[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6052 Introduced in House (IH)]








109th CONGRESS
  2d Session
                                H. R. 6052

  To amend title 17, United States Code, to provide for licensing of 
  digital delivery of musical works and to provide for limitation of 
 remedies in cases in which the copyright owner cannot be located, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 12, 2006

Mr. Smith of Texas introduced the following bill; which was referred to 
                     the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
  To amend title 17, United States Code, to provide for licensing of 
  digital delivery of musical works and to provide for limitation of 
 remedies in cases in which the copyright owner cannot be located, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Copyright 
Modernization Act of 2006''.
    (b) Table of Contents.--The table of contents of this Act is the 
following:

Sec. 1. Short title; table of contents.
                        TITLE I--MUSIC LICENSING

Sec. 101. Short title.
Sec. 102. Statutory Licenses for digital delivery of musical works.
Sec. 103. Performance right preserved.
Sec. 104. Interim rate process.
Sec. 105. Technical amendments.
Sec. 106. Effective date.
Sec. 107. Savings clauses.
Sec. 108. Staying of infringement actions.
                         TITLE II--ORPHAN WORKS

Sec. 201. Short title.
Sec. 202. Limitation on remedies in cases involving orphan works.
Sec. 203. Report to Congress on amendments.
Sec. 204. Inquiry on remedies for small copyright claims.
               TITLE III--COPYRIGHT PROTECTION RESOURCES

Sec. 301. Short title.
Sec. 302. Registration in civil infringement actions.
Sec. 303. Statutory damages.
Sec. 304. Improved investigative and forensic resources for enforcement 
                            of laws related to intellectual property 
                            crimes.

                        TITLE I--MUSIC LICENSING

SEC. 101. SHORT TITLE.

    This title may be cited as the ``Section 115 Reform Act of 2006''.

SEC. 102. 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 licensee 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. Except as provided in 
        paragraph (9)(E)(v), 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) Exemption for noninteractive server and incidental 
        reproductions.--
                    ``(A) In general.--Notwithstanding section 106, it 
                shall not be an infringement of the exclusive right of 
                reproduction or distribution in a copyrighted musical 
                work, as described in section 106(1) and (3), for a 
                digital music provider or a transmitting entity to make 
                server and incidental reproductions to facilitate 
                noninteractive streaming or terrestrial radio analog 
                broadcasts of that musical work, subject to the 
                following:
                            ``(i) The exemption under this subparagraph 
                        is limited to reproductions on servers and 
                        incidental reproductions made under authority 
                        of the digital music provider or transmitting 
                        entity and incident to noninteractive streaming 
                        or terrestrial radio analog broadcasting, 
                        including cached, network, and RAM buffer 
                        reproductions, to the extent reasonably 
                        necessary for, and only to the extent that such 
                        reporductions are used for the purpose of, 
                        engaging in noninteractive streaming or 
                        terrestrial radio analog broadcasting.
                            ``(ii) The exemption under this 
                        subparagraph does not apply to any server or 
                        incidental reproductions made to facilitate 
                        noninteractive streaming or terrestrial radio 
                        analog broadcasts by a digital music provider 
                        or a transmitting entity that takes affirmative 
                        steps to intentionally induce, cause, or 
                        promote the making of reproductions of musical 
                        works by or for end users that are accessible 
                        by those end users for future listening, unless 
                        valid license authority for reproduction and 
                        distribution rights otherwise exists permitting 
                        the service to use such server or incidental 
                        reproductions for that activity. For purposes 
                        of this clause, none of the following shall in 
                        itself be considered an affirmative step to 
                        intentionally induce, cause, or promote the 
                        making of reproductions of musical works:
                                    ``(I) The transmission of metadata 
                                to identify sound recordings.
                                    ``(II) The transmission of 
                                unencrypted streams.
                                    ``(III) A transmitting entity's 
                                announcement of a particular song to be 
                                broadcast.
                    ``(B) Retroactive effect.--The exemption from 
                liability provided under subparagraph (A) shall apply 
                to actions taken on or after January 1, 2001.
                    ``(C) Savings clause regarding infringement.--
                Neither the exemption provided under subparagraph (A), 
                nor the limitations on such exemption set forth in 
                subparagraph (A)(ii), shall be construed to imply that 
                the making of server or incidental reproductions not 
                covered by the exemption does or does not constitute 
                copyright infringement. In evaluating a claim of 
                infringement based on the making by a service of server 
                or incidental reproductions in a case in which the use 
                of such server or incidental reproductions is not 
                within the scope of the exemption set forth in 
                subparagraph (A), a court shall not take into account 
                the exemption, or the activities that are excluded from 
                the scope of the exemption under subparagraph (A)(ii).
                    ``(D) Rights with respect to sound recordings.--The 
                exemption under this paragraph does not limit or 
                otherwise affect any rights with respect to sound 
                recordings under this title.
            ``(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) License scope and effective date.--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 on 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.
            ``(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) 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.
                    ``(B) Payment.--Licensees under this subsection 
                shall make payments of royalties to the designated 
                agents at rates and terms as directed by the Copyright 
                Royalty Judges.
                    ``(C) Rates and terms for new license activities.--
                            ``(i) In general.--Not later than July 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 July 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.
                    ``(D) 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, 
                        retroactive to the inception of the activity, 
                        until a final rate and terms for the activity 
                        are determined under subparagraph (C), or as 
                        otherwise agreed by the parties.
                            ``(II) An interim rate and terms described 
                        in clause (ii) 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 and terms 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 (C), 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 exceeds 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 March 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, 
                        but only for copyright owners who do not choose 
                        to be represented by an additional designated 
                        agent, and to the extent provided in 
                        subparagraphs (E)(ii)(II) and (G)(ii).
                            ``(III)(aa) The General Designated Agent 
                        shall be governed by a board of directors 
                        consisting of 5 members, 2 of whom shall be 
                        professional songwriters.
                            ``(bb) The mechanical licensing and 
                        collection agency described in subclause (I) 
                        shall select the representatives of music 
                        publishing entities that will serve on the 
                        board of directors of the General Designated 
                        Agent.
                            ``(cc) The Register of Copyrights shall 
                        select the 2 songwriter directors, after 
                        consulting with the songwriter community. Each 
                        of the 2 songwriter directors shall have--
                                    ``(AA) significant artistic 
                                experience in the songwriting 
                                profession, including by deriving the 
                                major portion of his or her income from 
                                songwriter activities such as 
                                mechanical, performance, and 
                                synchronization rights, whether online 
                                or terrestrial; and
                                    ``(BB) significant business 
                                experience in the songwriting 
                                profession so that he or she can fully 
                                understand and participate in the 
                                deliberations of the board of 
                                directors.
                        The 2 songwriter directors shall serve 
                        staggered 3-year terms.
                            ``(dd) All members of the board of 
                        directors of the General Designated Agent have 
                        a fiduciary duty to the publishing entities and 
                        songwriters that the board represents.
                            ``(ii) Decertification.--Upon a showing 
                        that the General Designated Agent fails to meet 
                        the qualifications under this subparagraph or 
                        otherwise fails to meet the requirements under 
                        this paragraph, the Register of Copyrights may, 
                        after providing the General Designated Agent a 
                        reasonable opportunity to respond, disqualify 
                        the General Designated Agent. In such a case, 
                        the Register of Copyrights shall designate 
                        another General Designated Agent.
                    ``(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 1 or more 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. The 
                        additional designated agent elected shall make 
                        a copy of the election available to any other 
                        designated agent upon a reasonable request for 
                        such a copy.
                            ``(iii) Decertification.--Upon a showing 
                        that an additional designated agent fails to 
                        meet the qualifications under this subparagraph 
                        or otherwise fails to meet the requirements 
                        under this paragraph, the Register of 
                        Copyrights may, after providing the additional 
                        designated agent a reasonable opportunity to 
                        respond, remove the certification of the 
                        additional designated agent.
                    ``(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 choose an 
                        additional designated agent to represent the 
                        owner, except that a copyright owner may be 
                        represented by only 1 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.--If the 
                                additional designated agent chosen by a 
                                copyright owner 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 new designated agent, as provided in clause 
                        (ii).
                            ``(iv) Voluntary agreements.--A copyright 
                        owner and a digital music provider may enter 
                        into a voluntary license agreement to cover 
                        activities licensed under this subsection. Any 
                        such agreement shall apply in lieu of a blanket 
                        license under this subsection, to the extent 
                        permissible under subsection (c)(3)(E), 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, any interested party 
                wishing to serve as an additional 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 additional designated agent (described 
                in subparagraph (H)(i)) identifying musical works (or 
                shares of musical works) represented by the additional 
                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 to the existing 
                                General Designated Agent or, in the 
                                case of the termination of the General 
                                Designated Agent, to the successor 
                                General Designated Agent, electronic 
                                and other copies of all records that 
                                are necessary to determine copyright 
                                ownership and payment of royalties.
                            ``(ii) Assumption of duties by general 
                        designated agent.--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 database.--
                            ``(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 additional 
                        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, taking into account 
                        reasonable protection of proprietary data.
                    ``(I) Letters of direction.--
                            ``(i) Recoupment of advance.--
                                    ``(I) Letter of direction.--Subject 
                                to subclauses (II), (III), (IV), and 
                                (V), a copyright owner may 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 in order to allow the 
                                sound recording company to recoup an 
                                advance payment made to the copyright 
                                owner under a contract entered into 
                                between the copyright owner and the 
                                sound recording company.
                                    ``(II) Contracts entered into 
                                before october 1, 2006.--In the case of 
                                a contract described in subclause (I) 
                                that is entered into before October 1, 
                                2006, a letter of direction is valid 
                                only if it is submitted to the General 
                                Designated Agent by March 30, 2008.
                                    ``(III) Contracts entered into 
                                after september 30, 2006.--In the case 
                                of a contract described in subclause 
                                (I) that is entered into before on or 
                                after October 1, 2006, a letter of 
                                direction is valid only if it uses the 
                                terms `letter of direction' and 
                                `designated agent' within the meaning 
                                of this subsection.
                                    ``(IV) Validity of letters of 
                                direction.--A letter of direction that 
                                complies with subclauses (II) and (III) 
                                is valid (subject to the resolution of 
                                any dispute with respect to the letter 
                                that is resolved under subclause (VI)) 
                                with respect to any designated agent 
                                who is or may become responsible for 
                                payment of royalties that are the 
                                subject of the contract between the 
                                copyright owner and the sound recording 
                                company.
                                    ``(V) Exception.--A copyright owner 
                                may not submit a letter of direction 
                                under subclause (I) if another person 
                                who is not a party to the contract 
                                described in subclause (I) owns a share 
                                of the copyright in the musical work 
                                covered by the contract and is due 
                                royalties for that musical work.
                                    ``(VI) Disputes.--If the copyright 
                                owner and the sound recording company 
                                disagree on whether the contract 
                                described in subclause (I) requires the 
                                artist to allow recoupment, either 
                                party may bring an action to resolve 
                                the dispute only in the court specified 
                                in the contract. If the contract does 
                                not specify such a court, either party 
                                may bring an action to resolve the 
                                dispute only in the United States 
                                district court for the judicial 
                                district in which the General 
                                Designated Agent is located.
                            ``(ii) In general.--A designated agent 
                        shall comply with a valid letter of direction 
                        submitted under clause (i)(I) that instructs 
                        the designated agent to pay all or part of the 
                        royalties otherwise payable to the copyright 
                        owner to another person.
            ``(10) Royalty reporting and compliance.--
                    ``(A) Requirements.--
                            ``(i) In general.--Each licensee under this 
                        subsection shall, not later than 30 days after 
                        the end of each calendar quarter, report to the 
                        applicable designated agent, in electronic 
                        format, the licensee's usage of musical works 
                        under the license, and make royalty payments by 
                        reason of such usage,.
                            ``(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, in which 
                                        case the designated agent shall 
                                        make reasonable efforts to 
                                        obtain confidential treatment 
                                        of such information and, unless 
                                        precluded by operation of law, 
                                        shall provide written notice to 
                                        the licensee of any impending 
                                        disclosure of the information.
                            ``(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 an annual rate of 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 exemptions.--
                                    ``(I) Free promotional uses by 
                                digital music providers.--A digital 
                                music provider shall not be required to 
                                pay royalties under this subsection for 
                                a free promotional use of a musical 
                                work in the form of an interactive 
                                stream or limited download, if the 
                                digital music provider is authorized to 
                                do so by the owner or licensee of the 
                                applicable sound recording, and reports 
                                to all appropriate designated agents 
                                such use as a free promotional use in 
                                its quarterly reports under 
                                subparagraph (A)(i).
                                    ``(II) Other free promotional uses 
                                by sound recording owners.--
                                            ``(aa) Authority.--The 
                                        owner or licensee of a sound 
                                        recording who seeks to offer 
                                        free promotional uses of the 
                                        sound recording in the form of 
                                        an interactive stream or 
                                        limited download through a 
                                        third party not licensed as a 
                                        digital music provider under 
                                        this subsection may offer such 
                                        free promotional uses if the 
                                        owner or licensee (as the case 
                                        may be)--

                                                    ``(AA) files a 
                                                notice of such free 
                                                promotional use, at the 
                                                same time that a report 
                                                under subparagraph 
                                                (A)(i) is filed for 
                                                each quarterly 
                                                reporting period in 
                                                which such free 
                                                promotional use is 
                                                provided, with the 
                                                designated agent that 
                                                represents the musical 
                                                work (or share thereof) 
                                                embodied in the sound 
                                                recording;

                                                    ``(BB) includes in 
                                                the notice the identity 
                                                of the work in 
                                                question, the date or 
                                                dates of the free 
                                                promotional uses, the 
                                                types of uses being 
                                                offered, the third 
                                                party that is 
                                                distributing the uses 
                                                to end users, the 
                                                street and internet 
                                                addresses of the third 
                                                party, and such other 
                                                information as the 
                                                Register of Copyrights 
                                                may prescribe by 
                                                regulation.

                                            ``(bb) Request for 
                                        documentation.--By written 
                                        notice, a designated agent may 
                                        request the owner or licensee 
                                        of the sound recording to 
                                        provide documentation 
                                        demonstrating that a use of a 
                                        musical work qualifies as a 
                                        free promotional use under this 
                                        clause. If the owner or 
                                        licensee fails to provide such 
                                        documentation within 30 days 
                                        after the date of such notice, 
                                        the free promotional use shall 
                                        be considered not to have been 
                                        authorized under this 
                                        subclause.
                                    ``(III) 30-second promotional 
                                streams.--
                                            ``(aa) In general.--
                                        Notwithstanding subsection (a) 
                                        or any other provision of this 
                                        section, but subject to 
                                        subsection (f), a digital music 
                                        provider licensed under this 
                                        subsection to distribute a full 
                                        download of a sound recording, 
                                        or authorized to distribute a 
                                        physical phonorecord of a sound 
                                        recording, shall, if the 
                                        digital music provider is 
                                        authorized to do so by the 
                                        owner or licensee of the sound 
                                        recording, has the right to 
                                        create, reproduce, and 
                                        transmit, including the making 
                                        of all server and incidental 
                                        reproductions that are 
                                        necessary, an excerpt of the 
                                        sound recording of up to 30 
                                        seconds in length to be made 
                                        available directly to end users 
                                        in the form of an interactive 
                                        stream--

                                                    ``(AA) solely for 
                                                purposes of promoting 
                                                the lawful sale or paid 
                                                use of the sound 
                                                recording, or the paid 
                                                use of a subscription 
                                                service offering the 
                                                sound recording; and

                                                    ``(BB) only if such 
                                                stream is a free 
                                                promotional use.

                                            ``(bb) Reporting not 
                                        required.--A digital music 
                                        provider is not required to 
                                        report to the designated agent 
                                        free promotional uses of 30-
                                        second excerpts authorized 
                                        under this subclause.
                                            ``(cc) Construction.--(AA) 
                                        The authority granted under 
                                        this subclause does not include 
                                        or extend to any other right to 
                                        create, reproduce, or 
                                        distribute an excerpt of a 
                                        musical work for any purpose 
                                        other than that expressly 
                                        authorized under this 
                                        subclause, including for use 
                                        as, or to promote, a ringtone 
                                        or mastertone.
                                            ``(BB) Nothing in this 
                                        subclause shall be cited, 
                                        relied upon, interpreted, or 
                                        construed for purposes of 
                                        evaluating or determining 
                                        whether the creation or use of 
                                        an excerpt of a musical work 
                                        other than as expressly 
                                        authorized under this subclause 
                                        does or does not qualify for a 
                                        compulsory license under this 
                                        section.
                                    ``(IV) Regulations.--The Register 
                                of Copyrights shall promulgate 
                                regulations detailing reporting and 
                                recordkeeping requirements for free 
                                promotional uses.
                    ``(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 1 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) 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) 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 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 
                        claim of the designated agent (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) Substantial failure.--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. If the default is not 
                        remedied within that 30-day period, the license 
                        terminates upon the expiration of that 30-day 
                        period. Such termination makes the uses of the 
                        musical works that are the subject of the 
                        default actionable as acts of infringement 
                        under section 501 and fully subject to the 
                        remedies provided by sections 502 through 506 
                        and 509.
                            ``(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.
                    ``(D) Information provided to copyright owners.--
                Each designated agent shall, on an annual basis, 
                provide to copyright owners, free of charge, the 
                information, regarding the musical works of those 
                copyright owners, that the designated agent receives 
                from digital music providers in the quarterly reports 
                under subparagraph (A). A copyright owner may request 
                such information more frequently, but in such a case 
                the designated agent may charge the copyright owner the 
                costs borne by the designated agent in providing the 
                information. Designated agents may provide the 
                information under this subparagraph in electronic or 
                paper format.
            ``(11) Distribution of royalties, unclaimed funds, and 
        dispute resolution.--
                    ``(A) Distribution of royalties.--Each designated 
                agent shall be responsible for distributing, on a 
                quarterly basis, 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). Distributions under the preceding 
                sentence shall be made not later than 60 days after the 
                end of each calendar quarter.
                    ``(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 claim to unclaimed funds.
                    ``(C) Disputes.--
                            ``(i) Dispute resolution committee.--Each 
                        designated agent shall establish a dispute 
                        resolution committee consisting of--
                                    ``(I) at least 6 representatives of 
                                different music publishing entities 
                                represented by the designated agent, 
                                and
                                    ``(II) an equal number of 
                                songwriters who are legally and 
                                financially independent of the 
                                designated agent,
                        who shall be appointed under clause (iii).
                            ``(ii) Purpose.--The purpose of each 
                        dispute resolution committee is to address any 
                        disputes raised by a copyright owner or 
                        songwriter whose works are represented by the 
                        designated agent relating to license rates or 
                        terms, the expenditure of fees and other funds 
                        by the designated agent, and the allocation and 
                        payment by the designated agent of royalties 
                        among individual copyright owners under 
                        licenses granted by the designated agent under 
                        this subsection.
                            ``(iii) Appointment.--The Register of 
                        Copyrights shall appoint the members of each 
                        dispute resolution committee based upon 
                        nominees provided by music publishers and 
                        songwriters. Of the music publishing 
                        representatives, at least 2 shall be appointed 
                        from among large music publishing companies, 
                        and at least 2 shall be appointed from among 
                        small music publishing companies. Of the 
                        songwriter representatives, at least 3 shall be 
                        representatives, affiliates, or members of each 
                        of the performing rights organizations. The 
                        members of the dispute resolution committee 
                        shall serve staggered 3-year terms. In making 
                        appointments under this clause, the Register 
                        shall give preference to the nominees that have 
                        the greatest support among the interested 
                        parties.
                            ``(iv) Procedures.--The Register of 
                        Copyrights shall establish procedures to govern 
                        the conduct of meetings by the dispute 
                        resolution committees to assure that the 
                        proceedings are fair and that decisions are 
                        reached in a timely manner. The Register shall 
                        include in such procedures a mechanism to 
                        resolve cases in which an equal number of 
                        members of the dispute resolution committee 
                        vote for and against a proposed solution to a 
                        dispute. The dispute resolution process shall 
                        not affect any other legal or equitable rights 
                        or remedies available to any copyright owner, 
                        songwriter, or designated agent.
                    ``(D) Procedures for holding funds and royalties 
                subject to legal proceedings.--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 funds 
                that are the subject of an ownership dispute or legal 
                proceeding, nor shall a copyright owner be subject to a 
                legal claim based upon or arising from a designated 
                agent's compliance with this paragraph.
                    ``(E) Songwriter access to information.--
                            ``(i) In general.--Subject to clause (ii), 
                        a songwriter whose musical works (or shares 
                        thereof) are administered by a music publisher 
                        for licensing under this subsection (including 
                        those music publishers 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.
                            ``(ii) Exception.--If a designated agent, 
                        on an annual basis or more frequently, provides 
                        to all songwriters whose works the designated 
                        agent represents information on royalty 
                        statements provided to music publishers, the 
                        designated agent is not required to provide 
                        such information pursuant to a request under 
                        clause (i).
                    ``(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 March 
                1, 2007, the Copyright Royalty Judges shall initiate a 
                proceeding to determine, not later than June 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) Exception under blanket licenses.--
                    ``(A) In general.--
                            ``(i) Election to retain right to be paid 
                        by licensee.--A sound recording company may 
                        elect to retain the right to be paid, by any 
                        licensee under this subsection with which the 
                        sound recording company has a contract for the 
                        distribution of digital phonorecord deliveries 
                        or hybrid offerings, the applicable royalties 
                        under a compulsory license under paragraph (2) 
                        for the use a musical work as embodied in a 
                        particular sound recording in the form of such 
                        digital phonorecord deliveries or hybrid 
                        offerings, and to distribute such royalties as 
                        appropriate to copyright owners, if the 
                        following conditions are met:
                                    ``(I) The sound recording company 
                                notifies the appropriate designated 
                                agent and each such licensee in writing 
                                of the election.
                                    ``(II) The use of the musical work 
                                as embodied in the sound recording--
                                            ``(aa) is a digital 
                                        phonorecord delivery that is 
                                        subject to a contract to which 
                                        the second sentence of 
                                        subsection (c)(3)(E)(i) is 
                                        inapplicable by operation of 
                                        subsection (c)(3)(E)(ii); or
                                            ``(bb) is not a digital 
                                        phonorecord delivery and is 
                                        subject to a contract to which 
                                        subsection (c)(3)(E)(i) 
                                        applies.
                            ``(ii) Requirements of notice.--The notice 
                        required by clause (i)(I) may be provided 
                        electronically at any time and shall be 
                        effective beginning with payment for the 
                        reporting quarter following the quarter during 
                        which the notice is provided. The notice shall 
                        include sufficient data to identify the 
                        applicable sound recording, the musical work 
                        embodied in the sound recording and relevant 
                        shares thereof, and the digital music provider 
                        and specific activities that are the subject of 
                        the election under clause (i).
                            ``(iii) Actions by designated agent.--A 
                        designated agent receiving a notice of an 
                        election under clause (i)(I) shall indicate 
                        that election in its database maintained under 
                        paragraph (9)(H) and shall take such other 
                        steps as may be required, in view of its 
                        payment arrangements with digital music 
                        providers, to implement the election.
                            ``(iv) Payments.--For any musical work or 
                        share thereof that with respect to which a 
                        sound recording company makes an election under 
                        this subparagraph, the digital music provider 
                        shall make the appropriate payments to the 
                        sound recording company in accordance with the 
                        contracts between the digital music provider 
                        and the sound recording company, and the sound 
                        recording company shall make the appropriate 
                        payments to copyright owners in accordance with 
                        its contracts for use of the musical work.
                    ``(B) Errors.--
                            ``(i) By designated agents.--In any case in 
                        which a designated agent accepts in error 
                        payments for a use of a musical work with 
                        respect to which a sound recording company 
                        makes an election under subparagraph (A), the 
                        sound recording company may provide written 
                        notice of the error to the designated agent. If 
                        the designated agent fails to remedy the error 
                        by sending to the sound recording company, 
                        within 30 days after the date of the notice, 
                        the erroneously accepted funds, with interest 
                        calculated as provided in paragraph 
                        (10)(A)(iii), the designated agent shall be 
                        liable to the sound recording company in a 
                        civil action for the payment of the erroneously 
                        accepted funds, with interest calculated as 
                        provided in paragraph (10)(A)(iii). The United 
                        States district courts shall have exclusive 
                        jurisdiction of such a civil action. The remedy 
                        provided in section 505 shall be available in 
                        such an action only if the designated agent did 
                        not act in good faith.
                            ``(ii) By sound recording companies.--In 
                        any case in which a sound recording company 
                        makes an election under subparagraph (A) with 
                        respect to the use of a musical work in error, 
                        the copyright owner of the work may provide 
                        written notice of the error to the sound 
                        recording company. If the sound recording 
                        company fails to remedy the error by correcting 
                        the erroneous notice and sending to the 
                        copyright owner the difference between the 
                        royalties that the copyright owner should have 
                        received from the designated agent and the 
                        royalties paid by the sound recording company 
                        based upon the erroneous election, with 
                        interest calculated as provided in paragraph 
                        (10)(A)(iii), the sound recording company shall 
                        be liable to the copyright owner in a civil 
                        action for the payment of the difference in 
                        royalties, with interest calculated as provided 
                        in paragraph (10)(A)(iii). The United States 
                        district courts shall have exclusive 
                        jurisdiction of such a civil action. The remedy 
                        provided in section 505 shall be available in 
                        such an action only if the sound recording 
                        company did not act in good faith.
                            ``(iii) Designated agents protected.--A 
                        designated agent that acts in accordance with a 
                        notice provided under subparagraph (A)(i)(I), 
                        even if the notice was erroneously provided, 
                        shall not be subject to a legal claim by a 
                        copyright owner based upon or arising out of 
                        the actions of the designated agent with 
                        respect to the notice.
                            ``(iv) Consequences for digital music 
                        providers and sound recording companies.--Any 
                        digital music provider that has a valid license 
                        under this subsection with the appropriate 
                        designated agent, that acts in good faith with 
                        respect to an election under subparagraph (A) 
                        by a sound recording company, and that reports 
                        activity and makes payments under this 
                        subsection to the designated agent or sound 
                        recording company in accordance with the notice 
                        of the election under subparagraph (A)(i)(I), 
                        shall not be subject to any liability, 
                        including any action for copyright infringement 
                        of musical works alleging the 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. In any case in which a digital music 
                        provider or a sound recording company does not 
                        make the required payments for the use of a 
                        musical work, this paragraph neither expands 
                        nor limits the rights of any person under the 
                        applicable contracts, this title, or other 
                        applicable law.
                    ``(C) 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 regard 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 paragraph (10)(A)(iii)(II); and
                                    ``(II) a licensee acting in good 
                                faith with regard to the exclusion 
                                shall not be liable because of such 
                                error.
            ``(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 copyright owner, as defined in section 101, 
                that is a natural person or legally recognized entity 
                that owns or controls an interest or share in 1 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 relationship with the end users 
                                of the service, and controls what, if 
                                any, consideration is received from end 
                                users or others for the service;
                                    ``(II) controls how musical content 
                                is bundled with other musical or 
                                nonmusical content and offered through 
                                the service;
                                    ``(III) is able to fully report on 
                                all revenues and consideration received 
                                by or credited to the service; and
                                    ``(IV) is able to fully report on 
                                all elements of music usage by the 
                                service (or procure such reporting); or
                            ``(ii) with respect to hybrid offerings 
                        only, makes and distributes a hybrid offering, 
                        and--
                                    ``(I) controls how musical content 
                                is bundled with other musical and 
                                nonmusical content in the hybrid 
                                offering;
                                    ``(II) is able to fully report on 
                                all revenues and consideration received 
                                by or credited to such person with 
                                respect to the hybrid offering; and
                                    ``(III) is able to fully report on 
                                all elements of music usage in the 
                                hybrid offering (or procure such 
                                reporting).
                    ``(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) Free promotional use.--The term `free 
                promotional use' means the audio-only use of a musical 
                work if--
                            ``(i) with respect to the owner or 
                        exclusive licensee of the sound recording that 
                        is authorizing the use, or, as applicable, the 
                        digital music provider making the use, the 
                        primary purpose of the use is to promote either 
                        the lawful sale or paid use of a sound 
                        recording embodying the musical work or other 
                        sound recordings by the same featured recording 
                        artist, or the paid use of a subscription 
                        service offering the sound recording, but the 
                        primary purpose is not to promote any other 
                        product, offering, or entity;
                            ``(ii) the sound recording is made 
                        available to end users free of charge;
                            ``(iii) (I) no cash or non-cash 
                        consideration of any kind is received by the 
                        owner or exclusive licensee of the sound 
                        recording, a digital music provider, third 
                        party distributor, or any other person, in 
                        connection with such use of the musical work or 
                        sound recording, except for--
                                    ``(aa) the promotion of the lawful 
                                sale or paid use of the sound recording 
                                or paid use of a subscription service 
                                offering the sound recording; or
                                    ``(bb) the lawful collection of 
                                contact information from end users to 
                                access the work, either directly or 
                                through the third party user, solely 
                                for the purposes permitted by clause 
                                (i); and
                            ``(II) the limited consideration permitted 
                        under items (aa) and (bb) of subclause (I) is 
                        not received in connection with, or used to 
                        support, any other product, offering, or 
                        entity.
                    ``(F) 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.
                    ``(G) Hybrid offering.--The term `hybrid offering' 
                means--
                            ``(i) a reproduction or distribution of a 
                        phonorecord in physical form subject to a 
                        compulsory license under this section if 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 
                        audible after a finite period of time or a 
                        specified number of times rendered; or
                            ``(ii) a reproduction or distribution of a 
                        phonorecord subject to a compulsory license 
                        under this section that is custom-made by or 
                        under the authority of the licensee--
                                    ``(I) using a device located at a 
                                physical retail establishment based 
                                upon the specific request of an end 
                                user for distribution as a digital 
                                phonorecord delivery or in physical 
                                form to that end user at such retail 
                                establishment; or
                                    ``(II) based upon the specific 
                                request of an end user for distribution 
                                in physical form to that end user (or 
                                the end user's designee) through a mail 
                                order or private delivery service.
                    ``(H) Interactive stream.--
                            ``(i) In general.--The term `interactive 
                        stream' means an audio-only stream of a sound 
                        recording of a musical work that--
                                    ``(I) is made by an interactive 
                                service;
                                    ``(II) is made by a service if more 
                                than 7 percent of the programming of 
                                the service, on a per channel basis, as 
                                measured over a period of 168 hours of 
                                broadcasting, consists of--
                                            ``(aa) selections of sound 
                                        recordings from any single 
                                        commercially released 
                                        phonorecord; or
                                            ``(bb) selections of sound 
                                        recordings by the same featured 
                                        recording artist, that are 
                                        either played consecutively or 
                                        constitute more than 50 percent 
                                        of the programming in any given 
                                        hour, except in unique and 
                                        isolated circumstances such as 
                                        a memorial tribute program for 
                                        a particular artist lasting no 
                                        more than 24 hours that is 
                                        broadcast within a week of the 
                                        honoree's death or upon the 
                                        anniversary of the honoree's 
                                        death; or
                                    ``(III) is made by a service that 
                                publishes or publicizes, in advance, 
                                the titles of sound recordings to be 
                                transmitted at specified times or 
                                during specific blocks of time in the 
                                future, other than a schedule of 
                                classical music programming, except 
                                that this subclause does not include 
                                the announcement by a transmitting 
                                entity of a particular song to be 
                                broadcast.
                        If an entity offers both interactive and 
                        noninteractive services (either concurrently, 
                        through different channels or offerings, or at 
                        different times), the noninteractive component 
                        shall not be treated as part of an interactive 
                        service.
                            ``(ii) Interactive service.--In this 
                        subparagraph, the term `interactive service' 
                        means a service that enables a member of the 
                        public to receive a transmission of a program 
                        specially created for the recipient, or on 
                        request, a transmission of a particular sound 
                        recording, whether or not as part of a program, 
                        which is selected by or on behalf of the 
                        recipient; except that the ability of 
                        individuals to request that particular sound 
                        recordings be performed for reception by the 
                        public at large, or in the case of a 
                        subscription service, by all subscribers of the 
                        service, does not make a service interactive, 
                        if the programming on each channel of the 
                        service does not substantially consist of sound 
                        recordings that are performed within 1 hour of 
                        the request or at a time designated by either 
                        the transmitting entity or the individual 
                        making the request.
                    ``(I) 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).
                    ``(J) Limited download.--The term `limited 
                download' means a digital phonorecord delivery to an 
                end user 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.
                    ``(K) Noninteractive streaming.--The term 
                `noninteractive streaming' means the making of any 
                audio-only stream of a sound recordings of musical 
                work--
                            ``(i) that is not an interactive stream;
                            ``(ii) that, except as may otherwise be 
                        authorized by the copyright owner, consists of 
                        a transmission of a musical work that--
                                    ``(I) has previously been 
                                distributed to the public in the United 
                                States under authority of the copyright 
                                owner or pre-released under authority 
                                of the sound recording owner for 
                                promotional purposes; and
                                    ``(II) is embodied in a lawfully 
                                made sound recording;
                            ``(iii) that does not violate the 
                        conditions that apply to compulsory licensing 
                        of musical works set forth in subsection 
                        (a)(2); and
                            ``(iv) for which all necessary licenses 
                        have been obtained to perform the musical work 
                        publicly.
                    ``(L) 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.
                    ``(M) Songwriter.--The term `songwriter' means the 
                author of a musical work.
                    ``(N) Sound recording company.--The term `sound 
                recording company' means a person who--
                            ``(i) is a copyright owner of a sound 
                        recording of a musical work;
                            ``(ii) in the case of a sound recording of 
                        a musical fixed before February 15, 1972, has 
                        rights to the sound recording, under the common 
                        law or statutes of any State, that are similar 
                        to the rights under this title of a copyright 
                        owner of a sound recording of a musical work;
                            ``(iii) is an exclusive licensee of a sound 
                        recording of a musical work; or
                            ``(iv) performs the functions of marketing 
                        and authorizing the distribution of a sound 
                        recording of a musical work under its own 
                        label, under the authority of the copyright 
                        owner of the sound recording.
                    ``(O) 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.--
                    ``(A) In general.--The Register of Copyrights shall 
                issue such regulations as are necessary to carry out 
                this subsection, including--
                            ``(i) specifying the requirements and 
                        procedures for reporting and making payments, 
                        and conducting royalty compliance examinations, 
                        under paragraph (10), including provisions for 
                        the protection of confidential information and 
                        the effect of settlements with respect to 
                        royalty compliance examinations;
                            ``(ii) specifying the procedures for 
                        expedited proceedings under paragraph 
                        (8)(E)(ii)(II)(bb) and subsection 
                        (c)(7)(B)(ii)(II);
                            ``(iii) specifying the form of a letter of 
                        direction under paragraph (9)(I)(i); and
                            ``(iv) facilitating exclusions from the 
                        blanket license under paragraph (13).
                    ``(B) Resolution of disputes.--If a copyright owner 
                or user of nondramatic musical works wishes to have the 
                Register of Copyrights resolve a dispute concerning 
                whether an activity or offering subject to compulsory 
                licensing under this section is licensable under this 
                subsection or under subsection (b), the copyright owner 
                or user may petition the Register for such a 
                determination. If it appears to the Register from the 
                petition that the issue presented is likely to be 
                material to multiple copyright owners or users, then 
                the Register shall decide the issue by rulemaking 
                within 6 months after the date of the petition.
            ``(16) Application of subsection to pre-existing 
        licenses.--This subsection shall apply to digital phonorecord 
        deliveries and hybrid offerings in lieu of any compulsory 
        license under this section that applied to such digital 
        phonorecord deliveries and hybrid offerings before the 
        enactment of the Section 115 Reform Act of 2006.''.

SEC. 103. 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, exemptions, and 
licenses granted under, and the definitions contained in, 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)(iv) 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. 104. 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 new type of phonorecord 
                configuration 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 in accordance with 
                subsection (b)(1), have a license to make and 
                distribute such phonorecords, subject to subparagraph 
                (B).
                    ``(B) Interim rates.--Upon serving notice as 
                described in subparagraph (A) with respect to a 
                phonorecord configuration--
                            ``(i) the parties may negotiate an interim 
                        rate and terms that will apply to the 
                        configuration 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 conduct the 
                                expedited proceeding and determine the 
                                interim rate and terms not less than 30 
                                days and not more than 60 days after 
                                publishing the notice.
                    ``(C) Applicability of interim rates.--(i) Interim 
                rates and terms negotiated under subparagraph (B)(i) or 
                established under subparagraph (B)(ii) shall be 
                retroactive to the inception of the activity under the 
                license concerned and shall apply until a rate and 
                terms for the phonorecord configuration are determined 
                under paragraph (3)(C) and chapter 8, or as otherwise 
                agreed by the parties.
                    ``(ii) Interim rates and terms described in 
                subparagraph (B) with respect to a configuration 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), 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 a configuration 
                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 a 
                configuration 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 making and 
                distribution of phonorecords 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 and terms becomes effective--
                            ``(i) the licensee shall pay to the 
                        copyright owner any amounts due from 
                        underpayment of fees by the licensee because 
                        the final rate exceeds the interim rate; or
                            ``(ii) the copyright owner shall refund to 
                        the licensee the amounts of any overpayment of 
                        fees by the licensee because the interim rate 
                        exceeds the final rate, or, at the election of 
                        the licensee, the copyright owner shall credit 
                        such overpayment against future payments by the 
                        licensee to the copyright owner under this 
                        subsection.''.

SEC. 105. 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) Interactive streams.--The term `digital phonorecord 
        delivery' includes an interactive stream (as such term is 
        defined in subsection (e)(14)(H)) of nondramatic musical works, 
        on the following terms:
                    ``(A) An interactive stream is an incidental 
                digital phonorecord delivery as described in subsection 
                (c)(3)(C)(i) and (D)(i). An interactive stream is not a 
                general digital phonorecord delivery as described in 
                subsection (c)(3)(C)(ii) and (D)(ii).
                    ``(B) The Copyright Royalty Judges, in establishing 
                royalty rates or terms for digital phonorecord 
                deliveries, shall not consider the characterization, in 
                this section or regulations issued under this section, 
                of a digital phonorecord delivery as general or 
                incidental. The preceding sentence does not limit the 
                ability of the Copyright Royalty Judges to refer to the 
                actual nature or functionality of the particular type 
                of digital phonorecord delivery in a ratemaking 
                proceeding.''.
    (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;
                    (C) in subparagraph (D), by striking ``Such terms 
                and rates shall distinguish'' and all that follows 
                through the end of the sentence; and
                    (D) in subparagraph (E)(i), by inserting after 
                ``License agreements,'' the following: ``to make and 
                distribute phonorecords other than digital phonorecord 
                deliveries and hybrid offerings'' ; 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. 106. EFFECTIVE DATE.

    (a) In General.--Subject to subsection (b), this title and the 
amendments made by this title 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. 107. SAVINGS CLAUSES.

    (a) Scope of Rights Covered.--This title and the amendments made by 
this title are limited to the exclusive rights to reproduce and 
distribute musical works as provided by paragraphs (1) and (3) of 
section 106 of title 17, United States Code, and do not create any new 
exclusive rights under section 106 of title 17, United Stats Code.
    (b) Fair Use.--Nothing in this title shall affect any right, 
limitation, or defense to copyright infringement, including fair use, 
under title 17, United States Code.
    (c) Protections of Service Providers.--This title and the 
amendments made by this title shall not be construed to limit in any 
manner the protections afforded to service providers under section 512 
of title 17, United States Code.

SEC. 108. STAYING OF INFRINGEMENT ACTIONS.

    If an action for infringement is brought against a digital music 
provider (as defined in section 115(e)(14) of title 17, United States 
Code) for activities engaged in before January 1, 2008, that may be 
covered by a license under section 115(e) of title 17, United States 
Code, the court may stay the action until not later than March 1, 2008, 
if the digital music provider makes the payments required under section 
115(e)(6) of such title, for such activities.

                         TITLE II--ORPHAN WORKS

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Orphan Works Act of 2006''

SEC. 202. LIMITATION ON REMEDIES IN CASES INVOLVING ORPHAN WORKS.

    (a) Limitation on Remedies.--Chapter 5 of title 17, United States 
Code, is amended by adding at the end the following new section:
``Sec. 514. Limitation on remedies in cases involving orphan works
    ``(a) Conditions for Eligibility.--
            ``(1) Conditions.--Notwithstanding sections 502 through 
        505, in an action brought under this title for infringement of 
        copyright in a work, the remedies for infringement shall be 
        limited under subsection (b) if the infringer sustains the 
        burden of proving, and the court finds, that--
                    ``(A) before the infringing use of the work began, 
                the infringer, a person acting on behalf of the 
                infringer, or any person jointly and severally liable 
                with the infringer for the infringement of the work--
                            ``(i) performed and documented a reasonably 
                        diligent search in good faith to identify and 
                        locate the owner of the infringed copyright; 
                        but
                            ``(ii) was unable to locate the owner; and
                    ``(B) the infringing use of the work provided 
                attribution, in a manner reasonable under the 
                circumstances, to the author and owner of the 
                copyright, if known with a reasonable degree of 
                certainty based on information obtained in performing 
                the reasonably diligent search.
            ``(2) Definitions; requirements for searches.--
                    ``(A) Owner of infringed copyright.--For purposes 
                of paragraph (1)(A), the `owner' of an infringed 
                copyright in a work is the legal or beneficial owner 
                of, or any party with authority to grant or license, an 
                exclusive right under section 106 applicable to the 
                infringement.
                    ``(B) Requirements for reasonably diligent 
                search.--(i) For purposes of paragraph (1), a search to 
                locate the owner of an infringed copyright in a work--
                            ``(I) is `reasonably diligent' only if it 
                        includes such steps that are reasonable under 
                        the circumstances to locate that owner in order 
                        to obtain permission for the use of the work; 
                        and
                            ``(II) is not `reasonably diligent' solely 
                        by reference to the lack of identifying 
                        information with respect to the copyright on 
                        the copy or phonorecord of the work.
                    ``(ii) The steps referred to in clause (i)(I) shall 
                ordinarily include, at a minimum, review of the 
                information maintained by the Register of Copyrights 
                under subparagraph (C).
                    ``(iii) A reasonably diligent search includes the 
                use of such expertise and technology as are reasonably 
                available and appropriate under the circumstances, and 
                may include, if reasonable under the circumstances, 
                resources for which a charge or subscription fee is 
                imposed.
                    ``(C) Information to guide searches.--The Register 
                of Copyrights shall receive, maintain, and make 
                available to the public, including through the 
                Internet, information from authoritative sources, such 
                as industry guidelines, statements of best practices, 
                and other relevant documents, that is designed to 
                assist users in conducting and documenting a reasonably 
                diligent search under this subsection. Such information 
                may include--
                            ``(i) the records of the Copyright Office 
                        that are relevant to identifying and locating 
                        copyright owners;
                            ``(ii) other sources of copyright ownership 
                        information reasonably available to users;
                            ``(iii) methods to identify copyright 
                        ownership information associated with a work;
                            ``(iv) sources of reasonably available 
                        technology tools and reasonably available 
                        expert assistance; and
                            ``(v) best practices for documenting a 
                        reasonably diligent search.
    ``(b) Limitations on Remedies.--The limitations on remedies in a 
case to which subsection (a) applies are the following:
            ``(1) Monetary relief.--
                    ``(A) General rule.--Subject to subparagraph (B), 
                an award for monetary relief (including actual damages, 
                statutory damages, costs, and attorney's fees) may not 
                be made, other than an order requiring the infringer to 
                pay reasonable compensation for the use of the 
                infringed work.
                    ``(B) Exceptions.--(i) An order requiring the 
                infringer to pay reasonable compensation for the use of 
                the infringed work may not be made under subparagraph 
                (A) if--
                            ``(I) the infringement is performed without 
                        any purpose of direct or indirect commercial 
                        advantage and primarily for a charitable, 
                        religious, scholarly, or educational purpose, 
                        and
                            ``(II) the infringer ceases the 
                        infringement expeditiously after receiving 
                        notice of the claim for infringement,
                unless the copyright owner proves, and the court finds, 
                that the infringer has earned proceeds directly 
                attributable to the infringement.
                    ``(ii) If, after receiving notice of the claim for 
                infringement, the infringer fails to negotiate in good 
                faith with the owner of the infringed work regarding 
                the amount of reasonable compensation for the use of 
                the infringed work, the court may award full costs, 
                including a reasonable attorney's fee, against the 
                infringer under section 505, subject to section 412.
            ``(2) Injunctive relief.--
                    ``(A) General rule.--Subject to subparagraph (B), 
                the court may impose injunctive relief to prevent or 
                restrain the infringing use, except that, if the 
                infringer has met the requirements of subsection (a), 
                the relief shall, to the extent practicable, account 
                for any harm that the relief would cause the infringer 
                due to its reliance on the reasonably diligent search 
                performed under subsection (a).
                    ``(B) Special rule for new works.--In a case in 
                which a new work of authorship recasts, transforms, 
                adapts, or integrates the infringed work with the new 
                work's original expression, any injunctive relief 
                ordered by the court--
                            ``(i) may not restrain the infringer's 
                        continued preparation or use of that new work;
                            ``(ii) shall require that the infringer pay 
                        reasonable compensation to the owner of the 
                        infringed copyright for the use of the 
                        infringed work; and
                            ``(iii) shall require that the infringer 
                        provide attribution to the owner of the 
                        infringed copyright in a manner that the court 
                        determines is reasonable under the 
                        circumstances.
                    ``(C) Treatment of parties not subject to suit.--
                The limitations on remedies under this paragraph shall 
                not be available to an infringer that asserts in an 
                action under section 501(b) that neither it nor its 
                representative acting in an official capacity is 
                subject to suit in Federal court for an award of 
                damages to the copyright owner under section 504, 
                unless the court finds that the infringer--
                            ``(i) has complied with the requirements of 
                        subsection (a) of this section; and
                            ``(ii) pays reasonable compensation to the 
                        copyright owner as defined under paragraph (3).
                    ``(D) Construction.--Nothing in subparagraph (C) 
                shall be deemed to authorize or require, and no action 
                taken pursuant to subparagraph (C) shall be deemed to 
                constitute, an award of damages by the court against 
                the infringer.
                    ``(E) Rights and privileges not waived.--No action 
                taken by an infringer pursuant to subparagraph (C) 
                shall be deemed to waive any right or privilege that, 
                as a matter of law, protects the infringer from being 
                subject to suit in Federal court for an award of 
                damages to the copyright owner under section 504.
            ``(3) Reasonable compensation.--In establishing reasonable 
        compensation under paragraph (1) or (2), the owner of the 
        infringed copyright has the burden of establishing the amount 
        on which a reasonable willing buyer and a reasonable willing 
        seller in the positions of the owner and the infringer would 
        have agreed with respect to the infringing use of the work 
        immediately before the infringement began.
    ``(c) Preservation of Other Rights, Limitations, and Defenses.--
This section does not affect any right, limitation, or defense to 
copyright infringement, including fair use, under this title. If 
another provision of this title provides for a statutory license when 
the copyright owner cannot be located, that provision applies in lieu 
of this section.
    ``(d) Copyright for Derivative Works and Compilations.--
Notwithstanding section 103(a), the infringing use of a work in 
accordance with this section shall not limit or affect the copyright 
protection for a work that employs the infringed work.''.
    (b) Conforming Amendment.--The table of sections for chapter 5 of 
title 17, United States Code, is amended by adding at the end the 
following new item:

``514. Limitation on remedies in cases involving orphan works.''.
    (c) Effective Date.--The amendments made by this section shall 
apply only to infringing uses that commence on or after June 1, 2008.

SEC. 203. REPORT TO CONGRESS ON AMENDMENTS.

    The Register of Copyrights shall, not later than December 12, 2014, 
report to the Committee on the Judiciary of the House of 
Representatives and the Committee on the Judiciary of the Senate on the 
implementation and effects of the amendments made by section 202, 
including any recommendations for legislative changes that the Register 
considers appropriate.

SEC. 204. INQUIRY ON REMEDIES FOR SMALL COPYRIGHT CLAIMS.

    (a) In General.--The Register of Copyrights shall conduct an 
inquiry with respect to remedies for copyright infringement claims by 
an individual copyright owner or a related group of copyright owners 
seeking limited amounts of monetary relief, including consideration of 
alternative means of resolving disputes currently heard in the United 
States district courts. The inquiry shall cover infringement claims to 
which section 514 of title 17, United States Code (as added by section 
202 of this Act), apply, and other infringement claims under title 17, 
United States Code.
    (b) Procedures.--The Register of Copyrights shall publish notice of 
the inquiry under subsection (a), providing a period during which 
interested persons may submit comments on the inquiry, and an 
opportunity for interested persons to participate in public roundtables 
on the inquiry. The Register shall hold the public roundtables at such 
times as the Register considers appropriate.
    (c) Report to Congress.--The Register of Copyrights shall, not 
later than 1 year after the date of the enactment of this Act, prepare 
and submit to the Committee on the Judiciary of the House of 
Representatives and the Committee on the Judiciary of the Senate a 
report on the inquiry conducted under this section, including such 
recommendations that the Register considers appropriate.

               TITLE III--COPYRIGHT PROTECTION RESOURCES

SEC. 301. SHORT TITLE.

    This title may be cited as the ``Copyright Protection Resources 
Authorization Act of 2006''.

SEC. 302. REGISTRATION IN CIVIL INFRINGEMENT ACTIONS.

    (a) Limitation to Civil Actions; Protection of Copyright Claim With 
Pending Application; Harmless Error.--Section 411 of title 17, United 
States Code, is amended by inserting after subsection (a) the following 
new subsection:
    ``(b)(1) A certificate of registration satisfies the requirements 
of this section and section 412, regardless of whether the certificate 
contains any inaccurate information, unless--
            ``(A) the inaccurate information was included on the 
        application for copyright registration with knowledge that it 
        was inaccurate; and
            ``(B) the inaccurate information, if known, would have 
        caused the Register of Copyrights to refuse registration.
    ``(2) In any case in which inaccurate information described under 
paragraph (1) is alleged, the court shall request the Register of 
Copyrights to advise the court whether the inaccurate information, if 
known, would have caused the Register of Copyrights to refuse 
registration.'';''.
    (b) Conforming Amendment.--Section 412 of title 17, United States 
Code, is amended by striking ``411(b)'' and inserting ``411(c)''.

SEC. 303. STATUTORY DAMAGES.

    Section 504(c)(1) of title 17, United States Code, is amended in 
the second sentence by inserting before the period ``, except that the 
court in its discretion may determine that such parts are separate 
works if the court concludes that they are distinct works having 
independent economic value''.

SEC. 304. IMPROVED INVESTIGATIVE AND FORENSIC RESOURCES FOR ENFORCEMENT 
              OF LAWS RELATED TO INTELLECTUAL PROPERTY CRIMES.

    (a) In General.--The Attorney General, in consultation with the 
Director of the Federal Bureau of Investigation, shall, with respect to 
crimes related to the theft of intellectual property--
            (1) create an operational unit of the Federal Bureau of 
        Investigation--
                    (A) to work with the Computer Crime and 
                Intellectual Property section of the Department of 
                Justice on the investigation and coordination of 
                intellectual property crimes that are complex, 
                committed in more than one judicial district, or 
                international;
                    (B) that consists of at least 10 agents of the 
                Bureau; and
                    (C) that is located at the headquarters of the 
                Bureau;
            (2) ensure that any unit in the Department of Justice 
        responsible for investigating computer hacking or intellectual 
        property crimes is assigned at least 2 agents of the Federal 
        Bureau of Investigation (in addition to any agent assigned, or 
        authorized to be assigned, to such unit as of the date of the 
        enactment of this Act) to support such unit for the purpose of 
        investigating or prosecuting intellectual property crimes; and
            (3) implement a comprehensive program--
                    (A) the purpose of which is to train agents of the 
                Federal Bureau of Investigation in the investigation 
                and prosecution of such crimes and the enforcement of 
                laws related to intellectual property crimes;
                    (B) that includes relevant forensic training 
                related to investigating and prosecuting intellectual 
                property crimes; and
                    (C) that requires such agents who investigate or 
                prosecute intellectual property crimes to attend the 
                program annually.
    (b) Intellectual Property Law Enforcement Coordinators.--Not later 
than 120 days after the date of the enactment of this Act, the Attorney 
General shall assign one Federal prosecutor to the appropriate office 
of the Department of Justice located in Hong Kong and one Federal 
prosecutor to such an office located in Budapest, Hungary, to assist in 
the coordination of the enforcement of intellectual property laws 
between the United States and foreign nations.
    (c) Organized Crime Task Force.--Not later than 120 days after the 
date of the enactment of this Act, the Attorney General, through the 
United States Attorneys' Offices, the Computer Crime and Intellectual 
Property section, and the Organized Crime and Racketeering section of 
the Department of Justice, and in consultation with the Federal Bureau 
of Investigation and other Federal law enforcement agencies, shall 
create a Task Force to develop and implement a comprehensive, long-
range plan to investigate and prosecute international organized crime 
syndicates engaging in or supporting crimes relating to the theft of 
intellectual property.
    (d) Authorization.--There are authorized to be appropriated to 
carry out this section $12,000,000 for each of fiscal years 2007 
through 2011.
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