[Congressional Record Volume 141, Number 132 (Tuesday, August 8, 1995)]
[Senate]
[Pages S11945-S11967]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             DIGITAL PERFORMANCE RIGHT IN SOUND RECORDINGS

  Mr. GORTON. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of calendar No. 165, S. 227.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       A bill (S. 227) to amend title 17, United States Code, to 
     provide an exclusive right to perform sound recordings 
     publicly by means of digital transmissions, and for other 
     purposes, which had been reported from the Committee on the 
     Judiciary, with an amendment to strike all after the enacting 
     clause and insert in lieu thereof the following:
     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Digital Performance Right in 
     Sound Recordings Act of 1995''.

     SEC. 2. EXCLUSIVE RIGHTS IN COPYRIGHTED WORKS.

       Section 106 of title 17, United States Code, is amended--
       (1) in paragraph (4) by striking ``and'' after the 
     semicolon;
       (2) in paragraph (5) by striking the period and inserting 
     ``; and''; and
       (3) by adding at the end the following:
       ``(6) in the case of sound recordings, to perform the 
     copyrighted work publicly by means of a digital audio 
     transmission.''.

     SEC. 3. SCOPE OF EXCLUSIVE RIGHTS IN SOUND RECORDINGS.

       Section 114 of title 17, United States Code, is amended--
       (1) in subsection (a) by striking ``and (3)'' and inserting 
     ``(3) and (6)'';
       (2) in subsection (b) in the first sentence by striking 
     ``phonorecords, or of copies of motion pictures and other 
     audiovisual works,'' and inserting ``phonorecords or 
     copies'';
       (3) by striking subsection (d) and inserting:
       ``(d) Limitations on Exclusive Right.--Notwithstanding the 
     provisions of section 106(6)--
       ``(1) Exempt transmissions and retransmissions.--The 
     performance of a sound recording publicly by means of a 
     digital audio transmission or retransmission, other than as a 
     part of an interactive service, is not an infringement of 
     section 106(6) if the performance is part of--
       ``(A) a nonsubscription transmission, such as a 
     nonsubscription broadcast transmission;
       ``(B) a retransmission of a nonsubscription broadcast 
     transmission: Provided, That, in the case of a retransmission 
     of a radio station's broadcast transmission--
       ``(i) the radio station's broadcast transmission is not 
     willfully or repeatedly retransmitted more than a radius of 
     150 miles from the site of the radio broadcast transmitter, 
     however--

       ``(I) the 150 mile limitation under this clause shall not 
     apply when a nonsubscription broadcast transmission by a 
     radio station licensed by the Federal Communications 
     Commission is retransmitted on a nonsubscription basis by a 
     terrestrial broadcast station, terrestrial translator, or 
     terrestrial repeater licensed by the Federal Communications 
     Commission; and
       ``(II) in the case of a subscription retransmission of a 
     nonsubscription broadcast retransmission covered by subclause 
     (I), the 150 mile radius shall be measured from the 
     transmitter site of such broadcast retransmitter;

       ``(ii) the retransmission is of radio station broadcast 
     transmissions that are--

       ``(I) obtained by the retransmitter over the air;
       ``(II) not electronically processed by the retransmitter to 
     deliver separate and discrete signals; and
       ``(III) retransmitted only within the local communities 
     served by the retransmitter;

       ``(iii) the radio station's broadcast transmission was 
     being retransmitted to cable systems (as defined in section 
     111(f)) by a satellite carrier on January 1, 1995, and that 
     retransmission was being retransmitted by cable systems as a 
     separate and discrete signal, and the satellite carrier 
     obtains the radio station's broadcast transmission in an 
     analog format: Provided, That the broadcast transmission 
     being retransmitted may embody the programming of no more 
     than one radio station; or
       ``(iv) the radio station's broadcast transmission is made 
     by a noncommercial educational broadcast station funded on or 
     after January 1, 1995, under section 396(k) of the 
     Communications Act of 1934 (47 U.S.C. 396(k)), consists 
     solely of noncommercial educational and cultural radio 
     programs, and the retransmission, whether or not 
     simultaneous, is a nonsubscription terrestrial broadcast 
     retransmission; or
       ``(C) a transmission or retransmission that comes within 
     any of the following categories:
       ``(i) a prior or simultaneous transmission or 
     retransmission incidental to an exempt transmission or 
     retransmission, such as a feed received by and then 
     retransmitted by an exempt transmitter: Provided, That such 
     incidental transmissions or retransmissions do not include 
     any subscription transmission or
      retransmission directly for reception by members of the 
     public;
       ``(ii) a transmission or retransmission within a business 
     establishment, confined to its premises or the immediately 
     surrounding vicinity;
       ``(iii) a retransmission by any retransmitter, including a 
     multichannel video programming distributor as defined in 
     section 522(12) of the Communications Act of 1934 (47 U.S.C. 
     522(12)), of a transmission by a transmitter licensed to 
     publicly perform the sound recording as a part of that 
     transmission, if the retransmission is simultaneous with the 
     licensed transmission and authorized by the transmitter; or

[[Page S 11946]]

       ``(iv) a transmission or retransmission to a business 
     establishment for use in the ordinary course of its business: 
     Provided, That the business recipient does not retransmit the 
     transmission outside of its premises or the immediately 
     surrounding vicinity, and that the transmission does not 
     exceed the sound recording performance complement. Nothing in 
     this clause shall limit the scope of the exemption in clause 
     (ii).
       ``(2) Subscription transmissions.--In the case of a 
     subscription transmission not exempt under subsection (d)(1), 
     the performance of a sound recording publicly by means of a 
     digital audio transmission shall be subject to statutory 
     licensing, in accordance with subsection (f) of this section, 
     if--
       ``(A) the transmission is not part of an interactive 
     service;
       ``(B) the transmission does not exceed the sound recording 
     performance complement;
       ``(C) the transmitting entity does not cause to be 
     published by means of an advance program schedule or prior 
     announcement the titles of the specific sound recordings or 
     phonorecords embodying such sound recordings to be 
     transmitted;
       ``(D) except in the case of transmission to a business 
     establishment, the transmitting entity does not automatically 
     and intentionally cause any device receiving the transmission 
     to switch from one program channel to another; and
       ``(E) except as provided in section 1002(e) of this title, 
     the transmission of the sound recording is accompanied by the 
     information encoded in that sound recording, if any, by or 
     under the authority of the copyright owner of that sound 
     recording, that identifies the title of the sound recording, 
     the featured recording artist who performs on the sound 
     recording, and related information, including information 
     concerning the underlying musical work and its writer.
       ``(3) Licenses for transmissions by interactive services.--
       ``(A) No interactive service shall be granted an exclusive 
     license under section 106(6) for the performance of a sound 
     recording publicly by means of digital audio transmission for 
     a period in excess of 12 months, except that with respect to 
     an exclusive license granted to an interactive service by a 
     licensor that holds the copyright to 1,000 or fewer sound 
     recordings, the period of such license shall not exceed 24 
     months: Provided, however, That the grantee of such exclusive 
     license shall be ineligible to receive another exclusive 
     license for the performance of that sound recording for a 
     period of 13 months from the expiration of the prior 
     exclusive license.
       ``(B) The limitation set forth in subparagraph (A) of this 
     paragraph shall not apply if--
       ``(i) the licensor has granted and there remain in effect 
     licenses under section 106(6) for the public performance of 
     sound recordings by means of digital audio transmission by at 
     least 5 different interactive services: Provided, however, 
     That each such license must be for a minimum of 10 percent of 
     the copyrighted sound recordings owned by the licensor that 
     have been licensed on an exclusive basis to interactive 
     services, but in no event less than 50 sound recordings; or
       ``(ii) the exclusive license is granted to perform publicly 
     up to 45 seconds of a sound recording and the sole purpose of 
     the performance is to promote the distribution or performance 
     of that sound recording.
       ``(C) Notwithstanding the grant of an exclusive or 
     nonexclusive license of the right of public performance under 
     section 106(6), an interactive service may not publicly 
     perform a sound recording unless a license has been granted 
     for the public performance of any copyrighted musical work 
     contained in the sound recording, Provided, That such license 
     to publicly perform the copyrighted musical work may be 
     granted either by a performing rights society representing 
     the copyright owner or by the copyright owner.
       ``(D) The performance of a sound recording by means of a 
     digital audio retransmission is not an infringement of 
     section 106(6) if--
       ``(i) the retransmission is of a transmission by an 
     interactive service licensed to publicly perform the sound 
     recording to a particular member of the public as part of 
     that transmission; and
       ``(ii) the retransmission is simultaneous with the licensed 
     transmission, authorized by the transmitter, and limited to 
     that particular member of the public intended by the 
     interactive service to be the recipient of the transmission.
       ``(E) For the purposes of this paragraph--
       ``(i) a `licensor' shall include the licensing entity and 
     any other entity under any material degree of common 
     ownership, management, or control that owns copyrights in 
     sound recordings; and
       ``(ii) a `performing rights society' is an association or 
     corporation that licenses the public performance of 
     nondramatic musical works on behalf of the copyright owner, 
     such as the American Society of Composers, Authors and 
     Publishers, Broadcast Music, Inc., and SESAC, Inc.
       ``(4) Rights not otherwise limited.--
       ``(A) Except as expressly provided in this section, this 
     section does not limit or impair the exclusive right to 
     perform a sound recording publicly by means of a digital 
     audio transmission under section 106(6).
       ``(B) Nothing in this section annuls or limits in any way--
       ``(i) the exclusive right to publicly perform a musical 
     work, including by means of a digital audio transmission, 
     under section 106(4);
       ``(ii) the exclusive rights to reproduce and distribute a 
     sound recording or the musical work embodied therein under 
     sections 106(1) and 106(3); or
       ``(iii) any other rights under any other clause of section 
     106, or remedies available under this title, as such rights 
     or remedies exist either before or after the date of 
     enactment of the Digital Performance Right in Sound 
     Recordings Act of 1995.
       ``(C) Any limitations in this section on the exclusive 
     right under section 106(6) apply only to the exclusive right 
     under section 106(6) and not to any other exclusive rights 
     under section 106. Nothing in this section shall be construed 
     to annul, limit, impair or otherwise affect in any way the 
     ability of the owner of a copyright in a sound recording to 
     exercise the rights under sections 106(1), 106(2) and 106(3), 
     or to obtain the remedies available under this title pursuant 
     to such rights, as such rights and remedies exist either 
     before or after the date of enactment of the Digital 
     Performance Right in Sound Recordings Act of 1995.''; and
       (4) by adding after subsection (d) the following:
       ``(e) Authority for Negotiations.--
       ``(1) Notwithstanding any provision of the antitrust laws, 
     in negotiating statutory licenses in accordance with 
     subsection (f), any copyright owners of sound recordings and 
     any entities performing sound recordings affected by this 
     section may negotiate and agree upon the royalty rates and 
     license terms and conditions for the performance of such 
     sound recordings and the proportionate division of fees paid 
     among copyright owners, and may designate common agents on a 
     nonexclusive basis to negotiate, agree to, pay, or receive 
     payments.
       ``(2) For licenses granted under section 106(6), other than 
     statutory licenses, such as for performances by interactive 
     services or performances that exceed the sound recording 
     performance complement--
       ``(A) copyright owners of sound recordings affected by this 
     section may designate common agents to act on their behalf to 
     grant licenses and receive and remit royalty payments, 
     Provided, That each copyright owner shall establish the 
     royalty rates and material license terms and conditions 
     unilaterally, that is, not in agreement, combination, or 
     concert with other copyright owners of sound recordings; and
       ``(B) entities performing sound recordings affected by this 
     section may designate common agents to act on their behalf to 
     obtain licenses and collect and pay royalty fees, Provided, 
     That each entity performing sound recordings shall determine 
     the royalty rates and material license terms and conditions 
     unilaterally, that is, not in agreement, combination, or 
     concert with other entities performing sound recordings.
       ``(f) Licenses for Nonexempt Subscription Transmissions.--
       ``(1) No later than 30 days after the enactment of the 
     Digital Performance Right in Sound Recordings Act of 1995, 
     the Librarian of Congress shall cause notice to be published 
     in the Federal Register of the initiation of voluntary 
     negotiation proceedings for the purpose of determining 
     reasonable terms and rates of royalty payments for the 
     activities specified by subsection (d)(2) of this section 
     during the period beginning on the effective date of such Act 
     and ending on December 31, 2000. Such terms and rates shall 
     distinguish among the different types of digital audio 
     transmission services then in operation. Any copyright owners 
     of sound recordings or any entities performing sound 
     recordings affected by this section may submit to the 
     Librarian of Congress licenses covering such activities with 
     respect to such sound recordings. The parties to each 
     negotiation proceeding shall bear their own costs.
       ``(2) In the absence of license agreements negotiated under 
     paragraph (1), the Librarian of Congress shall, pursuant to 
     chapter 8, convene a copyright arbitration royalty panel to 
     determine and publish in the Federal Register a schedule of 
     rates and terms which, subject to paragraph (3), shall be 
     binding on all copyright owners of sound recordings and 
     entities performing sound recordings. In establishing such 
     rates and terms the copyright arbitration royalty panel may 
     consider the rates for comparable types of digital audio 
     transmission services and comparable circumstances under 
     voluntary license agreements negotiated as provided in 
     paragraph (1). The parties to the proceeding shall bear the 
     entire cost of the proceeding in such manner and proportion 
     as the arbitration panels shall direct. The Librarian of 
     Congress shall also establish requirements by which copyright 
     owners may receive reasonable notice of the use of their 
     sound recordings under this section, and under which records 
     of such use shall be kept by entities performing sound 
     recordings.
       ``(3) License agreements voluntarily negotiated at any time 
     between one or more copyright owners of sound recordings and 
     one or more entities performing sound recordings shall be 
     given effect in lieu of any determination by a copyright 
     arbitration royalty panel or decision by the Librarian of 
     Congress.
       ``(4) The procedures specified in paragraphs (1) and (2) 
     shall be repeated and concluded, in accordance with 
     regulations that the Librarian of Congress shall prescribe--
       ``(A) within a 6-month period each time that a petition is 
     filed by any copyright owners of sound recordings or any 
     entities performing sound recordings affected by this section 
     indicating that a new type of digital audio transmission 
     service on which sound recordings are performed is or is 
     about to become operational, and
       ``(B) between June 30 and December 31, 2000 and at 5-year 
     intervals thereafter.
       ``(5)(A) Any person who wishes to perform a sound recording 
     publicly by means of a nonexempt subscription transmission 
     under this subsection may do so without infringing the 
     exclusive right of the copyright owner of the sound 
     recording--
       ``(i) by complying with such notice requirements as the 
     Register of Copyrights shall prescribe by regulation and by 
     paying royalty fees in accordance with this subsection; or
       ``(ii) if such royalty fees have not been set, by agreeing 
     to pay such royalty fees as shall be determined in accordance 
     with this subsection.

[[Page S 11947]]

       ``(B) Any royalty payments in arrears shall be made on or 
     before the twentieth day of the month next succeeding the 
     month in which the royalty fees are set.
       ``(g) Proceeds From Licensing of Subscription 
     Transmissions.--
       ``(1) Except in the case of a subscription transmission 
     licensed in accordance with subsection (f) of this section--
       ``(A) a featured recording artist who performs on a sound 
     recording that has been licensed for a subscription 
     transmission shall be entitled to receive payments from the 
     copyright owner of the sound recording in accordance with the 
     terms of the artist's contract; and
       ``(B) a nonfeatured recording artist who performs on a 
     sound recording that has been licensed for a subscription 
     transmission shall be entitled to receive payments from the 
     copyright owner of the sound recording in accordance with the 
     terms of the nonfeatured recording artist's applicable 
     contract or other applicable agreement.
       ``(2) The copyright owner of the exclusive right under 
     section 106(6) of this title to publicly perform a sound 
     recording by means of a digital audio transmission shall 
     allocate to recording artists in the following manner its 
     receipts from the statutory licensing of subscription 
     transmission performances of the sound recording in 
     accordance with subsection (f) of this section:
       ``(A) 2\1/2\ percent of the receipts shall be deposited in 
     an escrow account managed by an independent administrator 
     jointly appointed by copyright owners of sound recordings and 
     the American Federation of Musicians (or any successor 
     entity) to be distributed to nonfeatured musicians (whether 
     or not members of the American Federation of Musicians) who 
     have performed on sound recordings.
       ``(B) 2\1/2\ percent of the receipts shall be deposited in 
     an escrow account managed by an independent administrator 
     jointly appointed by copyright owners of sound recordings and 
     the American Federation of Television and Radio Artists (or 
     any successor entity) to be distributed to nonfeatured 
     vocalists (whether or not members of the American Federation 
     of Television and Radio Artists) who have performed on sound 
     recordings.
       ``(C) 45 percent of the receipts shall be allocated, on a 
     per sound recording basis, to the recording artist or artists 
     featured on such sound recording (or the persons conveying 
     rights in the artists' performance in the sound recordings).
       ``(h) Licensing to Affiliates.--
       ``(1) If the copyright owner of a sound recording licenses 
     an affiliated entity the right to publicly perform a sound 
     recording by means of a digital audio transmission under 
     section 106(6), the copyright owner shall make the licensed 
     sound recording available under section 106(6) on no less 
     favorable terms and conditions to all bona fide entities that 
     offer similar services, except that, if there are material 
     differences in the scope of the requested license with 
     respect to the type of service, the particular sound 
     recordings licensed, the frequency of use, the number of 
     subscribers served, or the duration, then the copyright owner 
     may establish different terms and conditions for such other 
     services.
       ``(2) The limitation set forth in paragraph (1) of this 
     subsection shall not apply in the case where the copyright 
     owner of a sound recording licenses--
       ``(A) an interactive service; or
       ``(B) an entity to perform publicly up to 45 seconds of the 
     sound recording and the sole purpose of the performance is to 
     promote the distribution or performance of that sound 
     recording.
       ``(i) No Effect on Royalties for Underlying Works.--License 
     fees payable for the public performance of sound recordings 
     under clause (6) of section 106 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 public 
     performance of their works. It is the intent of Congress that 
     royalties payable to copyright owners of musical works for 
     the public performance of their works shall
      not be diminished in any respect as a result of the rights 
     granted by section 106(6).
       ``(j) Definitions.--As used in this section, the following 
     terms have the following meanings:
       ``(1) An `affiliated entity' is an entity engaging in 
     digital audio transmissions covered by section 106(6), other 
     than an interactive service, in which the licensor has any 
     direct or indirect partnership or any ownership interest 
     amounting to 5 percent or more of the outstanding voting or 
     non-voting stock.
       ``(2) A `broadcast transmission' is a transmission made by 
     a broadcast station licensed as such by the Federal 
     Communications Commission.
       ``(3) A `digital audio transmission' is a digital 
     transmission as defined in section 101, that embodies the 
     transmission of a sound recording. This term does not include 
     the transmission of any audiovisual work.
       ``(4) An `interactive service' is one that enables a member 
     of the public to receive, on request, a transmission of a 
     particular sound recording chosen by or on behalf of the 
     recipient. The ability of individuals to request that 
     particular sound recordings be performed for reception by the 
     public at large does not make a service interactive. If an 
     entity offers both interactive and non-interactive services 
     (either concurrently or at different times), the non-
     interactive component shall not be treated as part of an 
     interactive service.
       ``(5) A `nonsubscription transmission', `nonsubscription 
     retransmission', or a `nonsubscription broadcast 
     transmission' is any transmission or retransmission that is 
     not a subscription transmission or retransmission.
       ``(6) A `retransmission' includes any further simultaneous 
     retransmission of the same transmission. Nothing in this 
     definition shall be construed to exempt a transmission that 
     fails to satisfy a separate element required to qualify for 
     an exemption under section 114(d)(1).
       ``(7) The `sound recording performance complement' is the 
     transmission during any 3-hour period, on a particular 
     channel used by a transmitting entity, of no more than--
       ``(A) 3 different selections of sound recordings from any 
     one phonorecord lawfully distributed for public performance 
     or sale in the United States, if no more than 2 such 
     selections are transmitted consecutively; or
       ``(B) 4 different selections of sound recordings
       ``(i) by the same featured recording artist; or
       ``(ii) from any set or compilation of phonorecords lawfully 
     distributed together as a unit for public performance or sale 
     in the United States,

     if no more than three such selections are transmitted 
     consecutively:

     Provided, That the transmission of selections in excess of 
     the numerical limits provided for in clauses (A) and (B) from 
     multiple phonorecords shall nonetheless qualify as a sound 
     recording performance complement if the programming of the 
     multiple phonorecords was not willfully intended to avoid the 
     numerical limitations prescribed in such clauses.
       ``(8) A `subscription transmission' is a transmission that 
     is controlled and limited to particular recipients, and for 
     which consideration is required to be paid or otherwise given 
     by or on behalf of the recipient to receive the transmission 
     or a package of transmissions including the transmission.''.

     SEC. 4. MECHANICAL ROYALTIES IN DIGITAL PHONORECORD 
                   DELIVERIES.

       Section 115 of title 17, United States Code, is amended--
       (1) in subsection (a)(1)--
       (A) in the first sentence by striking out ``any other 
     person'' and inserting in lieu thereof ``any other person, 
     including those who make phonorecords or digital phonorecord 
     deliveries by means of a digital audio transmission,''; and
       (B) in the second sentence by inserting before the period 
     ``, including by means of a digital phonorecord delivery'';
       (2) in subsection (c)(2) in the second sentence by 
     inserting ``and other than as provided in paragraph (3),'' 
     after ``For this purpose,'';
       (3) by redesignating paragraphs (3), (4), and (5) of 
     subsection (c) as paragraphs (4), (5), and (6), respectively, 
     and by inserting after paragraph (2) the following new 
     paragraph:
       ``(3)(A) A compulsory license under this section includes 
     the right of the compulsory licensee to distribute or 
     authorize the distribution of a phonorecord of a nondramatic 
     musical work by means of a digital transmission which 
     constitutes a digital phonorecord delivery, regardless of 
     whether the digital transmission is also a public performance 
     of the sound recording under section 106(6) of this title or 
     of any nondramatic musical work embodied therein under 
     section 106(4) of this title. For every digital phonorecord 
     delivery by or under the authority of the compulsory 
     licensee--
       ``(i) on or before December 31, 1997, the royalty payable 
     by the compulsory licensee shall be the royalty prescribed 
     under paragraph (2) and chapter 8 of this title; and
       ``(ii) on or after January 1, 1998, the royalty payable by 
     the compulsory licensee shall be the royalty prescribed under 
     subparagraphs (B) through (F) and chapter 8 of this title.
       ``(B) Notwithstanding any provision of the antitrust laws, 
     for the purpose of this subparagraph, any copyright owners of 
     nondramatic musical works and any persons entitled to obtain 
     a compulsory license under subsection (a)(1) may negotiate 
     and agree upon the terms and rates of royalty payments under 
     this paragraph and the proportionate division of fees paid 
     among copyright owners, and may designate common agents to 
     negotiate, agree to, pay or receive such royalty payments. 
     Such authority to negotiate the terms and rates of royalty 
     payments includes,
      but is not limited to, the authority to negotiate the year 
     during which the royalty rates prescribed under 
     subparagraphs (B) through (F) and chapter 8 of this title 
     shall next be determined.
       ``(C) During the period of June 30, 1996, through December 
     31, 1996, Librarian of Congress shall cause notice to be 
     published in the Federal Register of the initiation of 
     voluntary negotiation proceedings for the purpose of 
     determining reasonable terms and rates of royalty payments 
     for the activities specified by subparagraph (A) during the 
     period beginning January 1, 1998, and ending on December 31, 
     2007, or such earlier date (regarding digital transmissions) 
     as the parties may agree. Such terms and rates shall 
     distinguish between (i) digital phonorecord deliveries where 
     the reproduction or distribution of a phonorecord is 
     incidental to the transmission which constitutes the digital 
     phonorecord delivery, and (ii) digital phonorecord deliveries 
     in general. Any copyright owners of nondramatic musical works 
     and any persons entitled to obtain a compulsory license under 
     subsection (a)(1) may submit to the Librarian of Congress 
     licenses covering such activities. The parties to each 
     negotiation proceeding shall bear their own costs.
       ``(D) In the absence of license agreements negotiated under 
     subparagraph (C), the Librarian of Congress shall, pursuant 
     to chapter 8, convene a copyright arbitration royalty panel 
     to determine and publish in the Federal Register a schedule 
     of rates and terms which, subject to subparagraph (E), shall 
     be binding on all copyright owners of nondramatic musical 
     works and persons entitled to obtain a compulsory license 
     under subsection (a)(1) during the period beginning January 
     1, 1998, and ending on December 31, 2007, or such earlier 
     date (regarding digital transmissions) as may be determined 
     pursuant to subparagraph (C) or chapter 8. Such terms and 
     rates shall distinguish between (i) digital 

[[Page S 11948]]
     phonorecord deliveries where the reproduction or distribution of a 
     phonorecord is incidental to the transmission which 
     constitutes the digital phonorecord delivery, and (ii) 
     digital phonorecord deliveries in general. In addition to the 
     objectives set forth in section 801(b)(1), in establishing 
     such rates and terms, the copyright arbitration royalty panel 
     may consider rates under voluntary license agreements 
     negotiated as provided in subparagraph (C). The royalty rates 
     payable for a compulsory license for a digital phonorecord 
     delivery under this section shall be established de novo and 
     no precedential effect shall be given to the amount of the 
     royalty payable by a compulsory licensee for digital 
     phonorecord deliveries on or before December 31, 1997. The 
     parties to the proceeding shall bear the entire cost thereof 
     in such manner and proportion as the arbitration panels shall 
     direct. The Librarian of Congress shall also establish 
     requirements by which copyright owners may receive reasonable 
     notice of the use of their works under this section, and 
     under which records of such use shall be kept and made 
     available by persons making digital phonorecord deliveries.
       ``(E)(i) License agreements voluntarily negotiated at any 
     time between one or more copyright owners of nondramatic 
     musical works and one or more persons entitled to obtain a 
     compulsory license under subsection (a)(1) shall be given 
     effect in lieu of any determination by the Librarian of 
     Congress. Subject to clause (ii), the royalty rates 
     determined pursuant to subparagraph (C) or (D) shall be given 
     effect in lieu of any contrary royalty rates specified in a 
     contract pursuant to which a recording artist who is the 
     author of a nondramatic musical work grants a license under 
     that person's exclusive rights in the musical work under 
     section 106(1) or (3) to a person desiring to fix in a 
     tangible medium of expression a sound recording embodying the 
     musical work.
       ``(ii) Clause (i) shall not apply to--
       ``(I) a contract entered into on or before June 22, 1995, 
     and not modified thereafter for the purpose of reducing such 
     rates or of increasing the number of musical works within the 
     scope of the contract covered by the reduced rates, except if 
     a contract entered into on or before June 22, 1995, is 
     modified thereafter for the purpose of increasing the number 
     of musical works within the scope of the contract, any 
     contrary royalty rates specified in the contract shall be 
     given effect in lieu of royalty rates determined pursuant to 
     subparagraph (C) or (D) for the number of musical works 
     within the scope of the contract as of June 22, 1995; and
       ``(II) a contract entered into after the date that the 
     sound recording is fixed in a tangible medium of expression 
     substantially in a form intended for commercial release, if 
     at the time the contract is entered into, the recording 
     artist retains the right to grant licenses under sections 
     106(1) and 106(3).
       ``(F) The procedures specified in subparagraphs (C) and (D) 
     shall be repeated and concluded, in accordance with 
     regulations that the Librarian of Congress shall prescribe, 
     as provided in section 803(a)(3), except to the extent that 
     different times for the repeating and concluding of such 
     proceedings may be determined in accordance with subparagraph 
     (C) or (D).
       ``(G) Except as provided in section 1002(e) of this title, 
     a digital phonorecord delivery licensed under this paragraph 
     shall be accompanied by the information encoded in the sound 
     recording, if any, by or under the authority of the copyright 
     owner of that sound recording, that identifies the title of 
     the sound recording, the featured recording artist who 
     performs on the sound recording, and related information, 
     including information concerning the underlying musical work 
     and its writer.
       ``(H)(i) A digital phonorecord delivery of a sound 
     recording is actionable as an act of infringement under 
     section 501, and is fully subject to the remedies provided by 
     sections 502 through 506 and sections 509 and 510, unless--
       ``(I) the digital phonorecord delivery has been authorized 
     by the copyright owner of the sound recording; and
       ``(II) the owner of the copyright in the sound recording or 
     the entity making the digital phonorecord delivery has 
     obtained a compulsory license under this section or has 
     otherwise been authorized to distribute or authorize the 
     distribution, by means of a digital phonorecord delivery, of 
     each nondramatic musical work embodied in the sound 
     recording.
       ``(ii) Any cause of action under this subparagraph shall be 
     in addition to those available to the owner of the copyright 
     in the nondramatic musical work under subsection (c)(5) and 
     section 106(4) and the owner of the copyright in the sound 
     recording under section 106(6).
       ``(I) The liability of the copyright owner of a sound 
     recording for infringement of the copyright in a musical work 
     embodied in the sound recording shall be determined in 
     accordance with applicable law, except that the owner of a 
     copyright in a sound recording shall not be liable for a 
     digital phonorecord delivery by a third party if the owner of 
     the copyright in the sound recording does not license the 
     distribution of a phonorecord of the musical work.
       ``(J) Nothing in section 1008 shall be construed to prevent 
     the exercise of the rights and remedies allowed by this 
     paragraph, paragraph (7), and chapter 5 in the event of a 
     digital phonorecord delivery, except that no action alleging 
     infringement of copyright may be brought under this title 
     against a manufacturer, importer or distributor of a digital 
     audio recording device, a digital audio recording medium, an 
     analog recording device, or an analog recording medium, or 
     against a consumer, based on the actions described in such 
     section.
       ``(K) Nothing in this section annuls or limits (i) the 
     exclusive right to publicly perform a sound recording or the 
     musical work embodied therein, including by means of a 
     digital transmission, under sections 106(4) and 106(6), (ii) 
     except for compulsory licensing under the conditions 
     specified by this section, the exclusive rights to reproduce 
     and distribute the sound recording and the musical work 
     embodied therein under sections 106(1) and 106(3), including 
     by means of a digital phonorecord delivery, or (iii) any 
     other rights under any other provision of section 106, or 
     remedies available under this title, as such rights or 
     remedies exist either before or after the date of enactment 
     of the Digital Performance Right in Sound Recordings Act of 
     1995.
       ``(L) The provisions of this section concerning digital 
     phonorecord deliveries shall not apply to any exempt 
     transmissions or retransmissions under section 114(d)(1). The 
     exemptions created in section 114(d)(1) do not expand or 
     reduce the rights of copyright owners under section 106 (1) 
     through (5) with respect to such transmissions and 
     retransmissions.''; and
       (5) by adding after subsection (c) the following:
       ``(d) Definition.--As used in this section, the following 
     term has the following meaning: A `digital phonorecord 
     delivery' is each individual delivery of a phonorecord by 
     digital transmission of a sound recording which results in a 
     specifically identifiable reproduction by or for any 
     transmission recipient of a phonorecord of that sound 
     recording, regardless of whether the digital transmission is 
     also a public performance of the sound recording or any 
     nondramatic musical work embodied therein. A digital 
     phonorecord delivery does not result from a real-time, 
     noninteractive subscription transmission of a sound recording 
     where no reproduction of the sound recording or the musical 
     work embodied therein is made from the inception of the 
     transmission through to its receipt by the transmission 
     recipient in order to make the sound recording audible.''.

     SEC. 5. CONFORMING AMENDMENTS.

       (a) Definitions.--Section 101 of title 17, United States 
     Code, is amended by inserting after the definition of 
     ``device'', ``machine'', or ``process'' the following:
       ``A `digital transmission' is a transmission in whole or in 
     part in a digital or other non-analog format.''.
       (b) Limitations on Exclusive Rights: Secondary 
     Transmissions.--Section 111(c)(1) of title 17, United States 
     Code, is amended in the first sentence by inserting ``and 
     section 114(d)'' after ``of this subsection''.
       (c) Limitations on Exclusive Rights: Secondary 
     Transmissions of Superstations and Network Stations for 
     Private Home Viewing.--
       (1) Section 119(a)(1) of title 17, United States Code, is 
     amended in the first sentence by inserting ``and section 
     114(d)'' after ``of this subsection''.
       (2) Section 119(a)(2)(A) of title 17, United States Code, 
     is amended in the first sentence by inserting ``and section 
     114(d)'' after ``of this subsection''.
       (d) Copyright Arbitration Royalty Panels.--
       (1) Section 801(b)(1) of title 17, United States Code, is 
     amended in the first and second sentences by striking ``115'' 
     each place it appears and inserting ``114, 115,''.
       (2) Section 802(c) of title 17, United States Code, is 
     amended in the third sentence by striking ``section 111, 116, 
     or 119,'' and inserting ``section 111, 114, 116, or 119, any 
     person entitled to a compulsory license under section 114(d), 
     any person entitled to a compulsory license under section 
     115,''.
       (3) Section 802(g) of title 17, United States Code, is 
     amended in the third sentence by inserting ``114,'' after 
     ``111,''.
       (4) Section 802(h)(2) of title 17, United States Code, is 
     amended by inserting ``114,'' after ``111,''.

     SEC. 6. EFFECTIVE DATE.

       This Act and the amendments made by this Act shall take 
     effect 3 months after the date of enactment of this Act, 
     except that the provisions of sections 114(e) and 114(f) of 
     title 17, United States Code (as added by section 3 of this 
     Act) shall take effect immediately upon the date of enactment 
     of this Act.
                           Amendment No. 2302

    (Purpose: To amend title 17, United States Code, to provide an 
   exclusive right to perform sound recordings publicly by means of 
             digital transmissions, and for other purposes)

  Mr. GORTON. Mr. President, on behalf of Senators Hatch and Feinstein, 
I send an amendment to the desk to the committee amendment and ask for 
its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Washington [Mr. Gorton] for Mr. Hatch, for 
     himself and Mrs. Feinstein, proposes an amendment numbered 
     2302.

  Mr. GORTON. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  Mr. GORTON. Mr. President, I ask unanimous consent that the amendment 
be agreed to.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment (No. 2302) was agreed to.
  Mr. HATCH. Mr. President, I rise to request my colleagues' support 
for S. 

[[Page S 11949]]
227, the Digital Performance Right in Sound Recordings Act of 1995.
  Mr. President, sound recordings--whether records, CD's, or tapes--are 
the only copyrighted works capable of performance that do not enjoy a 
performance right under our copyright law, even though they enjoy such 
a right in over 60 other nations. That simple fact, and the policies 
that underlie it, is what S. 227 is all about. All other works, whether 
they be films, plays, operas, songs, or ballets are protected by the 
performance right which guarantees that when their works are heard or 
seen publicly, those who created and produced the work are compensated.
  This legislation has been a long time in coming. From the very first 
moment that Federal copyright protection was extended to sound 
recordings in 1972, Congress has been concerned about whether this 
discrimination with regard to the performance right makes sense. In the 
Copyright Act of 1976, we ordered the Register of Copyrights to study 
this problem and to report to Congress ``after consulting with 
representatives of owners of copyrighted materials, representatives of 
the broadcasting, recording, motion picture, entertainment industries, 
and arts organizations, representatives of organized labor and 
performers of copyrighted materials.'' 17 U.S.C. Section 114(d).
  The report of the Copyright Office strongly recommended the adoption 
of a sweeping performance right for sound recordings. Over 10 years 
later, Congress requested a supplemental study of the issue, one that 
would take into account the many technological and legal changes in the 
intervening years. That report, filed in October of 1991, reaffirmed 
the view that sound recordings are illogically and unfairly 
discriminated against in our copyright law, with clearly identifiable 
adverse consequences for American artists individually and for our 
balance of trade in general.
  Responding to these studies, Senator Feinstein and I filed S. 1421 in 
the last Congress. That bill did not seek to create a performance right 
for all public performances of sound records, but instead addressed the 
most immediate threat to the owners of copyright in sound recordings--
the ease of copying and greater fidelity that is achievable through the 
transmission of sound recordings by means of digital technologies.
  We were unable to achieve passage of S. 1421 in the 103d Congress, 
but, because of the discussions and negotiations held throughout the 
past 2 years, we are able to present to this
 body a bill that accommodates the legitimate interests of everyone 
involved in the music licensing, distribution, and performance systems. 
The new digital performance right created by this bill applies to 
digital audio transmission of sound recordings which are part of an 
interactive service, or for which a subscriber pays a fee. The bill 
does not apply to traditional broadcasts and most other free 
transmissions, transmissions within business establishments, and 
transmissions made by commercial music services to businesses, among 
others. In drawing these lines, the Judiciary Committee, which I have 
the honor of chairing, attempted to balance the competing interests of 
the various copyright owners as well as users, and we think we have 
gotten it right.

  S. 227 was unanimously approved by the Judiciary Committee on June 
29, 1995. Indeed, I am pleased to note that, in addition to Senator 
Feinstein and myself, the bill is now cosponsored by Senator DeWine, 
Senator Simpson, Senator Lott, Senator Baucus, Senator Thurmond, and 
Senator Leahy. I believe it is ready for approval by the Senate today.
  I should note that I am proposing today a substitute that contains a 
number of technical corrections to the bill as approved by the 
Judiciary Committee. The legislation is complex, and we have attempted 
to correct some inconsistent uses of defined terms and other technical 
errors. In addition, we have adopted a number of suggestions made by 
the Copyright Office to improve the procedures provided for in the 
legislation for negotiating and arbitrating royalty rates and terms. I 
am submitting a description of these changes and a section-by-section 
analysis for the Record along with this statement for the information 
of my colleagues.
  Mr. President, today is an important day for creators of American 
music. Today we are correcting an anomalous inequity in our copyright 
law. Although American music has long been the world's most popular, we 
have strangely not given the creators of sound recordings a right to 
control and be remunerated for their works. Today we take a substantial 
step to ending that inequity.
  This bill is forward looking. It largely leaves in place mature 
businesses that have grown up under the old copyright regime. It seeks 
to ensure that creators of sound recordings will have the rights they 
have been denied until now as the digital age dawns.
  This bill also will help protect the creators of American music 
abroad by strengthening our international position in negotiating 
safeguards for the makers of American music performed in other 
countries, as it is all over the world.
  Mr. President, it is important that the creators of America's music--
whether they compose the score, write the lyrics, sing the songs, or 
produce the recordings--be fairly and equitably compensated for the 
public performances that result. For too long they have not been.
  I therefore ask my colleagues to support and pass S. 227, so that 
this long overdue protection can be at last provided.
  I also ask unanimous consent that a description of the changes from 
the committee-approved bill, and a new section-by-section analysis be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
  Description of Technical Corrections To the Committee-Approved Bill


      section 114(d)(1)--exempt transmissions and retransmissions

       As originally approved by the Committee, the bill generally 
     used to term ``transmission'' to refer to all transmissions, 
     and the term ``retransmission'' to refer to the subset of 
     transmissions that are further transmissions of initial 
     transmissions. Thus, for example, new section 106(6) granted 
     an exclusive right to perform a copyrighted sound recording 
     publicly ``by means of a digital audio transmission,'' and 
     did not mention retransmissions, even though it was intended 
     that the new performance right would cover all digital audio 
     transmissions, including retransmissions.
       Use of those terms in section 114(d)(1) was not always 
     consistent with that general usage. The corrected bill uses 
     these terms consistently. To clarify the original intention 
     of the bill, the following changes were made:
       In section 114(j), a new definition of the term 
     ``transmission'' was added to clarify that that term includes 
     retransmissions. 
     The definitions of the terms ``broadcast'' 
     transmission, ``retransmission'' and ``non- subscription'' 
     transmission were also revised to reflect this clarification.
       In section 114(d)(1), the phrase ``or retransmission'' has 
     been deleted in several places where it is not necessary in 
     light of the new definitions.
       Section 114(d)(1)(A) also was revised to reflect the 
     clarified definitions. Subparagraph (A) originally was 
     intended to exempt nonsubscription transmissions being 
     initially delivered to the public, such as nonsubscription 
     broadcast transmissions. With the clarification of the 
     definitions, it became necessary to specify more precisely 
     which transmissions are covered by this exemption. Thus, 
     under the corrected bill, a transmission is exempt if it is 
     either:
       A nonsubscription transmission other than a retransmission 
     (such as a nonbroadcast nonsubscription digital audio service 
     that originates its transmissions rather than retransmitting 
     a programming feed);
       An initial nonsubscription retransmission made for direct 
     reception by members of the public of a prior or simultaneous 
     incidental transmission that is not made for direct reception 
     by members of the public (such as an initial retransmission 
     to the public of a network feed--whether the feed itself is 
     exempt remains governed by section 114(d)(1)(C)(i)); or
       A nonsubscription broadcast transmission. As defined in 
     section 114(j)(2), this category includes all nonsubscription 
     broadcast transmissions made by terrestrial broadcast 
     stations licensed by the FCC, whether an initial transmission 
     (such as a local newscast) or a retransmission (such as the 
     retransmission of a feed supplied by a network or 
     syndicator). This clause does not cover retransmissions by 
     entities other than broadcast stations (such as cable 
     systems) of transmissions made by broadcast stations; whether 
     such retransmissions are themselves exempt remains governed 
     by section 114(d)(1)(B) and, to some extent, section 
     114(d)(1)(C).
       In light of the technical amendments to section 
     114(d)(1)(A), transmissions exempted 

[[Page S 11950]]
     by section 114(d)(1)(B)(i)(I) may already be exempt under section 
     114(d)(1)(A). For example, since section 114(d)(1)(A) exempts 
     all nonsubscription broadcast tarnsmissions (including 
     nonsubscription broadcast retransmissions), the 
     retransmissions by terrestrial broadcast stations that are 
     exempted by Section 114(d)(1)(B)(i)(I) are also exempt under 
     section 114(d)(1)(A)(iii). To leave no doubt about the 
     intention to exempt the retransmissions described in section 
     114(d)(1)(B)(i)(I) (without regard to the 150-mile limitation 
     generally applicable under section 114(d)(1)(B)(i)), that 
     section has been left intact.
       In addition, section 114(d)(1)(C)(iii), an incorrect 
     reference to section 522(12) of the Communications Act of 
     1934 was corrected.


 section 114(d)(3)-- licenses for transmissions by interactive services

       Subparagraph (A) limits the duration of exclusive 
     performance licenses granted to interactive services, and 
     subparagraph (B)(i) provides an exception to this limitation 
     if a record company grants sufficient licenses to multiple 
     interactive services. In describing this exception, the bill 
     as originally approved referred to a percentage of the sound 
     recordings licensed by a sound recording copyright owner ``on 
     an exclusive basis.'' However, to encourage diversity of 
     licensing, the percentage should not be calculated based only 
     on the number of sound recordings licensed ``on an exclusive 
     basis.'' Thus, the
      corrected bill deletes the phrase ``on an exclusive basis'' 
     to make clear that the percentage should be calculated 
     based on the number of sound recordings licensed by the 
     copyright owner on an exclusive or nonexclusive basis.
       Subparagraph (D) has been revised to use the phrase 
     ``retransmission of a digital audio transmission,'' which 
     conforms to the terms defined and used throughout the bill.


            section 114(d)(4)--rights not otherwise limited

       As the bill was originally approved, subparagraph (B)(ii) 
     made clear that none of the changes made by the bill to 
     section 114 of the Copyright Act is to affect the existing 
     reproduction and distribution rights of sound recording and 
     musical work copyright owners. Of course, the changes to 
     section 114 are not intended to affect the adaptation rights 
     of sound recording and musical work copyright owners either. 
     The corrected bill adds a specific reference to section 
     106(2) of the Act to avoid any implication to the contrary.


   section 114(f)--licenses for nonexempt subscription transmissions

       The Copyright Office provided thoughtful comments on 
     various aspects of the bill as originally approved, including 
     particularly those provisions concerning the mechanics of 
     establishing statutory licensing royalty rates and terms. The 
     corrected bill includes revised language to address a number 
     of issues raised by those comments and related issues.
       In paragraph (2):
       New language makes clear that if an arbitration proceeding 
     is necessary to establish the initial statutory licensing 
     rates and terms, it will commence only upon the filing of a 
     petition during a 60-day period which will commence 6 months 
     after publication of notice of the initiation of the 
     voluntary negotiation proceeding.
       Language (already used in new section 115(c)(3)(D)) is 
     added to clarify that the objectives set forth in existing 
     section 801(b)(1) of the Copyright Act are to be considered 
     by arbitration panels in setting statutory licensing rates 
     and terms.
       A reference to ``terms'' is added to clarify that 
     arbitration panels may consider voluntarily negotiated 
     license terms in determining the terms applicable to 
     statutory licenses.
       A sentence was deleted at the suggestion of the Copyright 
     Office because substantially the same language already 
     appears in existing section 802(c) of the Copyright Act.
       The words ``and made available'' were added to be 
     consistent with the provisions of new section 115(c)(3)(D).
       Paragraph (4) of the bill was rewritten to clarify when 
     voluntary negotiation or arbitration proceedings should 
     commence. Under the revised paragraph, the Librarian of 
     Congress is to publish notice of the initiation of voluntary 
     negotiation proceedings:
       (a) within 30 days after being petitioned to publish notice 
     concerning a new type of digital audio transmission service; 
     and
       (b) in January 2000, and every five years thereafter.
       If voluntary negotiations do not lead to an agreement among 
     the interested parties, an arbitration may be commenced upon 
     the filing of a petition in accordance with existing section 
     803(a)(1) of the Copyright Act during a specified 60-day 
     period. That period commences:
       (a) six months after publication of notice of the 
     initiation of a voluntary negotiation proceeding concerning a 
     new type of digital audio transmission service; and
       (b) on July 1, 2000, and every five years thereafter.
       Regardless of when an arbitration proceeding is commenced, 
     it is to be concluded in accordance with the existing 
     procedures in section 802 of the Copyright Act.
       In paragraph (5)(A)(i), an erroneous reference to the 
     ``Register of Copyrights'' has been corrected.


      section 114(i)--No Effect on Royalties for Underlying Works

       The form of a reference to section 106(6) was conformed to 
     other references in the bill.
                      section 114(j)--definitions

       As explained in connection with section 114(d)(1), the 
     corrected bill includes a new definition of the term 
     ``transmission'' and several revised definitions intended to 
     clarify the original intention of the bill concerning the use 
     of those terms:
       The revised definition of ``transmission'' clarifies the 
     intention that that term covers both all initial 
     transmissions and all retransmissions.
       To reflect the use of the term ``broadcast'' transmission 
     in section 114(d)(1)(A)(iii), as described above, the 
     definition has been limited to transmissions by terrestrial 
     broadcast stations. Whether nonbroadcast nonsubscription 
     transmissions, for example by non-terrestrial services (such 
     as satellite services), are exempt is governed by sections 
     114(d)(1)(A) (i) and (ii).
       The definition of ``nonsubscription'' transmission was 
     simplified in light of the other definitional changes.
       The definition of ``retransmission'' previously set forth 
     only an example of a retransmission. As modified, the 
     provision defines the term as a further transmission of an 
     initial transmission, as well as any further retransmission 
     of the same transmission. Except as otherwise provided, a 
     transmission is a ``retransmission'' only if it is 
     simultaneous with the initial transmission.


                           section 115(a)(1)

       The phrase ``by means of a digital audio transmission'' was 
     deleted because it is redundant.


                          section 115(c)(3)(B)

       The phrase ``for the purpose of this subparagraph'' was 
     deleted because it is incorrect. The corrected provision 
     conforms with the language of new section 114(e)(1).


                          section 115(c)(3)(C)

       This subparagraph was revised to provide that once 
     statutory licensing rates and terms are established, they 
     shall remain in effect until successor rates and terms are 
     established, either by negotiation or, if necessary, 
     arbitration. In addition, a reference to ``digital 
     transmissions'' was replaced with the more precise term 
     ``digital phonorecord deliveries.''


                          section 115(c)(3)(D)

       This subparagraph has been revised in several ways to 
     clarify the mechanics of establishing compulsory licensing 
     royalty rates and terms:
       References to subparagraph (B) have been added because 
     negotiations conducted under the procedures of subparagraph 
     (C) are covered by the provisions of subparagraph (B).
       An arbitration proceeding is to commence only upon the 
     filing of a petition in accordance with existing section 
     803(a)(1). (Unlike arbitration under section 114, however, a 
     petition of arbitration under section 115(c)(3)(D) may be 
     filed at any time during the calendar year in which the 
     mechanical royalty rates and terms for digital phonorecord 
     deliveries are to be established.)
       Once statutory licensing rates and terms are established, 
     they shall remain in effect until successor rates and terms 
     are established, either by negotiation or, if necessary, 
     arbitration.
       A reference to ``digital transmissions'' was replaced with 
     the more precise term ``digital phonorecord deliveries.''
       Arbitration panels may consider voluntarily negotiated 
     license ``terms'' as well as ``rates'' in determining 
     statutory licenses.
       A sentence was deleted at the suggestion of the Copyright 
     Office because substantially the same language already 
     appears in existing section 802(c) of the Copyright Act.


                          section 115(c)(3)(E)

       Subparagraph (E)(i) was revised to make clear that the 
     limitation on ``controlled composition'' clauses applies not 
     only to contracts where a recording artist who is the author 
     of a musical work grants a mechanical license in the work 
     that, but also to contracts where the recording artist 
     commits another person
      (such as the artist's music publisher) to grant a mechanical 
     license in that work.
       Several additional minor corrections were made to this 
     subparagraph:
       References to subparagraph (F) were added to recognize that 
     subparagraphs (C), (D) and (F) all are relevant to 
     determining compulsory licensing rates and terms.
       The introduction to subparagraph (E)(ii) has been corrected 
     to refer only to the second sentence of subparagraph (E)(i), 
     because the exceptions contained in subparagraph (E)(ii) are 
     not relevant to the first sentence of subparagraph (E)(i).
       In subparagraph (E)(ii), ambiguous references to ``such 
     rates'' and to ``the right to grant licenses'' have been 
     replaced with more specific language.


                          section 115(c)(3)(F)

       As the bill was originally approved, this subparagraph 
     provided that mechanical royalty rates and terms for digital 
     phonorecord deliveries were to be reexamined every ten years, 
     as provided in section 803(a)(3), except to the extent that 
     different years for doing so were determined by agreement of 
     the parties. If the parties did not agree on the shorter 
     period for determining rates, the issue would have been 
     subject to arbitration. It is preferable to provide a shorter 
     period by statute, in the event the parties do not agree, to 
     reexamine whether circumstances 

[[Page S 11951]]
     warrant a change in mechanical license rates and terms. Thus, the 
     procedures specified in subparagraphs (C) and (D) shall next 
     be repeated in five years if the parties do not choose 
     another year.


                          Section 115(c)(3)(H)

       Several corrections were made to this subparagraph:
       In subparagraph (H)(i), an erroneous reference to section 
     510 was deleted.
       New language in subparagraph (H)(i)(II) makes clear that, 
     if no compulsory license is obtained, it is the musical work 
     copyright owner (or someone acting under that person's 
     authority) who must authorize the making of digital 
     phonorecord deliveries of the musical work to digital 
     phonorecord deliveries of the musical work to satisfy the 
     requirements of subparagraph (H)(i)(II).
       In subparagraph (H)(i)(II), the word ``nondramatic'' was 
     deleted to confirm that the provisions of subparagraph (H) 
     apply to digital phonorecord deliveries of sound recordings 
     of both dramatic and nondramatic musical works.
       In subparagraph (H)(ii), an erroneous reference to 
     subsection (c)(5) was corrected.


                          Section 115(c)(3)(I)

       Because section 115 generally applies only to nondramatic 
     musical works, the word ``nondramatic'' was added to this 
     subparagraph.


                          Section 115(c)(3)(J)

       An erroneous reference to paragraph (7) was corrected.


                         Conforming Amendments

       Additional conforming amendments have been added to the 
     bill. These clarify the relationship between section 803 of 
     the Copyright Act and the new arbitration provisions of 
     sections 114 and 115.
                                                                    ____

       Digital Performance Right in Sound Recordings Act of 1995


                      section-by-section analysis

       Section 1--Short Title.--This section sets forth the title 
     of the Act, the ``Digital Performance Right in Sound 
     Recordings Act of 1995.''
       Section 2--Exclusive Rights in Copyrighted Works.--This 
     section amends section 106 of title 17 to add a new paragraph 
     (6) to provide an exclusive right to perform a copyrighted 
     sound recording publicly by means of a digital audio 
     transmission.
       Section 3--Scope of Exclusive Rights in Sound Recordings.--
     This section amends section 114(a) by adding a reference to 
     new section 106(6) in the list of exclusive rights granted to 
     the owner of a copyright in a sound recording.
       This section also amends the language of section 114(b) 
     relating to the tangible medium of expression in which sound 
     recordings can be duplicated. Instead of referring only to 
     phonorecords or ``copies of motion pictures and other 
     audiovisual works,'' the new language recognizes that sound 
     recordings can be reproduced in copies of any kind. As 
     multimedia technologies begin to blur the lines between 
     different categories of works capable of being embodied in 
     copies, the Committee deemed it important to confirm that, 
     subject to the specific limitations in section 114(b), sound 
     recordings enjoy the full scope of protection afforded by the 
     reproduction right under section 106(1).
       This section also strikes section 114(d) of title 17, an 
     obsolete provision that directed the Register of Copyrights 
     to submit a report on performance rights to Congress on 
     January 3, 1978, and replaces it with new subsections (d) 
     through (i), as described below.

             Section 114(d). Limitations on Exclusive Right

      Section 114(d)(1). Exempt Transmissions and Retransmissions

       Section 114(d)(1) is designed to ensure that the new right 
     provided to owners of copyright in sound recordings with 
     respect to certain digital public performances of those 
     recordings will not affect nonsubscription transmissions 
     being initially delivered to the public (such as radio or 
     television broadcasts), certain retransmissions of those 
     transmissions, and certain other transmissions (including 
     retransmissions) that the Committee believes should not be 
     subject to the new right.
       To take advantage of the Section 114(d)(1) exemptions, a 
     transmission must not be part of an ``interactive service'' 
     as defined in Section 114(j)(4). The Committee anticipates 
     that this requirement will not present any difficulty for the 
     types of services covered by the Section 114(d)(1) exemption. 
     The term ``interactive service'' is intended to cover only 
     services in which an individual can arrange for the 
     transmission of a specific sound recording to that person or 
     another, individually.
       Under Section 114(d)(1), a transmission will be exempt from 
     the new right under Section 106(6) if it falls into at least 
     one of the following categories:

     Section 114(d)(1)(A) (certain nonsubscription) transmissions)

       Under this provision, any transmission to members of the 
     public that is not a part of an interactive service is exempt 
     from the new digital performance right if it is either: a 
     nonsubscription transmission other than a retransmission 
     (such as a nonbroadcast nonsubscription digital audio service 
     that originates its transmissions rather than retransmitting 
     a programming feed); an initial nonsubscription 
     retransmission made for direct reception by members of the 
     public of a prior or simultaneous incidental transmission 
     that is not made for direct reception by members of the 
     public (such as an initial retransmission to the public of a 
     network feed; whether the feed itself is exempt is governed 
     by section 114(d)(1)(C)(i)); or a nonsubscription broadcast 
     transmission. As defined  in  section  114(j)(2),  this  
     category includes  all  nonsubscription  broadcast 
     transmissions made by terrestrial broadcast stations licensed 
     by the FCC, whether an initial transmission (such as a local 
     newscast) or a retransmission (such as the retransmission of 
     a feed supplied by a network or syndicator). This clause does 
     not cover retransmissions by entities other than broadcast 
     stations (such as cable systems) of transmissions made by 
     broadcast stations; whether such retransmissions are 
     themselves exempt is governed by section 114(d)(1)(B) and, to 
     some extent, section 114(d)(1)(C).
       The classic example of such an exempt transmission is a 
     transmission to the general public by a free over-the-air 
     broadcast station, such as a traditional radio or television 
     station, and the Committee intends that such transmissions be 
     exempt regardless of whether they are in a digital or non-
     digital format, in whole or in part.

  Section 114(d)(1)(B) (retransmissions of nonsubscription broadcast 
                             transmissions)

       In general, this provision exempts all retransmissions of 
     nonsubscription broadcast transmissions, whether the retrans-
     missions are offered on a subscription or a nonsubscription 
     basis. Retransmissions of radio station broadcast 
     transmissions, however, are exempt only if they are not part 
     of an interactive service and fall within certain specified 
     categories, which are discussed in detail below.
       The Committee has created the Section 114(d)(1)(B) 
     exemption because it is aware that cable systems and other 
     multichannel programming distributors often offer re-
     transmissions of nonsubscription broadcast transmissions to 
     their customers. At present, copyright liability for these 
     retransmissions  ordinarily  is  covered  pur-suant to 
     Sections 111 and 119 of the Act. The Committee  intends,  
     subject  to the limitations discussed below concerning 
     retransmissions  of  radio  broadcasts,  that all 
     noninteractive retransmissions of noninteractive 
     nonsubscription broadcast transmissions be exempt from the 
     new digital sound recording performance right. These 
     retransmissions will be exempt even if the cable system (or 
     other retransmission service) limits the delivery of the 
     retransmission to its customers and charges a fee to receive 
     the retransmission. In other words, retransmissions of 
     broadcast stations' signals will be exempt even if the 
     retransmissions are themselves ``subscription'' transmissions 
     under the Act. A cable system's delivery of a retransmitted 
     radio broadcast signal within 150 miles of the transmitter, 
     for example, will be exempt under Section 114(d)(1)(B)(i), 
     even if the cable system charges a monthly fee to subscribers 
     to receive the signal.
       Retransmissions of the broadcast transmissions of radio 
     stations are exempt pursuant to Section 114(d)(1)(B) only if 
     they fall within one of the categories listed in paragraphs 
     114(d)(1)(B)(i) through (B)(iv):
       Section 114(d)(1)(B)(i) (retransmission of radio  signals  
     within  150  mile  radius  of transmitter).--Under this 
     provision, retransmissions of a radio station within a 150 
     mile radius of the site of that station's transmitter are 
     exempt, whether retrans-mitted on a subscription or a 
     nonsubscription basis, provided that they are not part of an 
     interactive service.
       This provision does not, however, exempt the willful or 
     repeated retransmission of a radio station's broadcast 
     transmission more than a 150 mile radius from the radio 
     station's transmitter. The Committee recognizes that the 150 
     mile limit could serve as a dangerous trap for the 
     uninitiated or inattentive. To ensure against that 
     possibility, Section 114(d)(1)(B)(i) provides that a 
     retransmission beyond the
      150 mile radius will fall outside the exemption only if the 
     retransmission is willful or repeated. The Committee 
     intends the phrase ``willful or repeated'' to be 
     understood in the same way that phrase was used in Section 
     111 of the Act, as explained in the House Report on the 
     1976 Act, H.R. Rep. No. 1476, 94th Cong., 2d Sess. 93 
     (1976).
       Pursuant to Section 114(d)(1)(B)(i)(I), the 150-mile 
     limitation does not apply when a nosubscription broadcast 
     transmission by an FCC-licensed station is retransmitted on a 
     nonsubscription basis by an FCC-licensed terrestrial 
     broadcast station, terrestrial translator, or terrestrial 
     repeater. In other words, a radio station's broadcast 
     transmission may be retransmitted by another FCC-licensed 
     basis without regard to the 150 mile restriction.
       The Committee notes that transmissions exempted by section 
     114(d)(1)(B)(i)(I) may already be exempt under section 
     114(d)(1)(A). For example, since section 114(d)(1)(A) exempts 
     all nonsubscription broadcast transmissions (including 
     nonsubscription broadcast retransmissions), the 
     retransmissions by terrestrial broadcast stations that are 
     exempted by Section 114(d)(1)(B)(i)(I) are also exempt under 
     section 114(d)(1)(A)(iii). To leave no doubt about the 
     intention to exempt the retransmissions described in section 
     114(d)(1)(B)(i)(I) (without regard to the 150-mile limitation 
     generally applicable under section 114(d)(1)(B)(i)), that 
     section has been included in the bill in this form.

[[Page S 11952]]

       Under Section 114(d)(1)(B)(i)(II), when a retransmission 
     covered by Section 114(d)(1)(B)(i)(I) is itself retransmitted 
     on a subscription basis, the 150-mile radius is measured from 
     the transmitter site of the broadcast retransmitter (whether 
     a station, translator, or repeater). This means that a cable 
     system (or other subscription retransmitter) can, without 
     incurring liability under Section 106(6), retransmit a 
     broadcast retransmission within 150 miles of the transmitter 
     site of the station, translator, or repeater that is making 
     the retransmission.
       Section 106(6) is not intended to apply to the transmission 
     of a local radio station's programming free of charge to 
     local or long distance callers who are put ``on hold'' during 
     a telephone call with a business, nor is the bill intended to 
     change current law as it applies to such performances of 
     copyrighted musical works under section 106(4).
       Section 114(d)(1)(B)(ii) (all-band retrans-missions of 
     radio transmissions received over the air).--This provision 
     is intended to permit retransmitters (such as cable systems) 
     to offer retransmissions to their local subscribers of all 
     radio stations that the retransmitter is able to pick up 
     using an over-the-air antenna. (These are sometimes called 
     ``all-band'' retransmissions.) There are three requirements 
     for this exemption: (1) the retransmitter (such as a cable 
     system) must obtain the radio broadcast transmission over the 
     air; (2) the broadcast transmission must not be 
     electronically processed by the retransmitter as separate and 
     discrete signals (as that term is used in 37 C.F.R. 
     Sec. 201.17(b)(4)), and (3) the transmissions must be 
     retransmitted only within the local communities served by the 
     retransmitter. Since some radio station broadcast 
     transmissions can be picked up over the air beyond 150 miles, 
     this provision is intended to ensure that the 150-mile 
     limitation in Section 114(d)(1)(B)(i) will not create 
     unintended liability for all-band retransmissions.
       Section 114(d)(1)(B)(iii) (grandfathering).--This provision 
     exempts certain other retransmissions of radio broadcast 
     transmissions, again without regard to the 150 mile limit in 
     Section 114(d)(1)(B)(i). The requirements for this exemption 
     are as follows: (1) the radio station's transmission was 
     being retransmitted by a satellite carrier on January 1, 1995 
     (as was, for example, Chicago radio station WFMT); (2) that 
     retransmission was being retransmitted by cable systems (as 
     defined in Section 111(f) of the Act) as a separate and 
     discrete signal; (3) the satellite carrier receives the radio 
     station's transmission in analog form; and (4) the broadcast 
     transmission being retransmitted embodies the programming of 
     no more than one radio station (i.e., the station must not 
     the multiplexed).
       Section 114(d)(1)(B)(iv) (nonsubscription broadcast 
     retransmissions of public radio station broadcast 
     transmissions)--The Committee recognizes that noncommercial 
     educational radio stations rely on a variety of types of 
     broadcast retransmissions to deliver their programming to the 
     public. This provision establishes an exemption for such 
     retransmissions. Specifically, this provision exempts both 
     simultaneous and nonsimultaneous retransmissions of broadcast 
     transmissions originally made by federally funded 
     noncommercial educational radio stations, provided that the 
     retransmissions are carried out through nonsubscription 
     terrestrial broadcasts. To qualify, the noncommercial 
     educational radio station's broadcasts must consist of news, 
     informational, cultural, public affairs, or other 
     ``educational and cultural'' programming to the public. The 
     150-mile limitation of Section 114(d)(1)(B)(i) does not apply 
     to retransmissions that qualify for this exemption.
       Many noncommercial educational stations also use 
     intermediate nonbroadcast transmission links to broadcast 
     their programming to the public, and those nonbroadcast 
     transmissions or retransmissions may be exempt under other 
     provisions of the bill.

 Section 114(d)(1)(C) (other exempt transmissions and retransmissions)

       This provision exempts certain other categories of 
     transmissions, without regard to whether they are 
     subscription transmissions or nonsubscription transmissions. 
     The categories exempted under this provision are as follows:
       Section 114(d)(1)(C)(i) (incidental transmissions).--In the 
     course of arranging for the delivery of an exempt 
     transmission, many incidental transmissions may take place. 
     For example, a radio or television station may receive a 
     satellite feed from a network or from another station that 
     provides programming to the station; a station or network may 
     receive a ``backhaul'' transmission from a sports or news 
     event at a remote location; or a station may deliver a clean 
     feed of its broadcast transmission to a cable system to 
     ensure that the cable system's retransmission will be of the 
     highest technical quality. Among other things, Section 
     114(d)(1)(C)(i) exempts transmissions of a broadcast station 
     that both broadcasts its signal to the public and, either 
     immediately or through intermediate terrestrial links, 
     transmits that signal by satellite to other broadcast 
     stations for their simultaneous or subsequent broadcast to 
     the public. The Committee intends that all such incidental 
     transmissions be exempt from the new digital performance 
     right under Section 106(6) regardless of whether they are 
     made on a subscription or a nonsubscription basis, and 
     regardless of whether some or all portions of a transmission 
     are in a digital format. Thus, section 114(d)(1)(C)(i) also 
     exempts an incidental transmission, as described above, by a 
     subscription digital transmission service to a cable system 
     to the extent that the cable system is engaging in an exempt 
     retransmission of that transmission to a business 
     establishment pursuant to section 114(d)(1)(C)(iv). The 
     Committee does not intend, however, for any subscription 
     transmission intended for reception directly by members of 
     the public to fall within the category of exempt incidental 
     transmissions. To qualify for this ``incidental'' exemption, 
     transmissions must be made for the purpose of facilitating an 
     exempt transmission. Thus, a transmission that is available 
     for general reception by the public (for example, through the 
     Internet), which is not being used to facilitate an exempt 
     transmission, would not qualify as an ``incidental'' 
     transmission under this section.
       Section 114(d)(1)(C)(ii) (transmissions by businesses on 
     and around their premises).--Businesses often utilize 
     transmissions on or around their premises that include 
     prerecorded musical works. This activity is sometimes called 
     ``storecasting.'' The Committee is aware that there has been 
     extensive litigation over the scope of Section 110(5) of the 
     Act relating to the particular circumstances under which 
     businesses are liable to the copyright owners of musical 
     works when they utilize transmissions
      containing such works on and around their premises. To leave 
     absolutely no doubt that the new Section 106(6) right is 
     not intended to create any comparable right in the owners 
     of copyright in sound recordings regarding ``storecasts,'' 
     Section 114(d)(1)(C)(ii) specifically provides that the 
     new right does not reach transmissions on or around 
     business premises. In particular, Section 114(d)(1)(C)(ii) 
     would permit a business to engage in transmissions 
     (including retransmissions of any transmission) on its 
     premises or the immediately surrounding vicinity without 
     incurring liability to the copyright owners of sound 
     recordings under Section 106(6). This provision is not 
     intended to change the rights of copyright owners of 
     musical works regarding transmissions under existing law.
       Section 114(d)(1)(C)(iii) (authorized retransmissions of 
     licensed transmissions).--To simplify licensing practices, 
     section 114(d)(1)(C)(iii) provides a ``through to the 
     listener'' exemption intended to permit retransmitters, 
     including cable systems, direct broadcast satellite (``DBS'') 
     service providers and other multichannel video programming 
     distributors (``MVPDs'') (as defined in the 1934 
     Communications Act, as amended), simultaneously to retransmit 
     to the listener noninteractive music programming provided by 
     a licensed source. To qualify for this exemption, the 
     retransmission must be simultaneous with the original 
     transmission and authorized by the original transmitter; and 
     the original transmission must be licensed by the copyright 
     owner of the sound recording. Retransmissions are deemed to 
     be ``simultaneous'' even if there is some momentary time 
     delay resulting from the technology used for transmission or 
     retransmission.
       Thus, Section 114(d)(1)(C)(iii) exempts retransmissions 
     from liability for copyright infringement where a 
     noninteractive music programmer transmitter has obtained a 
     public performance copyright license from the copyright owner 
     of the sound recording, and the retransmitter has not 
     obtained such a license but is authorized by the licensed 
     music programmer transmitter to retransmit the sound 
     recording. Retransmissions of this type are exempt under the 
     provisions of this Act, as the sound recordings retransmitted 
     are covered by the licenses that the music programmer 
     transmitter obtains from the sound recording copyright 
     owners.
       Section 114(d)(1)(C)(iv) (certain transmissions to business 
     establishments).--This provision exempts from liability under 
     new section 106(6) certain noninteractive transmissions made 
     to business establishments for use in the ordinary course of 
     their business, such as for background music played in 
     offices, retail stores or restaurants.
       To qualify, the transmission must meet all of the following 
     conditions: (a) the transmission must be to a business 
     establishment; (b) the transmission must be for use by the 
     business establishment in the ordinary course of its 
     business; (c) the business establishment must not retransmit 
     the transmission outside its premises or the immediately 
     surrounding vicinity; and (d) the transmission must not 
     exceed the sound recording performance complement, as defined 
     in Section 114(j)
       If a business establishment retransmits the transmission in 
     a manner not otherwise exempted under subparagraph (C)(ii), 
     without the authority or prior knowledge of or any inducement 
     by any entity that transmitted the service to the business 
     establishment, then only the retransmission by the business 
     establishment is not exempt pursuant to subparagraph (C)(iv). 
     Under such circumstances, the non-exempt status of such a 
     retransmission would not affect the exempt status of the 
     transmission to that business establishment.
       If the same subscription transmission service programming 
     is being transmitted to both business establishments and non-
     business consumers, then only the transmission of that 
     service to the business establishments would qualify for an 
     exemption pursuant to subparagraph (C)(iv). As the bill 

[[Page S 11953]]
     makes clear, nothing in this exemption is intended to limit the breadth 
     of the general exemption in Section 114(d)(1)(C)(ii) for 
     transmissions by business establishments on their premises, 
     or any of the other exemptions in this Section 114(d)(1).
       Section 106(6) is not intended to apply to the transmission 
     of a commercial background music service free of charge to 
     local or long distance callers who are put ``on hold'' during 
     a telephone call with a business, nor is the bill intended to 
     change current law as it applies to such performances of 
     copyrighted musical works under section 106(4).

             Section 114(d)(2). Subscription Transmissions

       Subsection (d)(2) provides that certain subscription 
     transmissions may be subject to statutory licensing if the 
     transmissions conform to the criteria set forth in that 
     section. `'Subscription transmissions'' are defined in 
     subsection (j)(8) as transmissions limited to particular 
     recipients for which consideration is required to be paid. 
     Transmitters of noninteractive subscription transmissions 
     that are not otherwise exempt under subsection (d)(1) may be 
     eligible for a statutory license under subsection (f). A 
     ``statutory license'' guarantees that every noninteractive 
     subscription transmission service will receive a license to 
     perform the sound recording by means of a digital 
     transmission, provided that the transmission service pays the 
     royalty and complies with the terms prescribed in accordance 
     with subsection (f). The rates and terms will be set by 
     industry or individual negotiation, or if necessary, by a 
     copyright arbitration royalty panel convened pursuant to 
     chapter 8 of the Copyright Act.
       In order to qualify for a statutory license, a performance 
     of a sound recording by digital audio transmission must meet 
     five conditions, enumerated in subparagraphs (A) through (E):
       First, as already noted, the transmission cannot be part of 
     an ``interactive service'', as defined in subsection (j)(4). 
     Interactive services, which allow listeners to receive sound 
     recordings ``on-demand'', pose the greatest threat to 
     traditional record sales, as to which sound recording 
     copyright owners currently enjoy full exclusive rights. Thus, 
     in order to provide a comparable ability to control 
     distribution of their works, copyright owners of sound 
     recordings must have the right to negotiate the terms of 
     licenses granted to interactive services.
       Second, subparagraph (B) requires that transmissions 
     subject to the statutory license cannot exceed the sound 
     recording performance complement defined in subsection 
     (j)(7). The complement, more fully described below, contains 
     limits on the number of selections a subscription 
     transmission service can play from any one phonorecord or 
     boxed set, or by the same featured recording artist pursuant 
     to the statutory license. For purposes of this subparagraph, 
     each channel of a multichannel service is a separate 
     ``transmission.''
       Third, subparagraph (C) states that the transmitting entity 
     may not avail itself of the statutory license if it publishes 
     an advance program schedule or makes prior announcements of 
     the titles of specific sound recordings or phonorecords to be 
     transmitted. This provision addresses the situation in which 
     an entity informs its subscribers in advance as to when 
     particular sound recordings will be performed. A 
     preannouncement that does not use the title of the upcoming 
     selection would still come within this limitation so long as 
     it sufficiently identifies the selection through other 
     information, such as the artist's name and the song's well-
     known current chart position. The limitation is not intended, 
     however, to prevent a transmitting entity from advertising 
     the names of illustrative sound recordings or phonorecords 
     that may, at some time, be performed by that entity under the 
     statutory license.
       Fourth, the transmitting entity cannot automatically and 
     intentionally cause the receiver's equipment to switch from 
     one channel to another. This limitation does not apply to 
     transmissions made to a business establishment. This 
     subparagraph is intended to remedy the situation in which a 
     service licensed under the statutory license might 
     intentionally attempt to evade the sound recording 
     performance complement by switching a non-business 
     subscriber's receiver from one channel to another.
       Finally, subparagraph (E) imposes as a condition of 
     statutory licensing the obligation of a subscription entity 
     to carry within its transmitted signal certain specified 
     types of information, if that information has been encoded in 
     the sound recording under the authority of the copyright 
     owner of that sound recording. This provision does not 
     obligate the copyright owner of the sound recording to encode 
     such copyright management information in the work, nor does 
     it limit the copyright owner's ability to select the types of 
     information (e.g., artist, title) to be encoded. In addition, 
     it is not intended to require a transmitting entity to 
     generate or encode such information in its transmission if 
     the information is not encoded in the sound recording. 
     Moreover, the transmitting entity is not required to transmit 
     information that may be encoded in the sound recording other 
     than the information specified in this subparagraph and 
     ``related information'' (i.e., information that is 
     specifically related to the identification of the works being 
     performed and upon which payments are to be made by the 
     transmitting entity under this bill). Subparagraph (E) also 
     makes clear that nothing in this section affects the 
     provisions of section 1002(e).

 Section 114(d)(3). Licenses for transmissions by interactive services

       This provision places limits on the sound recording 
     copyright owner's exclusive right to license interactive 
     copyright owner's exclusive right to license interactive 
     services. (No limitations are imposed where the sound 
     recording copyright owner licenses an interactive service on 
     a nonexclusive basis.) As described below, an ``interactive 
     service'' includes on-line or other services that offer 
     ``pay-per-listen,'' ``audio-on-demand,'' or ``celestial 
     jukebox'' features, regardless of whether there is a charge 
     to receive the service. The Committee is aware of concerns 
     that the copyright owners of sound recordings might become 
     ``gatekeepers'' and limit opportunities for public 
     performances of the musical works embodied in the sound 
     recordings. The Committee believes that the limits set forth 
     in subsection (d)(3) appropriately resolve any such concerns.
       Paragraph (3)(A) provides that the duration of an exclusive 
     license granted to an interactive service for the public 
     performance of a sound recording by means of digital audio 
     transmission cannot exceed 12 months. In the case of a 
     copyright owner that holds fewer than 1,000 copyrights in 
     sound recordings, an exclusive license to an interactive 
     service can last up to 24 months. In either case, after the 
     license expires, that interactive service cannot receive 
     another exclusive license for the same sound recording for a 
     period of 13 months.
       The sound recording copyright owner is not subject to these 
     limitations in certain circumstances, as enumerated in 
     paragraph (3)(B). Subparagraph (B)(i) provides that the 
     limitations do not apply where the licensor has granted 
     performance licenses to at
      least 5 different interactive services. Each license must be 
     for a significant portion of that segment of the 
     licensor's catalog of sound recordings that has been 
     licensed to interactive services--specifically, at least 
     10% of the sound recordings that have been licensed to 
     interactive services, but in no event less than 50 sound 
     recordings. For example, a record company would not be 
     subject to the limitations in paragraph (3)(A) if it has 
     granted performance licenses for a total of 10,000 sound 
     recordings to 5 different interactive services, and each 
     service received a performance license for at least 1,000 
     sound recordings.
       Subparagraph (B)(ii) provides that the limits on licenses 
     to interactive services also do not apply where the 
     performance license is granted for promotional purposes. The 
     sole purpose of the license must be to promote the 
     distribution or performance of the sound recording, and the 
     license can only permit a public performance of up to 45 
     seconds. A qualifying public performance is merely exempted 
     from the limitation on licensing found in paragraph (3)(A); 
     subparagraph (B)(ii) does not provide an exemption from 
     infringement liability for a transmission otherwise subject 
     to liability.
       Section 114(d)(3)(C) provides that, whether or not the 
     owner of copyright in a sound recording has granted an 
     exclusive or nonexclusive license to an interactive service, 
     the service must nevertheless obtain a license from a 
     performing rights society or from the copyright owner of the 
     musical work contained in the sound recording. This provision 
     does not affect any existing limitation under sections 107-
     113, section 116-120, or the unmended portions of sections 
     114 and 115.
       To simplify licensing practices, a ``through to the 
     listener'' exemption is provided in paragraph (3)(D) for 
     those entities that retransmit digital audio transmissions 
     from an interactive service. These retransmissions must be of 
     transmissions by an interactive service licensed to publicly 
     perform the sound recording; the retransmission must be 
     authorized by the interactive service; the retransmission 
     must be simultaneous with the transmission; and it must be 
     limited to the customer intended by the interactive service 
     to receive the transmission.
       The definition of ``licensor'' in subparagraph (3)(E)(i) 
     makes clear that this term includes certain affiliates of the 
     copyright owner in sound recordings that own sound recording 
     copyrights--namely, affiliates under a material degree of 
     common ownership, management or control. Thus, the number of 
     sound recording copyrights held by such affiliates of a 
     record company must be included in a calculation to determine 
     whether that company has fewer than 1,000 sound recordings 
     for the purpose of paragraph (3)(A), and to determine whether 
     the record company has licensed a sufficient number of sound 
     recordings to satisfy the
      requirements found in paragraph (3)(B)(i) regarding the 
     inapplicability of the exclusive licensing limitations.

            Section 114(d)(4). Rights not otherwise limited

       Under existing principles of copyright law, the 
     transmission or other communication to the public of a 
     musical work constitutes a public performance of that musical 
     work. In addition, the digital transmission of a sound 
     recording that results in the reproduction by or for the 
     transmission recipient of a phonorecord of that sound 
     recording implicates the exclusive rights to reproduce and 
     distribute the sound recording and the musical work embodied 
     therein. New technological uses of copyrighted sound 
     recordings are arising which require an affirmation of 
     existing 

[[Page S 11954]]
     copyright principles and application of those principles to the digital 
     transmission of sound recordings, to encourage the creation 
     of and protect rights in those sound recordings and the 
     musical works they contain.
       This subsection makes clear, in paragraph (4)(A), the 
     Committee's intent that except as explicitly provided in 
     section 114, nothing in that section limits the exclusive 
     right to perform a sound recording publicly by means of a 
     digital audio transmission. Paragraph (4)(B) also makes clear 
     that section 114 does not in any way limit the exclusive 
     right to publicly perform a musical work under section 
     106(4); the exclusive right in sound recordings and musical 
     works under sections 106(1), 106(2), and 106(3); and any 
     other rights and remedies available under title 17. 
     Similarly, the bill does not affect any existing limitation 
     under sections 107-113, sections 116-120, or the unamended 
     portions of sections 114 and 115.
       Paragraph (4)(C) ensures that where an activity implicates 
     a sound recording copyright owner's rights under both section 
     106(6) and some other clause of section 106, the limitations 
     contained in section 114 shall not be construed to limit or 
     impair in any way any other rights the copyright owner may 
     have, or any other exemptions to which users may be entitled, 
     with respect to the particular activity. For example, where a 
     digital audio transmission is a digital phonorecord delivery 
     as well as a public performance of a sound recording, the 
     fact that the public performance may be exempt from liability 
     under section 114(d)(1) or subject to statutory licensing 
     under section 114(f) does not in any way limit or impair the 
     sound recording copyright owner's rights and remedies under 
     section 106(3) against the transmitter for the distribution 
     of a phonorecord of the sound recording. As another example, 
     where an interactive digital audio transmission constitutes a 
     distribution of a phonorecord as well as a public performance 
     of a sound recording, the fact that the transmitting entity 
     has obtained a license to perform the sound recording does 
     not in any way limit or affect the entity's obligation to 
     obtain a license to distribute phonorecords of the sound 
     recording.
      Similarly, the bill does not affect any existing limitation 
     under sections 107-113, sections 116-120, or the unamended 
     portions of sections 114 and 115.

               Section 114(e). Authority for negotiations

       This subsection clarifies the applicability of the 
     antitrust laws to the use of common agents in negotiations 
     and agreements relating to statutory licenses and other 
     licenses.
       Under subsection (e)(1), copyright owners of sound 
     recordings and operators of digital services (which perform 
     sound recordings affected by section 114) may collectively 
     negotiate statutory licenses for the performance of sound 
     recordings ``notwithstanding any provision of the antitrust 
     laws.'' This exemption from the antitrust laws extends to 
     negotiations and agreements on royalty rates and license 
     terms and conditions, the proportionate division of the 
     royalties among copyright owners, and the designation of 
     common agents on a nonexclusive basis to negotiate, agree to, 
     pay, or receive royalty payments.
       Subsection (e)(1) closely follows the language of existing 
     antitrust exemptions in copyright law relating to the 
     negotiation of statutory licenses, including 17 U.S.C. 
     Sec. 116(b)(1) (jukebox licenses) and 17 U.S.C. Sec. 118(b) 
     (noncommercial broadcasting). Like those provisions, 
     subsection (e)(1) is important to help effectuate the related 
     statutory license provision. But unlike those provisions, 
     subsection (e)(1) provides that use of a common agent must be 
     nonexclusive.
       The requirement of nonexclusivity is intended to preserve 
     the possibility of direct licensing negotiations between 
     individual copyright owners and operators of digital 
     services, rather than merely between their common agents. For 
     example, nonexclusivity should help prevent copyright owners 
     from using a common agent to demand supracompetitive rates, 
     because such demands might be avoided by direct negotiations 
     with individual copyright owners. In such negotiations an 
     individual copyright owner would exercise independent 
     judgment on whether to contract on particular terms.
       A more limited exemption to the antitrust laws is created 
     by subsection (e)(2), relating to licenses granted under 
     section 106(6), other than statutory licenses, such as 
     performances by interactive services or performances that 
     exceed the sound recording performance complement. Under 
     subsection (e)(2)(A), copyright owners may designate common 
     agents to ``grant licenses and receive and remit royalty 
     payments,'' while under subsection (e)(2)(B), operators of 
     digital services may designate common agents to ``obtain 
     licenses and collect and pay royalty fees,'' without 
     violating the antitrust laws. Importantly, however, 
     subsection (e)(2) does not permit
      either copyright owners or operators to jointly establish 
     royalty rates or competitively important license terms and 
     conditions.
       The antitrust protections provided for common agents in 
     subsection (e)(2) are important to facilitate the licensing 
     of digital sound recording performances (other than through 
     statutory licenses) by reducing transaction costs. While this 
     use of common agents might be found lawful under existing 
     law, the statutory exemption in subsection (e)(2) will ensure 
     that the formation of beneficial and procompetitive 
     arrangements to facilitate licensing of performances will not 
     be deterred by concerns over the possible application of the 
     antitrust laws. This is particularly important given that 
     other provisions in the copyright law contain antitrust 
     exemptions.
       The exemption in subsection (e)(2) is narrowly tailored to 
     make clear that it would be permissible to use common agents, 
     such as a clearinghouse, to handle the logistics of 
     licensing, payment of royalties, and transmitting royalties 
     to copyright owners. Establishment of royalty rates and 
     material license terms and conditions do not receive any 
     antitrust protection, however, so any common agents or 
     clearinghouse must conform to the antitrust laws in these 
     areas. To comply with this limitation, the common agent or 
     clearinghouse could either relay information about rates and 
     terms to and from the copyright owners and the operators of 
     digital services, or simply put interested operators in touch 
     with the appropriate copyright owners for direct 
     negotiations.

   Section 114(f). Licenses for nonexempt subscription transmissions

       This provision requires the Librarian of Congress to cause 
     notice to be published of voluntary negotiation proceedings. 
     The purpose of these proceedings is to determine reasonable 
     terms and royalty rates for transmissions that qualify for 
     statutory licensing under section 114(d)(2). The subsection 
     also contains other provisions concerning such proceedings.
       The first such voluntary negotiation proceeding is to 
     commence within 30 days after the enactment of this Act upon 
     publication by the Librarian of Congress of a notice in the 
     Federal Register. The purpose of that proceeding shall be to 
     determine reasonable terms and royalty rates for public 
     performances of sound recordings by means of nonexempt 
     subscription transmissions that qualify, under section 
     114(d)(2), for a statutory license. The statutory license 
     provided by this subsection covers only the performance of 
     sound recordings under section 106(6), and not the 
     reproduction or distribution of sound recordings under 
     sections 106(1) or 106(3).
       The terms and rates established will cover qualified 
     transmissions made between the effective date of this Act and 
     December 31, 2000. Paragraph (1) requires that terms and 
     rates should be established separately for each different 
     type of digital audio transmission service then in operation, 
     but does not require or suggest that the terms and rates 
     established must be different.
       The voluntary negotiation proceeding may result in license 
     agreements voluntarily negotiated among individual sound 
     recording copyright owners and individual entities that 
     perform or authorize the performance of sound recordings by 
     means of digital transmissions. It is the Committee's 
     intention that negotiations leading to any such agreements be 
     covered by section 114(e) and that any such agreements shall 
     be given effect in lieu of any determination by a copyright 
     arbitration royalty panel or decision by the Librarian of 
     Congress.
       Beyond such individual license agreements, however, the 
     Committee hopes that the voluntary negotiation proceeding 
     will lead to an industry-wide agreement concerning royalty 
     terms and rates. If an agreement as to rates and terms is 
     reached and there is no controversy as to these matters, it 
     would make no sense to subject the interested parties to the 
     needless expense of an arbitration proceeding conducted under 
     paragraph (2). Thus, it is the Committee's intention that in 
     such a case, as under the Copyright Office's current 
     regulations concerning rate adjustment proceedings, the 
     Librarian of Congress should notify the public of the 
     proposed agreement in a notice-and-comment proceeding and, if 
     no opposing comment is received from a party with a 
     substantial interest and an intent to participate in an 
     arbitration proceeding, the Librarian of Congress should 
     adopt the rates embodied in the agreement without convening 
     an arbitration panel. See 37 C.F.R. Sec. 251.63(b); see also 
     59 Fed. Reg. 63,038 (1994).
       Paragraph (2) provides that if a voluntary negotiation 
     proceeding as described in paragraph (1) does not lead to the 
     determination of the terms and royalty rates applicable to 
     qualified digital performances of sound recordings, those 
     terms and rates are to be determined by arbitration under 
     this paragraph. However, if an arbitration proceeding is 
     necessary to establish the initial statutory licensing rates 
     and terms, it will commence only upon the filing of a 
     petition during a 60-day period which will commence 6 months 
     after publication of notice of the initiation of the 
     voluntary negotiation proceeding. The Committee notes that 
     the paragraph specifically refers to chapter 8 of title 17, 
     which concerns copyright royalty arbitration in general. 
     Accordingly, arbitration under this subparagraph should be 
     conducted under the same type of procedures that apply in 
     other copyright royalty arbitrations.
       The parties are expected to negotiate, or if necessary 
     arbitrate, ``terms'' as well as rates. By terms, the 
     Committee means generally such details as how payments are to 
     be made, when, and other accounting matters (such as are 
     prescribed in section 115). In addition, the Librarian is to 
     establish related terms under section 114(f)(2). Should 
     additional terms be necessary to effectively implement the 
     statutory license, the parties may negotiate such provisions 
     or the CARPs may prescribe them.
       Terms and rates determined under paragraph (2), like terms 
     and rates determined under paragraph (1), are to be effective 
     for a five year period or until the date of the next 

[[Page S 11955]]
     effective rate adjustment. In determining terms and rates under 
     paragraph (2), a copyright arbitration royalty panel is to 
     consider the objectives set forth in section 801(b)(1), and 
     the arbitrators may consider rates and terms under 
     voluntarily negotiated license agreements. Paragraph (2) 
     specifically authorizes the Librarian of Congress to 
     establish requirements by which copyright owners may receive 
     reasonable notice of the use of their sound recordings under 
     this section, and under which records of such use shall be 
     kept and made available by persons performing sound 
     recordings.
       As provided in paragraph (4), the procedures for 
     negotiation and, if necessary, arbitration set forth in 
     paragraphs (1) and (2) of this subsection are to be repeated. 
     The Librarian of Congress is to publish notice of the 
     initiation of voluntary negotiation proceedings: (a) within 
     30 days after being petitioned to publish notice concerning a 
     new type of digital audio transmission service; and (b) in 
     January 2000, and every five years thereafter.
       If voluntary negotiations do not lead to an agreement among 
     the interested parties, an arbitration may be commenced upon 
     the filing of a petition in accordance with existing section 
     803(a)(1) of the Copyright Act during a specified 60-day 
     period. That period commences: (a) six months after 
     publication of notice of the initiation of a voluntary 
     negotiation proceeding concerning a new type of digital audio 
     transmission service; and (b) on July 1, 2000, and every five 
     years thereafter.
       Regardless of when an arbitration proceeding is commenced, 
     it is to be concluded in accordance with the existing 
     procedures in section 802 of the Copyright Act.
       Voluntary negotiation or arbitration proceedings concerning 
     a new type of digital radio transmission service should apply 
     only with respect to the new type of service or services 
     described in the petition.
       Paragraph (5) sets forth the requirements with which an 
     entity must comply in order to obtain a statutory license. 
     The performing entity must provide notice of the performance 
     as required by regulations prescribed by the Librarian of 
     Congress and pay the established royalty fees. If the royalty 
     fees have not been set at the time of performance, the 
     performing entity must agree to pay the royalty fee to be 
     determined under this subsection by the twentieth day of the 
     month following the month in which the rates are set. This 
     limited license to perform the sound recording until the rate 
     is set applies only to performances for which the entity 
     seeks a statutory license. The failure to pay royalty rates 
     in arrears makes the performing entity subject to full 
     liability for infringement of section 106(6) from the 
     inception of the transmissions of sound recordings by that 
     transmitter after the effective date of the Act, and may 
     disqualify the entity for a statutory license under paragraph 
     (5)(A)(i).

 Section 114(g). Proceeds from licensing of subscription transmissions

       This subsection describes how royalties from the licensing 
     of the digital performance right in a sound recording are 
     distributed to the artists who performed on the sound 
     recording.
       Paragraph (1) of this subsection provides that payments to 
     both featured and nonfeatured (or background) artists of 
     royalties from the licensing of the digital performance of 
     the sound recording will be determined by the applicable 
     contract with, or collective bargaining agreement pertaining 
     to, the artist, unless the performance of the sound recording 
     is pursuant to a statutory license under subsection (f).
       Where royalties are received from statutory licensing of a 
     sound recording, then under paragraph (2), the sound 
     recording copyright owner is required to allocate a total of 
     50% of the receipts as provided by subparagraphs (A), (B), 
     and (C). Subparagraph (A) requires that 2\1/2\% of the 
     receipts (as described more specifically below) are to be 
     placed into an escrow account managed by an independent 
     administrator appointed jointly by record companies and the 
     American Federation of Musicians (``AFM'') (or any successor 
     entity) and distributed to nonfeatured musicians (regardless 
     of whether they are members of AFM or any successor entity) 
     who have performed on sound recordings. Similarly, 
     subparagraph (B) requires that 2\1/2\% of the receipts are to 
     be placed into an escrow account managed by an independent 
     administrator appointed jointly by record companies and the
      American Federation of Television and Radio Artists 
     (``AFTRA'') (or any successor entity) and distributed to 
     nonfeatured vocalists (regardless of whether they are 
     members of AFTRA or any successor entity) who have 
     performed on sound recordings. Subparagraph (C) requires 
     that 45% of the receipts are to be paid to the featured 
     artist or artists (or the person(s) conveying rights in 
     the performance of the featured artist(s) in the sound 
     recording). Although the Copyright Office currently 
     administers several funds under the Copyright Act, the 
     Committee does not expect that the Copyright Office would 
     be asked to manage these escrow accounts.
       ``Receipts'' means the licensing fees received by the 
     copyright owner of the sound recording. Thus, if a collecting 
     society or other organization acts on behalf of the copyright 
     owner of the sound recording in licensing and/or collecting 
     royalties, ``receipts'' shall constitute the monies the 
     copyright owner receives from the collecting agency and, 
     therefore, would exclude administrative fees either deducted 
     by or paid to the collective.

                Section 114(h). Licensing to affiliates

       In addition to the protections available under antitrust 
     law, subsection (h) specifically is intended to ensure 
     competitive licensing practices by a licensor that owns an 
     interest in an ``affiliated entity'' as defined in subsection 
     (j)(1). Subsection (h) makes clear that terms no less 
     favorable than those granted to the affiliated entity also 
     must be made available to other bona fide entities that offer 
     services similar to those covered by the affiliate's 
     performance license.
       For example, a licensor that grants to an affiliated entity 
     a performance license for a fixed term with separate and 
     distant rates for cable and satellite subscription 
     transmission services would be required to offer no less 
     favorable terms and conditions to an unrelated entity 
     offering the same services. If, as another example, the 
     license to the affiliated entity is limited only as to 
     performances via cable, then an unrelated entity offering 
     only satellite services cannot claim an entitlement to 
     receive a performance license at the rate specified for cable 
     services.
       Nothing in this section is intended to prevent a licensor 
     from establishing different rate structures, terms and 
     conditions based on material differences in the license 
     sought. But distinctions drawn among licensees should be 
     applied rationally and consistently based on the nature, 
     scope and duration of the requested license, and not based on 
     arbitrary distinctions for monopolistic, discriminatory or 
     other anticompetitive purposes. The factors identified in 
     subsection (h), i.e., different types of services, the 
     particular sound recordings licensed, the frequency of use of 
     the sound recordings, the duration of the
      requested license and the number of subscribers served, are 
     all relevant bases upon which a copyright owner may draw 
     rational distinctions.
       The term ``no less favorable'' indicates that the same 
     terms and conditions can be offered, but this is not to say 
     that the licensor should not offer lower rates or more 
     beneficial terms and conditions if it deems it appropriate. 
     For example, a licensor might in its business judgment offer 
     an unrelated start-up entity a more favorable rate for a 
     shorter period of time. It is intended, however, that the 
     potential licensee under such circumstances could reject the 
     more favorable short-term license and instead request the 
     terms and conditions granted to the affiliated licensed 
     entity for similar services. In that event, the licensor must 
     make a performance license available upon the same terms and 
     conditions to the potential licensee, with respect to the 
     same services proposed to be licensed, as described above.
       The term ``bona fide entities'' is intended to make clear 
     that the potential licensee must have a genuine intention and 
     reasonable capability to provide the licensed services.
       Paragraph (2) of this subsection makes clear that the 
     obligations set forth in paragraph (1) are inapplicable where 
     the affiliated entity is offering performances through an 
     interactive service, or is granted a performance license for 
     the sole purpose of promoting the sound recording. A public 
     performance qualifying for the promotional exemption is 
     merely exempted from the obligations of paragraph (1); 
     paragraph (2)(B) does not provide an exemption for a 
     transmission otherwise subject to liability where such a 
     performance is unauthorized or unlicensed.

      Section 114(i). No effect on royalties for underlying works

       The Committee intends this provision to ensure that 
     licensing fees paid under the new digital performance right 
     shall not be taken into account in any administrative, 
     judicial, or other governmental proceeding that sets or 
     adjusts rates for the royalties to be paid for the public 
     performance of musical works. The provision also makes clear 
     Congress' intent that the new digital performance right shall 
     not diminish in any respect the royalties payable to 
     copyright owners of musical works for the public performance 
     of their works.

                      Section 114(j). Definitions

                Section 114(j)(1)--``affiliated entity''

       A digital transmission service is considered affiliated 
     with a licensor when the licensor has any direct or indirect 
     partnership or any ownership interest of more than 5 percent 
     of
      the outstanding voting or non-voting stock in the entity 
     engaging in digital audio transmissions. An entity 
     engaging in interactive services cannot be an affiliated 
     entity under this definition, but to the extent that an 
     entity is engaging in digital transmissions that are not 
     interactive, it can qualify as an affiliated entity for 
     that purpose alone.

             Section 114(j)(2)--``broadcast'' transmission

       Transmissions made by terrestrial broadcast stations 
     licensed as such by the Federal Communications Commission 
     come within this definition.

           Section 114(j)(3)--``digital audio transmission''

       This phrase means a transmission is a digital format (or 
     any other non-analog format that might currently exist or be 
     developed in the future) that embodies the transmission of a 
     sound recording. A transmission that is only partly in a 
     digital or non-analog format satisfies this definition. (See 
     section 101 definition of ``digital transmission.'') A 
     transmission of an audiovisual work does not come within this 
     definition.

[[Page S 11956]]

       The Committee has amended the bill as originally introduced 
     to make clear that the performance right recognized herein 
     applies only to digital transmissions of sound recordings and 
     that nothing in the bill creates any new copyright liability 
     with respect to the transmission of a motion picture or other 
     audiovisual work, whether digital or analog, whether 
     subscription or nonsubscription, and whether interactive or 
     noninteractive.

               Section 114(j)(4)--``interactive service''

       The phrase ``interactive service'' is defined, in part, as 
     a service that ``enables a member of the public to receive, 
     on request, a transmission of a particular sound recording . 
     . . .'' This term is intended to reach, for example, a 
     service that enables an individual to make a request (by 
     telephone, e-mail, or otherwise) to a service that will send 
     a digital transmission to that individual or another 
     individual of the specific sound recording that had been 
     requested by or on behalf of the recipient. thus, it would 
     include such services commonly referred to as ``audio-on-
     demand,'' ``pay-per-listen'' or ``celestial jukebox'' 
     services. The term also would apply to an on-line service 
     that transmits recordings on demand, regardless of whether 
     there is a charge for the service or for any transmission. 
     But as the second sentence of the definition makes clear, the 
     term ``interactive service'' is not intended to cover 
     traditional practices engaged in by, for example, radio 
     broadcast stations, through which individuals can ask the 
     station to play a particular sound recording as part of the 
     service's general
      programming available for reception by members of the public 
     at large.
       If an entity offering a nonsubscription service (such as a 
     radio or television station) chooses to offer an interactive 
     service as a separate business, or only during certain hours 
     of the day, that decision does not affect the exempt status 
     of any component of the entity's business that does not offer 
     an interactive service. In other words, each transmission 
     should be judged on its own merits with regard to whether it 
     qualifies as part of an ``interactive'' service. The third 
     sentence of the definition of ``interactive service'' is 
     intended to make this clear.

          Section 114(j)(5)--``nonsubscription'' transmission

       This term includes any transmission that does not come 
     within the definition of ``subscription'' transmission.

                 Section 114(j)(6)--``retransmission''

       As the definition of ``retransmission'' makes clear, that 
     term includes any further transmission of an initial 
     transmission, as well as any further retransmission of the 
     same transmission. That is, the term ``retransmission'' is 
     intended to cover both an initial retransmission of a 
     transmission (such as by a satellite carrier) and any further 
     transmissions of that transmission (such as by a cable 
     system). Of course, the fact that a further simultaneous 
     transmission qualifies as a ``retransmission'' does not by 
     itself mean that it is exempt under any particular paragraph 
     of Section 114(d)(1). To qualify for the 114(d)(1)(C)(ii) 
     exemption, for example, a retransmission would need to be 
     made by a business establishment on its premises or the 
     immediately surrounding vicinity.
       Except as otherwise provided, a transmission is a 
     ``retransmission'' only if it is simultaneous with the 
     initial transmission. The term ``simultaneous'' is used in 
     this definition (and throughout this bill) to refer to 
     retransmissions that are essentially simultaneous. Although 
     there may be momentary time delays resulting from the 
     technology used for retransmissions, such delays do not 
     affect the status of the retransmissions as simultaneous.

     Section 114(j)(7)--``sound recording performance complement''

       The ``sound recording performance complement'' defines the 
     metes and bounds of programming available to be transmitted 
     under the statutory license grant in subsection (f). The 
     definition is intended to encompass certain typical 
     programming practices such as those used on broadcast radio. 
     It does not extend to the performance of albums in their 
     entirety, or the performance over
      a short period of time of a substantial number of different 
     selections by a particular artist or from a particular 
     phonorecord or compilation of phonorecords. Transmissions 
     that exceed the limits of the complement are not eligible 
     for a statutory license under subsection (f).
       The definition provides that for a transmission to be 
     within the complement, it must not include, on a particular 
     channel in any rolling three-hour period, more than three 
     selections from any one phonorecord, and no more than two of 
     those selections can be transmitted consecutively. The 
     transmission also must not include, on a particular channel 
     in any rolling three-hour period, more than four selections 
     by the same featured artist or from any boxed set or 
     compilation of phonorecords, and no more than three of those 
     selections can be transmitted consecutively. Whether 
     selections are consecutive is determined by the sequence of 
     the sound recordings transmitted, regardless of whether some 
     tones or other brief interlude is transmitted between the 
     sound recordings.
       To avoid imposing liability for programming that 
     unintentionally may exceed the complement, the complement is 
     limited to the performance of sound recordings ``from'' a 
     particular phonorecord. Many phonorecords include sound 
     recordings that also appear on other phonorecords or 
     compilations, such as the ``greatest hits'' of a particular 
     artist, decade or genre of music. Similarly, the same sound 
     recordings may appear on separate compilations under the 
     names of different featured artists. It is not the intention 
     of this legislation to impose liability where selections that 
     are performed from separate phonorecords also may be 
     incorporated on a different phonorecord or compilation, or 
     also may appear on a different phonorecord under the name of 
     another featured artist, in the absence of an intention by 
     the performing entity to knowingly circumvent the numerical 
     limits of the complement. An example of such a case is where 
     the transmitting entity plays within a three-hour period one 
     selection for each of four different phonorecord, which four 
     selections also happen to be compiled on a soundtrack album. 
     So long as the transmitting entity did not willfully intend 
     to replicate selections from the soundtrack album, its 
     transmission would be considered within the complement. 
     However, where the transmitting entity willfully plays within 
     a three-hour period five selections of a single featured 
     recording artist, regardless of whether they were played from 
     several different phonorecords, and regardless of whether the 
     transmitting entity knew that the transmission included more 
     than three songs from a single album, the transmission does 
     not come within the complement. The fact that the 
     transmitting entity did not willfully intend to violate the 
     numerical limits for a single phonorecord under paragraph (A) 
     does not excuse the willful violation of the limit of 
     paragraph (B)(i).
       The complement is to be evaluated as of the time of ``the 
     programming of the multiple phonorecords,'' rather than at 
     the time of transmission. This avoids imposing liability for 
     programming that occurs such as a week or two in advance of 
     transmission that unintentionally exceeds the complement. An 
     example is where, between the time of the programming and 
     transmission, a phonorecord or set or compilation of 
     phonorecords is released that embodies selections previously 
     programmed by the transmitting entity from multiple 
     phonorecords.
       Certain transmitting entities covered by this legislation 
     may provide multiple channels of service and musical formats. 
     The bill applies the complement to each particular channel 
     separately and not to all channels in the aggregate.
       The requirement of ``different selections'' permits the 
     performance of the same selection in excess of the numerical 
     limits. This is intended to facilitate under the statutory 
     license the programming of music formats that tend to repeat 
     the same selections of music, such as ``top 40'' formats.
       The term ``featured recording artist'' means the performing 
     group or ensemble or, if not a group or ensemble, the 
     individual performer, identified most prominently in print 
     on, or otherwise in connection with, the phonorecord actually 
     being performed. Except in the case of a sound recording 
     consisting of a compilation of sound recordings by more than 
     one performer or group or ensemble, there will ordinarily be 
     only one ``featured recording artist'' per phonorecord. A 
     vocalist or soloist performing along with a group or ensemble 
     is not a ``featured recording artist'' unless that person is 
     identified in connection with the phonorecord as the primary 
     performer. For example, the Eagles would be the ``featured 
     recording artist'' on a track from an Eagles album that does 
     not feature Don Henley by name with equal prominence; but if 
     the same sound recording were performed from ``Don Henley's 
     Greatest Hits,'' then Don Henley and not the Eagles would be 
     the ``featured recording artist.'' Where both the vocalist or 
     soloist and the group or ensemble are identified as a single 
     entity and with equal prominence (such as ``Diana Ross and 
     the Supremes''), both the individual and the group qualify as 
     the ``featured recording artist.''

            Section 114(j)(8)--``subscription'' transmission

       A ``subscription transmission'' is defined as a 
     transmission of a sound recording in a digital format that is 
     ``controlled and limited to particular recipients,' and for 
     which consideration is required to be paid or given ``by or 
     on behalf of the recipient to receive the transmission or a 
     package of transmissions including the transmission.'' It 
     does not matter what the mechanism might be for the delivery 
     of the transmission; thus, a digital transmission, whether 
     delivered by cable, wire, satellite or
      terrestrial microwave, video dialtone, the Internet or any 
     other digital transmission mechanism, could be a 
     subscription transmission if the requirements cited above 
     are satisfied. This definition obviously does not reach 
     traditional over-the-air broadcast transmissions, which 
     satisfy neither of these requirements. A typical 
     transmission that would qualify as a ``subscription 
     transmission'' under this definition is a cable system's 
     transmission of a digital audio service, which is 
     available only to the paying customers of the cable 
     system. The payments required to satisfy the 
     ``consideration'' requirement might consist, for example, 
     of an ``a la carte'' fee for a specific audio service, or 
     of a fee for an overall package of services that includes 
     the digital audio service (e.g., a cable system's tier of 
     services for a fee). The reference in the definition to 
     payments ``on behalf of'' a recipient is intended to 
     recognize that payments for a service may be made by one 
     person on 

[[Page S 11957]]
     behalf of other people, such as a parent making payment for a child who 
     lives away from home and receives the subscription 
     service.

                  Section 114(j)(9)--``transmission''

       This definition recognizes that the term ``transmission'' 
     refers to any transmission, whether it is an initial 
     transmission or a retransmission. Thus, for example, section 
     106(6) grants an exclusive right to perform a copyrighted 
     sound recording publicly ``by means of a digital audio 
     transmission,'' and does not mention retransmissions, even 
     though it is intended that the new performance right cover 
     all digital audio transmissions, including retransmissions. 
     Similarly, except where otherwise explicitedly indicated, the 
     exemptions for certain ``transmissions'' created by section 
     114(d)(1) apply to both initial transmissions and 
     retransmissions.
       Section 4--Mechanical Royalties in Digital Phonorecord 
     Deliveries.--This section amends section 115 of title 17 to 
     clarify how the compulsory license for making and 
     distributing phonorecords applies in the context of certain 
     types of digital transmissions identified in the bill as 
     ``digital phonorecord deliveries.''
       Among other things, this section is intended to confirm and 
     clarify the right of musical work and sound recording 
     copyright owners to be protected against infringement when 
     phonorecords embodying their works are delivered to consumers 
     by means of transmissions rather than by means of phonorecord 
     retail sales. The intention in extending the mechanical 
     compulsory license to digital phonorecord deliveries is to 
     maintain and reaffirm the mechanical rights of songwriters 
     and music publishers as new technologies permit phonorecords 
     to be delivered by wire or over the airwaves rather than by 
     the traditional making and distribution of records, cassettes 
     and CDs. The intention is not to substitute for or duplicate 
     performance rights in musical
      works, but rather to maintain mechanical royalty income and 
     performance rights income for writers and music 
     publishers.
       Changes to sections 115(a)(1) and 115(c)(2) make clear that 
     the compulsory license for making and distributing 
     phonorecords is not limited to the making and distribution of 
     physical phonorecords, but that a compulsory license is also 
     available for the making of digital phonorecord deliveries. 
     The Committee intends that a compulsory license for digital 
     phonorecord deliveries may be obtained, and the required 
     mechanical royalties may be paid, either directly by a 
     digital transmission service making a digital phonorecord 
     delivery or by a record company authorizing a digital 
     phonorecord delivery. Thus, the changes to section 115 are 
     designed to minimize the burden on transmission services by 
     placing record companies in a position to license not only 
     their own rights, but also, if they choose to do so, the 
     rights of writers and music publishers to authorize digital 
     phonorecord deliveries; and by recognizing that transmission 
     services themselves may obtain a compulsory license to make 
     digital phonorecord deliveries.
       As between a digital transmission service and a record 
     company, allocation of the responsibility for paying 
     mechanical royalties could be a subject of negotiation, but 
     copyright owners of musical works would only be entitled to 
     receive one mechanical royalty payment for each digital 
     phonorecord delivery, not multiple payments. Of course, a 
     digital transmission service would be liable for any 
     infringing digital phonorecord delivery it made in the 
     absence of a compulsory license or the authorization of the 
     musical work copyright owner. (The liability of sound 
     recording copyright owners in such a case is addressed in new 
     section115(c)(3)(I).)
       Section 4 also redesignates subsections (c) (3), (4) and 
     (5) as subsections (c)(4), (5) and (6) and inserts new 
     subsections (c)(3) and (d), which are descried in detail 
     below.

                          Section 115(c)(3)(A)

       This subparagraph specifically sets forth that a compulsory 
     license includes the right of the compulsory licensee to make 
     or authorize digital phonorecord deliveries and identifies 
     the statutory rate of each digital phonorecord delivery made 
     by or under the authority of the compulsory licensee. For all 
     digital phonorecord deliveries made or authorized under a 
     compulsory license on or before December 31, 1997, the 
     royalty rate is to be the statutory rate than in effect under 
     section 115(c)(2) for the making and distribution of a 
     physical phonorecord. For digital phonorecord deliveries made 
     authorized under a compulsory license on or after January 1, 
     1998, the statutory mechanical royalty rates for digital 
     phonorecord deliveries shall be determined in accordance with 
     subparagraphs (B) through (F); and
      the statutory mechanical royalty rate for making and 
     distributing physical phonorecords shall be determined in 
     accordance with chapter 8.

                          Section 115(c)(3)(B)

       This subparagraph clarifies that collective negotiations 
     and agreements relating to statutory licenses are not 
     prohibited by the antitrust laws. This provision is nearly 
     identical to new section 114(e)(1), and is patterned on 
     existing antitrust exemptions relating to the negotiations of 
     statutory licenses, including 17 U.S.C. Sec. 116(b)(1) 
     (jukebox licenses) and 17 U.S.C. Sec. 118(b) (noncommercial 
     broadcasting). Like those provisions, subsection (c)(3)(B) is 
     important to help effectuate the related statutory license 
     provision.
       This subparagraph authorizes musical work copyright owners, 
     record companies, digital transmission services, and any 
     other persons entitled to obtain a compulsory license 
     collectively to negotiate and agree upon the terms and 
     statutory royalty rates under subsection 115(c)(3) 
     ``notwithstanding any provision of the antitrust laws.'' This 
     exemption from the antitrust laws extends to negotiations and 
     agreements on terms and rates of royalty payments, the 
     proportionate division of royalties among copyright owners, 
     the designation of common agents to negotiate, agree to, pay, 
     or receive royalty payments, and the year during which the 
     royalty rates prescribed under subparagraphs (B) through (F) 
     and chapter 8 of title 17 are to next be determined.
       The latter authorization allows the affected parties to 
     agree when rates and terms should next be determined. If they 
     do not do so voluntarily, then subparagraph (F) prescribes 
     that the rates and terms will be reconsidered at five-year 
     intervals. Given the rapid pace at which digital transmission 
     technology is developing, and changes in the marketplace, the 
     Committee recognizes that the statutory rate for digital 
     phonorecord deliveries might need to be considered in 
     different years, and that the interested parties are in the 
     best position to determine how frequently and when this 
     should be done.

                          Section 115(c)(3)(C)

       This subparagraph requires the Librarian of Congress to 
     cause notice to be published of voluntary negotiation 
     proceedings to determine reasonable terms and statutory 
     royalty rates for the making of digital phonorecord 
     deliveries under a compulsory license. The subparagraph also 
     contains other provisions concerning such proceedings.
       The Librarian is to publish notice of commencement of the 
     first such voluntary negotiation proceeding in the Federal 
     Register between June 30, 1996 and December 31, 1996. The
      Committee expects that the Librarian will publish this 
     notice relatively early in the prescribed period. However, 
     the exact date of the notice is of limited importance 
     because subparagraph (B) authorizes negotiations that can 
     begin or end at any time, as determined by the parties. 
     The purpose of the notice is simply to allow persons with 
     a substantial interest who might not be represented by the 
     parties engaged in negotiations to be aware that 
     negotiations may be taking place that could lead to an 
     industry-wide agreement concerning mechanical royalty 
     rates.
       The purpose of the first voluntary negotiation proceeding 
     shall be to determine reasonable terms and statutory royalty 
     rates for the making of digital phonorecord deliveries under 
     a compulsory license during the period beginning January 1, 
     1998 and ending when successor rates and terms are 
     established, either by negotiation or, if necessary, 
     arbitration.
       The subparagraph states that if any digital phonorecord 
     delivery statutory mechanical royalty rates and terms are 
     determined as a result of a voluntary negotiation proceeding, 
     then such rates and terms shall distinguish between: (1) 
     rates and terms for digital phonorecord deliveries where the 
     reproduction or distribution of a phonorecord is 
     ``incidental'' to the transmission which constitutes the 
     digital phonorecord delivery, and (2) rates and terms for 
     digital phonorecord deliveries in general. The Committee 
     recognizes that there are likely to be different types of 
     digital transmission systems that could result in the making 
     of a digital phonorecord delivery. In the case of some of 
     these transmission systems, delivering a phonorecord to a 
     transmission recipient could be incidental to the purpose of 
     a transmission. For example, if a transmission system was 
     designed to allow transmission recipients to hear sound 
     recordings substantially at the time of transmission, but the 
     sound recording was transmitted to a high speed burst of data 
     and stored in a computer memory for prompt playback (such 
     storage being technically the making of a phonorecord), and 
     the transmission recipient could not retain the phonorecord 
     for playback on subsequent occasions (or for any other 
     purpose), delivering the phonorecord to the transmission 
     recipient would be incidental to the transmission. If such a 
     system allowed transmission recipients to retain phonorecords 
     for playback on subsequent occasions, but transmission 
     recipients did not do so, delivering the phonorecords to the 
     transmission recipients could be incidental to the 
     transmissions. On and after January 1, 1998, statutory 
     mechanical royalty rates shall distinguish between 
     ``incidental'' digital phonorecord deliveries that take into 
     account the different purpose and effect of these 
     transmissions and digital phonorecord deliveries in general.
       The voluntary negotiation proceeding may result in license 
     agreements voluntarily negotiated among individual musical 
     work copyright owners and individual entities that make or 
     authorize
      digital phonorecord deliveries. It is the Committee's 
     intention that negotiations leading to any such agreements 
     be covered by section 115(c)(3)(B) and that any such 
     agreements have the effect set forth in section 
     115(c)(3)(E).
       Beyond such individual license agreements, however, the 
     Committee anticipates that the voluntary negotiation 
     proceeding will lead to an industry-wide agreement concerning 
     mechanical royalty terms and rates and the year when terms 
     and rates next will be determined.
       The parties are expected to negotiate, or if necessary 
     arbitrate, ``terms'' as well as rates. By ``terms,'' the 
     Committee means 

[[Page S 11958]]
     such details as how payments are to be made, when, and other accounting 
     matters. While these details are for the most part already 
     prescribed in section 115, and related details are to be 
     established by the Librarian under section 115(c)(3)(D), the 
     bill allows for additional such terms to be set by the 
     parties or by CARPs in the event that the foregoing 
     provisions or regulations are not readily applicable to the 
     new digital transmission environment.
       If an agreement as to rates and terms is reached and there 
     is no controversy as to these matters, it would make no sense 
     to subject the interested parties to the needless expense of 
     an arbitration proceeding conducted under section 
     115(c)(3)(D). Thus, it is the Committee's intention that in 
     such a case, as under the Copyright Office's current 
     regulations concerning rate adjustment proceedings, the 
     Librarian of Congress should notify the public of the 
     proposed agreement in a notice-and-comment proceeding and, if 
     no opposing comment is received from a party with a 
     substantial interest and an intent to participate in an 
     arbitration proceeding, the Librarian of Congress should 
     adopt the rates embodied in the agreement, and any agreed-to 
     year when the mechanical royalty rates for digital 
     phonorecord deliveries next will be determined, without 
     convening an arbitration panel. See 37 C.F.R. Sec. 251.63 
     (b); see also 59 Fed. Reg. 63,038 (1994).
       As provided in section 115(c)(3)(F), the procedures for 
     negotiation and, if necessary, arbitration set forth in this 
     subparagraph and in section 115(c)(3)(D) are to be repeated 
     every five years unless it is voluntarily determined by the 
     parties pursuant to this subparagraph and subparagraph (B) 
     that rates and terms should next be determined in a different 
     year. The Committee recognizes that it may be unusual to 
     allow the interested parties to negotiate and agree to a year 
     when the statutory mechanical royalty rates for digital 
     phonorecord deliveries next will be determined. However, the 
     Committee was concerned that rapidly changing technology 
     might justify redetermining the terms and royalty rates 
     applicable to digital phonorecord deliveries made under a 
     compulsory license on a different schedule than once every 
     five years. Thus, the
      Committee chose to give the interested parties flexibility 
     in this area.
       The Committee wishes to make clear that nothing in section 
     115(c)(3) is intended to affect the schedule prescribed in 
     section 803(a)(3) for determining the mechanical royalty rate 
     for the making and distribution of physical phonorecords. 
     Proceedings to establish mechanical royalty rates for the 
     making and distribution of physical phonorecords are expected 
     to be conducted in 1997 and every ten years thereafter, and 
     are not subject to contrary agreement.

                          Section 115(c)(3)(D)

       If a voluntary negotiation proceeding as described in 
     section 115(c)(3)(C) does not lead to the determination of 
     the terms and statutory royalty rates applicable to digital 
     phonorecord deliveries made under a compulsory license, those 
     terms and rates are to be determined by arbitration under 
     this subparagraph. The Committee notes that the subparagraph 
     specifically refers to chapter 8 of title 17, which concerns 
     copyright royalty arbitration in general. Accordingly, 
     arbitration under this subparagraph should be conducted under 
     the same type of procedures that apply in other copyright 
     royalty arbitrations. Thus, for example, an arbitration 
     proceeding is to commence only upon the filing of a petition 
     in accordance with existing section 803(a)(1).
       Like terms and rates determined under section 115(c)(3)(C), 
     terms and rates determined under this subparagraph are to 
     distinguish between digital phonorecord deliveries where the 
     reproduction or distribution of a phonorecord is incidental 
     to the transmission which constitutes the digital phonorecord 
     delivery, and digital phonorecord deliveries in general.
       In determining terms and rates under this subparagraph, a 
     copyright arbitration royalty panel is to consider the 
     objectives set forth in section 801(b)(1), and the 
     arbitrators may consider terms and rates under voluntarily 
     negotiated license agreements. However, the statutory 
     mechanical royalty payable for digital phonorecord deliveries 
     made on or before December 31, 1997 shall be given no 
     precedential effect in determining the statutory mechanical 
     royalty payable for digital phonorecord deliveries made on or 
     after January 1, 1998. The Committee specifically chooses to 
     remain neutral on the question whether the mechanical royalty 
     rates for any category of digital phonorecord delivery made 
     on or after January 1, 1998 should be the same as, lower 
     than, or higher than the mechanical royalty rate for the 
     making and distribution of physical phonorecords.
       The subparagraph specifically authorizes the Librarian of 
     Congress to establish requirements by which copyright owners 
     may
      receive reasonable notice of the use of their works under 
     this section, and under which records of such use shall be 
     kept and made available by persons making digital 
     phonorecord deliveries.

                          Section 115(c)(3)(E)

       This subparagraph provides that in general, the provisions 
     of voluntarily negotiated agreements for the licensing of 
     nondramatic musical works shall be given effect in lieu of 
     any statutory rates and terms determined by the Librarian of 
     Congress. For example, the Committee understands that 
     individual record companies and music publishers have 
     negotiated license agreements for specific albums prescribing 
     a royalty rate less than the statutory mechanical royalty 
     rate. The Committee does not intend to prevent negotiation of 
     voluntary license agreements, for either physical 
     phonorecords or digital phonorecord deliveries, prescribing 
     royalties at less than the statutory rates, except in the 
     situation described below.
       There is a situation in which the provisions of voluntarily 
     negotiated license agreements should not be given effect in 
     lieu of any mechanical royalty rates determined by the 
     Librarian of Congress. For some time, music publishers have 
     expressed concerns about so-called ``controlled composition'' 
     clauses in recording contracts. Generally speaking, 
     controlled composition clauses are provisions whereby a 
     recording artist who is the author of a nondramatic musical 
     work agrees to reduce the mechanical royalty rate payable 
     when a record company makes and distributes phonorecords 
     which include recordings of such artist's compositions. 
     Subject to the exceptions set forth in subparagraph (E)(ii), 
     the second sentence of subparagraph (E)(i) is intended to 
     make these controlled composition clauses inapplicable to 
     digital phonorecord deliveries.
       Specifically, unless the requirements of one or both of the 
     exceptions of subparagraph (E)(ii) are satisfied, the royalty 
     rates determined through negotiation or arbitration pursuant 
     to subparagraph (C) or (D) are to be given effect in lieu of 
     any contrary rates specified in a contract pursuant to which 
     a recording artist who is the author of a nondramatic musical 
     work grants a mechanical license in that work to a record 
     company or commits another person (such as the artists music 
     publisher) to grant such a mechanical license in that work.
       Subparagraph (E)(ii) specifies two types of contracts where 
     the negotiated royalty rates set forth in the contracts are 
     to be given effect notwithstanding the second sentence of 
     subparagraph (E)(i). The first of these is a ``grandfather 
     clause'' giving effect to contracts and rates agreed to in a 
     contract with a recording artist on or before June 22, 1995, 
     except to the extent they are modified after that date for 
     the purpose of reducing the royalty prescribed therein to 
     less than the
      statutory rates or to add new compositions at less than the 
     statutory rates. Thus, if a recording contract entered 
     into on or before June 22, 1995 was modified after that 
     date to cover a larger number of musical works, the 
     royalty rates specified in the contract would apply to the 
     number of works within the scope of the contract as of 
     June 22, 1995, and the statutory rates would apply to the 
     number of works added thereafter. The Committee also notes 
     that recording artist contracts entered into on or before 
     June 22, 1995 and not modified thereafter, or modified 
     thereafter to extend the date by which an artist must 
     complete a recording, are examples of contracts to be 
     given effect notwithstanding the second sentence of 
     subparagraph (E)(i).
       The second of the exceptions provided in subparagraph 
     (E)(ii) is intended to allow a recording artist-author who 
     chooses to act as his or her own music publisher to agree to 
     accept mechanical royalties at less than the statutory rates, 
     provided that the contract containing such lower rates is 
     entered into after the sound recording has been fixed in a 
     tangible medium of expression substantially in a form 
     intended for commercial release.
       It should be emphasized that subparagraph (E) applies only 
     to the making of digital phonorecord deliveries and not to 
     the making and distribution of physical phonorecords. Nothing 
     in the bill is intended to interfere with the application of 
     controlled composition clauses to the making and distribution 
     of physical phonorecords or to digital phonorecord deliveries 
     where the agreements are not covered by the terms of 
     subsection (c)(3)(E).

                          Section 115(c)(3)(F)

       This subparagraph provides that the procedures specified in 
     subparagraphs (C) and (D) for negotiation or arbitration of 
     mechanical compulsory license rates and terms for digital 
     phonorecord deliveries are to be repeated ever five years, 
     unless different years for repeating such proceedings are 
     determined in accordance with subparagraphs (B) or (C). 
     Nothing in section 115(c)(3) is intended to affect the 
     schedule prescribed for determining the mechanical royalty 
     rate for the making and distribution of physical 
     phonorecords. Proceedings to establish mechanical royalty 
     rates for the making and distribution of physical 
     phonorecords are to be conducted in 1997 and every ten years 
     thereafter, and are not subject to contrary agreement.
       The reference in subparagraph (F) to the procedures 
     specified in subparagraphs (C) and (D) is to the publication 
     of notice, initiation of voluntary negotiations, and 
     convening of CARPs if necessary. The reference is not to the 
     dates within the year as described in subparagraph (C). 
     Indeed, the Committee
      encourages the Librarian to publish a notice of initiation 
     of voluntary negotiation proceedings as early in the year 
     as practicable, to allow the maximum amount of time for 
     voluntary negotiations, or if necessary arbitration.

                          Section 115(c)(3)(G)

       This subparagraph imposes as a condition of compulsory 
     licensing the obligation that digital phonorecord deliveries 
     be accompanied by certain specified types of information, if 
     that information has been encoded in the sound recording 
     being transmitted under 

[[Page S 11959]]
     the sound recording copyright owner's authority. This provision does 
     not obligate the copyright owner of the sound recording to 
     encode copyright management information in the work. In 
     addition, it is not intended to require a transmitting entity 
     to generate or encode such information in its transmission if 
     the information is not encoded in the sound recording. 
     Moreover, the transmitting entity is not required to transmit 
     information that may be encoded in the sound recording other 
     than the information specified in this subparagraph and 
     ``related information'' (o.e., information that is 
     specifically related to the identification of the works being 
     performed and upon which payments are to be made by the 
     transmitting entity under this bill). The subparagraph also 
     makes clear that nothing in this section affects the 
     provisions of section 1002(e).

                          Section 115(c)(3)(H)

       This subparagraph confirms that musical work copyright 
     owners and sound recording copyright owners both have the 
     same rights to be protected against infringement with respect 
     to digital phonorecord deliveries as they have with respect 
     to distributions of physical phonorecords of their respective 
     works. Thus, subject to the limitations contained in existing 
     law, a digital phonorecord delivery infringes the rights of 
     the sound recording copyright owner unless authorized by the 
     sound recording copyright owner (or his or her agent), and a 
     digital phonorecord delivery infringes the rights of the 
     musical work copyright owner unless covered by a compulsory 
     license or authorized by the musical work copyright owner (or 
     his or her agent). The subparagraph makes clear that any 
     cause of action under this subparagraph is in addition to 
     other remedies available under title 17.
                          Section 115(c)(3)(I)

       This subparagraph clarifies the circumstances under which a 
     sound recording copyright owner may be held liable for 
     digital phonorecord deliveries by third parties. The changes 
     to section 115 made by S. 227 are intended to allow record 
     companies to license not only their own rights, but also, if 
     they choose to do so, the rights of writers and music 
     publishers to authorize
      digital phonorecord deliveries. If a record company grants a 
     digital transmission service a license under both the 
     record company's rights in a sound recording and the 
     musical work copyright owner's rights, the record company 
     may be liable, to an extent determined in accordance with 
     applicable law, for the applicable mechanical royalty for 
     every digital phonorecord delivery made under the record 
     company's authority. However, if a record company grants a 
     license under its rights in a sound recording only, and 
     does not grant a mechanical license under the copyright in 
     the musical work embodied in the sound recording, it is 
     the transmission service's responsibility to obtain a 
     license under the musical work copyright, and the record 
     company cannot be held liable for infringement of the 
     copyright in the musical work by the record company's 
     licensee.

                          Section 115(c)(3)(J)

       This subparagraph makes clear that nothing in section 1008 
     shall be construed to prevent the exercise of the rights and 
     remedies allowed by paragraphs (3) and (6) and chapter 5 in 
     the event of a digital phonorecord delivery. However, no 
     action alleging infringement of copyright may be brought 
     under title 17 against a manufacturer, importer or 
     distributor of a digital audio recording device, a digital 
     audio recording medium, an analog recording device, or an 
     analog recording medium, or against a consumer, based on the 
     actions described in section 1008.

                          Section 115(c)(3)(K)

       This subsection makes clear that section 115, as amended by 
     the bill, is not intended to annul or limit any existing or 
     future right or remedy of a sound recording copyright owner 
     or musical work copyright owner, except to the extent that a 
     musical work copyright owner's exclusive rights are limited 
     by compulsory licensing under the conditions specified by 
     section 115 as amended.

                          Section 115(c)(3)(L)

       This subparagraph makes clear that the changes made to 
     section 115 by the bill with regard to liability for digital 
     phonorecord deliveries do not apply to transmissions or 
     retransmissions that are exempt under section 114(d)(1). At 
     the same time, the exemptions set forth in section 114(d)(1) 
     are not intended either to enlarge or to diminish in any way 
     the rights of copyright owners under existing law with 
     respect to such transmissions or retransmissions.

                             Section 115(d)
       This subsection defines the term ``digital phonorecord 
     delivery.'' A ``digital phonorecord delivery'' is each 
     individual delivery of a phonorecord by digital transmission 
     of a sound recording which results in a specifically 
     identifiable reproduction by or for any transmission 
     recipient of a phonorecord of that sound recording. The 
     Committee notes that the phrase ``specifically identifiable 
     reproduction,'' as used in the definition, should be 
     understood to mean a reproduction specifically identifiable 
     to the transmission service. Of course, a transmission 
     recipient making a reproduction from a transmission is able 
     to identify that reproduction, but the mere fact that a 
     transmission recipient can make and identify a reproduction 
     should not in itself cause a transmission to be considered a 
     digital phonorecord delivery.
       The final sentence of this definition provides that a 
     digital phonorecord delivery does not result from a real-
     time, noninteractive subscription transmission of a sound 
     recording where no reproduction of the sound recording or the 
     musical work embodied therein is made from the inception of 
     the transmission through to its receipt by the transmission 
     recipient in order to make the sound recording audible. For 
     example, a transmission by a noninteractive subscription 
     transmission service that transmits in real time a continuous 
     program of music selections chosen by the transmitting 
     entity, for which a consumer pays a flat monthly fee, would 
     not be a ``digital phonorecord delivery'' so long as there 
     was no reproduction at any point in the transmission in order 
     to make the sound recording audible. Moreover, such a 
     transmission would not be a ``digital phonorecord delivery'' 
     even if subscribers, through actions taken on their own part, 
     may record all or part of the programming from that service. 
     The final sentence of the definition of ``digital phonorecord 
     delivery'' is not intended to change current law with respect 
     to rights under section 106, or the limitations on those 
     rights under sections 107-113, sections 116-120, and the 
     unamended portions of sections 114 and 115.
       Section 5--Conforming Amendments.--This section makes 
     certain technical amendments to other sections of title 17.
       Among other things, it adds to section 101 a definition of 
     ``digital transmission,'' which is any transmission in whole 
     or in part in a digital or other non-analog format. Although 
     the Committee is not presently aware of any non-analog 
     formats that are not digital, the Committee wants to make 
     clear that all non-analog formats now known or later 
     developed are covered by the bill. For purposes of section 
     115, a transmission of a motion picture or other audiovisual 
     work does not come within the definition of ``digital 
     transmission.''
       Section 6--Effective Date.--This section provides that new 
     sections 114(e) and 114(f) of title 17, which concern 
     negotiation of licenses under the new performance right, take 
     effect immediately upon the date of enactment. The effective 
     date of other provisions of the Act is three months after the 
     date of enactment.
  Mrs. FEINSTEIN. Mr. President, I rise today in support of S. 227, the 
Digital Performance Right in Sound Recordings Act of 1995. I am pleased 
to be a cosponsor of this legislation introduced by Senator Hatch, the 
distinguished chairman of the Judiciary Committee. This bill will allow 
the United States to finally join more than 60 nations in enacting this 
same copyright protection for sound recordings.
  The bill before us, today, essentially closes a glaring loophole in 
the Copyright Act which had denied protection to recording artists and 
record companies ever since the copyright was first extended to sound 
recordings in 1972. This legislation would create a right to public 
performance in digital transmissions and give copyright owners the 
ability to negotiate the use of their works in new technologies.
  Every other copyrighted work--motion pictures, books, plays, computer 
software and musical compositions--already has this protection. It is 
time to bring the law up to date for sound recordings.
  Senator Hatch and I first introduced a version of this bill in the 
103d Congress. Since that time, we have heard from literally hundreds 
of interested parties from all affected sides. We have had input from 
broadcasters, cable companies, consumers, songwriters, music 
publishers, artists, record companies, and more. Many of those affected 
by the legislation have had suggestions on how to make it better and 
more responsive to the marketplace.
  I would like to commend Senator Hatch and his staff and thank them 
for working so hard with us to assure that all of the legitimate 
concerns with the original legislation were so thoughtfully addressed. 
Senators Biden, Leahy, and Thurmond and their staffs deserve credit as 
well.
  Every copyright expert who testified before the Judiciary Committee, 
including those from the nonpartisan U.S. Copyright Office, agreed that 
this legislation needs to be enacted.
  The Digital Performance Right in Sound Recordings Act helps move our 
copyrighted industries closer to the Information Superhighway. A road 
where consumers will have access to new music and exciting artists 
delivered to the consumer in technology advanced ways beyond what we 
might have imagined when we first heard the Victrola, or even stereo 
sound. As these new technologies develop and as we enter this digital 
and computer age, the protection of America's intellectual property has 
taken on a tremendous urgency.

[[Page S 11960]]

  The inequities of the current law are best illustrated by a real-
world example: when a digital music service, paid for with a 
subscription fee and available via a consumer's cable TV box, play a 
piece of recorded music from a compact disc, such as ``White 
Christmas'' performed by Bing Crosby, the songwriter and music 
publisher, in this case Irving Berlin, have rights and receive payment 
for the performance of that work. Yet while Irving Berlin is 
compensated, Bing Crosby, the recording artist who brought the song to 
life, and the record company which invested the moneys to record and 
distribute the album would receive nothing.
  We have chosen to be forward thinking with this legislation, to 
enable Congress to close a loophole which threatens to
 grow immensely in the near future. With new digital technology, a 
transmission service, simply by acquiring a single copy of a compact 
disc, can deliver CD-quality sound electronically to millions of homes 
and cars, without any payment to the creators of that recorded music.

  The hundreds of thousands of consumers who love new music could make 
perfect copies of the one CD. Potentially millions of perfect copies of 
this CD can be made electronically. Why would anyone go to a record 
store in the future if they were able to receive music this way? Why 
should the digital transmission businesses be making money by selling 
music when they are not paying the creators who have produced that 
music?
  If this should occur without copyright protection, investment in 
recorded music will decline, as performers and record companies produce 
recordings which are widely distributed without compensation to them. 
This would result in the decline of what presently constitutes one of 
America's most important, productive and competitive industries.
  America's copyright industries contributed a staggering 3.7 percent 
to the Nation's gross domestic product in 1993. That's a contribution 
of $238.6 billion, Mr. President. Between 1977 and 1993, the number of 
workers employed by those industries doubled to 3 million, 2.55 percent 
of our work force. Over the last 5 years, employment in this sector has 
grown at four times the rate of jobs in other sectors.
  And, perhaps most significant of all in this context, these 
industries together achieved foreign sales of $45.8 billion in 1993. 
Amazingly, that was the second biggest single contribution to America's 
balance of trade in 1993 among all industries, second only to autos and 
their parts.
  My home State of California has been a particular beneficiary of this 
growth. It is an important home to the music industry, the industry 
whose copyright protection we are specifically addressing today. 
California's music community is home to over 100,000 jobs, including 
recording, manufacturing, distribution and retail.
  These are the jobs of the future, and I am pleased that this 
legislation will assure the continued viability of these important 
businesses and creative endeavors.
  More than 60 nations, including 9 members of the European Community, 
provide their rightsholders with a performance right. $150 million is 
collected worldwide for the public performance of sound recordings.
  The United States is the world's leading exporter of recorded music, 
with American artists accounting for 35 percent of all music sold 
worldwide. However, because the United States does not reciprocate in 
providing this performance right, the U.S. Patent and Trademark Office 
reports that U.S. performers and record companies are denied access to 
these substantial royalties. Rectifying this disparity will obviously 
benefit this very important export sector of our economy.
  Moreover, I'm told that the lack of a performance right has been a 
major obstacle to the efforts of our trade negotiators to achieve 
higher levels of intellectual property protection in general. The 
Senate today can help eliminate this obstacle.
  This legislation would provide equity, Mr. President. Equity for the 
digital transmitters who would be assured that new music was available 
for their services. Equity for consumers who would be assured that new 
and varied music continues to get recorded and produced. Equity for the 
creators and producers of music who invest their talent, effort and 
dollars in sound recordings.
  In sum, as I detailed in my Record statement of January 13 when we 
introduced this bill, and at the hearing on this bill in March, passing 
this legislation is the right thing to do as a matter of copyright 
policy, it's the fair thing to do, and it is clearly in the best 
economic interests of the Nation. I urge its adoption.
  Thank you, Mr. President. I yield the floor.
  Mr. HELMS. Mr. President, it is regrettable that S. 227 fails to 
address the present concerns of countless small businesses in North 
Carolina, including many restaurants, that offer background music for 
the enjoyment of their customers.
  Many restauranteurs, retailers, and radio broadcasters resent the 
continued heavy-handed practices by music-licensing organizations in 
imposing unreasonable copyright fees. I hope these concerns may be 
addressed soon in future legislation.
  Mr. President, this is the problem: A restaurant has a radio or 
television set playing, and a representative of one of the music 
royalty organizations shows up threatening court action unless the 
restauranteur pays an exorbitant licensing fee, simply for having a 
radio or television set on.
  This double-dipping is both arrogant and unfair--the royalty 
organizations insist on collecting fees from both broadcasters and the 
small businesses that receive the public broadcasts.
  Not only do these organizations double-dip, they also seek to 
intimidate small businesses into paying fees for listening to radio or 
TV stations.
  Small businesses are entitled to fair protection against arbitrary 
pricing, discriminatory enforcement, and abusive collection practices 
by music-licensing organizations.
  This is a problem that should be addressed soon, and, Mr. President, 
I ask unanimous consent that a relevant article be printed in the 
Record at the conclusion of my remarks--it being a Nation's Restaurant 
News article by Ron Ruggless entitled, ``Operators to Lawmakers: Now 
You're Playing Our Song; Legislators Tackle Industry's Music-Licensing 
Gripe; Restauranteurs.''
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

             [From Nation's Restaurant News, Feb. 27, 1995]

Operators to Lawmakers: Now You're Playing Our Song; Legislators Tackle 
            Industry's Music-Licensing Gripe; Restaurateurs

                           (By Ron Ruggless)

       Washington.--At the urging of restaurateurs and other 
     small-business owners, federal and state lawmakers are 
     pumping up the volume on the way music-licensing agents do 
     business and the fees they charge.
       In Congress Rep. Jim Sensenbrenner, R-Wis., has introduced 
     a bill to amend federal copyright law and exempt 
     restaurateurs from paying licensing fees for background music 
     from radios and televisions, for which they are now liable.
       And in 10 states, from New Hampshire to Hawaii, 
     Legislatures are considering proposals that would regulate 
     the way the music-licensing agents conduct themselves in 
     collecting royalties.
       ``Restaurant owners all over the country have been 
     infuriated by the bullying tactics of the huge music-
     licensing agents,'' said Herman Cain, president of the 
     National Restaurant Association. ``Their outrage is 
     palpable.''
       For years restaurateurs have been alarmed by what they 
     consider random pricing and abusive collections and threats 
     by the performing rights societies, such as Broadcast Music 
     Inc., or BMI; the American Society of Composers, Authors and 
     Publishers, or ASCAP; and the Society for European 
     Songwriters and Composers, or SESAC.
       I can't tell you the number of times small-business owners 
     in my district have complained about the tactics used by 
     these performing rights societies to collect fees for music 
     played on radios or TVs,'' Sensenbrenner explained. ``I 
     believe artists should be compensated for their works, but I 
     don't believe these societies should be able to intimidate a 
     restaurant owner into paying fees for the incidental use of a 
     broadcast over which he is she has no control.''
       More than 150 restaurateurs were scheduled to fly in to 
     Washington on Feb. 23 to lobby the 104th Congress on 
     Sensenbrenner's Fairness in Musical Licensing Act of 1995 
     (H.R. 789). Similar legislation was introduced in last year's 
     Congress but was not acted upon before it adjourned.
       The Sensenbrenner bill, which had 21 co-sponsors by mid-
     February, also would
      establish an arbitration system to resolve rate disputes. 
     Under current federal copyright 

[[Page S 11961]]
     law, only the federal court of the Southern District of New York is 
     allowed to handle such disputes, which makes it expensive 
     for business people elsewhere in the nation. The National 
     Restaurant Association has long claimed that ASCAP, BMI, 
     and SESAC rely on the threat of costly court battles to 
     force restaurateurs to comply with their fees.
       Meanwhile, restaurateurs were working at the local level in 
     10 states to regulate the way the music-copyright agents 
     conduct their collections of royalties.
       Most states were patterning their legislation after New 
     Jersey's Collection Practices Reform Act, which has passed 
     the state's General Assembly and is now under consideration 
     by the Senate.
       The New Jersey proposal would require music-licensing 
     agents to provide list of songs they represent, provide 
     comparisons of fees charged within a 25-mile radius of a 
     business, force them to identify themselves upon entering a 
     business establishment and set up a third-party arbitration 
     group to mediate contract disputes.
       States with similar bills wending their way through the 
     legislatures include Colorado, Hawaii, Maryland, Missouri, 
     New Hampshire, Oklahoma, Texas, Virginia, and Wyoming.
       In Texas the proposed legislation includes the New Jersey 
     provisions as well as a component that would require agents 
     to be licensed by the state, according to Glen Garey, general 
     counsel for the Texas Restaurant Association. ``I don't think 
     we'll be too easy to push over,'' Garey said, referring to 
     lobbying by the performing-rights societies. ``I don't buy 
     into the argument that any of this is unconstitutional or 
     conflicts with federal law.''
       Colorado's proposed legislation in mid-February had 
     garnered the sponsorship of 20 of 65 House members and 10 of 
     35 senators, according to Pete Meersman, executive director 
     of the Colorado Restaurant Association.
       It doesn't deal with whether or not operators owe royalties 
     to copyright owners, or whether those royalties are fair,'' 
     Meersman said. What it does deal with is how royalties are 
     collected in Colorado. It sets a standard of professional 
     conduct for agents of these Performing-rights societies.''
       The legislation would require music-licensing agents to 
     identify themselves upon entering establishments for the 
     purposes of investigating the use of copyrighted music.
       ``A lot of times,'' Meersman explained, ``they will come in 
     unannounced. We've had members find them in their coat rooms, 
     where their music equipment is kept. We've had them question 
     employees who don't really know anything about the equipment, 
     type of music or whether it's CDs, tapes or radio.
       ``We'd like them to identify themselves so someone who 
     knows what they are talking about can get them the 
     information they need.''
       Another provision would require the societies to provide 
     lists of
      copyrighted songs they represent. ``The reason we want to 
     have lists available is that, say, you're an operator, and 
     you don't want to pay royalties or a blanket licensing fee 
     to all these groups,'' he said. ``You want to know what is 
     copyrighted or covered under your agreement. In other 
     words, you want to know what you are paying for.''
       One other provision in the bill would require the 
     performing-rights societies to let operators know what other 
     similar establishments are paying in the same area, which was 
     defined as a 25-mile radius. ``That way you might be able to 
     determine whether you are being asked to pay fees that are 
     unreasonable compared to similar establishments,'' Meersman 
     said.
       A number of Colorado restaurant operators have been 
     threatened if they didn't sign a music agreement, he said. 
     ``We think our members ought to be treated in a more 
     professional manner. They don't like to be threatened, 
     intimidated. It's a standard of professional conduct.''
       Meersman said the Colorado legislation has drawn opposition 
     from lobbyists from the music-copyright companies, who, he 
     said, ``are pulling out all the stops to try to squash this 
     legislation wherever it comes up.''
       One argument is that music-copyright legislation should be 
     handled at the federal level, but Meersman disagrees: 
     ``Issues dealing with whether or not someone has to pay a 
     fee, those are not things we can deal with at the state 
     level. But how these people treat business owners in the 
     state and how they go about collecting the fees is a state 
     issue.''
       Katy McGregor, a legislative representative with the NRA in 
     Washington, welcomes the state initiatives. If they can get 
     some reforms at the state level, it certainly makes dealing 
     with these music-licensing groups a little more agreeable 
     until we can get some changes in copyright law at the federal 
     level,'' she said. ``What they are doing in the states is 
     crucial.''
  Mr. LEAHY. Mr. President, the matter of a performance right for sound 
recordings is an issue that has been in dispute for over 20 years. I 
believe that Congress will finally enact a law establishing that right.
  I believe that musicians, singers and featured performers on 
recordings ought to be compensated like other creative artists for the 
public performances of works that they create and that we all enjoy. I 
want companies that export American music not to be disadvantaged 
internationally by the lack of U.S. recognition of such a performance 
right. Most of all, I have wanted to be sure that the new law is fair 
to all parties--to performers, musicians, songwriters, music 
publishers, performing rights societies, emerging companies expanding 
new technologies, and, in particular, consumers and the public.
  I am glad to have been able to play a role in redesigning the bill to 
meet these objectives. The substitute seeks to preserve existing 
rights, to encourage the development of new technologies, and to 
promote competition as the best protection for consumers. I was pleased 
to join as a cosponsor of the substitute and to urge support for S. 227 
as amended when the Judiciary Committee considered the bill on June 29.
  Working with Senator Thurmond, the Chairman of the Antitrust 
Subcommittee, and with the help of the Antitrust Division of the 
Department of Justice, we have been able to strengthen the bill in 
significant regard.
  At our March hearing on S. 227, I raised antitrust concerns about 
certain provisions in the bill. In particular, I was concerned about 
subsections (h) and (e), which were proposed to be added to section 114 
of the Copyright Act. The language of both subsections has been revised 
and strengthened to protect against anticompetitive activity.
  As originally drafted, the bill might have created a virtually 
unlimited antitrust exemption for major record companies to combine to 
set prices for licensing music. While I want to work to find ways to 
keep transaction costs as low as possible for clearing rights in order 
to make music in the future more accessible to the public at lower 
prices, I do not support such an exemption to our antitrust laws.
  On June 20, I received a letter from the Department of Justice 
responding to a letter I had sent following our hearing. The Department 
noted that subsection (e) of the original bill could be read to provide 
statutory authority to record companies to form a licensing cartel. In 
light of the concentration of the record industry in which 6 major 
companies account for 80 to 85 percent of the U.S. market, this could, 
in the words of the Justice Department ``cause great mischief by 
allowing the formation of a cartel immune from antitrust scrutiny.'' I 
know that is not what the original sponsors of this legislation 
intended.
  I was pleased to work with Senator Thurmond and others to resolve 
these problems. The Department provided technical assistance to us as 
we worked out another approach that authorizes only a clearinghouse to 
cut down transaction costs without authorizing price fixing by 
combinations of companies. This is an approach with which we are all 
more comfortable. In this regard, we received a follow-up letter from 
the Department of Justice on these provisions.
  I commend the industry groups that took seriously our suggestion that 
they talk through their differences and see whether they could 
recommend a consensus solution to Congress. The cooperation and good 
faith contributed greatly to the process. My experience has been that 
in these areas of copyright law, legislation moves best and most easily 
by consensus. I think that is what we have strived to attain and what 
we have achieved.
  I ask unanimous consent to have printed in the Record copies of the 
June 20 and July 21 letters from the Department of Justice on this 
measure.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                       U.S. Department of Justice,


                                Office of Legislative Affairs,

                                    Washington, DC, June 20, 1995.
     Hon. Patrick Leahy,
     Ranking Member, Subcommittee on Antitrust, Business Rights 
         and Competition, Committee on the Judiciary, U.S. Senate, 
         Washington, DC.
       Dear Senator Leahy: Thank you for your March 13, 1995, 
     letter to Assistant Attorney General Anne Bingaman asking for 
     views on S. 227, the ``Digital Performance Right in Sound 
     Recordings Act of 1995.'' The Administration supports the 
     establishment of a performance right in digital recordings. 
     However, based on our review of S. 227, we believe: (1) that 
     proposed subsection (e) may inadvertently authorize cartel 
     activity in the licensing of performance rights, and (2) that 
     proposed subsection (h) does not fully address the potential 
     competition issues associated with licensing to affiliated 
     entities. 

[[Page S 11962]]
     Minor modifications to S. 227 would remedy these deficiencies without 
     undermining the bill's underlying goals.
       Performance rights in sound recordings, common in Europe 
     and other regions, are not currently granted by the 1976 
     Copyright Act or any other federal statute. Thus, under 
     current law, producers of sound recordings are not entitled 
     to license or receive royalties for the public performance 
     and broadcast of their recordings in the U.S. for example, 
     digital subscription transmission services \1\ currently may 
     buy a compact disc on the retail market and simply play the 
     music from it on their channels without obtaining the 
     permission of or compensating the artists or record companies 
     that produced the recording.
     Footnotes at end of article.
---------------------------------------------------------------------------
       Senate Bill 227 would amend the Copyright Act to create a 
     performance right in digital transmissions. Under the bill, 
     right holders would have the authority to receive royalty 
     fees from, and in some cases, negotiate the terms of, the 
     performance of their sound recordings by digital delivery 
     services such as pay-per-listen and subscription transmission 
     services.
       Generally, we believe that S. 227 would advance competition 
     by allowing producers of sound recordings control over 
     certain transmissions of their recordings by some digital 
     transmission services, this potentially allowing them to 
     limit the threat of uncompensated home copying by subscribers 
     to those services. Nevertheless, given the concentrated 
     nature of the affected industries, the danger exists that 
     this remedial legislation could be subverted to monopolistic 
     aims.
       1. Licensing Cartel.--We are concerned that proposed 
     subsection (e), by allowing license negotiations by a common 
     agent, would authorize formation of a cartel by performance 
     rights holders. Our understanding is that a ``performance 
     right'' would, at least with respect to the major record 
     companies and their affiliates (the ``majors'') \2\ be held 
     by the record company, either by virtue of its producer 
     status or by contract with the artist.\3\
       As part of its ongoing inquiry into licensing practices in 
     U.S. and in foreign commerce, the Department is currently 
     investigating whether certain record companies have 
     unlawfully colluded on license fees by, inter alia, forming 
     ``performance rights societies'' in Europe and elsewhere that 
     operate as the exclusive negotiating agency for all of the 
     record companies. Unlike licensing societies that act as 
     nonexclusive agents for owners and composers of copyrighted 
     compositions, the foreign performance rights societies are 
     the exclusive assignees of performance rights and arguably 
     are highly concentrated. Exploiting the combined market power 
     associated with the pooling of intellectual property rights, 
     these exclusive licensing societies typically charge a 
     percentage-of-revenue fee in return for a blanket license. 
     The European Commission has issued a Statement of Objections 
     against these practices as they relate to music video 
     licenses, and the Division is likewise seeking to determine 
     whether the activities of these foreign rights societies have 
     an adverse impact on U.S. exports of music video and digital 
     radio programming. See United States v. Time Warner
      Inc., et at., No. Misc. 94-338 HHG (filed Nov. 3, 1994) 
     (Petition to enforce civil investigative demands).
       Arguably, S. 227 would statutorily authorize performance 
     right holders, and record companies in particular, to form 
     the same kind of anticompetitive performance rights society 
     here in the United States. According to proposed subsection 
     (e):
       ``Any copyright owners of sound recordings and any entities 
     performing sound recordings affected by this section may 
     negotiate and agree upon the terms and rates of royalty 
     payments for the performance of such sound recordings and the 
     proportionate division of fees paid among copyright owners, 
     and may designate common agents to negotiate, agree to, pay, 
     or receive such royalty payments.''
       (Emphasis added). This subsection could cause great 
     mischief by allowing the formation of a cartel immune from 
     antitrust scrutiny. Although the arbitration royalty panel 
     created by the statute would set some limit on fees charged 
     for compulsory licenses, this provision would authorize 
     collective negotiations by right holders for unregulated 
     voluntary licenses as well. Moreover, even in the compulsory 
     license context, a small programmer would almost certainly 
     pay hefty premium in order to avoid the costs of a challenge 
     before the royalty panel against a cartel whose costs and 
     legal fees are spread over a multi-billion dollar industry. 
     Ultimately, U.S. consumers would pay this premium.
       We therefore strongly recommend that proposed subsection 
     (e) be deleted. To do so would in no way affect the salutary 
     goals of the bill. Artists could transfer rights to the 
     record companies. Record companies could unilaterally hire 
     agents. They could even form a performance right society so 
     long as it conformed to the antitrust laws. What they could 
     not do is form a federally authorized cartel to set higher-
     than-competitive prices.
       2. Licensing to Affiliates.--Proposed subsection (h) 
     provides that, where a right holder licenses a sound 
     recording to a digital programmer it directly or indirectly 
     controls, the right holder must license to similarly situated 
     programmers on similar terms and conditions. As written, this 
     provision is unlikely to be an effective deterrent to 
     discrimination in favor of affiliates and may have the 
     unintended effect of mandating higher-than-competitive 
     license fees.
       In the first place, the trigger language of the bill is too 
     narrow. As far as we know, no individual right holder, 
     including the record companies, has a large enough individual 
     stake in a
      digital programmer to have positive ``control''. Together, 
     however, several majors potentially may exercise 
     substantial collective influence. Taking the cable audio 
     services industry as an example, Sony, Warner, and EMI 
     each hold a 33% interest in SWE Cable Radio Company (SWE), 
     which in turn holds a 35% interest--enough for negative 
     control over any major decision--in Digital Cable Radio 
     Associates L.P. (DCR). Presumably, these partners could 
     favor their collectively controlled programmer at the 
     expense of Digital Music Express (DMX), the only other 
     digital radio programmer. S. 227 would not prevent 
     discrimination of this type.
       Second, it is by no means clear that programmers such as 
     DMX would be protected by subsection (h) even if it were 
     triggered. As written, the subsection mandates ``similar 
     terms'' as those provided to the affiliated programmer. This 
     raises the possibility that right holder(s) could set a high 
     price to the affiliated programmer and then claim a statutory 
     requirement to apply the artificially high rate to the non-
     affiliated programmer.
       Third, to be an effective deterrent to discrimination, 
     subsection (h)(2), allowing the right holder to set different 
     terms and conditions for essentially any reason, should be 
     tightened.
       We suggest, therefore, the following modifications to 
     proposed subsection (h) (changes in italics):
       ``Where a copyright owner of sound recordings, indvidually 
     or collectively with other copyright owners of sound 
     recordings, owns a controlling interest in, or otherwise 
     possesses the power directly or indirectly to control or 
     block important management decisions of, an entity engaging 
     in digital transmissions covered by section 106(6) and 
     licenses to such entity the right to publicly perform a sound 
     recording by means of digital transmission, the copyright 
     owner shall make the licensed sound recording available under 
     section 106(6) on terms and conditions no less favorable to 
     all similarly-situated entities offering similar types of 
     digital transmission services, except that the copyright 
     owner may--
       ``(1) impose reasonable requirements for creditworthiness; 
     and
       ``(2) make reasonable adjustments to the prices, terms, and 
     conditions to take into account the types of services 
     offered, the duration of the license, the geographic region, 
     the numbers of subscribers served, and any other relevant 
     factors.''

     We believe this modified language would address the concerns 
     set forth above by (1) expanding the coverage of the 
     subsection to include situations where right holders 
     collectively control a programmer or have a stake in a 
     programmer that does not rise to the level of positive 
     control; (2) restricting the ability of a right holder to 
     discriminate based on pretextual dissimilarities among 
     affiliated and non-affiliated programmers; (3) preserving the 
     ability of rights holders to take substantial differences 
     among programmers into account; and (4) ensuring that a 
     programmer is not bound by statute to accept an artificially 
     high license fee.
       Thank you for the opportunity to comment on S. 227. In our 
     view, the bill would be measurably improved if Congress were 
     to adopt the suggested modifications or take other steps to 
     address the concerns we have raised. Please do not hesitate 
     to contact me at any time for further elaboration of the 
     views expressed.
       The Office of Management and Budget has advised that there 
     is no objection from the standpoint of the Administration's 
     program to the submission of this report to the Congress.
           Sincerely,
                                                      Kent Markus,
     Acting Assistant Attorney General.
                                                                    ____

                               FOOTNOTES

     \1\ Digital subscription transmission services currently 
     provide approximately 60 CD-quality channels of audio 
     programming to cable and satellite television subscribers.
     \2\ Six major record companies and their affiliates (the 
     ``majors'') collectively account for approximately eighty to 
     eighty-five percent of the U.S. and worldwide markets for 
     prerecorded records, taps, and compact discs.
     \3\ When a recording artist signs with a major record label, 
     he or she typically transfers all copyrights, including any 
     performance right, to the record company in perpetuity 
     throughout the world.
                                                                    ____

                                       U.S. Department of Justice,


                                Office of Legislative Affairs,

                                    Washington, DC, July 21, 1995.
     Hon. Patrick Leahy,
     U.S. Senate,
     Washington, DC.
       Dear Senator Leahy: This letter responds to your June 29, 
     1995, letter to Anne K. Bingaman in which you, joined by 
     Senators Thurmand, Kyl and Brown, asked for the Department of 
     Justice's views on whether the most recent changes made to S. 
     227 adequately address the antitrust concerns raised in the 
     Department's June 20, 1995, letter to you on this subject.
       S. 227 would amend the Copyright Act to create a 
     performance right in digital transmissions. Under the bill, 
     right holders would have the authority to receive royalty 
     fees 

[[Page S 11963]]
     from, and, in some cases, negotiate the terms of the performance of 
     their sound recordings by digital delivery services such as 
     pay-per-listen and subscriptions transmission services.
       The Administration supports the establishment of a 
     performance right for sound recordings. Generally, we believe 
     that S. 227 would advance competition by allowing producers 
     of sound recordings control over certain transmissions of 
     their recordings by some digital services, thus potentially 
     allowing them to limit the threat of uncompensated home 
     copying by subscribers of those services.
       As set forth more fully in our earlier letter, the original 
     language of S. 227 could have been read to statutorily 
     authorize activities that might otherwise violate the 
     antitrust laws. Specifically, proposed subsection (e) 
     arguably would have authorized rights holders--typically 
     record companies--to designate ``common agents'' without 
     appropriate safeguards to ensure against cartel behavior. 
     Similarly, proposed subsection (h) could have been read to 
     require an unaffiliated programmer to
      pay the same artificially high license as paid by an 
     affiliated programmer.
       As we read the Chairman's Final Mark Substitute Draft of S. 
     227, the revised bill can no longer be read to exempt 
     activity that would otherwise clearly violate the antitrust 
     laws.
       With respect to proposed subsection (e), ``Authority for 
     Negotiations,'' we were concerned that the original language 
     of the bill would have the unintended effect of making cartel 
     conduct immune from antitrust scrutiny. In the revised bill, 
     the role of the common agent has been substantially 
     curtailed, thus addressing our concern. Specifically, in the 
     context of ``voluntary negotiations'' for a statutory 
     license, the common agent is now ``non-exclusive''--meaning 
     that a programmer may not be required to negotiate through 
     the common agent. In addition, any impasse on license fees, 
     terms and conditions can be resolved by the rate panel, if 
     necessary. Where a statutory license has not been created 
     (e.g., for interactive transmissions or transmissions that 
     exceed the performance complement), the common agent's role 
     is limited to a ``clearing house'' function. In other words, 
     under those circumstances a common agent may not be the 
     instrument of collective negotiation of rates and material 
     terms. These changes address our primary concerns with the 
     original language of subsection (e).\1\
     \1\ Proposed subsection (e)(1) contains the clause 
     ``[n]otwithstanding any provision of the antitrust laws * * * 
     .'' We would prefer such language be deleted, although we 
     understand that Congress has used that language in other 
     parts of the Copyright Act dealing with statutory licenses. 
     Even with that language, we note that the substance of 
     proposed subsection (e)(1) does not appear to authorize 
     conduct facially at odds with the antitrust laws.
---------------------------------------------------------------------------
       With respect to proposed subsection (h), ``Licensing to 
     Affiliates,'' our primary concerns were whether the language 
     of the bill: (1) adequately defined situations in which right 
     holders might individually or collectively control an 
     affiliate, and (2) would have permitted right holders to 
     impose artificially high license fees on non-affiliates. With 
     the addition of a definition of an ``affiliated entity'' in 
     (j)(1) and the replacement of ``similar terms and 
     conditions'' in subsection (h) with ``no less favorable terms 
     and conditions,'' we believe that control of affiliates is 
     adequately defined and that our competitive concern that the 
     bill would create a likelihood of competitive disadvantage 
     for non-affiliates has been addressed.
       We believe that S. 227, as modified, adequately addresses 
     the competition concerns of the Department of Justice.
       The Office of Management and Budget advises that there is 
     no objection to the submission of this report from the 
     standpoint of the Administration's program.
           Sincerely,
                                                      Andrew Fois,
                                       Assistant Attorney General.
  Mr. GORTON. Mr. President, I ask unanimous consent that the committee 
amendment, as amended, be agreed to; that the bill be deemed read a 
third time and passed, as amended; that the motion to reconsider be 
laid upon the table; and that any statements relating to the bill be 
placed at the appropriate place in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  So the bill (S. 227), as amended, was deemed read the third time and 
passed, as follows:
                                 S. 227
       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,
     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Digital Performance Right in 
     Sound Recordings Act of 1995''.

     SEC. 2. EXCLUSIVE RIGHTS IN COPYRIGHTED WORKS.

       Section 106 of title 17, United States Code, is amended--
       (1) in paragraph (4) by striking ``and'' after the 
     semicolon;
       (2) in paragraph (5) by striking the period and inserting 
     ``; and''; and
       (3) by adding at the end the following:
       ``(6) in the case of sound recordings, to perform the 
     copyrighted work publicly by means of a digital audio 
     transmission.''.

     SEC. 3. SCOPE OF EXCLUSIVE RIGHTS IN SOUND RECORDINGS.

       Section 114 of title 17, United States Code, is amended--
       (1) in subsection (a) by striking ``and (3)'' and inserting 
     ``(3) and (6)'';
       (2) in subsection (b) in the first sentence by striking 
     ``phonorecords, or of copies of motion pictures and other 
     audiovisual works,'' and inserting ``phonorecords or 
     copies'';
       (3) by striking subsection (d) and inserting:
       ``(d) Limitations on Exclusive Right.--Notwithstanding the 
     provisions of section 106(6)--
       ``(1) Exempt transmissions and retransmissions.--The 
     performance of a sound recording publicly by means of a 
     digital audio transmission, other than as a part of an 
     interactive service, is not an infringement of section 106(6) 
     if the performance is part of--
       ``(A)(i) a nonsubscription transmission other than a 
     retransmission;
       ``(ii) an initial nonsubscription retransmission made for 
     direct reception by members of the public of a prior or 
     simultaneous incidental transmission that is not made for 
     direct reception by members of the public; or
       ``(iii) a nonsubscription broadcast transmission;
       ``(B) a retransmission of a nonsubscription broadcast 
     transmission: Provided, That, in the case of a retransmission 
     of a radio station's broadcast transmission--
       ``(i) the radio station's broadcast transmission is not 
     willfully or repeatedly retransmitted more than a radius of 
     150 miles from the site of the radio broadcast transmitter, 
     however--

       ``(I) the 150 mile limitation under this clause shall not 
     apply when a nonsubscription broadcast transmission by a 
     radio station licensed by the Federal Communications 
     Commission is retransmitted on a nonsubscription basis by a 
     terrestrial broadcast station, terrestrial translator, or 
     terrestrial repeater licensed by the Federal Communications 
     Commission; and
       ``(II) in the case of a subscription retransmission of a 
     nonsubscription broadcast retransmission covered by subclause 
     (I), the 150 mile radius shall be measured from the 
     transmitter site of such broadcast retransmitter;

       ``(ii) the retransmission is of radio station broadcast 
     transmissions that are--

       ``(I) obtained by the retransmitter over the air;
       ``(II) not electronically processed by the retransmitter to 
     deliver separate and discrete signals; and
       ``(III) retransmitted only within the local communities 
     served by the retransmitter;

       ``(iii) the radio station's broadcast transmission was 
     being retransmitted to cable systems (as defined in section 
     111(f)) by a satellite carrier on January 1, 1995, and that 
     retransmission was being retransmitted by cable systems as a 
     separate and discrete signal, and the satellite carrier 
     obtains the radio station's broadcast transmission in an 
     analog format: Provided, That the broadcast transmission 
     being retransmitted may embody the programming of no more 
     than one radio station; or
       ``(iv) the radio station's broadcast transmission is made 
     by a noncommercial educational broadcast station funded on or 
     after January 1, 1995, under section 396(k) of the 
     Communications Act of 1934 (47 U.S.C. 396(k)), consists 
     solely of noncommercial educational and cultural radio 
     programs, and the retransmission, whether or not 
     simultaneous, is a nonsubscription terrestrial broadcast 
     retransmission; or
       ``(C) a transmission that comes within any of the following 
     categories:
       ``(i) a prior or simultaneous transmission incidental to an 
     exempt transmission, such as a feed received by and then 
     retransmitted by an exempt transmitter: Provided, That such 
     incidental transmissions do not include any subscription 
     transmission directly for reception by members of the public;
       ``(ii) a transmission within a business establishment, 
     confined to its premises or the immediately surrounding 
     vicinity;
       ``(iii) a retransmission by any retransmitter, including a 
     multichannel video programming distributor as defined in 
     section 602(12) of the Communications Act of 1934 (47 U.S.C. 
     522(12)), of a transmission by a transmitter licensed to 
     publicly perform the sound recording as a part of that 
     transmission, if the retransmission is simultaneous with the 
     licensed transmission and authorized by the transmitter; or
       ``(iv) a transmission to a business establishment for use 
     in the ordinary course of its business: Provided, That the 
     business recipient does not retransmit the transmission 
     outside of its premises or the immediately surrounding 
     vicinity, and that the transmission does not exceed the sound 
     recording performance complement. Nothing in this clause 
     shall limit the scope of the exemption in clause (ii).
       ``(2) Subscription transmissions.--In the case of a 
     subscription transmission not exempt under subsection (d)(1), 
     the performance of a sound recording publicly by means of a 
     digital audio transmission shall be subject to statutory 
     licensing, in accordance with subsection (f) of this section, 
     if--
       ``(A) the transmission is not part of an interactive 
     service;
       ``(B) the transmission does not exceed the sound recording 
     performance complement;

[[Page S 11964]]

       ``(C) the transmitting entity does not cause to be 
     published by means of an advance program schedule or prior 
     announcement the titles of the specific sound recordings or 
     phonorecords embodying such sound recordings to be 
     transmitted;
       ``(D) except in the case of transmission to a business 
     establishment, the transmitting entity does not automatically 
     and intentionally cause any device receiving the transmission 
     to switch from one program channel to another; and
       ``(E) except as provided in section 1002(e) of this title, 
     the transmission of the sound recording is accompanied by the 
     information encoded in that sound recording, if any, by or 
     under the authority of the copyright owner of that sound 
     recording, that identifies the title of the sound recording, 
     the featured recording artist who performs on the sound 
     recording, and related information, including information 
     concerning the underlying musical work and its writer.
       ``(3) Licenses for transmissions by interactive services.--
       ``(A) No interactive service shall be granted an exclusive 
     license under section 106(6) for the performance of a sound 
     recording publicly by means of digital audio transmission for 
     a period in excess of 12 months, except that with respect to 
     an exclusive license granted to an interactive service by a 
     licensor that holds the copyright to 1,000 or fewer sound 
     recordings, the period of such license shall not exceed 24 
     months: Provided, however, That the grantee of such exclusive 
     license shall be ineligible to receive another exclusive 
     license for the performance of that sound recording for a 
     period of 13 months from the expiration of the prior 
     exclusive license.
       ``(B) The limitation set forth in subparagraph (A) of this 
     paragraph shall not apply if--
       ``(i) the licensor has granted and there remain in effect 
     licenses under section 106(6) for the public performance of 
     sound recordings by means of digital audio transmission by at 
     least 5 different interactive services: Provided, however, 
     That each such license must be for a minimum of 10 percent of 
     the copyrighted sound recordings owned by the licensor that 
     have been licensed to interactive services, but in no event 
     less than 50 sound recordings; or
       ``(ii) the exclusive license is granted to perform publicly 
     up to 45 seconds of a sound recording and the sole purpose of 
     the performance is to promote the distribution or performance 
     of that sound recording.
       ``(C) Notwithstanding the grant of an exclusive or 
     nonexclusive license of the right of public performance under 
     section 106(6), an interactive service may not publicly 
     perform a sound recording unless a license has been granted 
     for the public performance of any copyrighted musical work 
     contained in the sound recording: Provided, That such license 
     to publicly perform the copyrighted musical work may be 
     granted either by a performing rights society representing 
     the copyright owner or by the copyright owner.
       ``(D) The performance of a sound recording by means of a 
     retransmission of a digital audio transmission is not an 
     infringement of section 106(6) if--
       ``(i) the retransmission is of a transmission by an 
     interactive service licensed to publicly perform the sound 
     recording to a particular member of the public as part of 
     that transmission; and
       ``(ii) the retransmission is simultaneous with the licensed 
     transmission, authorized by the transmitter, and limited to 
     that particular member of the public intended by the 
     interactive service to be the recipient of the transmission.
       ``(E) For the purposes of this paragraph--
       ``(i) a `licensor' shall include the licensing entity and 
     any other entity under any material degree of common 
     ownership, management, or control that owns copyrights in 
     sound recordings; and
       ``(ii) a `performing rights society' is an association or 
     corporation that licenses the public performance of 
     nondramatic musical works on behalf of the copyright owner, 
     such as the American Society of Composers, Authors and 
     Publishers, Broadcast Music, Inc., and SESAC, Inc.
       ``(4) Rights not otherwise limited.--
       ``(A) Except as expressly provided in this section, this 
     section does not limit or impair the exclusive right to 
     perform a sound recording publicly by means of a digital 
     audio transmission under section 106(6).
       ``(B) Nothing in this section annuls or limits in any way--
       ``(i) the exclusive right to publicly perform a musical 
     work, including by means of a digital audio transmission, 
     under section 106(4);
       ``(ii) the exclusive rights in a sound recording or the 
     musical work embodied therein under sections 106(1), 106(2) 
     and 106(3); or
       ``(iii) any other rights under any other clause of section 
     106, or remedies available under this title, as such rights 
     or remedies exist either before or after the date of 
     enactment of the Digital Performance Right in Sound 
     Recordings Act of 1995.
       ``(C) Any limitations in this section on the exclusive 
     right under section 106(6) apply only to the exclusive right 
     under section 106(6) and not to any other exclusive rights 
     under section 106. Nothing in this section shall be construed 
     to annul, limit, impair or otherwise affect in any way the 
     ability of the owner of a copyright in a sound recording to 
     exercise the rights under sections 106(1), 106(2) and 106(3), 
     or to obtain the remedies available under this title pursuant 
     to such rights, as such rights and remedies exist either 
     before or after the date of enactment of the Digital 
     Performance Right in Sound Recordings Act of 1995.''; and
       (4) by adding after subsection (d) the following:
       ``(e) Authority for Negotiations.--
       ``(1) Notwithstanding any provision of the antitrust laws, 
     in negotiating statutory licenses in accordance with 
     subsection (f), any copyright owners of sound recordings and 
     any entities performing sound recordings affected by this 
     section may negotiate and agree upon the royalty rates and 
     license terms and conditions for the performance of such 
     sound recordings and the proportionate division of fees paid 
     among copyright owners, and may designate common agents on a 
     nonexclusive basis to negotiate, agree to, pay, or receive 
     payments.
       ``(2) For licenses granted under section 106(6), other than 
     statutory licenses, such as for performances by interactive 
     services or performances that exceed the sound recording 
     performance complement--
       ``(A) copyright owners of sound recordings affected by this 
     section may designate common agents to act on their behalf to 
     grant licenses and receive and remit royalty payments: 
     Provided, That each copyright owner shall establish the 
     royalty rates and material license terms and conditions 
     unilaterally, that is, not in agreement, combination, or 
     concert with other copyright owners of sound recordings; and
       ``(B) entities performing sound recordings affected by this 
     section may designate common agents to act on their behalf to 
     obtain licenses and collect and pay royalty fees: Provided, 
     That each entity performing sound recordings shall determine 
     the royalty rates and material license terms and conditions 
     unilaterally, that is, not in agreement, combination, or 
     concert with other entities performing sound recordings.
       ``(f) Licenses for Nonexempt Subscription Transmissions.--
       ``(1) No later than 30 days after the enactment of the 
     Digital Performance Right in Sound Recordings Act of 1995, 
     the Librarian of Congress shall cause notice to be published 
     in the Federal Register of the initiation of voluntary 
     negotiation proceedings for the purpose of determining 
     reasonable terms and rates of royalty payments for the 
     activities specified by subsection (d)(2) of this section 
     during the period beginning on the effective date of such Act 
     and ending on December 31, 2000. Such terms and rates shall 
     distinguish among the different types of digital audio 
     transmission services then in operation. Any copyright owners 
     of sound recordings or any entities performing sound 
     recordings affected by this section may submit to the 
     Librarian of Congress licenses covering such activities with 
     respect to such sound recordings. The parties to each 
     negotiation proceeding shall bear their own costs.
       ``(2) In the absence of license agreements negotiated under 
     paragraph (1), during the 60-day period commencing 6 months 
     after publication of the notice specified in paragraph (1), 
     and upon the filing of a petition in accordance with section 
     803(a)(1), the Librarian of Congress shall, pursuant to 
     chapter 8, convene a copyright arbitration royalty panel to 
     determine and publish in the Federal Register a schedule of 
     rates and terms which, subject to paragraph (3), shall be 
     binding on all copyright owners of sound recordings and 
     entities performing sound recordings. In addition to the 
     objectives set forth in section 801(b)(1), in establishing 
     such rates and terms, the copyright arbitration royalty panel 
     may consider the rates and terms for comparable types of 
     digital audio transmission services and comparable 
     circumstances under voluntary license agreements negotiated 
     as provided in paragraph (1). The Librarian of Congress shall 
     also establish requirements by which copyright owners may 
     receive reasonable notice of the use of their sound 
     recordings under this section, and under which records of 
     such use shall be kept and made available by entities 
     performing sound recordings.
       ``(3) License agreements voluntarily negotiated at any time 
     between one or more copyright owners of sound recordings and 
     one or more entities performing sound recordings shall be 
     given effect in lieu of any determination by a copyright 
     arbitration royalty panel or decision by the Librarian of 
     Congress.
       ``(4)(A) Publication of a notice of the initiation of 
     voluntary negotiation proceedings as specified in paragraph 
     (1) shall be repeated, in accordance with regulations that 
     the Librarian of Congress shall prescribe--
       ``(i) no later than 30 days after a petition is filed by 
     any copyright owners of sound recordings or any entities 
     performing sound recordings affected by this section 
     indicating that a new type of digital audio transmission 
     service on which sound recordings are performed is or is 
     about to become operational; and
       ``(ii) in the first week of January, 2000 and at 5-year 
     intervals thereafter.
       ``(B)(i) The procedures specified in paragraph (2) shall be 
     repeated, in accordance with regulations that the Librarian 
     of Congress shall prescribe, upon the filing of a petition in 
     accordance with section 803(a)(1) during a 60-day period 
     commencing--
       ``(I) six months after publication of a notice of the 
     initiation of voluntary negotiation proceedings under 
     paragraph (1) pursuant to a petition under paragraph 
     (4)(A)(i); or
       ``(II) on July 1, 2000 and at 5-year intervals thereafter.

[[Page S 11965]]

       ``(ii) The procedures specified in paragraph (2) shall be 
     concluded in accordance with section 802.
       ``(5)(A) Any person who wishes to perform a sound recording 
     publicly by means of a nonexempt subscription transmission 
     under this subsection may do so without infringing the 
     exclusive right of the copyright owner of the sound 
     recording--
       ``(i) by complying with such notice requirements as the 
     Librarian of Congress shall prescribe by regulation and by 
     paying royalty fees in accordance with this subsection; or
       ``(ii) if such royalty fees have not been set, by agreeing 
     to pay such royalty fees as shall be determined in accordance 
     with this subsection.
       ``(B) Any royalty payments in arrears shall be made on or 
     before the twentieth day of the month next succeeding the 
     month in which the royalty fees are set.
       ``(g) Proceeds From Licensing of Subscription 
     Transmissions.--
       ``(1) Except in the case of a subscription transmission 
     licensed in accordance with subsection (f) of this section--
       ``(A) a featured recording artist who performs on a sound 
     recording that has been licensed for a subscription 
     transmission shall be entitled to receive payments from the 
     copyright owner of the sound recording in accordance with the 
     terms of the artist's contract; and
       ``(B) a nonfeatured recording artist who performs on a 
     sound recording that has been licensed for a subscription 
     transmission shall be entitled to receive payments from the 
     copyright owner of the sound recording in accordance with the 
     terms of the nonfeatured recording artist's applicable 
     contract or other applicable agreement.
       ``(2) The copyright owner of the exclusive right under 
     section 106(6) of this title to publicly perform a sound 
     recording by means of a digital audio transmission shall 
     allocate to recording artists in the following manner its 
     receipts from the statutory licensing of subscription 
     transmission performances of the sound recording in 
     accordance with subsection (f) of this section:
       ``(A) 2\1/2\ percent of the receipts shall be deposited in 
     an escrow account managed by an independent administrator 
     jointly appointed by copyright owners of sound recordings and 
     the American Federation of Musicians (or any successor 
     entity) to be distributed to nonfeatured musicians (whether 
     or not members of the American Federation of Musicians) who 
     have performed on sound recordings.
       ``(B) 2\1/2\ percent of the receipts shall be deposited in 
     an escrow account managed by an independent administrator 
     jointly appointed by copyright owners of sound recordings and 
     the American Federation of Television and Radio Artists (or 
     any successor entity) to be distributed to nonfeatured 
     vocalists (whether or not members of the American Federation 
     of Television and Radio Artists) who have performed on sound 
     recordings.
       ``(C) 45 percent of the receipts shall be allocated, on a 
     per sound recording basis, to the recording artist or artists 
     featured on such sound recording (or the persons conveying 
     rights in the artists' performance in the sound recordings).
       ``(h) Licensing to Affiliates.--
       ``(1) If the copyright owner of a sound recording licenses 
     an affiliated entity the right to publicly perform a sound 
     recording by means of a digital audio transmission under 
     section 106(6), the copyright owner shall make the licensed 
     sound recording available under section 106(6) on no less 
     favorable terms and conditions to all bona fide entities that 
     offer similar services, except that, if there are material 
     differences in the scope of the requested license with 
     respect to the type of service, the particular sound 
     recordings licensed, the frequency of use, the number of 
     subscribers served, or the duration, then the copyright owner 
     may establish different terms and conditions for such other 
     services.
       ``(2) The limitation set forth in paragraph (1) of this 
     subsection shall not apply in the case where the copyright 
     owner of a sound recording licenses--
       ``(A) an interactive service; or
       ``(B) an entity to perform publicly up to 45 seconds of the 
     sound recording and the sole purpose of the performance is to 
     promote the distribution or performance of that sound 
     recording.
       ``(i) No Effect on Royalties for Underlying Works.--License 
     fees payable for the public performance of sound recordings 
     under section 106(6) 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 public performance of their works. It 
     is the intent of Congress that royalties payable to copyright 
     owners of musical works for the public performance of their 
     works shall not be diminished in any respect as a result of 
     the rights granted by section 106(6).
       ``(j) Definitions.--As used in this section, the following 
     terms have the following meanings:
       ``(1) An `affiliated entity' is an entity engaging in 
     digital audio transmissions covered by section 106(6), other 
     than an interactive service, in which the licensor has any 
     direct or indirect partnership or any ownership interest 
     amounting to 5 percent or more of the outstanding voting or 
     non-voting stock.
       ``(2) A `broadcast' transmission is a transmission made by 
     a terrestrial broadcast station licensed as such by the 
     Federal Communications Commission.
       ``(3) A `digital audio transmission' is a digital 
     transmission as defined in section 101, that embodies the 
     transmission of a sound recording. This term does not include 
     the transmission of any audiovisual work.
       ``(4) An `interactive service' is one that enables a member 
     of the public to receive, on request, a transmission of a 
     particular sound recording chosen by or on behalf of the 
     recipient. The ability of individuals to request that 
     particular sound recordings be performed for reception by the 
     public at large does not make a service interactive. If an 
     entity offers both interactive and non-interactive services 
     (either concurrently or at different times), the non-
     interactive component shall not be treated as part of an 
     interactive service.
       ``(5) A `nonsubscription' transmission is any transmission 
     that is not a subscription transmission.
       ``(6) A `retransmission' is a further transmission of an 
     initial transmission, and includes any further retransmission 
     of the same transmission. Except as provided in this section, 
     a transmission qualifies as a `retransmission' only if it is 
     simultaneous with the initial transmission. Nothing in this 
     definition shall be construed to exempt a transmission that 
     fails to satisfy a separate element required to qualify for 
     an exemption under section 114(d)(1).
       ``(7) The `sound recording performance complement' is the 
     transmission during any 3-hour period, on a particular 
     channel used by a transmitting entity, of no more than--
       ``(A) 3 different selections of sound recordings from any 
     one phonorecord lawfully distributed for public performance 
     or sale in the United States, if no more than 2 such 
     selections are transmitted consecutively; or
       ``(B) 4 different selections of sound recordings
       ``(i) by the same featured recording artist; or
       ``(ii) from any set or compilation of phonorecords lawfully 
     distributed together as a unit for public performance or sale 
     in the United States,

     if no more than three such selections are transmitted 
     consecutively:

     Provided, That the transmission of selections in excess of 
     the numerical limits provided for in clauses (A) and (B) from 
     multiple phonorecords shall nonetheless qualify as a sound 
     recording performance complement if the programming of the 
     multiple phonorecords was not willfully intended to avoid the 
     numerical limitations prescribed in such clauses.
       ``(8) A `subscription' transmission is a transmission that 
     is controlled and limited to particular recipients, and for 
     which consideration is required to be paid or otherwise given 
     by or on behalf of the recipient to receive the transmission 
     or a package of transmissions including the transmission.
       ``(9) A `transmission' includes both an initial 
     transmission and a retransmission.''.

     SEC. 4. MECHANICAL ROYALTIES IN DIGITAL PHONORECORD 
                   DELIVERIES.

       Section 115 of title 17, United States Code, is amended--
       (1) in subsection (a)(1)--
       (A) in the first sentence by striking out ``any other 
     person'' and inserting in lieu thereof ``any other person, 
     including those who make phonorecords or digital phonorecord 
     deliveries,''; and
       (B) in the second sentence by inserting before the period 
     ``, including by means of a digital phonorecord delivery'';
       (2) in subsection (c)(2) in the second sentence by 
     inserting ``and other than as provided in paragraph (3),'' 
     after ``For this purpose,'';
       (3) by redesignating paragraphs (3), (4), and (5) of 
     subsection (c) as paragraphs (4), (5), and (6), respectively, 
     and by inserting after paragraph (2) the following new 
     paragraph:
       ``(3)(A) A compulsory license under this section includes 
     the right of the compulsory licensee to distribute or 
     authorize the distribution of a phonorecord of a nondramatic 
     musical work by means of a digital transmission which 
     constitutes a digital phonorecord delivery, regardless of 
     whether the digital transmission is also a public performance 
     of the sound recording under section 106(6) of this title or 
     of any nondramatic musical work embodied therein under 
     section 106(4) of this title. For every digital phonorecord 
     delivery by or under the authority of the compulsory 
     licensee--
       ``(i) on or before December 31, 1997, the royalty payable 
     by the compulsory licensee shall be the royalty prescribed 
     under paragraph (2) and chapter 8 of this title; and
       ``(ii) on or after January 1, 1998, the royalty payable by 
     the compulsory licensee shall be the royalty prescribed under 
     subparagraphs (B) through (F) and chapter 8 of this title.
       ``(B) Notwithstanding any provision of the antitrust laws, 
     any copyright owners of nondramatic musical works and any 
     persons entitled to obtain a compulsory license under 
     subsection (a)(1) may negotiate and agree upon the terms and 
     rates of royalty payments under this paragraph and the 
     proportionate division of fees paid among copyright owners, 
     and may designate common agents to negotiate, agree to, pay 
     or receive such royalty payments. Such authority to negotiate 
     the terms and rates of royalty payments includes, but is not 
     limited to, the authority to negotiate the year during which 
     the royalty rates prescribed under subparagraphs (B) through 
     (F) and chapter 8 of this title shall next be determined.

[[Page S 11966]]

       ``(C) During the period of June 30, 1996, through December 
     31, 1996, the Librarian of Congress shall cause notice to be 
     published in the Federal Register of the initiation of 
     voluntary negotiation proceedings for the purpose of 
     determining reasonable terms and rates of royalty payments 
     for the activities specified by subparagraph (A) during the 
     period beginning January 1, 1998, and ending on the effective 
     date of any new terms and rates established pursuant to 
     subparagraph (C), (D) or (F), or such other date (regarding 
     digital phonorecord deliveries) as the parties may agree. 
     Such terms and rates shall distinguish between (i) digital 
     phonorecord deliveries where the reproduction or distribution 
     of a phonorecord is incidental to the transmission which 
     constitutes the digital phonorecord delivery, and (ii) 
     digital phonorecord deliveries in general. Any copyright 
     owners of nondramatic musical works and any persons entitled 
     to obtain a compulsory license under subsection (a)(1) may 
     submit to the Librarian of Congress licenses covering such 
     activities. The parties to each negotiation proceeding shall 
     bear their own costs.
       ``(D) In the absence of license agreements negotiated under 
     subparagraphs (B) and (C), upon the filing of a petition in 
     accordance with section 803(a)(1), the Librarian of Congress 
     shall, pursuant to chapter 8, convene a copyright arbitration 
     royalty panel to determine and publish in the Federal 
     Register a schedule of rates and terms which, subject to 
     subparagraph (E), shall be binding on all copyright owners of 
     nondramatic musical works and persons entitled to obtain a 
     compulsory license under subsection (a)(1) during the period 
     beginning January 1, 1998, and ending on the effective date 
     of any new terms and rates established pursuant to 
     subparagraph (C), (D) or (F), or such other date (regarding 
     digital phonorecord deliveries) as may be determined pursuant 
     to subparagraphs (B) and (C). Such terms and rates shall 
     distinguish between (i) digital phonorecord deliveries where 
     the reproduction or distribution of a phonorecord is 
     incidental to the transmission which constitutes the digital 
     phonorecord delivery, and (ii) digital phonorecord deliveries 
     in general. In addition to the objectives set forth in 
     section 801(b)(1), in establishing such rates and terms, the 
     copyright arbitration royalty panel may consider rates and 
     terms under voluntary license agreements negotiated as 
     provided in subparagraphs (B) and (C). The royalty rates 
     payable for a compulsory license for a digital phonorecord 
     delivery under this section shall be established de novo and 
     no precedential effect shall be given to the amount of the 
     royalty payable by a compulsory licensee for digital 
     phonorecord deliveries on or before December 31, 1997. The 
     Librarian of Congress shall also establish requirements by 
     which copyright owners may receive reasonable notice of the 
     use of their works under this section, and under which 
     records of such use shall be kept and made available by 
     persons making digital phonorecord deliveries.
       ``(E)(i) License agreements voluntarily negotiated at any 
     time between one or more copyright owners of nondramatic 
     musical works and one or more persons entitled to obtain a 
     compulsory license under subsection (a)(1) shall be given 
     effect in lieu of any determination by the Librarian of 
     Congress. Subject to clause (ii), the royalty rates 
     determined pursuant to subparagraph (C), (D) or (F) shall be 
     given effect in lieu of any contrary royalty rates specified 
     in a contract pursuant to which a recording artist who is the 
     author of a nondramatic musical work grants a license under 
     that person's exclusive rights in the musical work under 
     sections 106(1) and (3) or commits another person to grant a 
     license in that musical work under sections 106(1) and (3), 
     to a person desiring to fix in a tangible medium of 
     expression a sound recording embodying the musical work.
       ``(ii) The second sentence of clause (i) shall not apply 
     to--
       ``(I) a contract entered into on or before June 22, 1995, 
     and not modified thereafter for the purpose of reducing the 
     royalty rates determined pursuant to subparagraph (C), (D) or 
     (F) or of increasing the number of musical works within the 
     scope of the contract covered by the reduced rates, except if 
     a contract entered into on or before June 22, 1995, is 
     modified thereafter for the purpose of increasing the number 
     of musical works within the scope of the contract, any 
     contrary royalty rates specified in the contract shall be 
     given effect in lieu of royalty rates determined pursuant to 
     subparagraph (C), (D) or (F) for the number of musical works 
     within the scope of the contract as of June 22, 1995; and
       ``(II) a contract entered into after the date that the 
     sound recording is fixed in a tangible medium of expression 
     substantially in a form intended for commercial release, if 
     at the time the contract is entered into, the recording 
     artist retains the right to grant licenses as to the musical 
     work under sections 106(1) and 106(3).
       ``(F) The procedures specified in subparagraphs (C) and (D) 
     shall be repeated and concluded, in accordance with 
     regulations that the Librarian of Congress shall prescribe, 
     in each fifth calendar year after 1997, except to the extent 
     that different years for the repeating and concluding of such 
     proceedings may be determined in accordance with 
     subparagraphs (B) and (C).
       ``(G) Except as provided in section 1002(e) of this title, 
     a digital phonorecord delivery licensed under this paragraph 
     shall be accompanied by the information encoded in the sound 
     recording, if any, by or under the authority of the copyright 
     owner of that sound recording, that identifies the title of 
     the sound recording, the featured recording artist who 
     performs on the sound recording, and related information, 
     including information concerning the underlying musical work 
     and its writer.
       ``(H)(i) A digital phonorecord delivery of a sound 
     recording is actionable as an act of infringement under 
     section 501, and is fully subject to the remedies provided by 
     sections 502 through 506 and section 509, unless--
       ``(I) the digital phonorecord delivery has been authorized 
     by the copyright owner of the sound recording; and
       ``(II) the owner of the copyright in the sound recording or 
     the entity making the digital phonorecord delivery has 
     obtained a compulsory license under this section or has 
     otherwise been authorized by the copyright owner of the 
     musical work to distribute or authorize the distribution, by 
     means of a digital phonorecord delivery, of each musical work 
     embodied in the sound recording.
       ``(ii) Any cause of action under this subparagraph shall be 
     in addition to those available to the owner of the copyright 
     in the nondramatic musical work under subsection (c)(6) and 
     section 106(4) and the owner of the copyright in the sound 
     recording under section 106(6).
       ``(I) The liability of the copyright owner of a sound 
     recording for infringement of the copyright in a nondramatic 
     musical work embodied in the sound recording shall be 
     determined in accordance with applicable law, except that the 
     owner of a copyright in a sound recording shall not be liable 
     for a digital phonorecord delivery by a third party if the 
     owner of the copyright in the sound recording does not 
     license the distribution of a phonorecord of the nondramatic 
     musical work.
       ``(J) Nothing in section 1008 shall be construed to prevent 
     the exercise of the rights and remedies allowed by this 
     paragraph, paragraph (6), and chapter 5 in the event of a 
     digital phonorecord delivery, except that no action alleging 
     infringement of copyright may be brought under this title 
     against a manufacturer, importer or distributor of a digital 
     audio recording device, a digital audio recording medium, an 
     analog recording device, or an analog recording medium, or 
     against a consumer, based on the actions described in such 
     section.
       ``(K) Nothing in this section annuls or limits (i) the 
     exclusive right to publicly perform a sound recording or the 
     musical work embodied therein, including by means of a 
     digital transmission, under sections 106(4) and 106(6), (ii) 
     except for compulsory licensing under the conditions 
     specified by this section, the exclusive rights to reproduce 
     and distribute the sound recording and the musical work 
     embodied therein under sections 106(1) and 106(3), including 
     by means of a digital phonorecord delivery, or (iii) any 
     other rights under any other provision of section 106, or 
     remedies available under this title, as such rights or 
     remedies exist either before or after the date of enactment 
     of the Digital Performance Right in Sound Recordings Act of 
     1995.
       ``(L) The provisions of this section concerning digital 
     phonorecord deliveries shall not apply to any exempt 
     transmissions or retransmissions under section 114(d)(1). The 
     exemptions created in section 114(d)(1) do not expand or 
     reduce the rights of copyright owners under section 106(1) 
     through (5) with respect to such transmissions and 
     retransmissions.''; and
       (5) by adding after subsection (c) the following:
       ``(d) Definition.--As used in this section, the following 
     term has the following meaning: A `digital phonorecord 
     delivery' is each individual delivery of a phonorecord by 
     digital transmission of a sound recording which results in a 
     specifically identifiable reproduction by or for any 
     transmission recipient of a phonorecord of that sound 
     recording, regardless of whether the digital transmission is 
     also a public performance of the sound recording or any 
     nondramatic musical work embodied therein. A digital 
     phonorecord delivery does not result from a real-time, 
     noninteractive subscription transmission of a sound recording 
     where no reproduction of the sound recording or the musical 
     work embodied therein is made from the inception of the 
     transmission through to its receipt by the transmission 
     recipient in order to make the sound recording audible.''.

     SEC. 5. CONFORMING AMENDMENTS.

       (a) Definitions.--Section 101 of title 17, United States 
     Code, is amended by inserting after the definition of 
     ``device'', ``machine'', or ``process'' the following:
       ``A `digital transmission' is a transmission in whole or in 
     part in a digital or other non-analog format.''.
       (b) Limitations on Exclusive Rights: Secondary 
     Transmissions.--Section 111(c)(1) of title 17, United States 
     Code, is amended in the first sentence by inserting ``and 
     section 114(d)'' after ``of this subsection''.
       (c) Limitations on Exclusive Rights: Secondary 
     Transmissions of Superstations and Network Stations for 
     Private Home Viewing.--
       (1) Section 119(a)(1) of title 17, United States Code, is 
     amended in the first sentence by inserting ``and section 
     114(d)'' after ``of this subsection''.
       (2) Section 119(a)(2)(A) of title 17, United States Code, 
     is amended in the first sentence by inserting ``and section 
     114(d)'' after ``of this subsection''.

[[Page S 11967]]

       (d) Copyright Arbitration Royalty Panels.--
       (1) Section 801(b)(1) of title 17, United States Code, is 
     amended in the first and second sentences by striking ``115'' 
     each place it appears and inserting ``114, 115,''.
       (2) Section 802(c) of title 17, United States Code, is 
     amended in the third sentence by striking ``section 111, 116, 
     or 119,'' and inserting ``section 111, 114, 116, or 119, any 
     person entitled to a compulsory license under section 114(d), 
     any person entitled to a compulsory license under section 
     115,''.
       (3) Section 802(g) of title 17, United States Code, is 
     amended in the third sentence by inserting ``114,'' after 
     ``111,''.
       (4) Section 802(h)(2) of title 17, United States Code, is 
     amended by inserting ``114,'' after ``111,''.
       (5) Section 803(a)(1) of title 17, United States Code, is 
     amended in the first sentence by striking ``115'' and 
     inserting ``114, 115'' and by striking ``and (4)'' and 
     inserting ``(4) and (5)''.
       (6) Section 803(a)(3) of title 17, United States Code, is 
     amended by inserting before the period ``or as prescribed in 
     section 115(c)(3)(D)''.
       (7) Section 803(a) of title 17, United States Code, is 
     amended by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) With respect to proceedings under section 801(b)(1) 
     concerning the determination of reasonable terms and rates of 
     royalty payments as provided in section 114, the Librarian of 
     Congress shall proceed when and as provided by that 
     section.''.

     SEC. 6. EFFECTIVE DATE.

       This Act and the amendments made by this Act shall take 
     effect 3 months after the date of enactment of this Act, 
     except that the provisions of sections 114(e) and 114(f) of 
     title 17, United States Code (as added by section 3 of this 
     Act) shall take effect immediately upon the date of enactment 
     of this Act.
     

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