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)

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).