[Congressional Record Volume 148, Number 130 (Monday, October 7, 2002)]
[House]
[Pages H7043-H7048]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SMALL WEBCASTER AMENDMENTS ACT OF 2002
Mr. SENSENBRENNER. Mr. Speaker, I move to suspend the rules and pass
the bill (H.R. 5469) to suspend for a period of 6 months the
determination of the Librarian of Congress of July 8, 2002, relating to
rates and terms for the digital performance of sound recordings and
ephemeral recordings, as amended.
The Clerk read as follows:
H.R. 5469
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 ``Small Webcaster Amendments
Act of 2002''.
[[Page H7044]]
SEC. 2. EPHEMERAL ROYALTY RATES FOR ELIGIBLE SMALL
WEBCASTERS.
Section 112(e) of title 17, United States Code, is
amended--
(1) in paragraph (4), by inserting immediately before the
period at the end of the first sentence the following: ``,
except that the royalty payable under this section for any
reproduction of a phonorecord made during the period
beginning on October 28, 1998, and ending on December 31,
2004, and used solely by an eligible small webcaster to
facilitate transmissions for which it pays royalties as and
when provided in section 114(f)(2)(D) shall be deemed to be
included within such royalty payments''; and
(2) in paragraph (6), by adding at the end the following:
``Notwithstanding the preceding provisions of this paragraph,
the royalty payable under this section for any reproduction
of a phonorecord made during the period beginning on October
28, 1998, and ending on December 31, 2004, and used solely by
an eligible small webcaster to facilitate transmissions for
which it pays royalties as and when provided in section
114(f)(2)(D) shall be deemed to be included within such
royalty payments.''
SEC. 3. ROYALTY RATES AND NOTICE AND RECORDKEEPING FOR
ELIGIBLE SMALL WEBCASTERS.
(a) Provision for Certain Rates.--Section 114(f)(2) of
title 17, United States Code, is amended--
(1) in subparagraph (B), by inserting immediately before
the period at the end of the first sentence the following:
``, except that the royalty rates for certain public
performances of sound recordings shall be as provided in
subparagraph (D)''; and
(2) in subparagraph (C), by adding after clause (iii) the
following:
``(iv) Notwithstanding the preceding provisions of this
subparagraph, the royalty rates and terms for certain public
performances of sound recordings by certain entities shall be
as provided in subparagraph (D).''.
(b) Rates for Eligible Small Webcasters.--Section 114(f)(2)
of title 17, United States Code, is amended by adding after
subparagraph (C) the following:
``(D)(i) Subject to clause (iii) and paragraph (3), but
notwithstanding any other provision of this paragraph, an
eligible small webcaster may, as provided in clause
(ii)(VII), for the period beginning on October 28, 1998, and
ending on December 31, 2002, or one or both of calendar years
2003 and 2004, elect the royalty rates specified in this
clause in lieu of any other applicable royalty rates:
``(I) For eligible nonsubscription transmissions made by an
eligible small webcaster during the period beginning on
October 28, 1998, and ending on December 31, 2002, the
royalty rate shall be 8 percent of the webcaster's gross
revenues during such period, or 5 percent of the webcaster's
expenses during such period, whichever is greater, except
that an eligible small webcaster that is a natural person
shall exclude from expenses those expenses not incurred in
connection with the operation of a service that makes
eligible nonsubscription transmissions, and an eligible small
webcaster that is a natural person shall exclude from gross
revenues his or her income during such period, other than
income derived from--
``(aa) a media or entertainment related business that
provides audio or other entertainment programming, or
``(bb) a business that primarily operates an Internet or
wireless service,
that is in either case directly or indirectly controlled by
such natural person, or of which such natural person
beneficially owns 5 percent or more of the outstanding voting
or non-voting stock.
``(II) For eligible nonsubscription transmissions made by
an eligible small webcaster during 2003 or 2004, the royalty
rate shall be 10 percent of the eligible small webcaster's
first $250,000 in gross revenues and 12 percent of any gross
revenues in excess of $250,000 during the applicable year, or
7 percent of the webcaster's expenses during the applicable
year, whichever is greater.
``(ii) Notwithstanding paragraph (4)(C), payment of the
amounts specified in clause (i) shall be made as follows:
``(I) Except as provided in clause (iii)(I) and (IV), the
amounts specified in clause (i)(I) for eligible
nonsubscription transmissions made by an eligible small
webcaster during the period beginning on October 28, 1998,
and ending on September 30, 2002, shall be paid in three
equal installments, with the first due by November 30, 2002,
the second due by May 31, 2003, and the third due by October
31, 2003.
``(II) The amounts specified in clause (i) for eligible
nonsubscription transmissions made by an eligible small
webcaster during October 2002 or any month thereafter shall
be paid on or before the twentieth day of the month next
succeeding such month.
``(III) If the gross revenues, plus the third party
participation revenues and revenues from the operation of new
subscription services, of a transmitting entity and its
affiliates have not exceeded $1,250,000 in any year, and the
transmitting entity expects to be an eligible small webcaster
in 2003 or 2004, the transmitting entity may make payments
for 2003 or 2004, as the case may be, on the assumption that
it will be an eligible small webcaster for that year for so
long as that assumption is reasonable.
``(IV) In making payments under clause (i)(II), the
webcaster shall, at the time a payment is due, calculate its
gross revenues and expenses for the year through the end of
the applicable month, and for the applicable month pay the
applicable percentage of gross revenues or expenses, as the
case may be, for the year through the end of the applicable
month, less any amounts previously paid for such year.
``(V) If a transmitting entity has made payments under
clause (i)(II) for 2003 or 2004 based on the assumption that
it will qualify as an eligible small webcaster, as provided
in subclause (IV), but the actual gross revenues in 2003, or
the actual gross revenues, third party participation
revenues, and revenues from the operation of new subscription
services in 2004, of the eligible small webcaster and its
affiliates, exceed the maximum amounts provided in clause
(vi)(II), then the transmitting entity shall immediately
commence to pay monthly royalties based on the royalty rates
otherwise applicable under this subsection, and on the third
payment date after the month in which such maximum amounts
are exceeded, it shall pay an amount of royalties based on
such otherwise applicable rates for the whole year through
the end of the immediately preceding month, less any amounts
previously paid under clause (i) for such year.
``(VI) Payments of all amounts specified in clause (i)
shall be made to the entity designated by the Copyright
Office to receive royalty payments under this section and
shall under no circumstances be refundable, but if an
eligible small webcaster makes overpayments during a year, it
shall be entitled to a credit in the amount of its
overpayment, and such credit shall be applicable to its
payments in subsequent years.
``(VII) An eligible small webcaster that wishes to elect
the royalty rates specified in clause (i) in lieu of any
other royalty rates that otherwise might apply under this
subsection for the period beginning on October 28, 1998, and
ending on December 31, 2002, or one or both of calendar years
2003 and 2004, shall file an election with the Copyright
Office and serve it on each entity designated by the
Copyright Office to distribute royalty payments under this
section to copyright owners and performers entitled to
receive royalties under subsection (d)(2) by no later than
the first date on which the webcaster is obligated under this
clause to make a royalty payment for such period. An eligible
small webcaster that fails to make a timely election shall
pay royalties as otherwise provided under this section. As a
condition of such election, an eligible small webcaster
shall--
``(aa) make available to the entity designated to receive
royalties under this section, on request at any time during
the 3 years following the applicable period, sufficient
evidence to support its eligibility as an eligible small
webcaster; and
``(bb) provide to such entity, by not later than January 31
of the year following the applicable period, an accounting of
its third party participation revenues.
The entity designated to receive royalties under this section
may share with individual copyright owners the accounting
provided by an eligible small webcaster under division (bb)
if such entity does so in such a way that the eligible small
webcaster cannot readily be identified.
``(iii) Notwithstanding clause (i), eligible small
webcasters that elect the royalty rates specified in clause
(i) shall pay a minimum fee for the periods specified in this
clause, as follows:
``(I) For eligible nonsubscription transmissions made by an
eligible small webcaster during the period beginning on
October 28, 1998, and ending on December 31, 1998, the
minimum fee for the year shall be $500.
``(II) For eligible nonsubscription transmissions made by
an eligible small webcaster in any part of calendar years
1999 through 2002, the minimum fee for each year in which
such transmissions are made shall be $2,000.
``(III) For eligible nonsubscription transmissions made by
an eligible small webcaster in any part of calendar years
2003 and 2004, the minimum fee for each year in which such
transmissions are made shall be $2,000 if the eligible small
webcaster had gross revenues during the immediately preceding
year of not more than $50,000 and expects to have gross
revenues during the applicable year of not more than $50,000.
``(IV) For eligible nonsubscription transmissions made by
an eligible small webcaster in any part of calendar years
2003 and 2004, the minimum fee for each year in which such
transmissions are made shall be $5,000 if the eligible small
webcaster had gross revenues during the immediately preceding
year of more than $50,000 or expects to have gross revenues
during the applicable year of more than $50,000.
``(V) The minimum fees specified in subclauses (I) and (II)
shall be paid within 30 days after the date of the enactment
of the Small Webcaster Amendments Act of 2002, except in the
case of an eligible small webcaster with gross revenues
during the period beginning on October 28, 1998, and ending
on December 31, 2002, of not more than $100,000, which may
pay such minimum fees in three equal installments at the
times specified in clause (ii)(I). The minimum fees specified
in subclauses (III) and (IV) shall be paid in two equal
installments, with the first due by January 31 of the
applicable year and the second due by June 30 of the
applicable year.
[[Page H7045]]
``(VI) Payments of all amounts specified in this clause
shall be made to the entity designated by the Copyright
Office to receive royalty payments under this section and
shall under no circumstances be refundable.
``(VII) All amounts paid under this clause shall be fully
creditable toward amounts due under clauses (i) and (ii) for
the same year.
``(iv) Subject to paragraph (3), but notwithstanding any
other provision of this paragraph, a noncommercial, non-FCC
webcaster may, for the period beginning on October 28, 1998,
and ending on December 31, 2002, or one or both of calendar
years 2003 and 2004, elect the royalty rates specified in
this clause in lieu of any other royalty rates that otherwise
might apply under this section. The royalty rate shall be .02
cents per performance. For the purpose of this clause, the
term `performance' has the meaning given that term in section
261.2 of title 37, Code of Federal Regulations, as published
in the Federal Register on July 8, 2002. Such royalties shall
be payable at the times specified in clause (ii)(I) and (II).
Noncommercial, non-FCC webcasters shall pay a minimum fee,
for any part of calendar years 1998 through 2004, of $500 for
each year in which such performances are made. Such minimum
fee shall be fully creditable toward royalties due for the
same year. For performances made during the period beginning
on October 28, 1998, and ending on December 31, 2002, such
minimum fee shall be paid within 30 days after the date of
the enactment of the Small Webcaster Amendments Act of 2002.
The minimum fee for a subsequent year shall be paid by
January 31 of that year. All payments specified in this
clause shall be made to the entity designated by the
Copyright Office to receive royalty payments under this
section and shall under no circumstances be refundable.
``(v) Any otherwise applicable terms determined in
accordance with this paragraph and applicable to payments
under this paragraph shall apply to payments under this
subparagraph except to the extent inconsistent with this
subparagraph.
``(vi) The rates and terms set forth in this subparagraph
shall not constitute evidence of rates and terms that would
have been negotiated in the marketplace between a willing
buyer and a willing seller or that meet the objectives set
forth in section 801(b)(1).
``(E) As used in subparagraph (D), the following terms have
the following meanings:
``(i) An `affiliate' of a transmitting entity is a person
or entity that directly, or indirectly through one or more
intermediaries --
``(I) has securities or other ownership interests
representing more than 50 percent of such person's or
entity's voting interests beneficially owned by--
``(aa) such transmitting entity; or
``(bb) a person or entity beneficially owning securities or
other ownership interests representing more than 50 percent
of the voting interests of the transmitting entity;
``(II) beneficially owns securities or other ownership
interests representing more than 50 percent of the voting
interests of the transmitting entity; or
``(III) otherwise controls, is controlled by, or is under
common control with the transmitting entity.
``(ii) A `beneficial owner' of a security or other
ownership interest is any person or entity who, directly or
indirectly, through any contract, arrangement, understanding,
relationship, or otherwise, has or shares voting power with
respect to such security or other ownership interest.
``(iii) The term `control' means the possession, direct or
indirect, of the power to direct or cause the direction of
the management and policies of a person or entity, whether
through the ownership of voting securities, by contract or
otherwise.
``(iv)(I) Subject to subclause (II), an `eligible small
webcaster' is a webcaster (as defined in section 261.2 of
title 37, Code of Federal Regulations, as published in the
Federal Register on July 8, 2002) that--
``(aa) for the period beginning on October 28, 1998, and
ending on December 31, 2002, has gross revenues during the
period beginning on November 1, 1998, and ending on June 30,
2002, of not more than $1,000,000;
``(bb) for 2003, together with its affiliates, has gross
revenues during 2003 of not more than $500,000; and
``(cc) for 2004, together with its affiliates, has gross
revenues, third party participation revenues, and revenues
from the operation of new subscription services during 2004
of not more than $1,250,000.
``(II) In determining qualification under subclauses
(I)(bb) and (cc), a transmitting entity shall exclude--
``(aa) income of an affiliate that is a natural person,
other than income such natural person derives from another
affiliate of such natural person that is either a media or
entertainment related business that provides audio or other
entertainment programming, or a business that primarily
operates an Internet or wireless service; and
``(bb) gross revenues of any affiliate that is not engaged
in a media or entertainment related business that provides
audio or other entertainment programming, and is not engaged
in a business that primarily operates an Internet or wireless
service, if the only reason such affiliate is affiliated with
the transmitting entity is that it is under common control of
the same natural person or both are beneficially owned by the
same natural person.
``(v) The term `expenses'--
``(I) means all costs incurred (whether actually paid or
not) by an eligible small webcaster, except that capital
costs shall be treated as expenses allocable to a period only
to the extent of charges for amortization or depreciation of
such costs during such period as are properly allocated to
such period in accordance with United States generally
accepted accounting principles (GAAP);
``(II) includes the fair market value of all goods,
services, or other non-cash consideration (including real,
personal, tangible, and intangible property) provided by an
eligible small webcaster to any third party in lieu of a cash
payment and the fair market value of any goods or services
purchased for or provided to an eligible small webcaster by
an affiliate of such webcaster; and
``(III) shall not include--
``(aa) the imputed value of personal services rendered by
up to 5 natural persons who are, directly or indirectly,
owners of the eligible small webcaster, and for which no
compensation has been paid;
``(bb) the imputed value of occupancy of residential
property for which no Federal income tax deduction is claimed
as a business expense; or
``(cc) costs of purchasing phonorecords of sound recordings
used in the eligible small webcaster's service.
``(vi) The term `gross revenues'--
``(I) means all revenue of any kind earned by a person or
entity, less --
``(aa) revenue from sales of phonorecords and digital
phonorecord deliveries of sound recordings;
``(bb) the person or entity's actual cost of other products
and services actually sold through a service that makes
eligible nonsubscription transmissions, and related sales and
use taxes imposed on such transactions, costs of shipping
such products, allowance for bad debts, and credit card and
similar fees paid to unrelated third parties;
``(cc) revenue from the operation of a new subscription
service for which royalties are paid in accordance with
provisions of this section other than this subparagraph; and
``(dd) revenue from the sale of assets in connection with
the sale of all or substantially all of the assets of such
person's or entity's business, or from the sale of capital
assets; and
``(II) includes--
``(aa) all cash or cash equivalents;
``(bb) the fair market value of goods, services, or other
non-cash consideration (including real, personal, tangible,
and intangible property); and
``(cc) amounts earned by such person or entity but paid to
an affiliate of such person or entity in lieu of payment to
such person or entity.
Gross revenues shall be calculated in accordance with United
States generally accepted accounting principles (GAAP),
except that a transmitting entity that computes Federal
taxable income on the basis of the cash receipts and
disbursements method of accounting for any taxable year may
compute its gross receipts for any period included in such
taxable year on the same basis.
``(vii) A `noncommercial, non-FCC webcaster' is a webcaster
as defined in section 261.2 of title 37, Code of Federal
Regulations, as published in the Federal Register on July 8,
2002, that is exempt from taxation under section 501 of the
Internal Revenue Code of 1986 (26 U.S.C. 501).
``(viii) The `third party participation revenues' of a
transmitting entity are revenues of any kind earned by a
person or entity, other than the transmitting entity,
including those identified in divisions (aa), (bb), and (cc)
of clause (vi)(II)--
``(I) that relate to the public performance of sound
recordings and are subject to an economic arrangement in
which the transmitting entity receives anything of value; or
``(II) that are earned by such person or entity from the
sale of advertising of any kind in connection with the
transmitting entity's eligible nonsubscription
transmissions.''.
(c) Notice and Recordkeeping.--Section 114(f)(4)(A) of
title 17, United States Code, is amended--
(1) by striking ``(A) The'' and inserting ``(A)(i) Subject
to clauses (ii) and (iii), the''; and
(2) by adding at the end the following:
``(ii) For either or both of calendar years 2003 and 2004,
an eligible small webcaster that makes an election pursuant
to paragraph (2)(D)(ii)(VII) for any year shall, for that
year, keep records, and make available to copyright owners of
sound recordings reports of use, covering the following on a
channel by channel basis:
``(I) The featured recording artist, group or orchestra.
``(II) The sound recording title.
``(III) The title of the retail album or other product (or,
in the case of compilation albums created for commercial
purposes, the name of the retail album identified by the
eligible small webcaster for purchase of the sound
recording).
``(IV) The marketing label of the commercially available
album or other product on which the sound recording is
found--
``(aa) for all albums or other products commercially
released after 2002; and
``(bb) in the case of albums or other products commercially
released before 2003, for 67 percent of the eligible small
webcaster's digital audio transmissions of such pre-2003
releases during 2003 and all of the eligible small
webcaster's digital audio transmissions during 2004.
``(V) The International Standard Recording Code (ISRC)
embedded in the sound recording, if available--
``(aa) for all albums or other products commercially
released after 2002; and
[[Page H7046]]
``(bb) in the case of albums or other products commercially
released before 2003, for 50 percent of the eligible small
webcaster's digital audio transmissions of such pre-2003
releases during 2003, and for 75 percent of the eligible
small webcaster's digital audio transmissions of such pre-
2003 releases during 2004, to the extent that such
information concerning such pre-2003 releases can be provided
using commercially reasonable efforts.
``(VI) The copyright owner information provided in the
copyright notice on the retail album or other product (e.g.,
following the symbol (P) (the letter P in a circle) or, in
the case of compilation albums created for commercial
purposes, in the copyright notice for the individual track)--
``(aa) for all albums or other products commercially
released after 2002; and
``(bb) in the case of albums or other products commercially
released before 2003, for 50 percent of an eligible small
webcaster's digital audio transmissions of such pre-2003
releases during 2003, and for 75 percent of an eligible small
webcaster's digital audio transmissions of such pre-2003
releases during 2004, to the extent that such information
concerning such pre-2003 releases can be provided using
commercially reasonable efforts.
``(VII) The aggregate tuning hours, on a monthly basis, for
each channel provided by the eligible small webcaster as
computed by a recognized industry ratings service or as
computed by the eligible small webcaster from its server
logs. For the purpose of this subclause, the term `aggregate
tuning hours' has the meaning given that term in section
261.2 of title 37, Code of Federal Regulations, as published
in the Federal Register on July 8, 2002.
``(VIII) The channel for each transmission of each sound
recording.
``(IX) The start date and time of each transmission of each
sound recording.
``(iii) Reports of use described in clause (ii) shall be
provided, at the same time royalty payments are due under
paragraph (2)(D)(ii)(II), to the entity designated by the
Copyright Office to distribute royalty payments under this
section.
``(iv) For calendar years 2003 and 2004, details of the
means by which copyright owners may receive notice of the use
of their sound recordings, and details of the requirements
under which reports of use concerning the matters identified
in clause (ii) shall be made available, shall be as provided
in regulations issued by the Librarian of Congress under
clause (i).''.
SEC. 4. DEDUCTIBILITY OF COSTS AND EXPENSES OF AGENTS AND
DIRECT PAYMENT TO ARTISTS OF ROYALTIES FOR
DIGITAL PERFORMANCES OF SOUND RECORDINGS.
(a) Findings.--The Congress finds that--
(1) in the case of royalty payments from the licensing of
digital transmissions of sound recordings under subsection
(f) of section 114 of title 17, United States Code, the
parties have voluntarily negotiated arrangements under which
payments shall be made directly to featured recording artists
and the administrators of the accounts provided in subsection
(g)(2) of that section;
(2) such voluntarily-negotiated payment arrangements have
been codified in regulations issued by the Librarian of
Congress, currently found in section 261.4 of title 37, Code
of Federal Regulations, as published in the Federal Register
on July 8, 2002;
(3) other regulations issued by the Librarian of Congress
were inconsistent with the voluntarily-negotiated
arrangements by such parties concerning the deductibility of
certain costs incurred for licensing and arbitration, and the
Congress is therefore restoring those terms as originally
negotiated among the parties; and
(4) in light of the special circumstances described in this
subsection, the uncertainty created by the regulations issued
by the Librarian of Congress, and the fact that all of the
interested parties have reached agreement, the voluntarily-
negotiated arrangements agreed to among the parties are being
codified.
(b) Deductibility.--Section 114(g) of title 17, United
States Code, is amended by adding after paragraph (2) the
following:
``(3) A nonprofit agent designated to distribute receipts
from the licensing of transmissions in accordance with
subsection (f) may deduct from any of its receipts, prior to
the distribution of such receipts to any person or entity
entitled thereto, the reasonable costs of such agent incurred
after November 1, 1995, in--
``(A) the administration of the collection, distribution,
and calculation of the royalties;
``(B) the settlement of disputes relating to the collection
and calculation of the royalties; and
``(C) the licensing and enforcement of rights with respect
to the making of ephemeral recordings and performances
subject to licensing under section 112 and this section,
including those incurred in participating in negotiations or
arbitration proceedings under section 112 and this
section.''.
(c) Direct Payment to Artists.--Section 114(g)(2) of title
17, United States Code, is amended to read:
``(2) An agent designated to distribute receipts from the
licensing of transmissions in accordance with subsection (f)
shall distribute such receipts as follows:
``(A) 50 percent of the receipts shall be paid to 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.
``(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 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.
``(C) 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.
``(D) 45 percent of the receipts shall be paid, on a per
sound recording basis, to the recording artist or artists
featured on such sound recording (or the persons conveying
rights in the artists' performance in the sound
recordings).''.
SEC. 5. REPORT TO CONGRESS.
(a) Findings.--The Congress finds that--
(1) eligible small webcasters have economic arrangements
with third parties, as a result of which third parties, many
of them large businesses, realize a significant portion of
the revenues generated from the use of sound recordings in
the services operated by eligible small webcasters; and
(2) as a result of these arrangements, any royalty based on
revenues realized by an eligible small webcaster may result
in recording artists and sound recording copyright owners
receiving a royalty based on revenues that are a fraction of
the total revenues generated from the use of the sound
recordings under statutory license.
(b) Report to Congress.--By not later than June 1, 2004,
the Register of Copyrights and the Comptroller General of the
Untied States shall prepare and submit to the Committee on
the Judiciary of the House of Representatives and the
Committee on the Judiciary of the Senate a joint report
concerning--
(1) the economic arrangements among eligible small
webcasters and third parties and their consequences for the
ability of recording artists and sound recording copyright
owners to be compensated appropriately on a percentage of
revenue basis; and
(2) the economic incentives that percentage of revenue
statutory rates create for structuring economic arrangements
among eligible small webcasters and third parties that may be
to the detriment of recording artists and sound recording
copyright owners.
(c) Definition.--In this section, the term ``eligible small
webcaster'' has the meaning given that term in section
114(f)(2)(E) of title 17, United States Code, as added by
section 3 of this Act.
SEC. 6. EFFECTIVE DATE.
The amendments made by this Act shall take effect on the
date of the enactment of this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Wisconsin (Mr. Sensenbrenner) and the gentleman from California (Mr.
Berman) each will control 20 minutes.
The Chair recognizes the gentleman from Wisconsin (Mr.
Sensenbrenner).
General Leave
Mr. SENSENBRENNER. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days within which to revise and extend
their remarks and include extraneous material on H.R. 5469, the bill
currently under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Wisconsin?
There was no objection.
Mr. SENSENBRENNER. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, the 1995 Digital Performance Right and Sound Recording
Act that created a performance right in sound recordings for digital
transmissions did not specifically address the issue of webcasting or
Internet radio broadcasts. As a result, the 1998 Digital Millennium
Copyright Act contains provisions that authorize eligible webcasters to
accept a compulsory license, thereby enabling them to operate over the
Internet without negotiating licenses in the marketplace. A compulsory
license essential allows an individual or entity to use copyrighted
works like music and movies at an industry-negotiated or government-
mandated rate.
Because webcasters and members of the recording industry could not
agree to a rate, a statutorily authorized arbitration panel, called a
CARP, was convened at the U.S. Copyright Office to determine what the
rate would be. The arbitrators issued a decision on February 20, 2002.
The copyright holders in the recording industry thought that the rate
was too low, and the webcasters thought that the rate was too high.
[[Page H7047]]
Pursuant to his authority under the Copyright Act, the Librarian of
Congress, based upon a recommendation by the Register of Copyrights,
decided on June 8 to reject the suggestions of the webcasting CARP. On
June 20, he issued a final decision which lowered the rate further.
Some webcasters believe that the rate is still excessive. The copyright
holders maintain that this lower rate is even less reflective of a fair
market standard. That decision is now on appeal to the United States
Court of Appeals for the District of Columbia circuit.
Although a resolution to this dispute is legally in play,
implementation of the decision by the Librarian takes effect on October
20 and is retroactive to 1998. Unless Congress acts, some webcasters
will shut down. This explains the point of H.R. 5469 as originally
drafted: to suspend the implementation of the Librarian's decision for
6 months, effective October 20. This delay would ensure that all
parties would receive all of the judicial process to which they are
entitled under the law before the rate took effect.
I am happy to report that introduction of this bill placed a burr
under the saddle of both the copyright holders and the small webcasters
to conclude negotiations on these matters that began last summer. Since
last week, the parties have negotiated around the clock. They have now
arrived at a deal that sets new rates and payment terms that will
obviate the need for further legal and administrative intervention. The
manager's amendment simply codifies the terms of that deal.
Mr. Speaker, this solution is fair to both sides, the small
webcasters as well as the copyright holders. It dovetails with the
purpose of the Copyright Act in these cases, that is, to encourage
parties to develop their own agreements governing rates and terms. I am
happy to report that the parties have agreed today, as evidenced by the
manager's amendment. I urge my colleagues to support the bill.
Mr. Speaker, I reserve the balance of my time.
Mr. BERMAN. Mr. Speaker, I yield myself such time as I may consume.
I rise in support of the manager's amendment to H.R. 5469.
Last week, the Chairman introduced a bill which was scheduled for the
suspension file, which I reacted initially to, assumed was a rather
ham-handed effort to force the copyright owners, the recording artists,
the backup musicians and vocalists to wait at least another 6 months
before they receive the royalties they were entitled to under the
performance right we legislated in 1995, as amended by the compulsory
license in the Digital Millennium Copyright Act.
I was wrong. The Chairman had a method to the ham-handedness, and the
result of his legislative effort was to pull the parties together, the
webcasters, recording industry and the other affected parties, and put
together an excellent proposal which, as adjusted by a few matters just
today, I think builds a broad base of support for this proposal.
The manager's amendment will greatly benefit small webcasters. Under
this legislation, small webcasters will receive a huge discount on the
webcasting royalties they are required to pay pursuant to a July
decision by the Librarian of Congress.
From the small webcasters' perspective, this legislation is
particularly beneficial because it allows them to pay royalties as a
percentage of revenue. Small webcasters vehemently objected to the
Librarian's decision because it required them to pay royalties on a per
song per listener basis.
The terms of the deal are somewhat complicated, but the basic
provisions are this. Small webcasters pay webcasting royalties that
equal 8 percent of their gross revenues for the years 1998 through
2002, or a statutory minimum, whichever is greater. In 2003 and 2004,
small webcasters will pay the greater of 10 percent of their gross
revenues under $250,000 and 12 percent of their gross revenues over
$250,000, or 7 percent of expenses.
The criteria for eligibility as a small webcaster are reasonable and
allow such webcasters to grow and yet still obtain the royalty discount
provided by the legislation. A webcaster will be eligible for the
discounted royalty rate for the past 4 years if it had less than $1
million in gross revenues over those four years. A webcaster will be
eligible in the year 2003 if it has gross revenues under $500,000 for
that calendar year and in 2004 if it has gross revenues under $1.25
million.
While it drastically cuts the royalties to be paid copyright owners
and artists, this legislation has the support of the recording
industry. The legislation also requires that artists get direct payment
of webcasting royalties and thus gives them something that they stated
was necessary to garner their support; and it is a result of that that
the American Federation of Radio and Television Artists, the American
Federation of Musicians, the Screen Actor's Guild and the AFL-CIO are
supportive of this legislation.
The recording industry and small webcasters are to be commended for
working so hard to agree on terms, and the Chairman is to be commended
for driving them to this agreement.
{time} 1445
The recording industry and small webcasters are to be commended for
working so hard to agree on terms, and the chairman is to be commended
for driving them to this agreement.
In sum, this legislation provides small webcasters with much better
terms than the webcasting rates set by the Librarian of Congress. As
such, it addresses the concerns that the Librarian's rate might drive
many small webcasters out of business.
Mr. Speaker, I was wondering if I might engage with the chairman of
the committee in a colloquy.
Mr. SENSENBRENNER. Mr. Speaker, will the gentleman yield?
Mr. BERMAN. I yield to the gentleman from Wisconsin.
Mr. SENSENBRENNER. Mr. Speaker, I am happy to engage in a colloquy
with the gentleman.
Mr. BERMAN. Mr. Speaker, section 4 of this bill requires that agents
directed by the copyright office to distribute webcasting royalties
must make direct payment of those royalties to featured and nonfeatured
recording artists and musicians. Section 4 also allows such agents to
deduct their administrative and other reasonable expenses from the
royalties they distribute. These provisions are somewhat unusual, so I
want to confirm my understanding of their import with the distinguished
chairman. It is my understanding that both provisions simply codify
what is the current practice in the marketplace. Copyright office
regulations require direct payment of royalties for the years 1998 to
2002, and the only distributing agent currently designated by the
copyright office has contracted to make direct payments. Further,
royalty recipients have agreed to allow that distributing agent to
deduct its expenses from royalties. Is it the chairman's understanding
that these provisions simply codify those current practices?
Mr. SENSENBRENNER. Yes, that is my understanding.
Mr. BERMAN. Mr. Speaker, I would like to make one other point. It is
my understanding that these two provisions in no way interfere with the
long-standing U.S. legal doctrine that parties can voluntarily assign,
transfer, or allocate through contracts and other marketplace
arrangements the rights provided them under U.S. copyright law.
Mr. SENSENBRENNER. If the gentleman will yield further, that is also
my understanding.
Mr. BERMAN. I thank the gentleman for confirming my understanding.
Mr. CONYERS. Mr. Speaker, I rise in support of the manager's
amendment to H.R. 5469. This legislation reflects a compromise between
vocalists, recording artists, background musicians, record labels, and
small webcasters.
This bill has several provisions that will make it easier for music
to be performed online and for the creators to be compensated. First,
it incorporates an agreement that was reached between the content
owners and the small webcasters on royalty rates for Internet
broadcasts from 1998 through 2004.
I am especially pleased that the final legislation includes a
statutory direct payment provision. This provision ensures the
musicians, vocalists, and artists receive their royalties from digital
music directly from the collection agent instead of through other
intermediaries.
Ms. McCARTHY of Missouri. Mr. Speaker, I rise in support of H.R.
5469, the Small Webcaster Amendments Act of 2002. This bill codifies a
compromise between webcasters, recording artists, and record companies
to determine royalty payments for Internet radio broadcasts. I opposed
the bill in its original
[[Page H7048]]
form last week when it delayed the payments to copyright holders for
six months. The measure allows webcasters to broadcast diverse
programming to consumers, artists will be paid the royalty fees they
need to continue creating and performing the music we want to hear, and
record companies will deduct the administrative fees for royalty
collection.
This compromise bill benefits all parties involved. After deductions,
record companies will receive 50 percent of the royalty, artists will
receive 45 percent of the direct royalty payments, and the rest is
distributed to nonfeatured musicians and vocalists. This is a vast
improvement from past versions of this bill which left the recording
artists out of the equation. Even though webcasters have not begun to
make payments, future royalty rights are protected in H.R. 5469. Small
webcasters benefit from a reduced royalty fee, which will keep many
webcasters from declaring bankruptcy due to excessively high costs.
This lower payment schedule will ensure that Internet radio continues
to offer consumers a nearly endless number of listening choices
including Latin, classical, and even native African music that may not
be available over terrestrial stations. In addition, record companies
can deduct the administrative costs associated with royalty collection
for digital recordings so that their past and future expenses are
reimbursed.
Paying copyright owners for the use of their creative work is not a
new concept. In 1909, Congress passed a law to ensure that
manufacturers of piano rolls had to pay for the songs they were
reproducing. The license protects the composer's right to control
reproductions of the work, but permits the recording of a song by a
third party on ``mechanical'' media like a piano roll or record. This
statute was later expanded to protect digital media, and thus it
applies to Internet radio. The Copyright Arbitration Panel (CARP) first
met in 1998 to determine royalty fees, but they were unable to come to
an agreement between the interested parties. The last piece of the
puzzle came in the form of the Librarian of Congress implementing rates
for the statutory license on June 20, 2002, with the assumption that
Internet radio companies would begin paying royalties on October 20,
2002. The private sector compromise codifies the Librarian's
recommendations, and webcasters now have a defined schedule to pay
artists for the use of copyrighted works.
I thank my colleagues for their support of H.R. 5469. I am very
grateful to the organizations whose negotiations helped craft this
important legislation. Due to this agreement, consumers will benefit
from a myriad of choices for their listening pleasure.
Mr. BERMAN. Mr. Speaker, I yield back the balance of my time.
Mr. SENSENBRENNER. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Cantor). The question is on the motion
offered by the gentleman from Wisconsin (Mr. Sensenbrenner) that the
House suspend the rules and pass the bill, H.R. 5469, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
The title of the bill was amended so as to read: ``A bill to amend
title 17, United States Code, with respect to the statutory license for
webcasting, and for other purposes.''.
A motion to reconsider was laid on the table.
____________________