a digital 
                phonorecord delivery or hybrid offering; and
                    ``(B) all reproduction and distribution rights 
                necessary to engage in activities described in 
                subparagraph (A), solely for the purpose of engaging in 
                such activities under the license, including--
                            ``(i) the making of reproductions by and 
                        for end users;
                            ``(ii) reproductions made on servers under 
                        the authority of the licensee; and
                            ``(iii) incidental reproductions made under 
                        the authority of the license in the normal 
                        course of engaging in activities described in 
                        subparagraph (A), including cached, network, 
                        and RAM buffer reproductions.
            ``(2) Blanket licenses.--A person may obtain a compulsory 
        license to engage in activities subject to this subsection only 
        from a designated agent under paragraph (4) and only if the 
        person is a digital music provider. A person may engage in 
        activities subject to this subsection under authority of a 
        compulsory license only--
                    ``(A) if the license was obtained by a digital 
                music provider; and
                    ``(B) with respect to end users with which the 
                digital music provider meets the requirements of 
                paragraph (14)(C).
            ``(3) Royalty-free license.--
                    ``(A) In general.--A compulsory license shall be 
                available for the making of server and incidental 
                reproductions to facilitate noninteractive streaming.
                    ``(B) Activities covered.--Each designated agent 
                shall grant a license under this subsection for the 
                making of server and incidental reproductions to 
                facilitate noninteractive streaming at a royalty-free 
                rate. The designated agent may charge only a filing fee 
                of not more than $30 to administer the issuance of the 
                license. The license shall cover reproductions made on 
                servers under authority of the licensee and incidental 
                reproductions made under the authority of the licensee 
                in the course of the noninteractive streaming, 
                including cached, network, and RAM buffer 
                reproductions, to the extent reasonably necessary for, 
                and solely for the purpose of, engaging in 
                noninteractive streaming under the license in a 
                technologically reasonable and efficient matter.
                    ``(C) Excluded activities.--The license under 
                subparagraph (A) does not extend to any server or 
                incidental reproductions used to enable a streaming 
                service (or any other type of service) that takes 
                affirmative steps to authorize, enable, cause, or 
                induce the making of reproductions of musical works by 
                or for end users that are accessible by those end users 
                for future listening, unless a valid license for 
                reproduction and distribution rights has otherwise been 
                obtained by the streaming or other type of service 
                permitting the server or incidental reproductions to be 
                used for that activity.
            ``(4) Applications for licenses.--Any digital music 
        provider seeking a license under this subsection may apply to a 
        designated agent for the license, identifying in the 
        application each type of qualifying activity for which the 
        license is sought. Any digital music provider that has a 
        license under this subsection and seeks to engage in any 
        activity covered by this subsection that is not identified in 
        the license may engage in that activity only upon filing a new 
        application identifying the additional activity.
            ``(5) Licenses.--All activities specified in an application 
        filed under paragraph (4) for which a license is available 
        under this subsection shall be licensed by the designated 
        agent. The license shall be effective, upon the filing of the 
        application, for all copyrighted nondramatic musical works (or 
        shares of such musical works) represented by the designated 
        agent.
            ``(6) Retroactive royalty payments.--
                    ``(A) Retroactive payments.--A digital music 
                provider that has obtained a license from a designated 
                agent under this subsection for--
                            ``(i) the making and distribution of 
                        limited downloads, or
                            ``(ii) the making or distribution of 
                        interactive streams,
                may report to the designated agent activity authorized 
                by the license that the digital music provider engaged 
                in during the period beginning January 1, 2001, and 
                ending on January 1, 2008, and pay to the designated 
                agent royalties applicable to that activity. Such 
                reporting and payments shall be made not later than 
                March 1, 2008, in accordance with the regulations 
                issued under paragraph (10) regarding reporting and 
                payments.
                    ``(B) Limitation on liability.--A digital music 
                provider that reports activity and makes payments under 
                this paragraph for an activity under this paragraph 
                shall not be subject to an action for copyright 
                infringement alleging violation of reproduction or 
                distribution rights to the extent such action is based 
                on activity so reported for which all payments due have 
                been made.
                    ``(C) Effect on royalty-free license.--A digital 
                music provider that complies with the requirements of 
                this paragraph is entitled to a royalty-free license 
                under paragraph (3)(A) for the activity reported under 
                subparagraph (A), retroactive to January 1, 2001.
            ``(7) License not transferable.--A license granted to a 
        digital music provider under this subsection may not be 
        transferred to any other person or entity.
            ``(8) Royalty rates and terms.--
                    ``(A) In general.--Except as provided in this 
                paragraph, the Copyright Royalty Judges shall determine 
                reasonable rates and terms for digital phonorecord 
                deliveries and hybrid offerings as provided under 
                subsection (c) and chapter 8, except for server and 
                incidental reproductions for noninteractive streaming 
                that are eligible for royalty-free licenses under this 
                subsection.
                    ``(B) Rates and terms in effect.--Rates and terms 
                in effect under subsection (c) on the effective date of 
                the Section 115 Reform Act of 2006 for any activity for 
                which a license is available under this section shall 
                continue to apply to that activity on and after that 
                date until a new rate is determined under subsection 
                (c) and chapter 8.
                    ``(C) Payment.--Licensees under this subsection 
                shall make payments of royalty rates and terms to the 
                designated agents as directed by the Copyright Royalty 
                Judges.
                    ``(D) Rates and terms for new license activities.--
                            ``(i) In general.--Not later than December 
                        1, 2007, the Copyright Royalty Judges shall 
                        initiate a ratemaking proceeding, pursuant to 
                        the procedures set forth in chapter 8, to 
                        determine a final rate and terms for any 
                        activity for which a license is available under 
                        this subsection if--
                                    ``(I) a final rate and terms have 
                                not been established for the activity 
                                as of that date; or
                                    ``(II) the activity is not the 
                                subject of a proceeding to set a final 
                                rate and terms under subsection (c) 
                                that is pending before the Copyright 
                                Royalty Judges on that date.
                            ``(ii) Pending proceedings.--In any case in 
                        which a proceeding is pending before the 
                        Copyright Royalty Judges, on December 1, 2007, 
                        to determine final rates and terms under 
                        subsection (c) for any activity for which a 
                        license is available under this subsection, the 
                        Copyright Royalty Judges may expand and adjust 
                        the schedule of the proceeding to cover rates 
                        and terms for any activity described in clause 
                        (i), in lieu of initiating a proceeding under 
                        clause (i) with respect to that activity, if so 
                        expanding and adjusting the schedule of the 
                        proceeding will not unduly prejudice any party 
                        to the proceeding and will not delay the final 
                        determination of rates and terms by the 
                        Copyright Royalty Judges by more than 90 days.
                            ``(iii) Participation of designated 
                        agents.--All designated agents, and any other 
                        parties who have a significant interest, within 
                        the meaning of section 804(a), in the 
                        applicable royalty rate, are entitled to 
                        participate in a proceeding under this 
                        subparagraph relating to activities licensed 
                        under this subsection.
                    ``(E) Interim rates.--
                            ``(i) In general.--For any activity for 
                        which a license is available under this 
                        subsection and for which a rate and terms have 
                        not been determined under subsection (c), a 
                        digital music provider shall, upon filing a 
                        valid application with the relevant designated 
                        agent, have a license under this subsection to 
                        engage in the activity, subject to clause (ii).
                            ``(ii) Interim rates and terms.--Upon the 
                        filing of an application under clause (i)--
                                    ``(I) the digital music provider 
                                and the designated agent may negotiate 
                                an interim rate and terms that will 
                                apply to the activity under the 
                                license; or
                                    ``(II) the digital music provider 
                                or the designated agent, or both, may 
                                apply to the Copyright Royalty Judges 
                                for an interim rate and terms, in which 
                                case--
                                            ``(aa) the Copyright 
                                        Royalty Judges shall, not later 
                                        than 15 days after the 
                                        application is made, publish 
                                        notice of an expedited 
                                        proceeding to determine the 
                                        interim rate and terms; and
                                            ``(bb) the Judges shall 
                                        determine the interim rate and 
                                        terms not less than 30 days and 
                                        not more than 60 days after 
                                        publishing the notice, through 
                                        the expedited proceeding.
                            ``(iii) Applicability of interim rates and 
                        terms.--(I) An interim rate and terms 
                        negotiated under clause (ii)(I) or established 
                        under clause (ii)(II) shall apply to the 
                        activity under the license concerned until a 
                        final rate and terms for the activity are 
                        determined under subparagraph (D), or as 
                        otherwise agreed by the parties.
                            ``(II) An interim rate and terms described 
                        in clause (i) with respect to an activity by a 
                        digital music provider shall not be treated as 
                        precedent in a final ratemaking proceeding. If 
                        the Copyright Royalty Judges have established 
                        an interim rate and terms under clause 
                        (ii)(II), subject to clause (iv), that rate and 
                        those terms shall apply to the same activity 
                        engaged in by any digital music provider, 
                        except as otherwise agreed to by the parties.
                            ``(iv) Single proceeding for each 
                        activity.--Unless the Copyright Royalty Judges 
                        determine that there is good cause to review an 
                        interim rate established under clause (ii)(II), 
                        the Judges may conduct only 1 proceeding to 
                        determine an interim rate and terms for an 
                        activity for which a license is available under 
                        this subsection.
                            ``(v) Adjustment of interim rates.--After a 
                        determination of a final rate and terms that 
                        will apply to an activity for which a license 
                        is available under this subsection has been 
                        made under subparagraph (D), the final rate and 
                        terms shall be retroactive to the inception of 
                        the activity under all licenses to which such 
                        rate and terms apply, unless an agreement 
                        between the parties to a license provides 
                        otherwise. Not later than 60 days after the 
                        determination of the final rate becomes 
                        effective--
                                    ``(I) the digital music provider 
                                shall pay to the designated agent any 
                                amounts due from underpayment of fees 
                                by the digital music provider because 
                                the final rate exceeds the interim 
                                rate; or
                                    ``(II) the designated agent shall 
                                refund to the digital music provider 
                                the amounts of any overpayment of fees 
                                by the digital music provider because 
                                the interim rate exceed the final rate, 
                                or, at the election of the digital 
                                music provider, the designated agent 
                                shall credit such overpayment against 
                                future payments by the digital music 
                                provider to the designated agent under 
                                this subsection.
            ``(9) Designated agents.--
                    ``(A) In general.--Designated agents under this 
                subsection are the General Designated Agent and 
                additional designated agents.
                    ``(B) General designated agent.--
                            ``(i) Designation and purpose.--(I) Not 
                        later than August 1, 2007, the Register of 
                        Copyrights shall designate a mechanical 
                        licensing and collection agency representing 
                        music publishing entities that represent the 
                        greatest share of the music publishing market, 
                        as measured by the amount of royalties 
                        collected during the preceding 3 full calendar 
                        years with respect to the use of copyrighted 
                        musical works pursuant to this section, to 
                        establish and operate the General Designated 
                        Agent.
                            ``(II) The General Designated Agent shall 
                        grant and administer licenses and collect and 
                        distribute royalties payable for the use of 
                        musical works licensed under this subsection.
                            ``(III) The General Designated Agent shall 
                        be governed by a board of directors consisting 
                        of representatives of at least 5 music 
                        publishing entities.
                            ``(ii) Decertification.--The Register of 
                        Copyrights may disqualify the General 
                        Designated Agent upon a showing that it fails 
                        to meet the qualifications under this 
                        subparagraph or otherwise fails to meet the 
                        requirements under this paragraph. In such a 
                        case, the Register of Copyrights shall 
                        designate another General Designated Agent that 
                        most closely meets the requirements of clause 
                        (i)(I).
                    ``(C) Additional designated agents.--
                            ``(i) Certification.--The Register of 
                        Copyrights shall certify as an additional 
                        designated agent to represent copyright owners 
                        for purposes of licenses under this subsection 
                        any entity that demonstrates that--
                                    ``(I) upon certification, it will 
                                represent music publishing entities 
                                that represent at least a 15 percent 
                                share of the music publishing market, 
                                as measured by the amount of royalties 
                                collected during the preceding 3 full 
                                calendar years with respect to the use 
                                of copyrighted musical works pursuant 
                                to this section; and
                                    ``(II) it has the capability to 
                                perform the required functions of a 
                                designated agent under this subsection.
                            ``(ii) Duties.--(I) Upon certification 
                        under clause (i), an additional designated 
                        agent shall represent any copyright owners of 
                        musical works who elect to have the additional 
                        designated agent represent them and the musical 
                        works (or shares of musical works) owned or 
                        controlled by such copyright owners for 
                        purposes of the licenses under this subsection.
                            ``(II) Each additional designated agent 
                        shall notify the General Designated Agent and 
                        any other additional designated agent of each 
                        copyright owner, and the musical works (or 
                        shares of musical works) owned or controlled by 
                        the copyright owner, that the additional 
                        designated agent represents pursuant to 
                        subclause (I).
                            ``(III) Any election under subclause (I) is 
                        effective only if it is made in writing, a copy 
                        of which shall be made available to any other 
                        designated agent upon a reasonable request 
                        therefor.
                            ``(iii) Decertification.--The Register of 
                        Copyrights may remove the certification of any 
                        additional designated agent upon a showing that 
                        it fails to meet the qualifications under this 
                        subparagraph or otherwise fails to meet the 
                        requirements under this paragraph.
                    ``(D) Authorities of designated agents.--A 
                designated agent may--
                            ``(i) engage in activities pursuant to this 
                        subsection;
                            ``(ii) engage in such additional activities 
                        in the interest of music publishers and 
                        songwriters as the designated agent considers 
                        appropriate, including industry negotiations, 
                        ratesetting proceedings, litigation, and 
                        legislative efforts; and
                            ``(iii) apply any administrative fees or 
                        other funds it collects to support the 
                        activities described in clauses (i) and (ii).
                    ``(E) Elections by copyright owners.--
                            ``(i) Representation by single designated 
                        agent.--Each copyright owner, and the musical 
                        works (or shares of musical works) that the 
                        copyright owner owns or controls, may be 
                        represented by only one designated agent during 
                        any calendar year.
                            ``(ii) Annual enrollment period.--
                                    ``(I) In general.--Each copyright 
                                owner may, during the month of 
                                September of each year, elect to change 
                                the designated agent to represent the 
                                owner and the musical works (or shares 
                                of musical works) referred to in clause 
                                (i), beginning on January 1 of the 
                                succeeding calendar year.
                                    ``(II) Selection.--A copyright 
                                owner may choose only one designated 
                                agent during the month of September of 
                                each year. If the designated agent 
                                chosen is not certified pursuant to 
                                subparagraph (C)(i) or is decertified 
                                pursuant to subparagraph (C)(iii), the 
                                copyright owner and the musical works 
                                (or shares) referred to in clause (i) 
                                shall be represented by the General 
                                Designated Agent for the succeeding 
                                calendar year.
                            ``(iii) Effect on licenses.--A designated 
                        agent's representation of the musical works 
                        (and shares of musical works) of any copyright 
                        owner who elects to change designated agents 
                        under clause (ii) shall terminate on December 
                        31 of the year in which the election is made, 
                        after which the musical works (and shares of 
                        musical works) of the copyright owner will 
                        become subject to the licenses in effect with 
                        the designated agent selected under clause 
                        (ii).
                            ``(iv) Default representation by general 
                        designated agent.--If a copyright owner does 
                        not choose to be represented by an additional 
                        designated agent, the General Designated Agent 
                        shall represent the copyright owner and musical 
                        works (or shares of musical works) owned or 
                        controlled by the copyright owner.
                            ``(v) Voluntary agreements.--A copyright 
                        owner and a digital music provider may enter 
                        into a voluntary license agreement pursuant to 
                        subsection (c)(3)(E)(i) to cover activities 
                        licensed under this subsection. Any such 
                        agreement shall apply in lieu of a blanket 
                        license under this subsection with respect to 
                        those musical works (or shares of musical 
                        works) and activities covered by the agreement 
                        during the period that the agreement is in 
                        effect. The royalty fees due for usage of 
                        musical works (or shares of musical works) 
                        under a blanket license under this subsection 
                        shall be reduced in proportion to the usage 
                        covered under such a voluntary license 
                        agreement. Each designated agent shall 
                        establish procedures by which copyright owners 
                        and licensees shall be required to notify the 
                        designated agent of the existence of voluntary 
                        license agreements upon which they are relying 
                        in lieu of the blanket license. Such procedures 
                        shall include appropriate measures to protect 
                        confidential information of licensees.
                    ``(F) Notice of designated agents.--At least 90 
                days before beginning operations, the General 
                Designated Agent and any interested party wishing to 
                serve as a designated agent shall file with the 
                Copyright Office a notice of intent to operate as a 
                designated agent under this subsection. The notice 
                shall contain such contact information, and such 
                information concerning applications for licenses under 
                this subsection and access to the electronic database 
                of the designated agent (described in subparagraph 
                (H)(i)) identifying musical works (or shares of musical 
                works) represented by the designated agent, as required 
                in regulations issued to carry out this subsection. The 
                Copyright Office shall make each notice filed under 
                this subparagraph available to the public on the 
                Internet.
                    ``(G) Termination of designated agent.--
                            ``(i) Notice and transfer of records.--At 
                        least 180 days before terminating operations, a 
                        designated agent shall--
                                    ``(I) notify the Copyright Office, 
                                all of its licensees under this 
                                subsection, all of the copyright owners 
                                represented by the designated agent for 
                                the purposes of this subsection, and 
                                all other designated agents of its 
                                intent to terminate operations; and
                                    ``(II) transfer electronic and 
                                other copies of all relevant records to 
                                the existing General Designated Agent 
                                or, in the case of the termination of 
                                the General Designated Agent, to the 
                                successor General Designated Agent.
                            ``(ii) Assumption of duties by gda.--Upon 
                        the termination of operations of a designated 
                        agent, the General Designated Agent or 
                        successor General Designated Agent, as the case 
                        may be, shall assume the administration of the 
                        musical works and rights previously 
                        administered by the terminated designated 
                        agent, regardless of whether the terminated 
                        agent has complied with clause (i).
                    ``(H) Musical works data.--
                            ``(i) Availability.--The General Designated 
                        Agent and each additional designated agent 
                        shall maintain and make available to licensees, 
                        free of charge, a searchable electronic 
                        database of information from which licensees 
                        can determine which musical works (or shares of 
                        musical works) are available for licensing 
                        under this subsection through that designated 
                        agent. Any musical work (or shares of a musical 
                        work) not identified as being represented by 
                        the General Designated Agent or any additional 
                        designated agent in any such database may be 
                        presumed by licensees to be represented by the 
                        General Designated Agent.
                            ``(ii) Use of database by designated agents 
                        and licensees.--Subject to the public access 
                        described under clause (iii), the database 
                        required by clause (i) may be used by 
                        designated agents and licensees only for 
                        purposes of determining the identity and 
                        availability of musical works for licenses 
                        under this subsection, obtaining such licenses, 
                        reporting of use of musical works, payment of 
                        royalties, and otherwise to comply with 
                        licenses under this subsection, except that a 
                        designated agent may use or make the database 
                        it maintains available for other purposes 
                        relating to musical works or music publishers. 
                        The Copyright Royalty Judges shall, in 
                        establishing cost-sharing amounts pursuant to 
                        paragraph (12), consider the value and benefit 
                        of any such other purposes to the designated 
                        agent and the copyright owners it represents. 
                        The use of any such database shall be subject 
                        to reasonable confidentiality and security 
                        standards prescribed in regulations to carry 
                        out this subsection.
                            ``(iii) Public access to database.--The 
                        General Designated Agent and each designated 
                        agent shall make relevant portions of the 
                        database required by clause (i) available free 
                        of charge to the general public to access 
                        information concerning specific musical works 
                        that are represented by the designated agent, 
                        subject to reasonable terms and conditions of 
                        use as may be prescribed by the Register of 
                        Copyrights.
                    ``(I) Letters of direction.--
                            ``(i) In general.--A designated agent shall 
                        comply with a letter of direction submitted 
                        under clause (ii) or (iii) which instructs the 
                        designated agent to pay all or part of the 
                        royalties otherwise payable to the copyright 
                        owner to another person.
                            ``(ii) Recoupment of advance.--A copyright 
                        owner that receives an advance payment from a 
                        sound recording company under a contract 
                        entered into before June 1, 2006, that has not 
                        been recouped by the sound recording company 
                        shall, at the request of the sound recording 
                        company, submit a letter of direction to a 
                        designated agent instructing the designated 
                        agent to pay royalties otherwise payable to the 
                        copyright owner to the sound recording company 
                        until such time as the advance payment made by 
                        the sound recording company to the copyright 
                        owner is recouped by the sound recording 
                        company.
                            ``(iii) Missing copyright owner.--In any 
                        case in which a sound recording company is, 
                        after reasonable efforts, unable to locate a 
                        copyright owner that received an advance 
                        payment from the sound recording company that 
                        has not fully been recouped by the sound 
                        recording company, the sound recording company 
                        may submit a letter of direction to a 
                        designated agent directing the designated agent 
                        to pay royalties that would be due the 
                        copyright owner to the sound recording company.
            ``(10) Royalty reporting and compliance.--
                    ``(A) Requirements.--
                            ``(i) In general.--Each licensee under this 
                        subsection shall, on a quarterly basis and in 
                        electronic format, report its usage of musical 
                        works under the license, and make royalty 
                        payments by reason of such usage, to the 
                        applicable designated agent.
                            ``(ii) Limitation on disclosure.--
                                    ``(I) In general.--A designated 
                                agent may disclose information received 
                                under clause (i) to a recipient of 
                                royalty payments made by a licensee 
                                only with respect to musical works 
                                owned or controlled by the recipient. 
                                The designated agent may not disclose 
                                such information to any other person in 
                                a form that can be readily associated 
                                with a licensee except to the extent 
                                permitted by written agreement of the 
                                licensee.
                                    ``(II) Exception.--Subclause (I) 
                                does not prevent a designated agent 
                                from providing information with respect 
                                to a licensee--
                                            ``(aa) to the legal and 
                                        financial advisors of the 
                                        designated agent or to an 
                                        accountant or auditor rendering 
                                        services relating to this 
                                        subsection; or
                                            ``(bb) to the extent 
                                        necessary in connection with a 
                                        bona fide dispute or legal 
                                        claim or proceeding.
                            ``(iii) Interest.--
                                    ``(I) In general.--A licensee who 
                                has failed to make a payment required 
                                under this subsection by the due date 
                                to a designated agent (including as 
                                specified in a notice of payment 
                                deficiency or default, as determined in 
                                a royalty compliance examination under 
                                subparagraph (B), or as required by a 
                                determination of the Copyright Royalty 
                                Judges), shall pay to the designated 
                                agent interest on the overdue amount, 
                                at the Federal funds rate plus 5 
                                percent, such interest to accrue 
                                monthly from the date payment was due 
                                until the date payment is received by 
                                the designated agent.
                                    ``(II) Definition.--In this clause, 
                                the term `Federal funds rate' means the 
                                interest rate established by the 
                                Federal Reserve at which depository 
                                institutions lend balances at the 
                                Federal Reserve to other depository 
                                institutions overnight. The Federal 
                                funds rate for any 1-month period 
                                during which interest accrues under 
                                clause (i) is the Federal funds rate in 
                                effect on the first day of that 1-month 
                                period.
                            ``(iv) Promotional use.--A licensee under 
                        this subsection shall not be required to report 
                        or pay under this subsection for a free 
                        promotional use of a musical work that is 
                        authorized by the copyright owner of the 
                        musical work.
                    ``(B) Royalty compliance examinations.--A 
                designated agent may, upon providing written notice to 
                its licensee under this subsection, conduct a royalty 
                compliance examination of the licensee, subject to the 
                following:
                            ``(i) A designated agent may conduct only 1 
                        examination of any licensee in a calendar year, 
                        and may conduct an examination of a licensee 
                        with respect to a reporting period only once. A 
                        designated agent may conduct an examination 
                        jointly with one or more other designated 
                        agents.
                            ``(ii) The examination may begin only 
                        within 18 months after the end of the period 
                        being examined and may only cover a period of 
                        not less than 2 and not more than 4 consecutive 
                        years, except that an examination may cover a 
                        period of--
                                    ``(I) more than 4 years if the 
                                examination includes activities subject 
                                to retroactive payments under paragraph 
                                (6);
                                    ``(II) a period of less than 2 
                                years if--
                                            ``(aa) the licensee's 
                                        license has been terminated;
                                            ``(bb) the licensee has 
                                        defaulted in its reporting or 
                                        payments under this paragraph; 
                                        or
                                            ``(cc) the licensee has 
                                        terminated or is about to 
                                        terminate operations, has filed 
                                        or indicated an intent to file 
                                        for bankruptcy, or has 
                                        transferred or indicated an 
                                        intent to transfer its assets 
                                        to a third party; or
                                    ``(III) a period of less than 2 
                                years or more than 4 years, if for 
                                other good cause the examination cannot 
                                reasonably cover a period of 2 to 4 
                                years.
                            ``(iii) At the conclusion of the 
                        examination, the designated agent shall, after 
                        considering any written rebuttal provided by 
                        the licensee during the examination, provide a 
                        written notice to the licensee setting forth 
                        the designated agent's final determination of 
                        the claim, if any, resulting from the 
                        examination.
                            ``(iv) The designated agent shall bear the 
                        costs of the examination, except that, if the 
                        licensee underpaid royalty fees by 10 percent 
                        or more, the licensee shall bear the reasonable 
                        costs of the examination.
                            ``(v) A licensee may not assert section 507 
                        of this title or any other Federal or State 
                        statute of limitations, doctrine of laches or 
                        estoppel, or similar provision to avoid a 
                        royalty examination under this subparagraph, or 
                        as a defense to a legal action arising from 
                        such a royalty examination, if the legal action 
                        is commenced within 18 months after the final 
                        determination by the designated agent of the 
                        claim (as stated in the written notice under 
                        clause (iii)) resulting from the examination 
                        that is the basis for such action.
                    ``(C) Failure to report or pay royalties.--
                            ``(i) In general.--If a licensee under this 
                        subsection--
                                    ``(I) fails to provide a quarterly 
                                report when due or fails to provide a 
                                quarterly report in compliance with the 
                                error tolerance standard, or
                                    ``(II) fails to make all quarterly 
                                royalty payments when due or fails to 
                                pay royalties due for reported usage,
                        the designated agent may provide written notice 
                        to the licensee describing the default under 
                        subclause (I) or (II) and providing that if the 
                        default is not remedied within 30 days after 
                        receipt of the notice, the license will 
                        automatically terminate upon the expiration of 
                        that 30-day period. Upon such termination, the 
                        licensee will be subject to an infringement 
                        action as provided in subsection (c)(6) with 
                        respect to the uses of the musical works that 
                        are the subject of the default.
                            ``(ii) Failure with respect to individual 
                        work.--
                                    ``(I) Exclusion from license.--If a 
                                licensee with an otherwise valid 
                                license under this subsection--
                                            ``(aa) has not made the 
                                        required reports or royalty 
                                        payments under subparagraph 
                                        (A)(i) for a musical work 
                                        covered by the license, or
                                            ``(bb) upon being sent 
                                        written notice from the 
                                        designated agent of a valid 
                                        reporting or payment deficiency 
                                        with respect to the use of a 
                                        musical work, fails to remedy 
                                        that deficiency within the 
                                        specified cure period,
                                that work is excluded from the scope of 
                                the license until such time as the 
                                licensee provides all the reports that 
                                are past due, and makes all royalty 
                                payments that are past due, to the 
                                designated agent for that work, or the 
                                designated agent otherwise identifies 
                                the work, determines the usage of the 
                                work, and has received from the 
                                licensee all royalty payments for the 
                                work that are past due.
                                    ``(II) Specified cure period.--For 
                                purposes of subclause (I)(bb), the 
                                ``specified cure period'' means, with 
                                respect to a licensee--
                                            ``(aa) 90 days, during the 
                                        first 12 month-period in which 
                                        the licensee engages in 
                                        activities under a license 
                                        under this subsection;
                                            ``(bb) 60 days, during the 
                                        succeeding 12-month period in 
                                        which a licensee engages in 
                                        activities under a license 
                                        under this subsection; and
                                            ``(cc) 30 days, during any 
                                        period thereafter.
                                    ``(III) Exception.--If the licensee 
                                demonstrates to the designated agent 
                                with respect to a musical work that is 
                                the subject of a notice of deficiency 
                                described in subclause (I)(bb) that the 
                                deficiency cannot be remedied because 
                                it is due to missing information that, 
                                notwithstanding a diligent search by 
                                the licensee, is actually and 
                                objectively unobtainable by the 
                                licensee from any known source, then 
                                the license shall not be invalidated 
                                with respect to that work, if all 
                                royalties due for that work have been 
                                paid.
                            ``(iii) Obtaining subsequent licenses.--A 
                        licensee whose license is terminated by a 
                        designated agent under clause (i) and who fully 
                        remedies the default within 60 days after the 
                        date on which the license terminates, may apply 
                        for and obtain a new license from that 
                        designated agent, if, during the 5-year period 
                        ending on the date of such termination, the 
                        licensee has not previously had a license 
                        terminated by the designated agent. In any 
                        other case in which a license is validly 
                        terminated by a designated agent, the 
                        designated agent may require the licensee to 
                        meet reasonable credit or advance requirements 
                        or to demonstrate the capability to report and 
                        make royalty payments in compliance with this 
                        subsection before obtaining a new license.
            ``(11) Distribution of royalties, unclaimed funds, and 
        dispute resolution.--
                    ``(A) Distribution of royalties.--Each designated 
                agent shall be responsible for distributing royalties 
                collected from licensees under this subsection to any 
                copyright owner whom the designated agent represents 
                and who has provided the designated agent with 
                sufficient information to identify and pay that 
                copyright owner (or the copyright owner's designee).
                    ``(B) Unclaimed funds.--
                            ``(i) In general.--If a designated agent is 
                        unable, after a reasonably diligent search, to 
                        identify or locate a copyright owner entitled 
                        to receive royalties under subparagraph (A), 
                        the designated agent may deposit the 
                        undistributed royalties (in this subparagraph 
                        referred to as `unclaimed funds') into an 
                        unclaimed funds account that earns interest, 
                        accrued monthly, at the Federal short term rate 
                        determined under section 1274(d)(1)(C)(i) of 
                        the Internal Revenue Code of 1986. Interest 
                        accrued on unclaimed funds shall be payable to 
                        a copyright owner upon distribution of the 
                        unclaimed funds to such copyright owner.
                            ``(ii) Holding and distribution.--
                                    ``(I) Holding.--A designated agent 
                                with unclaimed funds shall hold the 
                                funds for a period of at least 3 years 
                                after the date on which the licensee 
                                paid the funds. The designated agent 
                                shall make reasonably diligent efforts 
                                to publicize the existence of the 
                                unclaimed funds and the procedures by 
                                which copyright owners may claim such 
                                funds from the designated agent.
                                    ``(II) Licensing administrative 
                                costs.--At the end of the period in 
                                which funds are held under subclause 
                                (I), the designated agent may apply the 
                                funds to offset licensing 
                                administrative costs.
                                    ``(III) Distribution of 
                                remainder.--Any unclaimed funds not 
                                applied to offset licensing 
                                administrative costs under subclause 
                                (II) shall be distributed as follows:
                                            ``(aa) The designated agent 
                                        shall pay to every other 
                                        designated agent its pro rata 
                                        share of the unclaimed funds as 
                                        determined on the basis of the 
                                        proportionate distribution of 
                                        royalties by each designated 
                                        agent to copyright owners for 
                                        the reporting periods during 
                                        which the funds were collected.
                                            ``(bb) Each designated 
                                        agent shall distribute, on an 
                                        equitable basis, its pro rata 
                                        share of the unclaimed funds to 
                                        the copyright owners that the 
                                        designated agent represents 
                                        under this subsection (other 
                                        than those that cannot be 
                                        identified or located).
                            ``(iii) Preemption.--This subparagraph 
                        preempts any State law (including common law) 
                        that would otherwise apply concerning 
                        escheatment or abandoned or unclaimed property.
                    ``(C) Disputes.--Each designated agent shall 
                establish a committee that includes an equal number 
                of--
                            ``(i) representatives of music publishing 
                        entities represented by the designated agent, 
                        and
                            ``(ii) songwriters with musical works 
                        represented by the designated agent who are not 
                        members of the board of directors, governing 
                        body, or management of the designated agent,
                for the purpose of addressing any dispute raised by a 
                copyright owner relating to the allocation and payment 
                by the designated agent of royalties to such copyright 
                owner under a license obtained from the designated 
                agent under this subsection. The dispute resolution 
                process shall not affect any other legal or equitable 
                rights or remedies available to any copyright owner or 
                the designated agent.
                    ``(D) Procedures.--The Register of Copyrights shall 
                establish by regulation the procedures for the holding 
                by a designated agent of unclaimed funds and royalties 
                paid under this subsection that are attributable to 
                musical works that are the subject of a legal dispute 
                or proceeding. A designated agent that complies with 
                the requirements of this paragraph and such regulations 
                shall not be subject to a legal claim based upon or 
                arising from unclaimed funds or an ownership dispute or 
                legal proceeding.
                    ``(E) Documentation.--A songwriter whose musical 
                works (or shares thereof) are administered by a music 
                publisher for licensing under this subsection 
                (including those represented through default 
                representation pursuant to paragraph (9)(E)(iv)) may 
                request from a designated agent a copy of the relevant 
                portions of any royalty statement that the designated 
                agent provided, within the preceding 4 calendar years, 
                to that publisher, and that shows all data provided by 
                the designated agent to the publisher regarding the use 
                and royalties distributed to the publisher in 
                connection with those works (or shares thereof). A 
                designated agent shall provide the information 
                requested by the songwriter within a reasonable time 
                after receiving the request. A songwriter may make such 
                a request of a particular designated agent not more 
                than once each calendar year.
                    ``(F) Withholding of interim royalties.--Each 
                designated agent may withhold reasonable reserves from 
                the distribution of interim royalties collected under 
                this subsection to allow for the possibility of a lower 
                final statutory rate. Upon final determination of the 
                statutory rate, to the extent such reserves are not 
                required to be returned or credited to the licensee, 
                the designated agent shall distribute to copyright 
                owners such reserves with interest.
            ``(12) Cost sharing fees.--
                    ``(A) In general.--The Copyright Royalty Judges 
                shall determine, under such procedures as they may 
                establish, an appropriate cost-sharing mechanism and 
                cost-sharing amounts to be paid by licensees under this 
                subsection to designated agents. Not later than 
                February 1, 2007, the Copyright Royalty Judges shall 
                initiate a proceeding to determine, not later than May 
                1, 2007, appropriate interim cost-sharing amounts to 
                apply pending the establishment of final cost-sharing 
                amounts. Any cost-sharing mechanism or cost-sharing 
                amounts shall be equitably applied to all designated 
                agents. In determining a cost-sharing mechanism or 
                cost-sharing amount under this paragraph, the Copyright 
                Royalty Judges shall consider--
                            ``(i)(I) the actual, reasonable costs of 
                        creating and maintaining an infrastructure for 
                        activities of designated agents under this 
                        subsection;
                            ``(II) any nonmonetary contributions by the 
                        parties to such infrastructures, including 
                        contributions of data and services;
                            ``(III) the actual, reasonable costs to 
                        designated agents specifically associated with 
                        the administration of licenses under this 
                        subsection;
                            ``(IV) the nature and value of any 
                        collateral benefits that any party may realize 
                        from the blanket license and blanket license 
                        system created by this subsection; and
                            ``(V) any other factors deemed relevant by 
                        the Copyright Royalty Judges.
                    ``(B) Cost-sharing not a factor in royalty rates.--
                The Copyright Royalty Judges, in establishing royalty 
                rates for statutory licenses, may not take into account 
                the cost-sharing mechanism or cost-sharing amounts 
                under subparagraph (A).
            ``(13) Exclusion from blanket licenses.--
                    ``(A) In general.--A sound recording company may, 
                by written notice to the appropriate designated agent, 
                exclude a musical work from a compulsory license under 
                paragraph (2) if the musical work is the subject of a 
                contract described in subsection (c)(3)(E)(ii).
                    ``(B) Exclusion errors.--
                            ``(i) Not excluded.--In any case in which a 
                        musical work could have been excluded pursuant 
                        to subparagraph (A) but was not due to 
                        uncertainty concerning ownership of the 
                        copyright of the musical work or the 
                        application of a contract described in 
                        subsection (c)(3)(E)(ii), or in any case in 
                        which a digital music provider makes payments 
                        to a designated agent for use of a musical work 
                        excluded under subparagraph (A), the designated 
                        agent shall make payments to the appropriate 
                        person as if the exclusion under subparagraph 
                        (A) had applied on the date of the enactment of 
                        the Section 115 Reform Act of 2006, unless an 
                        agreement between the designated agent and the 
                        appropriate person provides otherwise.
                            ``(ii) Excluded.--In any case in which a 
                        musical work was excluded pursuant to 
                        subparagraph (A) in error--
                                    ``(I) a sound recording company 
                                acting in good faith with regards to 
                                the exclusion shall only be liable for 
                                the payment of amounts that otherwise 
                                would have been payable under this 
                                subsection plus interest as described 
                                in (10)(A)(iii)(II); and
                                    ``(II) a licensee acting in good 
                                faith with regards to the exclusion 
                                shall not be liable.
            ``(14) Definitions.--In this subsection:
                    ``(A) Administrative fees.--The term 
                `administrative fees' means any fees that are collected 
                or deducted by a designated agent to cover licensing 
                administrative costs or other administrative costs.
                    ``(B) Copyright owner.--The term `copyright owner' 
                means a natural person or legally recognized entity 
                that owns or controls an interest in one or more 
                copyrighted nondramatic musical works subject to 
                licensing under this section.
                    ``(C) Digital music provider.--The term `digital 
                music provider' means a person that--
                            ``(i) with respect to a service engaging in 
                        activities licensed under this subsection--
                                    ``(I) contracts with or has a 
                                direct economic relationship with the 
                                end users of the service, and controls 
                                what end users pay for the service;
                                    ``(II) controls how content is 
                                bundled and offered through the 
                                service;
                                    ``(III) is able to fully report on 
                                all revenues and consideration 
                                generated by the service; and
                                    ``(IV) is able to fully report on 
                                all elements of music usage by the 
                                service (or procure such reporting); or
                            ``(ii) makes and distributes a hybrid 
                        offering.
                    ``(D) Error tolerance standard.--The term `error 
                tolerance standard' means the maximum percentage, of 
                all data that a licensee is required to report under 
                this subsection under its license in any statutory 
                reporting period, that is permitted to be inaccurate, 
                unreadable, or missing, or any combination thereof, as 
                determined under regulations issued to carry out this 
                subsection.
                    ``(E) Full download.--The term `full download' 
                means a digital phonorecord delivery of a sound 
                recording of a musical work that is not limited in 
                availability for listening by the end user either to a 
                period of time or a number of times the sound recording 
                can be played.
                    ``(F) Hybrid offering.--The term `hybrid offering' 
                means a reproduction or distribution of a phonorecord 
                in physical form subject to a compulsory license under 
                this section where--
                            ``(i) a digital transmission of data by or 
                        under the authority of the licensee is required 
                        to render the sound recording embodied on the 
                        phonorecord audible to the end user or to 
                        enable the continued rendering of the sound 
                        recording after a finite period of time or a 
                        specified number of times rendered; or
                            ``(ii) the phonorecord is made by or under 
                        the authority of the licensee at the request of 
                        a user for distribution to that user or the 
                        user's designee.
                    ``(G) Interactive stream.--The term `interactive 
                stream'--
                            ``(i) means a stream of a sound recording 
                        of a musical work that does not qualify for a 
                        statutory license under section 114(d)(2) with 
                        respect to the sound recording embodied 
                        therein; and
                            ``(ii) subject to clause (i), includes a 
                        stream of a particular sound recording of a 
                        musical work that an end user has selected, and 
                        is transmitted to such end user, to listen to 
                        at or substantially at the time of making such 
                        selection or at some future time, whether or 
                        not as a part of a program specially created 
                        for the end user.
                    ``(H) Licensing administrative costs.--The term 
                `licensing administrative costs' means the actual costs 
                to a designated agent that are attributable to the 
                issuance and administration of licenses under this 
                subsection, including--
                            ``(i) costs in connection with the 
                        collection and distribution of royalties under 
                        this subsection;
                            ``(ii) the costs of identifying and 
                        locating copyright owners and administering a 
                        claims system for unidentified copyright 
                        owners;
                            ``(iii) the costs of royalty examinations 
                        and other royalty compliance efforts; and
                            ``(iv) the costs of creating and 
                        maintaining an infrastructure for the 
                        activities described in clauses (i), (ii), and 
                        (iii).
                    ``(I) Limited download.--the term `limited 
                download' means a digital phonorecord delivery of a 
                sound recording of a musical work that is only 
                available for listening for--
                            ``(i) a definite period of time (including 
                        a period of time defined by ongoing 
                        subscription payments made by an end user); or
                            ``(ii) a specified number of times.
                    ``(J) Noninteractive streaming.--The term 
                `noninteractive streaming' means the radio-style 
                streaming of sound recordings of musical works for 
                which a statutory license is available with respect to 
                the sound recordings under section 114(d)(2).
                    ``(K) Other administrative costs.--The term `Other 
                administrative costs' means all expenses, expenditures, 
                retained earnings, and reserves of a designated agent, 
                other than licensing administrative costs, that are 
                authorized by the board of directors of the designated 
                agent.
                    ``(L) Songwriter.--The term `songwriter' means the 
                author of a musical work.
                    ``(M) Sound recording company.--The term `sound 
                recording company' means a person who is--
                            ``(i) a copyright owner or who has similar 
                        rights to a sound recording of a musical work 
                        under the common law or statues of any State 
                        with respect to a sound recording fixed before 
                        February 15, 1972;
                            ``(ii) an exclusive licensee of a sound 
                        recording of a musical work; or
                            ``(iii) performing the functions of 
                        marketing and authorizing the distribution of a 
                        sound recording of a musical work under the 
                        authority of the copyright owner of the musical 
                        work.
                    ``(N) Stream.--(i) The term `stream' means the 
                digital transmission of a sound recording embodying a 
                musical work for one-time listening by the end user 
                using technology such that the transmission is not 
                intended or designed to result in a substantially 
                complete reproduction of the sound recording, other 
                than an incidental reproduction made in the normal 
                course of such activity, including a cached, network, 
                or RAM buffer reproduction, to permit such one-time 
                listening.
                    ``(ii) The term `streaming' means the process of 
                making and distributing streams.
            ``(15) Regulations.--The Register of Copyrights shall issue 
        such regulations as are necessary to carry out this subsection, 
        including--
                    ``(A) specifying the requirements and procedures 
                for reporting and making payments, and conducting 
                royalty compliance examinations, under paragraph (10);
                    ``(B) specifying the procedures for expedited 
                proceedings under paragraph (8)(D)(ii)(II)(bb);
                    ``(C) specifying the form of a letter of direction 
                under paragraph (9)(I)(i); and
                    ``(D) facilitating exclusions from the blanket 
                license under paragraph (13).''.

SEC. 3. PERFORMANCE RIGHT PRESERVED.

    Section 115 of title 17, United States Code, is amended by adding 
at the end the following new subsection:
    ``(f) Performance Right Preserved.--The rights granted under 
subsection (e) shall not include, limit, or otherwise affect any right 
of public performance of a musical work. The third sentence of 
subsection (e)(9)(E)(v) and the definitions contained in paragraph (14) 
of subsection (e) shall not be taken into account in any 
administrative, judicial, or other governmental proceeding to set or 
adjust the royalties payable to copyright owners of musical works for, 
the right of public performance of their works.''.

SEC. 4. INTERIM RATE PROCESS.

    Section 115(c) of title 17, United States Code, is amended by 
adding at the end the following new paragraph:
            ``(7) Interim rates.--
                    ``(A) In general.--For any activity for which a 
                license is available under this section, other than an 
                activity for which a license is available under 
                subsection (e), for which a rate and terms have not 
                been determined, any person shall, upon serving notice 
                to the copyright owner, have a license under this 
                subsection to engage in the activity, subject to 
                subparagraph (B).
                    ``(B) Interim rates.--Upon the filing of an 
                application under subparagraph (A)--
                            ``(i) the parties may negotiate an interim 
                        rate and terms that will apply to the activity 
                        under the license; or
                            ``(ii) either party or both parties may 
                        apply to the Copyright Royalty Judges for an 
                        interim rate and terms, in which case--
                                    ``(I) the Copyright Royalty Judges 
                                shall, not later than 15 days after the 
                                application is made, publish notice of 
                                an expedited proceeding to determine 
                                the interim rate and terms; and
                                    ``(II) the Judges shall determine 
                                the interim rate and terms not less 
                                than 30 days and not more than 60 days 
                                after publishing the notice, through 
                                the expedited proceeding.
                    ``(C) Applicability of interim rates.--(i) Interim 
                rates and terms negotiated under subparagraph (B)(i) or 
                established under subparagraph (B)(ii) shall apply to 
                the activity under the license concerned until a rate 
                and terms for the activity are determined under 
                paragraph (3)(C) and chapter 8, or as otherwise agreed 
                by the parties.
                    ``(ii) Interim rates and terms described in 
                subparagraph (A) with respect to an activity by an 
                applicant shall not be treated as precedent in a final 
                ratemaking proceeding. If the Copyright Royalty Judges 
                have established an interim rate and terms under 
                subparagraph (B)(ii), subject to subparagraph (D), that 
                rate and those terms shall apply to the same activity 
                engaged in by any person, except as otherwise agreed to 
                by the parties.
                    ``(D) Single proceeding for each activity.--Unless 
                the Copyright Royalty Judges determine that there is 
                good cause to review an interim rate or terms 
                established under subparagraph (B)(ii), the Copyright 
                Royalty Judges may conduct only 1 proceeding to 
                determine an interim rate and terms for an activity for 
                which a license is available under this subsection.
                    ``(E) Adjustment of interim rates.--After a final 
                determination of rates and terms that will apply to an 
                activity for which a license is available under this 
                subsection has been made under paragraph (3)(C) and 
                chapter 8, the final rate and terms shall be 
                retroactive to the inception of the activity under a 
                license between a person and a copyright owner to which 
                the rate and terms apply, unless an agreement between 
                the parties to the license provides otherwise. Not 
                later than 60 days after the determination of the final 
                rate and terms becomes effective--
                            ``(i) the person shall pay to the copyright 
                        owner any amounts due from underpayment of fees 
                        by the person because the final rate exceeds 
                        the interim rate; or
                            ``(ii) the copyright owner shall refund to 
                        the person the amounts of any overpayment of 
                        fees by the person because the interim rate 
                        exceed the final rate, or, at the election of 
                        the person, the copyright owner shall credit 
                        such overpayment against future payments by the 
                        person to the copyright owner under this 
                        subsection.''.

SEC. 5. TECHNICAL AMENDMENTS.

    (a) Definition.--Section 115(d) of title 17, United States Code, is 
amended--
            (1) in the first sentence, by striking ``As used'' and 
        inserting by adding at the end the following: ``.''
            ``(1) In general.--As used'';
            (2) by moving the remaining text 2 ems to the right; and
            (3) by adding at the end the following:
            ``(2) Included activities.--The term `digital phonorecord 
        delivery' includes--
                    ``(A) an interactive stream (as such term is 
                defined in subsection (e)(16)(F)) of nondramatic 
                musical works; and
                    ``(B) server and incidental reproductions of 
                nondramatic musical works made to facilitate the 
                deliveries of phonorecords by digital transmission 
                described in subparagraph (A) and paragraph (1).''.
    (b) Conforming Amendments.--Section 115(c) of title 17, United 
States Code, is amended--
            (1) in paragraph (3)--
                    (A) in the first sentence of subparagraph (A), by 
                striking ``or authorize the distribution of'';
                    (B) in subparagraph (C), by striking ``Such terms 
                and rates shall distinguish'' and all that follows 
                through the end of the sentence; and
                    (C) in subparagraph (D), by striking ``Such terms 
                and rates shall distinguish'' and all that follows 
                through the end of the sentence; and
            (2) in paragraph (5)--
                    (A) by striking ``(5) Royalty payments'' and 
                inserting ``(5)(A) Subject to subparagraph (B), royalty 
                payments''; and
                    (B) by adding at the end the following:
            ``(B) Payments under the license provided for under 
        subsection (e) shall be governed by that subsection in lieu of 
        subparagraph (A).''.

SEC. 6. EFFECTIVE DATE.

    (a) In General.--Subject to subsection (b), this Act and the 
amendments made by this Act take effect on the date of the enactment of 
this Act.
    (b) Delay of Licenses.--No license under subsection (e) of section 
115 of title 17, United States Code, may take effect before January 1, 
2008.

SEC. 7. SAVINGS CLAUSES.

    (a) License Not Required.--This Act and the amendments made by this 
Act shall not be construed to indicate whether an activity for which a 
license under section 115 of title 17, United States Code, is 
available, if not licensed or otherwise authorized by the copyright 
owner, would constitute an act of copyright infringement.
    (b) Fair Use.--Nothing in this Act shall affect any right, 
limitation, or defense to copyright infringement, including fair use, 
under title 17, United States Code.
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