[Congressional Record (Bound Edition), Volume 150 (2004), Part 3]
[House]
[Pages 3297-3307]
[From the U.S. Government Publishing Office, www.gpo.gov]




         COPYRIGHT ROYALTY AND DISTRIBUTION REFORM ACT OF 2004

  Mr. SENSENBRENNER. Mr. Speaker, I move to suspend the rules and pass 
the bill (H.R. 1417) to amend title 17, United States Code, to replace 
copyright arbitration royalty panels with a Copyright Royalty Judge, 
and for other purposes, as amended.
  The Clerk read as follows:

                               H.R. 1417

       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 ``Copyright Royalty and 
     Distribution Reform Act of 2004''.

     SEC. 2. REFERENCE.

       Except as otherwise expressly provided, whenever in this 
     Act an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of title 17, United States Code.

     SEC. 3. COPYRIGHT ROYALTY JUDGE AND STAFF.

       (a) In General.--Chapter 8 is amended to read as follows:

          ``CHAPTER 8--PROCEEDINGS BY COPYRIGHT ROYALTY JUDGES

``Sec.
``801. Copyright Royalty Judges; appointment and functions.
``802. Copyright Royalty Judgeships; staff.
``803. Proceedings of Copyright Royalty Judges.
``804. Institution of proceedings.
``805. General rule for voluntarily negotiated agreements.

     ``Sec. 801. Copyright Royalty Judges; appointment and 
       functions

       ``(a) Appointment.--The Librarian of Congress shall appoint 
     3 full-time Copyright Royalty Judges, and shall appoint one 
     of the three as the Chief Copyright Royalty Judge. In making 
     such appointments, the Librarian shall consult with the 
     Register of Copyrights.
       ``(b) Functions.--Subject to the provisions of this 
     chapter, the functions of the Copyright Royalty Judges shall 
     be as follows:
       ``(1) To make determinations and adjustments of reasonable 
     terms and rates of royalty payments as provided in sections 
     112(e), 114, 115, 116, 118, 119 and 1004. The rates 
     applicable under sections 114(f)(1)(B), 115, and 116 shall be 
     calculated to achieve the following objectives:
       ``(A) To maximize the availability of creative works to the 
     public.
       ``(B) To afford the copyright owner a fair return for his 
     or her creative work and the copyright user a fair income 
     under existing economic conditions.
       ``(C) To reflect the relative roles of the copyright owner 
     and the copyright user in the product made available to the 
     public with respect to relative creative contribution, 
     technological contribution, capital investment, cost, risk, 
     and contribution to the opening of new markets for creative 
     expression and media for their communication.
       ``(D) To minimize any disruptive impact on the structure of 
     the industries involved and on generally prevailing industry 
     practices.
       ``(2) To make determinations concerning the adjustment of 
     the copyright royalty rates under section 111 solely in 
     accordance with the following provisions:
       ``(A) The rates established by section 111(d)(1)(B) may be 
     adjusted to reflect--
       ``(i) national monetary inflation or deflation; or
       ``(ii) changes in the average rates charged cable 
     subscribers for the basic service of providing secondary 
     transmissions to maintain the real constant dollar level of 
     the royalty fee per subscriber which existed as of the date 
     of October 19, 1976,

     except that--
       ``(I) if the average rates charged cable system subscribers 
     for the basic service of providing secondary transmissions 
     are changed so that the average rates exceed national 
     monetary inflation, no change in the rates established by 
     section 111(d)(1)(B) shall be permitted; and
       ``(II) no increase in the royalty fee shall be permitted 
     based on any reduction in the average number of distant 
     signal equivalents per subscriber.

     The Copyright Royalty Judges may consider all factors 
     relating to the maintenance of such level of payments, 
     including, as an extenuating factor, whether the industry has 
     been restrained by subscriber rate regulating authorities 
     from increasing the rates for the basic service of providing 
     secondary transmissions.
       ``(B) In the event that the rules and regulations of the 
     Federal Communications Commission are amended at any time 
     after April 8, 1976, to permit the carriage by cable systems 
     of additional television broadcast signals beyond the local 
     service area of the primary transmitters of such signals, the 
     royalty rates established by section 111(d)(1)(B) may be 
     adjusted to insure that the rates for the additional distant 
     signal equivalents resulting from such carriage are 
     reasonable in the light of the changes effected by the 
     amendment to such rules and regulations. In determining the 
     reasonableness of rates proposed following an amendment of 
     Federal Communications Commission rules and regulations, the 
     Copyright Royalty Judges shall consider, among other factors, 
     the economic impact on copyright owners and users; except 
     that no adjustment in royalty rates shall be made under this 
     subparagraph with respect to any distant signal equivalent or 
     fraction thereof represented by--
       ``(i) carriage of any signal permitted under the rules and 
     regulations of the Federal Communications Commission in 
     effect on April 15, 1976, or the carriage of a signal of the 
     same type (that is, independent, network, or noncommercial 
     educational) substituted for such permitted signal; or
       ``(ii) a television broadcast signal first carried after 
     April 15, 1976, pursuant to an individual waiver of the rules 
     and regulations of the Federal Communications Commission, as 
     such rules and regulations were in effect on April 15, 1976.
       ``(C) In the event of any change in the rules and 
     regulations of the Federal Communications Commission with 
     respect to syndicated and sports program exclusivity after 
     April 15, 1976, the rates established by section 111(d)(1)(B) 
     may be adjusted to assure that such rates are reasonable in 
     light of the changes to such rules and regulations, but any 
     such adjustment shall apply only to the affected television 
     broadcast signals carried on those systems affected by the 
     change.
       ``(D) The gross receipts limitations established by section 
     111(d)(1)(C) and (D) shall be adjusted to reflect national 
     monetary inflation or deflation or changes in the average 
     rates charged cable system subscribers for the basic service 
     of providing secondary transmissions to maintain the real 
     constant dollar value of the exemption provided by such 
     section, and the royalty rate specified therein shall not be 
     subject to adjustment.
       ``(3)(A) To authorize the distribution, under sections 111, 
     119, and 1007, of those royalty fees collected under sections 
     111, 119, and 1005, as the case may be, to the extent that 
     the Copyright Royalty Judges have found that the distribution 
     of such fees is not subject to controversy.
       ``(B) In cases where the Copyright Royalty Judges determine 
     that controversy exists, the Copyright Royalty Judges shall 
     determine the distribution of such fees, including partial 
     distributions, in accordance with section 111, 119, or 1007, 
     as the case may be.
       ``(C) the Copyright Royalty Judges shall make a partial 
     distribution of such fees during the pendency of the 
     proceeding under subparagraph (B) if all participants under 
     section 803(b)(2) in the proceeding that are entitled to 
     receive those fees that are to be partially distributed--
       ``(i) agree to such partial distribution;
       ``(ii) sign an agreement obligating them to return any 
     excess amounts to the extent necessary to comply with the 
     final determination on the distribution of the fees made 
     under subparagraph (B); and
       ``(iii) file the agreement with the Copyright Royalty 
     Judges.
       ``(D) The Copyright Royalty Judges and any other officer or 
     employee acting in good faith in distributing funds under 
     subparagraph (C) shall not be held liable for the payment of 
     any excess fees under subparagraph (C). The Copyright Royalty 
     Judges shall, at the time the final determination is made, 
     calculate any such excess amounts.
       ``(4) To accept or reject royalty claims filed under 
     section 111, 119, and 1007, on the basis of timeliness or the 
     failure to establish the basis for a claim.
       ``(5) To accept or reject rate adjustment petitions as 
     provided in section 804 and petitions to participate as 
     provided in section 803(b)(1) and (2).
       ``(6) To determine the status of a digital audio recording 
     device or a digital audio interface device under sections 
     1002 and 1003, as provided in section 1010.
       ``(7)(A) To adopt as the basis for statutory terms and 
     rates or as a basis for the distribution of statutory royalty 
     payments, an agreement concerning such matters reached among 
     some or all of the participants in a

[[Page 3298]]

     proceeding at any time during the proceeding, except that--
       ``(i) the Copyright Royalty Judges shall provide to the 
     other participants in the proceeding under section 803(b)(2) 
     that would be bound by the terms, rates, distribution, or 
     other determination set by the agreement an opportunity to 
     comment on the agreement and object to its adoption as the 
     basis for statutory terms and rates or as a basis for the 
     distribution of statutory royalty payments, as the case may 
     be; and
       ``(ii) the Copyright Royalty Judges may decline to adopt 
     the agreement as the basis for statutory terms and rates or 
     as the basis for the distribution of statutory royalty 
     payments, as the case may be, if any other participant 
     described in subparagraph (A) objects to the agreement and 
     the Copyright Royalty Judges find, based on the record before 
     them, that the agreement is not likely to meet the statutory 
     standard for setting the terms and rates, or for distributing 
     the royalty payments, as the case may be.
       ``(B) License agreements voluntarily negotiated pursuant to 
     section 112(e)(5), 114(f)(3), 115(c)(3)(E)(i), 116(c), or 
     118(b)(2) that do not result in statutory terms and rates 
     shall not be subject to clauses (i) and (ii) of subparagraph 
     (A).
       ``(c) Rulings.--The Copyright Royalty Judges may make any 
     necessary procedural or evidentiary rulings in any proceeding 
     under this chapter and may, before commencing a proceeding 
     under this chapter, make any such rulings that would apply to 
     the proceedings conducted by the Copyright Royalty Judges. 
     The Copyright Royalty Judges may consult with the Register of 
     Copyrights in making any rulings under section 802(f)(1).
       ``(d) Administrative Support.--The Librarian of Congress 
     shall provide the Copyright Royalty Judges with the necessary 
     administrative services related to proceedings under this 
     chapter.
       ``(e) Location in Library of Congress.--The offices of the 
     Copyright Royalty Judges and staff shall be in the Library of 
     Congress.

     ``Sec. 802. Copyright Royalty Judgeships; staff

       ``(a) Qualifications of Copyright Royalty Judges.--Each 
     Copyright Royalty Judge shall be an attorney who has at least 
     7 years of legal experience. The Chief Copyright Royalty 
     Judge shall have at least 5 years of experience in 
     adjudications, arbitrations, or court trials. Of the other 
     two Copyright Royalty Judges, one shall have significant 
     knowledge of copyright law, and the other shall have 
     significant knowledge of economics. An individual may serve 
     as a Copyright Royalty Judge only if the individual is free 
     of any financial conflict of interest under subsection (h). 
     In this subsection, `adjudication' has the meaning given that 
     term in section 551 of title 5, but does not include 
     mediation.
       ``(b) Staff.--The Chief Copyright Royalty Judge shall hire 
     3 full-time staff members to assist the Copyright Royalty 
     Judges in performing their functions.
       ``(c) Terms.--The terms of the Copyright Royalty Judges 
     shall each be 6 years, except of the individuals first 
     appointed, the Chief Copyright Royalty Judge shall be 
     appointed to a term of 6 years, and of the remaining 
     Copyright Royalty Judges, one shall be appointed to a term of 
     2 years, and the other shall be appointed to a term of 4 
     years. An individual serving as a Copyright Royalty Judge may 
     be reappointed to subsequent terms. The term of a Copyright 
     Royalty Judge shall begin when the term of the predecessor of 
     that Copyright Royalty Judge ends. When the term of office of 
     a Copyright Royalty Judge ends, the individual serving that 
     term may continue to serve until a successor is selected.
       ``(d) Vacancies or Incapacity.--
       ``(1) Vacancies.--If a vacancy should occur in the position 
     of Copyright Royalty Judge, the Librarian of Congress shall 
     act expeditiously to fill the vacancy, and may appoint an 
     interim Copyright Royalty Judge to serve until another 
     Copyright Royalty Judge is appointed under this section. An 
     individual appointed to fill the vacancy occurring before the 
     expiration of the term for which the predecessor of that 
     individual was appointed shall be appointed for the remainder 
     of that term.
       ``(2) Incapacity.--In the case in which a Copyright Royalty 
     Judge is temporarily unable to perform his or her duties, the 
     Librarian of Congress may appoint an interim Copyright 
     Royalty Judge to perform such duties during the period of 
     such incapacity.
       ``(e) Compensation.--
       ``(1) Judges.--The Chief Copyright Royalty Judge shall 
     receive compensation at the rate of basic pay payable for 
     level AL-1 for administrative law judges pursuant to section 
     5372(b) of title 5, and each of the other two Copyright 
     Royalty Judges shall receive compensation at the rate of 
     basic pay payable for level AL-2 for administrative law 
     judges pursuant to such section. The compensation of the 
     Copyright Royalty Judges shall not be subject to any 
     regulations adopted by the Office of Personnel Management 
     pursuant to its authority under section 5376(b)(1) of title 
     5.
       ``(2) Staff members.--Of the staff members appointed under 
     subsection (b)--
       ``(A) the rate of pay of one staff member shall be not more 
     than the basic rate of pay payable for GS-15 of the General 
     Schedule;
       ``(B) the rate of pay of one staff member shall be not less 
     than the basic rate of pay payable for GS-13 of the General 
     Schedule and not more than the basic rate of pay payable for 
     GS-14 of such Schedule; and
       ``(C) the rate of pay for the third staff member shall be 
     not less than the basic rate of pay payable for GS-8 of the 
     General Schedule and not more than the basic rate of pay 
     payable for GS-11 of such Schedule.
       ``(f) Independence of Copyright Royalty Judge.--
       ``(1) In making determinations.--
       ``(A) In general.--Subject to subparagraph (B), the 
     Copyright Royalty Judges shall have full independence in 
     making determinations concerning adjustments and 
     determinations of copyright royalty rates and terms, the 
     distribution of copyright royalties, the acceptance or 
     rejection of royalty claims, rate adjustment petitions, and 
     petitions to participate, and in issuing other rulings under 
     this title, except that the Copyright Royalty Judges may 
     consult with the Register of Copyrights on any matter other 
     than a question of fact. Any such consultations between the 
     Copyright Royalty Judges and the Register of Copyright on any 
     question of law shall be in writing or on the record.
       ``(B) Novel questions.--(i) Notwithstanding the provisions 
     of subparagraph (A), in any case in which the Copyright 
     Royalty Judges in a proceeding under this title are presented 
     with a novel question of law concerning an interpretation of 
     those provisions of this title that are the subject of the 
     proceeding, the Copyright Royalty Judges shall request the 
     Register of Copyrights, in writing, to submit a written 
     opinion on the resolution of such novel question. The 
     Register shall submit and make public that opinion within 
     such time period as the Copyright Royalty Judges may 
     prescribe. Any consultations under this subparagraph between 
     the Copyright Royalty Judges and the Register of Copyrights 
     shall be in writing or on the record. The opinion of the 
     Register shall not be binding on the Copyright Royalty 
     Judges, but the Copyright Royalty Judges shall take the 
     opinion of the Register into account in making the judges' 
     determination on the question concerned.
       ``(ii) In clause (i), a `novel question of law' is a 
     question of law that has not been determined in prior 
     decisions, determinations, and rulings described in section 
     803(a).
       ``(2) Performance appraisals.--
       ``(A) In general.--Notwithstanding any other provision of 
     law or any regulation of the Library of Congress, and subject 
     to subparagraph (B), the Copyright Royalty Judges shall not 
     receive performance appraisals.
       ``(B) Relating to sanction or removal.--To the extent that 
     the Librarian of Congress adopts regulations under subsection 
     (h) relating to the sanction or removal of a Copyright 
     Royalty Judge and such regulations require documentation to 
     establish the cause of such sanction or removal, the 
     Copyright Royalty Judge may receive an appraisal related 
     specifically to the cause of the sanction or removal.
       ``(g) Inconsistent Duties Barred.--No Copyright Royalty 
     Judge may undertake duties inconsistent with his or her 
     duties and responsibilities as Copyright Royalty Judge.
       ``(h) Standards of Conduct.--The Librarian of Congress 
     shall adopt regulations regarding the standards of conduct, 
     including financial conflict of interest and restrictions 
     against ex parte communications, which shall govern the 
     Copyright Royalty Judges and the proceedings under this 
     chapter.
       ``(i) Removal or Sanction.--The Librarian of Congress may 
     sanction or remove a Copyright Royalty Judge for violation of 
     the standards of conduct adopted under subsection (h), 
     misconduct, neglect of duty, or any disqualifying physical or 
     mental disability. Any such sanction or removal may be made 
     only after notice and opportunity for a hearing, but the 
     Librarian of Congress may suspend the Copyright Royalty Judge 
     during the pendency of such hearing. The Librarian shall 
     appoint an interim Copyright Royalty Judge during the period 
     of any such suspension.

     ``Sec. 803. Proceedings of Copyright Royalty Judges

       ``(a) Proceedings.--
       ``(1) In general.--The Copyright Royalty Judges shall act 
     in accordance with this title, and to the extent not 
     inconsistent with this title, in accordance with subchapter 
     II of chapter 5 of title 5, in carrying out the purposes set 
     forth in section 801. The Copyright Royalty Judges shall act 
     in accordance with regulations issued by the Copyright 
     Royalty Judges and on the basis of a fully documented written 
     record, prior decisions of the Copyright Royalty Tribunal, 
     prior copyright arbitration royalty panel determinations, 
     rulings by the Librarian of Congress before the effective 
     date of the Copyright Royalty and Distribution Reform Act of 
     2004, prior determinations of Copyright Royalty Judges under 
     this chapter, and decisions of the court in appeals under 
     this chapter before, on, or after such effective date. Any 
     participant in a proceeding under subsection (b)(2) may 
     submit relevant information and proposals to the Copyright 
     Royalty Judges.
       ``(2) Judges acting as panel and individually.--The 
     Copyright Royalty Judges shall

[[Page 3299]]

     preside over hearings in proceedings under this chapter en 
     banc. The Chief Copyright Royalty Judge may designate a 
     Copyright Royalty Judge to preside individually over such 
     collateral and administrative proceedings, and over such 
     proceedings under paragraphs (1) through (5) of subsection 
     (b), as the Chief Judge considers appropriate.
       ``(3) Determinations.--Final determinations of the 
     Copyright Royalty Judges in proceedings under this chapter 
     shall be made by majority vote. A Copyright Royalty Judge 
     dissenting from the majority on any determination under this 
     chapter may issue his or her dissenting opinion, which shall 
     be included with the determination.
       ``(b) Procedures.--
       ``(1) Initiation.--
       ``(A) Call for petitions to participate.--(i) Promptly upon 
     the filing of a petition for a rate adjustment or 
     determination under section 804(a) or 804(b)(8), or by no 
     later than January 5 of a year specified in section 804 for 
     the commencement of a proceeding if a petition has not been 
     filed by that date, the Copyright Royalty Judges shall cause 
     to be published in the Federal Register notice of 
     commencement of proceedings under this chapter calling for 
     the filing of petitions to participate in a proceeding under 
     this chapter for the purpose of making the relevant 
     determination under section 111, 112, 114, 115, 116, 118, 
     119, 1004 or 1007, as the case may be.
       ``(ii) Petitions to participate shall be filed by no later 
     than 30 days after publication of notice of commencement of a 
     proceeding, under clause (i), except that the Copyright 
     Royalty Judges may, for substantial good cause shown and if 
     there is no prejudice to the participants that have already 
     filed petitions, accept late petitions to participate at any 
     time up to the date that is 90 days before the date on which 
     participants in the proceeding are to file their written 
     direct statements.
       ``(B) Petitions to participate.--Each petition to 
     participate in a proceeding shall describe the petitioner's 
     interest in the subject matter of the proceeding. Parties 
     with similar interests may file a single petition to 
     participate.
       ``(2) Participation in general.--Subject to paragraph (4), 
     a person may participate in a proceeding under this chapter, 
     including through the submission of briefs or other 
     information, only if--
       ``(A) that person has filed a petition to participate in 
     accordance with paragraph (1) (either individually or as a 
     group under paragraph (1)(B)), together with a filing fee of 
     $150;
       ``(B) the Copyright Royalty Judges have not determined that 
     the petition to participate is facially invalid; and
       ``(C) the Copyright Royalty Judges have not determined, sua 
     sponte or on the motion of another participant in the 
     proceeding, that the person lacks a significant interest in 
     the proceeding.
       ``(3) Voluntary negotiation period.--
       ``(A) In general.--Promptly after the date for filing of 
     petitions to participate in a proceeding, the Copyright 
     Royalty Judges shall make available to all participants in 
     the proceeding a list of such participants and shall initiate 
     a voluntary negotiation period among the participants.
       ``(B) Length of proceedings.--The voluntary negotiation 
     period initiated under subparagraph (A) shall be 3 months.
       ``(C) Determination of subsequent proceedings.--At the 
     close of the voluntary negotiation proceedings, the Copyright 
     Royalty Judges shall, if further proceedings under this 
     chapter are necessary, determine whether and to what extent 
     paragraphs (4) and (5) will apply to the parties.
       ``(4) Small claims procedure in distribution proceedings.--
       ``(A) In general.--If, in a proceeding under this chapter 
     to determine the distribution of royalties, a participant in 
     the proceeding asserts that the contested amount of the claim 
     is $10,000 or less, the Copyright Royalty Judges shall decide 
     the controversy on the basis of the filing in writing of the 
     initial claim, the initial response by any opposing 
     participant, and one additional response by each such party. 
     The participant asserting the claim shall not be required to 
     pay the filing fee under paragraph (2).
       ``(B) Bad faith inflation of claim.--If the Copyright 
     Royalty Judges determine that a participant asserts in bad 
     faith an amount in controversy in excess of $10,000 for the 
     purpose of avoiding a determination under the procedure set 
     forth in subparagraph (A), the Copyright Royalty Judges shall 
     impose a fine on that participant in an amount not to exceed 
     the difference between the actual amount distributed and the 
     amount asserted by the participant.
       ``(5) Paper proceedings in ratemaking proceedings.--The 
     Copyright Royalty Judges in proceedings under this chapter to 
     determine royalty rates may decide, sua sponte or upon motion 
     of a participant, to determine issues on the basis of initial 
     filings in writing, initial responses by any opposing 
     participant, and one additional response by each such 
     participant. Prior to making such decision to proceed on such 
     a paper record only, the Copyright Royalty Judges shall offer 
     to all parties to the proceeding the opportunity to comment 
     on the decision. The procedure under this paragraph--
       ``(A) shall be applied in cases in which there is no 
     genuine issue of material fact, there is no need for 
     evidentiary hearings, and all participants in the proceeding 
     agree in writing to the procedure; and
       ``(B) may be applied under such other circumstances as the 
     Copyright Royalty Judges consider appropriate.
       ``(6) Regulations.--
       ``(A) In general.--The Copyright Royalty Judges may issue 
     regulations to carry out their functions under this title. 
     Not later than 120 days after Copyright Royalty Judges or 
     interim Copyright Royalty Judges, as the case may be, are 
     first appointed after the enactment of the Copyright Royalty 
     and Distribution Reform Act of 2004, such judges shall issue 
     regulations to govern proceedings under this chapter.
       ``(B) Interim regulations.--Until regulations are adopted 
     under subparagraph (A), the Copyright Royalty Judges shall 
     apply the regulations in effect under this chapter on the day 
     before the effective date of the Copyright Royalty and 
     Distribution Reform Act of 2004, to the extent such 
     regulations are not inconsistent with this chapter, except 
     that functions carried out under such regulations by the 
     Librarian of Congress, the Register of Copyrights, or 
     copyright arbitration royalty panels that, as of such date of 
     enactment, are to be carried out by the Copyright Royalty 
     Judges under this chapter, shall be carried out by the 
     Copyright Royalty Judges under such regulations.
       ``(C) Requirements.--Regulations issued under subparagraph 
     (A) shall include the following:
       ``(i) The written direct statements of all participants in 
     a proceeding under paragraph (2) shall be filed by a date 
     specified by the Copyright Royalty Judges, which may be no 
     earlier than four months, and no later than five months, 
     after the end of the voluntary negotiation period under 
     paragraph (3). Notwithstanding the preceding sentence, a 
     participant in a proceeding may, within 15 days after the end 
     of the discovery period specified in clause (iii), file an 
     amended written direct statement based on new information 
     received during the discovery process.
       ``(ii)(I) Following the submission to the Copyright Royalty 
     Judges of written direct statements by the participants in a 
     proceeding under paragraph (2), the judges shall meet with 
     the participants for the purpose of setting a schedule for 
     conducting and completing discovery. Such schedule shall be 
     determined by the Copyright Royalty Judges.
       ``(II) In this chapter, the term `written direct 
     statements' means witness statements, testimony, and exhibits 
     to be presented in the proceedings, and such other 
     information that is necessary to establish terms and rates, 
     or the distribution of royalty payments, as the case may be, 
     as set forth in regulations issued by the Copyright Royalty 
     Judges.
       ``(iii) Hearsay may be admitted in proceedings under this 
     chapter to the extent deemed appropriate by the Copyright 
     Royalty Judges.
       ``(iv) Discovery in such proceedings shall be permitted for 
     a period of 60 days, except for discovery ordered by the 
     Copyright Royalty Judges in connection with the resolution of 
     motions, orders and disputes pending at the end of such 
     period.
       ``(v) Any participant under paragraph (2) in a proceeding 
     under this chapter to determine royalty rates may, upon 
     written notice, seek discovery of information and materials 
     relevant and material to the proceeding. Any objection to any 
     such discovery request shall be resolved by a motion or 
     request to compel discovery made to the Copyright Royalty 
     Judges. Each motion or request to compel discovery shall be 
     determined by the Copyright Royalty Judges, or by a Copyright 
     Royalty Judge when permitted under subsection (a)(2), who may 
     approve the request only if the evidence that would be 
     produced is relevant and material. A Copyright Royalty Judge 
     may refuse a request to compel discovery of evidence that has 
     been found to be relevant and material, only upon good cause 
     shown. For purposes of the preceding sentence, the basis for 
     `good cause' may only be that--

       ``(I) the discovery sought is unreasonably cumulative or 
     duplicative, or is obtainable from another source that is 
     more convenient, less burdensome, or less expensive;
       ``(II) the participant seeking discovery has had ample 
     opportunity by discovery in the action to obtain the 
     information sought; or
       ``(III) the burden or expense of the proposed discovery 
     outweighs its likely benefit, taking into account the needs 
     and resources of the participants, the importance of the 
     issues at stake, and the importance of the proposed discovery 
     in resolving the issues.

       ``(vi) The rules in effect on the day before the effective 
     date of the Copyright Royalty and Distribution Reform Act of 
     2004, relating to discovery in proceedings under this title 
     to determine the distribution of royalty fees, shall continue 
     to apply to such proceedings on and after such effective 
     date.
       ``(vii) The Copyright Royalty Judges may issue subpoenas 
     requiring the production of evidence or witnesses, but only 
     if the evidence requested to be produced or that would be 
     proffered by the witness is relevant and material.

[[Page 3300]]

       ``(viii) The Copyright Royalty Judges shall order a 
     settlement conference among the participants in the 
     proceeding to facilitate the presentation of offers of 
     settlement among the participants. The settlement conference 
     shall be held during a 21-day period following the end of the 
     discovery period.
       ``(c) Determination of Copyright Royalty Judges.--
       ``(1) Timing.--The Copyright Royalty Judges shall issue 
     their determination in a proceeding not later than 11 months 
     after the conclusion of the 21-day settlement conference 
     period under subsection (b)(3)(C)(vi), but, in the case of a 
     proceeding to determine successors to rates or terms that 
     expire on a specified date, in no event later than 15 days 
     before the expiration of the then current statutory rates and 
     terms.
       ``(2) Rehearings.--
       ``(A) In general.--The Copyright Royalty Judges may, in 
     exceptional cases, upon motion of a participant under 
     subsection (b)(2), order a rehearing, after the determination 
     in a proceeding is issued under paragraph (1), on such 
     matters as the Copyright Royalty Judges determine to be 
     appropriate.
       ``(B) Timing for filing motion.--Any motion for a rehearing 
     under subparagraph (A) may only be filed within 15 days after 
     the date on which the Copyright Royalty Judges deliver their 
     initial determination concerning rates and terms to the 
     participants in the proceeding.
       ``(C) Participation by opposing party not required.--In any 
     case in which a rehearing is ordered, any opposing party 
     shall not be required to participate in the rehearing.
       ``(D) No negative inference.--No negative inference shall 
     be drawn from lack of participation in a rehearing.
       ``(E) Continuity of rates and terms.--(i) If the decision 
     of the Copyright Royalty Judges on any motion for a rehearing 
     is not rendered before the expiration of the statutory rates 
     and terms that were previously in effect, in the case of a 
     proceeding to determine successors to rates and terms that 
     expire on a specified date, then--
       ``(I) the initial determination of the Copyright Royalty 
     Judges that is the subject of the rehearing motion shall be 
     effective as of the day following the date on which the rates 
     and terms that were previously in effect expire; and
       ``(II) in the case of a proceeding under section 
     114(f)(1)(C) or 114(f)(2)(C), royalty rates and terms shall, 
     for purposes of section 114(f)(4)(B), be deemed to have been 
     set at those rates and terms contained in the initial 
     determination of the Copyright Royalty Judges that is the 
     subject of the rehearing motion, as of the date of that 
     determination.
       ``(ii) The pendency of a motion for a rehearing under this 
     paragraph shall not relieve persons obligated to make royalty 
     payments who would be affected by the determination on that 
     motion from providing the statements of account and any 
     reports of use, to the extent required, and paying the 
     royalties required under the relevant determination or 
     regulations.
       ``(iii) Notwithstanding clause (ii), whenever royalties 
     described in clause (ii) are paid to a person other than the 
     Copyright Office, the entity designated by the Copyright 
     Royalty Judges to which such royalties are paid by the 
     copyright user (and any successor thereto) shall, within 60 
     days after the motion for rehearing is resolved or, if the 
     motion is granted, within 60 days after the rehearing is 
     concluded, return any excess amounts previously paid to the 
     extent necessary to comply with the final determination of 
     royalty rates by the Copyright Royalty Judges.
       ``(3) Contents of determination.--A determination of the 
     Copyright Royalty Judges shall be accompanied by the written 
     record, and shall set forth the facts that the Copyright 
     Royalty Judges found relevant to their determination. Among 
     other terms adopted in a determination, the Copyright Royalty 
     Judges may specify notice and recordkeeping requirements of 
     users of the copyrights at issue that apply in lieu of those 
     that would otherwise apply under regulations.
       ``(4) Continuing jurisdiction.--The Copyright Royalty 
     Judges may amend the determination or the regulations issued 
     pursuant to the determination in order to correct any 
     technical errors in the determination or to respond to 
     unforeseen circumstances that preclude the proper 
     effectuation of the determination.
       ``(5) Protective order.--The Copyright Royalty Judges may 
     issue such orders as may be appropriate to protect 
     confidential information, including orders excluding 
     confidential information from the record of the determination 
     that is published or made available to the public, except 
     that any terms or rates of royalty payments or distributions 
     may not be excluded.
       ``(6) Publication of determination.--The Librarian of 
     Congress shall cause the determination, and any corrections 
     thereto, to be published in the Federal Register. The 
     Librarian of Congress shall also publicize the determination 
     and corrections in such other manner as the Librarian 
     considers appropriate, including, but not limited to, 
     publication on the Internet. The Librarian of Congress shall 
     also make the determination, corrections, and the 
     accompanying record available for public inspection and 
     copying.
       ``(d) Judicial Review.--
       ``(1) Appeal.--Any determination of the Copyright Royalty 
     Judges under subsection (c) may, within 30 days after the 
     publication of the determination in the Federal Register, be 
     appealed, to the United States Court of Appeals for the 
     District of Columbia Circuit, by any aggrieved participant in 
     the proceeding under subsection (b)(2) who fully participated 
     in the proceeding and who would be bound by the 
     determination. If no appeal is brought within that 30-day 
     period, the determination of the Copyright Royalty Judges 
     shall be final, and the royalty fee or determination with 
     respect to the distribution of fees, as the case may be, 
     shall take effect as set forth in paragraph (2).
       ``(2) Effect of rates.--
       ``(A) Expiration on specified date.--When this title 
     provides that the royalty rates and terms that were 
     previously in effect are to expire on a specified date, any 
     adjustment or determination by the Copyright Royalty Judges 
     of successor rates and terms for an ensuing statutory license 
     period shall be effective as of the day following the date of 
     expiration of the rates and terms that were previously in 
     effect, even if the determination of the Copyright Royalty 
     Judges is rendered on a later date.
       ``(B) Other cases.--In cases where rates and terms do not 
     expire on a specified date or have not yet been established, 
     successor or new rates or terms shall take effect on the 
     first day of the second month that begins after the 
     publication of the determination of the Copyright Royalty 
     Judges in the Federal Register, except as otherwise provided 
     in this title, and the rates and terms previously in effect, 
     to the extent applicable, shall remain in effect until such 
     successor rates and terms become effective.
       ``(C) Obligation to make payments.--(i) The pendency of an 
     appeal under this subsection shall not relieve persons 
     obligated to make royalty payments under section 111, 112, 
     114, 115, 116, 118, 119, or 1003, who would be affected by 
     the determination on appeal, from providing the statements of 
     account (and any report of use, to the extent required) and 
     paying the royalties required under the relevant 
     determination or regulations.
       ``(ii) Notwithstanding clause (i), whenever royalties 
     described in clause (i) are paid to a person other than the 
     Copyright Office, the entity designated by the Copyright 
     Royalty Judges to which such royalties are paid by the 
     copyright user (and any successor thereto) shall, within 60 
     days after the final resolution of the appeal, return any 
     excess amounts previously paid (and interest thereon, if 
     ordered pursuant to paragraph (3)) to the extent necessary to 
     comply with the final determination of royalty rates on 
     appeal.
       ``(3) Jurisdiction of court.--If the court, pursuant to 
     section 706 of title 5, modifies or vacates a determination 
     of the Copyright Royalty Judges, the court may enter its own 
     determination with respect to the amount or distribution of 
     royalty fees and costs, and order the repayment of any excess 
     fees, the payment of any underpaid fees, and the payment of 
     interest pertaining respectively thereto, in accordance with 
     its final judgment. The court may also vacate the 
     determination of the Copyright Royalty Judges and remand the 
     case to the Copyright Royalty Judges for further proceedings 
     in accordance with subsection (a).
       ``(e) Administrative Matters.--
       ``(1) Deduction of costs of library of congress and 
     copyright office from filing fees.--
       ``(A) Deduction from filing fees.--The Librarian of 
     Congress may, to the extent not otherwise provided under this 
     title, deduct from the filing fees collected under subsection 
     (b) for a particular proceeding under this chapter the 
     reasonable costs incurred by the Librarian of Congress, the 
     Copyright Office, and the Copyright Royalty Judges in 
     conducting that proceeding, other than the salaries of the 
     Copyright Royalty Judges and the 3 staff members appointed 
     under section 802(b).
       ``(B) Authorization of appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to pay the costs of proceedings under this chapter not 
     covered by the filing fees collected under subsection (b). 
     All funds made available pursuant to this subparagraph shall 
     remain available until expended.
       ``(2) Positions required for administration of compulsory 
     licensing.--Section 307 of the Legislative Branch 
     Appropriations Act, 1994, shall not apply to employee 
     positions in the Library of Congress that are required to be 
     filled in order to carry out section 111, 112, 114, 115, 116, 
     118, or 119 or chapter 10.

     ``Sec. 804. Institution of proceedings

       ``(a) Filing of Petition.--With respect to proceedings 
     referred to in paragraphs (1) and (2) of section 801(b) 
     concerning the determination or adjustment of royalty rates 
     as provided in sections 111, 112, 114, 115, 116, 118, and 
     1004, during the calendar years specified in the schedule set 
     forth in subsection (b), any owner or user of a copyrighted 
     work whose royalty rates are specified by this title, or are 
     established under this chapter before or after the enactment 
     of the Copyright Royalty and Distribution Reform Act

[[Page 3301]]

     of 2004, may file a petition with the Copyright Royalty 
     Judges declaring that the petitioner requests a determination 
     or adjustment of the rate. The Copyright Royalty Judges shall 
     make a determination as to whether the petitioner has such a 
     significant interest in the royalty rate in which a 
     determination or adjustment is requested. If the Copyright 
     Royalty Judges determine that the petitioner has such a 
     significant interest, the Copyright Royalty Judges shall 
     cause notice of this determination, with the reasons 
     therefor, to be published in the Federal Register, together 
     with the notice of commencement of proceedings under this 
     chapter. With respect to proceedings under paragraph (1) of 
     section 801(b) concerning the determination or adjustment of 
     royalty rates as provided in sections 112 and 114, during the 
     calendar years specified in the schedule set forth in 
     subsection (b), the Copyright Royalty Judges shall cause 
     notice of commencement of proceedings under this chapter to 
     be published in the Federal Register as provided in section 
     803(b)(1)(A).
       ``(b) Timing of Proceedings.--
       ``(1) Section 111 proceedings.--(A) A petition described in 
     subsection (a) to initiate proceedings under section 
     801(b)(2) concerning the adjustment of royalty rates under 
     section 111 to which subparagraph (A) or (D) of section 
     801(b)(2) applies may be filed during the year 2005 and in 
     each subsequent fifth calendar year.
       ``(B) In order to initiate proceedings under section 
     801(b)(2) concerning the adjustment of royalty rates under 
     section 111 to which subparagraph (B) or (C) of section 
     801(b)(2) applies, within 12 months after an event described 
     in either of those subsections, any owner or user of a 
     copyrighted work whose royalty rates are specified by section 
     111, or by a rate established under this chapter before or 
     after the enactment of the Copyright Royalty and Distribution 
     Reform Act of 2004, may file a petition with the Copyright 
     Royalty Judges declaring that the petitioner requests an 
     adjustment of the rate. The Copyright Royalty Judges shall 
     then proceed as set forth in subsection (a) of this section. 
     Any change in royalty rates made under this chapter pursuant 
     to this subparagraph may be reconsidered in the year 2005, 
     and each fifth calendar year thereafter, in accordance with 
     the provisions in section 801(b)(3)(B) or (C), as the case 
     may be. A petition for adjustment of rates under section 
     11(d)(1)(B) as a result of a change is the rules and 
     regulations of the Federal Communications Commission shall 
     set forth the change on which the petition is based.
       ``(C) Any adjustment of royalty rates under section 111 
     shall take effect as of the first accounting period 
     commencing after the publication of the determination of the 
     Copyright Royalty Judges in the Federal Register, or on such 
     other date as is specified in that determination.
       ``(2) Certain section 112 proceedings.--Proceedings under 
     this chapter shall be commenced in the year 2007 to determine 
     reasonable terms and rates of royalty payments for the 
     activities described in section 112(e)(1) relating to the 
     limitation on exclusive rights specified by section 
     114(d)(1)(C)(iv), to become effective on January 1, 2009. 
     Such proceedings shall be repeated in each subsequent fifth 
     calendar year.
       ``(3) Section 114 and corresponding 112 proceedings.--
       ``(A) For eligible nonsubscription services and new 
     subscription services.--Proceedings under this chapter shall 
     be commenced as soon as practicable after the effective date 
     of the Copyright Royalty and Distribution Reform Act of 2004 
     to determine reasonable terms and rates of royalty payments 
     under sections 114 and 112 for the activities of eligible 
     nonsubscription transmission services and new subscription 
     services, to be effective for the period beginning on January 
     1, 2006, and ending on December 31, 2010. Such proceedings 
     shall next be commenced in January 2009 to determine 
     reasonable terms and rates of royalty payments, to become 
     effective on January 1, 2011. Thereafter, such proceedings 
     shall be repeated in each subsequent fifth calendar year.
       ``(B) For preexisting subscription and satellite digital 
     audio radio services.--Proceedings under this chapter shall 
     be commenced in January 2006 to determine reasonable terms 
     and rates of royalty payments under sections 114 and 112 for 
     the activities of preexisting subscription services, to be 
     effective during the period beginning on January 1, 2008, and 
     ending on December 31, 2012, and preexisting satellite 
     digital audio radio services, to be effective during the 
     period beginning on January 1, 2007, and ending on December 
     31, 2012. Such proceedings shall next be commenced in 2011 to 
     determine reasonable terms and rates of royalty payments, to 
     become effective on January 1, 2013. Thereafter, such 
     proceedings shall be repeated in each subsequent fifth 
     calendar year.
       ``(C)(i) Notwithstanding any other provision of this 
     chapter, this subparagraph shall govern proceedings commenced 
     pursuant to sections 114(f)(1)(C) and 114(f)(2)(C) concerning 
     new types of services.
       ``(ii) Not later than 30 days after a petition to determine 
     rates and terms for a new type of service that is filed by 
     any copyright owner of sound recordings, or such new type of 
     service, indicating that such new type of service is or is 
     about to become operational, the Copyright Royalty Judges 
     shall issue a notice for a proceeding to determine rates and 
     terms for such service.
       ``(iii) The proceeding shall follow the schedule set forth 
     in such subsections (b), (c), and (d) of section 803, except 
     that--
       ``(I) the determination shall be issued by not later than 
     24 months after the publication of the notice under clause 
     (ii); and
       ``(II) the decision shall take effect as provided in 
     subsections (c)(2) and (d)(2) of section 803 and section 
     114(f)(4)(B)(ii) and (C).
       ``(iv) The rates and terms shall remain in effect for the 
     period set forth in section 114(f)(1)(C) or 114(f)(2)(C), as 
     the case may be.
       ``(4) Section 115 proceedings.--A petition described in 
     subsection (a) to initiate proceedings under section 
     801(b)(1) concerning the adjustment or determination of 
     royalty rates as provided in section 115 may be filed in the 
     year 2006 and in each subsequent fifth calendar year, or at 
     such other times as the parties have agreed under section 
     115(c)(3)(B) and (C).
       ``(5) Section 116 proceedings.--(A) A petition described in 
     subsection (a) to initiate proceedings under section 801(b) 
     concerning the determination of royalty rates and terms as 
     provided in section 116 may be filed at any time within 1 
     year after negotiated licenses authorized by section 116 are 
     terminated or expire and are not replaced by subsequent 
     agreements.
       ``(B) If a negotiated license authorized by section 116 is 
     terminated or expires and is not replaced by another such 
     license agreement which provides permission to use a quantity 
     of musical works not substantially smaller than the quantity 
     of such works performed on coin-operated phonorecord players 
     during the 1-year period ending March 1, 1989, the Copyright 
     Royalty Judges shall, upon petition filed under paragraph (1) 
     within 1 year after such termination or expiration, commence 
     a proceeding to promptly establish an interim royalty rate or 
     rates for the public performance by means of a coin-operated 
     phonorecord player of nondramatic musical works embodied in 
     phonorecords which had been subject to the terminated or 
     expired negotiated license agreement. Such rate or rates 
     shall be the same as the last such rate or rates and shall 
     remain in force until the conclusion of proceedings by the 
     Copyright Royalty Judges, in accordance with section 803, to 
     adjust the royalty rates applicable to such works, or until 
     superseded by a new negotiated license agreement, as provided 
     in section 116(b).
       ``(6) Section 118 proceedings.--A petition described in 
     subsection (a) to initiate proceedings under section 
     801(b)(1) concerning the determination of reasonable terms 
     and rates of royalty payments as provided in section 118 may 
     be filed in the year 2006 and in each subsequent fifth 
     calendar year.
       ``(7) Section 1004 proceedings.--A petition described in 
     subsection (a) to initiate proceedings under section 
     801(b)(1) concerning the adjustment of reasonable royalty 
     rates under section 1004 may be filed as provided in section 
     1004(a)(3).
       ``(8) Proceedings concerning distribution of royalty 
     fees.--With respect to proceedings under section 801(b)(3) 
     concerning the distribution of royalty fees in certain 
     circumstances under section 111, 116, 119, or 1007, the 
     Copyright Royalty Judges shall, upon a determination that a 
     controversy exists concerning such distribution, cause to be 
     published in the Federal Register notice of commencement of 
     proceedings under this chapter.

     ``Sec. 805. General rule for voluntarily negotiated 
       agreements

       ``Any rates or terms under this title that--
       ``(1) are agreed to by participants to a proceeding under 
     section 803(b)(2),
       ``(2) are adopted by the Copyright Royalty Judges as part 
     of a determination under this chapter, and
       ``(3) are in effect for a period shorter than would 
     otherwise apply under a determination pursuant to this 
     chapter,

     shall remain in effect for such period of time as would 
     otherwise apply under such determination, except that the 
     Copyright Royalty Judges shall adjust the rates pursuant to 
     the voluntary negotiations to reflect national monetary 
     inflation during the additional period the rates remain in 
     effect.''.
       (b) Conforming Amendment.--The table of chapters for title 
     17, United States Code, is amended by striking the item 
     relating to chapter 8 and inserting the following:

``8. Proceedings by Copyright Royalty Judges.................801''.....

     SEC. 4. DEFINITION.

       Section 101 is amended by inserting after the definition of 
     ``copies'' the following:
       ``A `Copyright Royalty Judge' is a Copyright Royalty Judge 
     appointed under section 802 of this title, and includes any 
     individual serving as an interim Copyright Royalty Judge 
     under such section.''.

     SEC. 5. TECHNICAL AMENDMENTS.

       (a) Cable Rates.--Section 111(d) is amended--
       (1) in paragraph (2), in the second sentence, by striking 
     ``a copyright arbitration royalty panel'' and inserting ``the 
     Copyright Royalty Judges.''; and
       (2) in paragraph (4)--

[[Page 3302]]

       (A) in subparagraph (A), by striking ``Librarian of 
     Congress'' each place it appears and inserting ``Copyright 
     Royalty Judges'';
       (B) in subparagraph (B)--
       (i) in the first sentence, by striking ``Librarian of 
     Congress shall, upon the recommendation of the Register of 
     Copyrights,'' and inserting ``Copyright Royalty Judges 
     shall'';
       (ii) in the second sentence, by striking ``Librarian 
     determines'' and inserting ``Copyright Royalty Judges 
     determine''; and
       (iii) in the third sentence--

       (I) by striking ``Librarian'' each place it appears and 
     inserting ``Copyright Royalty Judges''; and
       (II) by striking ``convene a copyright arbitration royalty 
     panel'' and inserting ``conduct a proceeding''; and

       (C) in subparagraph (C), by striking ``Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges''.
       (b) Ephemeral Recordings.--Section 112(e) is amended--
       (1) in paragraph (3)--
       (A) by amending the first sentence to read as follows: 
     ``Voluntary negotiation proceedings initiated pursuant to 
     section 804(a) for the purpose of determining reasonable 
     terms and rates of royalty payments for the activities 
     specified by paragraph (1) shall cover the 5-year period 
     beginning on January 1 of the second year following the year 
     in which the proceedings are commenced, or such other period 
     as the parties may agree.''; and
       (B) in the third sentence, by striking ``Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges'';
       (2) in paragraph (4)--
       (A) by amending the first sentence to read as follows: ``In 
     the absence of license agreements negotiated under paragraphs 
     (2) and (3), the Copyright Royalty Judges shall commence a 
     proceeding pursuant to chapter 8 to determine and publish in 
     the Federal Register a schedule of reasonable rates and terms 
     which, subject to paragraph (5), shall be binding on all 
     copyright owners of sound recordings and transmitting 
     organizations entitled to a statutory license under this 
     subsection during the 5-year period specified in paragraph 
     (3), or such other period as the parties may agree.'';
       (B) by striking ``copyright arbitration royalty panel'' 
     each subsequent place it appears and inserting ``Copyright 
     Royalty Judges'';
       (C) in the fourth sentence, by striking ``its decision'' 
     and inserting ``their decision''; and
       (D) in the last sentence, by striking ``Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges'';
       (3) in paragraph (5), by striking ``or decision by the 
     Librarian of Congress'' and inserting ``, decision by the 
     Librarian of Congress, or determination by the Copyright 
     Royalty Judges'';
       (4) by striking paragraph (6) and redesignating paragraphs 
     (7), (8), and (9), as paragraphs (6), (7), and (8), 
     respectively; and
       (5) in paragraph (6)(A), as so redesignated, by striking 
     ``Librarian of Congress'' and inserting ``Copyright Royalty 
     Judges''.
       (c) Scope of Exclusive Rights in Sound Recordings.--Section 
     114(f) is amended--
       (1) in paragraph (1)--
       (A) in subparagraph (A)--
       (i) by amending the first sentence to read as follows: 
     ``Voluntary negotiation proceedings initiated pursuant to 
     section 804(a) for the purpose of determining reasonable 
     terms and rates of royalty payments for subscription 
     transmissions by preexisting subscription services and 
     transmissions by preexisting satellite digital audio radio 
     services shall cover the 5-year period beginning on January 1 
     of the year following the second year in which the 
     proceedings are commenced, except where differential 
     transitional periods are provided in section 804(b)(3), or 
     such other period as the parties may agree.''; and
       (ii) in the third sentence, by striking ``Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges'';
       (B) in subparagraph (B)--
       (i) by amending the first sentence to read as follows: ``In 
     the absence of license agreements negotiated under 
     subparagraph (A), the Copyright Royalty Judges shall commence 
     a proceeding pursuant to chapter 8 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 affected by this paragraph during the 5-year 
     period specified in subparagraph (A), or such other date as 
     the parties may agree.''; and
       (ii) in the second sentence, by striking ``copyright 
     arbitration royalty panel'' and inserting ``Copyright Royalty 
     Judges''; and
       (C) by amending subparagraph (C) to read as follows:
       ``(C) The procedures under subparagraphs (A) and (B) also 
     shall be initiated pursuant to a petition filed by any 
     copyright owners of sound recordings, any preexisting 
     subscription services, or any preexisting satellite digital 
     audio radio services indicating that a new type of 
     subscription digital audio transmission service on which 
     sound recordings are performed is or is about to become 
     operational, for the purpose of determining reasonable terms 
     and rates of royalty payments with respect to such new type 
     of transmission service for the period beginning with the 
     inception of such new type of service and ending on the date 
     on which the royalty rates and terms for subscription digital 
     audio transmission services most recently determined under 
     subparagraph (A) or (B) and chapter 8 expire, or such other 
     period as the parties may agree.'';
       (2) in paragraph (2)--
       (A) in subparagraph (A)--
       (i) by amending the first sentence to read as follows: 
     ``Voluntary negotiation proceedings initiated pursuant to 
     section 804(a) for the purpose of determining reasonable 
     terms and rates of royalty payments for public performances 
     of sound recordings by means of eligible nonsubscription 
     transmissions and transmissions by new subscription services 
     specified by subsection (d)(2) shall cover the 5-year period 
     beginning on January 1 of the second year following the year 
     in which the proceedings are commenced, except where 
     different transitional periods are provided in section 
     804(b)(3)(A), or such other period as the parties may 
     agree.''; and
       (ii) in the third sentence, by striking ``Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges'';
       (B) in subparagraph (B)--
       (i) by amending the first sentence to read as follows: ``In 
     the absence of license agreements negotiated under 
     subparagraph (A), the Copyright Royalty Judges shall commence 
     a proceeding pursuant to chapter 8 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 affected by this paragraph during the period 
     specified in subparagraph (A), or such other period as the 
     parties may agree.''; and
       (ii) by striking ``copyright arbitration royalty panel'' 
     each subsequent place it appears and inserting ``Copyright 
     Royalty Judges''; and
       (C) by amending subparagraph (C) to read as follows:
       ``(C) The procedures under subparagraphs (A) and (B) shall 
     also be initiated pursuant to a petition filed by any 
     copyright owners of sound recordings or any eligible 
     nonsubscription service or new subscription service 
     indicating that a new type of eligible nonsubscription 
     service or new subscription service on which sound recordings 
     are performed is or is about to become operational, for the 
     purpose of determining reasonable terms and rates of royalty 
     payments with respect to such new type of service for the 
     period beginning with the inception of such new type of 
     service and ending on the date on which the royalty rates and 
     terms for preexisting subscription digital audio transmission 
     services or preexisting satellite digital radio audio 
     services, as the case may be, most recently determined under 
     subparagraph (A) or (B) and chapter 8 expire, or such other 
     period as the parties may agree.'';
       (3) in paragraph (3), by striking ``or decision by the 
     Librarian of Congress'' and inserting ``, decision by the 
     Librarian of Congress, or determination by the Copyright 
     Royalty Judges''; and
       (4) in paragraph (4), by striking ``Librarian of Congress'' 
     each place it appears and inserting ``Copyright Royalty 
     Judges''.
       (d) Phonorecords of Nondramatic Musical Works.--Section 
     115(c)(3) is amended--
       (1) in subparagraph (A)(ii), by striking ``(F)'' and 
     inserting ``(E)'';
       (2) in subparagraph (B)--
       (A) by striking ``under this paragraph'' and inserting 
     ``under this section''; and
       (B) by striking ``subparagraphs (B) through (F)'' and 
     inserting ``this subparagraph and subparagraphs (B) through 
     (E)'';
       (3) in subparagraph (C)--
       (A) by amending the first sentence to read as follows: 
     ``Voluntary negotiation proceedings initiated pursuant to a 
     petition filed under section 804(a) for the purpose of 
     determining reasonable terms and rates of royalty payments 
     for the activities specified by this section shall cover the 
     period beginning with the effective date of such terms and 
     rates, but not earlier than January 1 of the second year 
     following the year in which the petition is filed, and ending 
     on the effective date of successor terms and rates, or such 
     other period as the parties may agree.''; and
       (B) in the third sentence, by striking ``Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges'';
       (4) in subparagraph (D)--
       (A) by amending the first sentence to read as follows: ``In 
     the absence of license agreements negotiated under 
     subparagraphs (B) and (C), the Copyright Royalty Judges shall 
     commence proceedings pursuant to chapter 8 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 specified in subparagraph (C) or 
     such other period as may be determined pursuant to 
     subparagraphs (B) and (C), or such other period as the 
     parties may agree.'';
       (B) in the third sentence, by striking ``copyright 
     arbitration royalty panel'' and inserting ``Copyright Royalty 
     Judges''; and

[[Page 3303]]

       (C) in the last sentence, by striking ``Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges'';
       (5) in subparagraph (E)--
       (A) in clause (i)--
       (i) in the first sentence, by striking ``the Librarian of 
     Congress'' and inserting ``a copyright arbitration royalty 
     panel, the Librarian of Congress, or the Copyright Royalty 
     Judges''; and
       (ii) in the second sentence, by striking ``(C), (D) or (F) 
     shall be given effect'' and inserting ``(C) or (D) shall be 
     given effect as to digital phonorecord deliveries''; and
       (B) in clause (ii)(I), by striking ``(C), (D) or (F)'' each 
     place it appears and inserting ``(C) or (D)''; and
       (6) by striking subparagraph (F) and redesignating 
     subparagraphs (G) through (L) as subparagraphs (F) through 
     (K), respectively.
       (e) Coin-Operated Phonorecord Players.--Section 116 is 
     amended--
       (1) in subsection (b), by amending paragraph (2) to read as 
     follows:
       ``(2) Chapter 8 proceeding.--Parties not subject to such a 
     negotiation may have the terms and rates and the division of 
     fees described in paragraph (1) determined in a proceeding in 
     accordance with the provisions of chapter 8.''; and
       (2) in subsection (c)--
       (A) in the subsection heading, by striking ``Copyright 
     Arbitration Royalty Panel Determinations'' and inserting 
     ``Determinations by Copyright Royalty Judges''; and
       (B) by striking ``a copyright arbitration royalty panel'' 
     and inserting ``the Copyright Royalty Judges''.
       (f) Use of Certain Works in Connection With Noncommercial 
     Broadcasting.--Section 118 is amended--
       (1) in subsection (b)--
       (A) in paragraph (1)--
       (i) in the first sentence, by striking ``Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges''; and
       (ii) by striking the second and third sentences;
       (B) in paragraph (2), by striking ``the Librarian of 
     Congress:'' and all that follows through the end of the 
     sentence and inserting ``a copyright arbitration royalty 
     panel, the Librarian of Congress, or the Copyright Royalty 
     Judge, if copies of such agreements are filed with the 
     Copyright Royalty Judges within 30 days of execution in 
     accordance with regulations that the Copyright Royalty Judges 
     shall issue.''; and
       (C) in paragraph (3)--
       (i) in the second sentence--

       (I) by striking ``copyright arbitration royalty panel'' and 
     inserting ``Copyright Royalty Judges''; and

       (II) by striking ``paragraph (2).'' and inserting 
     ``paragraph (2) or (3).'';

       (ii) in the last sentence, by striking ```Librarian of 
     Congress'' and inserting ``Copyright Royalty Judges''; and
       (iii) by striking ``(3) In'' and all that follows through 
     the end of the first sentence and inserting the following:
       ``(3) Voluntary negotiation proceedings initiated pursuant 
     to a petition filed under section 804(a) for the purpose of 
     determining a schedule of terms and rates of royalty payments 
     by public broadcasting entities to copyright owners in works 
     specified by this subsection and the proportionate division 
     of fees paid among various copyright owners shall cover the 
     5-year period beginning on January 1 of the second year 
     following the year in which the petition is filed. The 
     parties to each negotiation proceeding shall bear their own 
     costs.
       ``(4) In the absence of license agreements negotiated under 
     paragraph (2) or (3), the Copyright Royalty Judges shall, 
     pursuant to chapter 8, conduct a proceeding to determine and 
     publish in the Federal Register a schedule of rates and terms 
     which, subject to paragraph (2), shall be binding on all 
     owners of copyright in works specified by this subsection and 
     public broadcasting entities, regardless of whether such 
     copyright owners have submitted proposals to the Copyright 
     Royalty Judges.'';
       (2) by striking subsection (c) and redesignating 
     subsections (d) through (g) as subsections (c) through (f), 
     respectively;
       (3) in subsection (c), as so redesignated, in the matter 
     preceding paragraph (1)--
       (A) by striking ``(b)(2)'' and inserting ``(b)(2) or (3)'';
       (B) by striking ``(b)(3)'' and inserting ``(b)(4)''; and
       (C) by striking ``a copyright arbitration royalty panel'' 
     and inserting ``the Copyright Royalty Judges'';
       (4) in subsection (d), as so redesignated--
       (A) by striking ``in the Copyright Office'' and inserting 
     ``with the Copyright Royalty Judges''; and
       (B) by striking ``Register of Copyrights'' and inserting 
     ``Copyright Royalty Judges''; and
       (5) in subsection (f), as so redesignated, by striking 
     ``(d)'' and inserting ``(c)''.
       (g) Secondary Transmissions by Satellite Carriers.--Section 
     119(b) is amended--
       (1) in paragraph (3), by striking ``Librarian of Congress'' 
     and inserting ``Copyright Royalty Judges''; and
       (2) in paragraph (4)--
       (A) in subparagraph (A), by striking ``Librarian of 
     Congress'' each place it appears and inserting ``Copyright 
     Royalty Judges''; and
       (B) by amending subparagraphs (B) and (C) to read as 
     follows:
       ``(B) Determination of controversy; distributions.--After 
     the first day of August of each year, the Copyright Royalty 
     Judges shall determine whether there exists a controversy 
     concerning the distribution of royalty fees. If the Copyright 
     Royalty Judges determine that no such controversy exists, the 
     Librarian of Congress shall, after deducting reasonable 
     administrative costs under this paragraph, distribute such 
     fees to the copyright owners entitled to receive them, or to 
     their designated agents. If the Copyright Royalty Judges find 
     the existence of a controversy, the Copyright Royalty Judges 
     shall, pursuant to chapter 8 of this title, conduct a 
     proceeding to determine the distribution of royalty fees.
       ``(C) Withholding of fees during controversy.--During the 
     pendency of any proceeding under this subsection, the 
     Copyright Royalty Judges shall withhold from distribution an 
     amount sufficient to satisfy all claims with respect to which 
     a controversy exists, subject to any distributions made under 
     section 801(b)(3).''.
       (h) Digital Audio Recording Devices.--
       (1) Royalty payments.--Section 1004(a)(3) is amended by 
     striking ``Librarian of Congress'' each place it appears and 
     inserting ``Copyright Royalty Judges''.
       (2) Entitlement to royalty payments.--Section 1006(c) is 
     amended by striking ``Librarian of Congress shall convene a 
     copyright arbitration royalty panel which'' and inserting 
     ``Copyright Royalty Judges''.
       (3) Procedures for distributing royalty payments.--Section 
     1007 is amended--
       (A) in subsection (a), by amending paragraph (1) to read as 
     follows:
       ``(1) Filing of claims.--During the first 2 months of each 
     calendar year, every interested copyright party seeking to 
     receive royalty payments to which such party is entitled 
     under section 1006 shall file with the Copyright Royalty 
     Judges a claim for payments collected during the preceding 
     year in such form and manner as the Copyright Royalty Judges 
     shall prescribe by regulation.''; and
       (B) by amending subsections (b) and (c) to read as follows:
       ``(b) Distribution of Payments in the Absence of a 
     Dispute.--After the period established for the filing of 
     claims under subsection (a), in each year, the Copyright 
     Royalty Judges shall determine whether there exists a 
     controversy concerning the distribution of royalty payments 
     under section 1006(c). If the Copyright Royalty Judges 
     determine that no such controversy exists, the Librarian of 
     Congress shall, within 30 days after such determination, 
     authorize the distribution of the royalty payments as set 
     forth in the agreements regarding the distribution of royalty 
     payments entered into pursuant to subsection (a). The 
     Librarian of Congress shall, before such royalty payments are 
     distributed, deduct the reasonable administrative costs 
     incurred by the Librarian under this section.
       ``(c) Resolution of Disputes.--If the Copyright Royalty 
     Judges find the existence of a controversy, the Copyright 
     Royalty Judges shall, pursuant to chapter 8 of this title, 
     conduct a proceeding to determine the distribution of royalty 
     payments. During the pendency of such a proceeding, the 
     Copyright Royalty Judges shall withhold from distribution an 
     amount sufficient to satisfy all claims with respect to which 
     a controversy exists, but shall, to the extent feasible, 
     authorize the distribution of any amounts that are not in 
     controversy. The Librarian of Congress shall, before such 
     royalty payments are distributed, deduct the reasonable 
     administrative costs incurred by the Librarian under this 
     section.''.
       (4) Determination of certain disputes.--(A) Section 1010 is 
     amended to read as follows:

     ``Sec. 1010. Determination of certain disputes

       ``(a) Scope of Determination.--Before the date of first 
     distribution in the United States of a digital audio 
     recording device or a digital audio interface device, any 
     party manufacturing, importing, or distributing such device, 
     and any interested copyright party may mutually agree to 
     petition the Copyright Royalty Judges to determine whether 
     such device is subject to section 1002, or the basis on which 
     royalty payments for such device are to be made under section 
     1003.
       ``(b) Initiation of Proceedings.--The parties under 
     subsection (a) shall file the petition with the Copyright 
     Royalty Judges requesting the commencement of a proceeding. 
     Within 2 weeks after receiving such a petition, the Chief 
     Copyright Royalty Judge shall cause notice to be published in 
     the Federal Register of the initiation of the proceeding.
       ``(c) Stay of Judicial Proceedings.--Any civil action 
     brought under section 1009 against a party to a proceeding 
     under this section shall, on application of one of the 
     parties to the proceeding, be stayed until completion of the 
     proceeding.
       ``(d) Proceeding.--The Copyright Royalty Judges shall 
     conduct a proceeding with respect to the matter concerned, in 
     accordance with such procedures as the Copyright Royalty 
     Judges may adopt. The Copyright Royalty Judges shall act on 
     the basis of a fully

[[Page 3304]]

     documented written record. Any party to the proceeding may 
     submit relevant information and proposals to the Copyright 
     Royalty Judges. The parties to the proceeding shall each bear 
     their respective costs of participation.
       ``(e) Judicial Review.--Any determination of the Copyright 
     Royalty Judges under subsection (d) may be appealed, by a 
     party to the proceeding, in accordance with section 803(d) of 
     this title. The pendency of an appeal under this subsection 
     shall not stay the determination of the Copyright Royalty 
     Judges. If the court modifies the determination of the 
     Copyright Royalty Judges, the court shall have jurisdiction 
     to enter its own decision in accordance with its final 
     judgment. The court may further vacate the determination of 
     the Copyright Royalty Judges and remand the case for 
     proceedings as provided in this section.''.
       (B) The item relating to section 1010 in the table of 
     sections for chapter 10 is amended to read as follows:

``1010. Determination of certain disputes.''.

     SEC. 6. EFFECTIVE DATE AND TRANSITION PROVISIONS.

       (a) Effective Date.--This Act and the amendments made by 
     this Act shall take effect 6 months after the date of the 
     enactment of this Act, except that the Librarian of Congress 
     shall appoint interim Copyright Royalty Judges under section 
     802(d) of title 17, United States Code, as amended by this 
     Act, within 90 days after such date of enactment to carry out 
     the functions of the Copyright Royalty Judges under title 17, 
     United States Code, to the extent that Copyright Royalty 
     Judges provided for in section 801(a) of title 17, United 
     States Code, as amended by this Act, have not been appointed 
     before the end of that 90-day period.
       (b) Transition Provisions.--
       (1) In general.--Subject to paragraph (2), the amendments 
     made by this Act shall not affect any proceedings commenced, 
     petitions filed, or voluntary agreements entered into before 
     the enactment of this Act under the provisions of title 17, 
     United States Code, amended by this Act, and pending on such 
     date of enactment. Such proceedings shall continue, 
     determinations made in such proceedings, and appeals taken 
     therefrom, as if this Act had not been enacted, and shall 
     continue in effect until modified under title 17, United 
     States Code, as amended by this Act. Such petitions filed and 
     voluntary agreements entered into shall remain in effect as 
     if this Act had not been enacted.
       (2) Effective periods for certain ratemaking proceedings.--
     Notwithstanding paragraph (1), terms and rates in effect 
     under section 114(f)(2) or 112(e) of title 17, United States 
     Code, for new subscription services, eligible nonsubscription 
     services, and services exempt under section 114(d)(1)(C)(iv) 
     of such title for the period 2003 through 2004, and any rates 
     published in the Federal Register under the authority of the 
     Small Webcaster Settlement Act of 2002 for the years 2003 
     through 2004, shall be effective until the first applicable 
     effective date for successor terms and rates specified in 
     section 804(b)(2) or (3)(A) of title 17, United States Code, 
     or until such later date as the parties may agree. Any 
     proceeding commenced before the enactment of this Act 
     pursuant to section 114(f)(2) and chapter 8 of title 17, 
     United States Code, to adjust or determine such rates and 
     terms for periods following 2004 shall be terminated upon the 
     enactment of this Act and shall be null and void.
       (c) Existing Appropriations.--Any funds made available in 
     an appropriations Act before the date of the enactment of 
     this Act to carry out chapter 8 of title 17, United States 
     Code, shall be available to the extent necessary to carry out 
     this section.

  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. 1417.
  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, I rise in strong support of H.R. 1417, legislation to 
reform the rate-making and royalty distribution system for compulsory 
and statutory licenses.
  Mr. Speaker, I would like to take this time to thank the ranking 
member of the Committee on the Judiciary, the gentleman from Michigan 
(Mr. Conyers), as well as the gentleman from Texas (Mr. Smith) and the 
gentleman from California (Mr. Berman), the chairman and ranking 
minority member of the Subcommittee on the Courts, the Internet and 
Intellectual Property, for their support in making CARP reform a 
priority.
  By way of background, with the creation of three copyright compulsory 
licenses in 1976, Congress contemplated the need for an administrative 
body that would be responsible for adjusting the rates of the statutory 
licenses from time to time, as well as acting as the distributors of 
the royalties subject to these licenses.
  The resulting entity was the Copyright Royalty Tribunal or the CRT. 
In 1993, in response to criticisms voiced against the CRT, Congress 
reassessed the rate-making and royalty distribution system and created 
the current system, the Copyright Royalty Arbitration Panel, otherwise 
known as CARPs.
  Among other things, H.R. 1417 addresses the uniform complaints that 
the CARP decisions are unpredictable and inconsistent by changing the 
structure from ad hoc arbitration panels to three permanent copyright 
royalty judges. To justify the need for these full-time judges, as well 
as to alleviate the overwhelming workloads at given periods of time, 
the bill staggers the timing at which the three various statutory 
licenses can be heard.
  The bill also addresses the complaint that the process is 
unnecessarily expensive by eliminating the costs of arbitration upon 
private parties. It does so by creating a specific process designed to 
give small claimants a more balanced ability to participate. The bill 
discourages persons or entities from disrupting the process at the 11th 
hour by requiring potential participants to show that they have a 
significant interest in the proceedings. In furtherance of marketplace 
negotiations, the measure establishes a cooling-off period during which 
time parties are to focus on reaching their own agreements.
  Finally, Mr. Speaker, the substitute before us incorporates certain 
noncontroversial amendments written to accommodate legitimate concerns 
that evolve after our committee reported the bill out.
  Mr. Speaker, H.R. 1417 was painstakingly negotiated among the various 
congressional, executive, and industry stakeholders. We worked in a 
bipartisan manner and developed a consensus product that will 
effectively address an arcane, but important, manner. I urge its 
adoption.
  Mr. Speaker, I reserve the balance of my time.
  Mr. BERMAN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in strong support of H.R. 1417, and I ask all of 
my colleagues to support what I think is fundamentally noncontroversial 
legislation.
  H.R. 1417 has been subjected to an exhaustive review process. It 
emerged from a hearing before the Subcommittee on the Courts, the 
Internet, and Intellectual Property during the 107th Congress and from 
a series of open roundtable discussions convened at the U.S. Copyright 
Office. Early drafts were shaped by several rounds of written comments 
from all affected stakeholders.
  After introduction of H.R. 1417 early this Congress, the subcommittee 
held another hearing. The subcommittee then reported by voice vote a 
substantially refined amendment, and the full Committee on the 
Judiciary made further significant revisions before also reporting its 
amendment by voice vote. Thus, the version of H.R. 1417 before us today 
has been forged through an extensive and open process.
  Both the chairman of the Committee on the Judiciary, the gentleman 
from Wisconsin (Mr. Sensenbrenner), and the chairman of the 
Subcommittee on the Courts, the Internet, and Intellectual Property, 
the gentleman from Texas (Mr. Smith), are to be commended for pushing 
H.R. 1417 forward. They have devoted significant time and energy to 
crafting both the substance of this bill and organizing the widespread 
support behind it. I thank both of them for working so closely with me 
and my staff, Alec French, in drafting this bill and its various 
iterations.

[[Page 3305]]

  The chairmen are also to be commended for ensuring that the bill 
remedies the procedural effects of the CARP process without straining 
into substantive copyright law issues that would surely doom its 
prospects for passage.
  H.R. 1417 focuses on a narrow, but complex, goal. It significantly 
reforms the system for copyright arbitration royalty panels. The U.S. 
copyright law contains a half dozen statutory licenses that require 
copyright owners to make their works available to certain users under 
government-set rates and terms. For instance, the section 114 statutory 
license allows Webcasters to perform sound recordings under government-
set rates and terms. The royalty rates and terms are established by 
CARPs, which also determine the appropriate distribution of royalties 
among copyright owners.
  There is widespread agreement among copyright owners and users alike 
that the CARP process is broken. The costs involved are often so high 
that parties cannot either afford to participate or find that the costs 
outweigh any potential royalties or efficiencies. The decisions often 
take too long to issue and thus create uncertainty and confusion among 
licensers and licensees alike. Finally, even when decisions do issue, 
they are often overturned or modified, are inconsistent with 
precedents, and cannot be effectively implemented until corresponding 
rule-makings are completed.

                              {time}  1100

  H.R. 1417 will go a long way to remedying the defects of the CARP 
process. While the changes are too copious to list in total, I would 
like to highlight a few of the improvements made by the bill.
  The primary flaw of the CARPs is they are conducted by private 
arbitrators who often have no prior experience in conducting a 
statutory license rate-setting or distribution, much less any prior 
familiarity with the substantive law or industry economics involved. 
Because the CARP arbitrators have neither the experience nor authority 
to do so, the Copyright Office is often called on to issue regulations 
resolving substantive legal issues that arise during CARPs, and all too 
often, as we saw in the 2002 webcasting CARP, the Copyright Office is 
called upon to overturn a CARP decision.
  H.R. 1417 replaces the part-time arbitrators with a panel of three 
full-time copyright royalty judges. These three CRJs will be appointed 
by the Librarian of Congress to serve staggered 6-year terms. Each 
panel will bring at least 6 years of experience to every rate-setting 
and distribution proceeding. Further, the Librarian is required to 
appoint CRJs with a breadth of experience in copyright law, economics 
and adjudications.
  Mr. Speaker, rather than list a number of the key changes in this 
bill, I reserve the balance of my time.
  Mr. SENSENBRENNER. Mr. Speaker, I yield such time as he may consume 
to the gentleman from Texas (Mr. Smith), the chairman of the 
subcommittee.
  Mr. SMITH of Texas. Mr. Speaker, I thank the gentleman from 
Wisconsin, the chairman of the Committee on the Judiciary, for yielding 
time.
  Mr. Speaker, our country has long worked to support and protect 
copyright holders to ensure they receive fair compensation for their 
creative works.
  Over the last 20 years, Congress has attempted to develop the 
appropriate mechanism to govern royalties; that is, how to distribute 
royalties to those who create and how to adjust royalties when 
necessary. In other words, we have tried to find a compromise that 
allows for the fair distribution of royalties when two parties cannot 
agree on the value of a creative work.
  When I say ``fair distribution of royalties'' that could mean many 
things to different parties, particularly the creators of copyrighted 
works themselves. It is a major reason why this issue is again before 
Congress.
  Congress established the first entity to deal with this in 1976. Ten 
years ago, that system was abolished to create the current Copyright 
Arbitration Royalty Panel, or CARP, system.
  This legislation that I authored addresses the main problem: 
frivolous royalty claims, which is a growing trend, as well as 
decisions made by the copyright panel that are unpredictable and 
inconsistent.
  Much like another intellectual property rights bill that reforms the 
Patent and Trademark Office, this legislation is critical to the 
entertainment industry and a growing economy. It is of great importance 
to artists, songwriters, music publishers and webcasters.
  For example, take the case of a songwriter and a webcaster. If a 
songwriter cannot reach an agreement with a webcaster about the value 
of a song in the marketplace, the matter is brought to the copyright 
royalty and distribution system. The private parties involved, of 
course, pay for the process.
  What happens now is the songwriter or the webcaster, or both, often 
are not left with much of a royalty payment because the process is too 
lengthy and too costly. If the songwriter cannot make enough on his 
creations to support himself, then he will no longer be able to create, 
and our economy and our society will be the loser.
  This is the central reason why we are here today: to ensure that the 
songwriter has the incentive to create and the webcaster has the 
benefit of distributing enjoyable musical creations.
  Unfortunately, American songwriters and webcasters today are caught 
up in a royalty system that is anything but fair. The current 
proceedings to establish royalty rates are long, laborious and costly. 
They harm our economy and take a tremendous toll on the businesses and 
persons involved. Congress must reform this broken system, which is 
exactly what this bill does.
  I urge my colleagues to support a balanced and fair process that 
will, for example, help songwriters and bring a little more melody into 
the lives of the American people.
  Mr. BERMAN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I am not going to detail all the different provisions 
contained in this bill. There are many and they are important. They 
deal with a problem in the past of setting rates retroactively and how 
under these reforms rates will be set prospectively, and they deal with 
the integration of the Copyright Office and its role in providing 
advice and opinions on matters of law into the process.
  They create mechanisms for small participants to participate at much 
less cost than they now participate through all paper rate-setting 
proceedings, make some changes in evidentiary rules and discovery 
rules, and at the same time, they enable the copyright owners to 
negotiate voluntary agreements rather than go through the whole full 
blown rate-setting and distribution proceedings.
  I do want to call the attention of the body to one particular 
provision which I think is very important. We rationalize in this bill, 
H.R. 1417, the ability of the parties to engage in voluntary 
negotiations in the context of the Section 115 statutory license for 
reproductions of musical compositions. The Section 115 license 
currently provides copyright owners and users a limited antitrust 
exemption to collectively negotiate rates and terms for Digital 
Phonorecord Deliveries of musical compositions. With the acquiescence 
of the Justice Department, H.R. 1417 extends this narrow antitrust 
exemption to all of Section 115, so that it now covers similar 
negotiations for mechanical reproductions of musical compositions, as 
well as the digital deliveries.
  Mr. Speaker, I rise in strong support of H.R. 1417. I ask all my 
colleagues to support this non-controversial legislation.
  H.R. 1417 has received exhaustive process. It emerged from a hearing 
before the Intellectual Property Subcommittee during the 107th 
Congress, and from series of open roundtable discussions convened at 
the U.S. Copyright Office. Early drafts were shaped by several rounds 
of written comments from all affected stakeholders. After introduction 
of H.R. 1417 early this Congress, the subcommittee held another 
hearing. The subcommittee then reported by voice vote a substantially 
refined amendment, and the full Judiciary Committee made further 
significant revisions before also reporting its amendment by voice 
vote. Thus, the version of H.R. 1417 before us today has

[[Page 3306]]

been forged through an extensive and open process.
  Both the chairman of the Judiciary Committee and the chairman of the 
Intellectual Property Subcommittee are to be commended for pushing H.R. 
1417 forward. They have devoted significant time and energy to crafting 
both the substance of this bill and the widespread support behind it. I 
thank them both for working so closely with me in drafting this bill 
and its various iterations.
  The chairmen are also to be commended for ensuring that the bill 
remedies the procedural defects of the CARP process without straying 
into substantive copyright law issues that would surely doom its 
prospects for passage.
  H.R. 1417 focuses on a narrow but complex goal: It significantly 
reforms the system for Copyright Arbitration Royalty Panels--or CARP.
  U.S. copyright law contains a half-dozen statutory licenses that 
require copyright owners to make their works available to certain users 
under Government-set rates and terms. For instance, the section 114 
statutory license allows webcasters to perform sound recordings under 
Government-set rates and terms. The royalty rates and terms are 
established by CARPs, which also determine the appropriate distribution 
of royalties among copyright owners.
  There is widespread agreement among copyright owners and users alike 
that the CARP process is broken. The costs involved are often so high 
that parties either cannot afford to participate, or find that the 
costs outweigh any potential royalties or efficiencies. The decisions 
often take too long to issue, and thus create uncertainty and confusion 
among licensors and licensees alike. Finally, even when decisions do 
issue, they are often overturned or modified, are inconsistent with 
precedents, and cannot be effectively implemented until corresponding 
rule-makings are completed.
  H.R. 1417 will go a long way to remedying the defects of the CARP 
process. While the changes are too copious to list in total, I would 
like to highlight a few of the improvements made by this bill.
  The primary flaw with CARPs is that they are conducted by private 
arbitrators who often have no prior experience in conducting a 
statutory license rate-setting or distribution, much less any prior 
familiarity with the substantive law or industry economics involved. 
Because the CARP arbitrators have neither the expertise nor authority 
to do so, the Copyright Office is often called on to issue regulations 
resolving substantive legal issue that arise during CARPs. And all too 
often, as we saw in the 2002 webcasting CARP, the Copyright Office is 
called upon to overturn a CARP decision.
  H.R. 1417 replaces the part-time arbitrators with a panel of three 
full-time Copyright Royalty Judges. These three CRJs will be appointed 
by the Librarian of Congress to serve staggered 6-year terms. Thus, 
each panel will bring at least 6 years of collective experience to 
every rate-setting and distribution proceeding. Further, the Librarian 
is required to appoint CRJs with a breadth of experience in copyright 
law, economics, and adjudications.
  The bill contains a number of other provisions that further 
consolidate and strength the authority of the CRJs. For instance, the 
bill gives CRJs continuing jurisdiction to ensure that they have the 
ability ``to respond to unforeseen circumstances that preclude the 
proper effectuation of the determination.''
  The continuity, experience, and enhanced authority of the CRJs should 
lead to decisions that are quicker, more consistent, more likely to 
withstand appeal, and in the long run, far less expensive to secure.
  While the new CRJs will have requisite authority and expertise to 
make good decisions, H.R. 1417 ensures they will be able to draw on, 
and benefit from, from the substantial expertise of the Copyright 
Office in this area. H.R. 1417 requires that the Librarian consult with 
the Register of Copyrights when appointing CRJs. Furthermore, the bill 
requires the CRJs to solicit the written opinion of the Copyright 
Office on novel questions of law, and allows the CRJs to consult--on 
the record--with the Register of Copyrights on all matters other than 
questions of fact.
  H.R. 1417 addresses another major flaw of the current CARP process--
the fact that the rates for several statutory licenses are set 
retroactively. The webcasting CARP concluded in 2002 demonstrates the 
problems with retroactive rate-setting. When rates were set in 2002 for 
webcasting that occurred between 1998 and 2002, many small webcasters 
found their viability threatened because they had not set aside enough 
money to defray the royalty obligations they had already incurred.
  H.R. 1417 addresses this problem through a series of interrelated 
changes to the various statutory licenses. H.R. 1417 ensures that all 
rates and terms for statutory licenses will be set prospectively, and 
eliminates the possibility that a time period covered by a statutory 
license will commence before the establishment of rates and terms.
  H.R. 1417 also addresses a variety of concerns about how CARPs gather 
evidence, conduct hearings, determine participation, requires parties 
to present their cases, and treat negotiated settlements. In addressing 
these concerns, H.R. 1417 hews closely to the overall objective of 
promoting expeditious, well-reasoned, and widely-supported outcomes.
  The bill substantially improves the CARP process from the perspective 
of small participants. H.R. 1417 allows CRJs to conduct an all-paper, 
rate-setting proceeding, which in many circumstances, should 
substantially reduce the barriers to participation for small copyright 
owners and users. H.R. 1417 also creates an expedited small-claims 
process to facilitate the distribution of royalties to small claimants.
  The bill substantially alters some evidentiary rules, while retaining 
others used by previous CARPs. It allows admission of hearsay ``to the 
extent deemed appropriate'' by the CRJs, rather than according to the 
Federal Rules of Evidence, and allows CRJs to issue subpoenas for 
relevant and material information. It directs the CRJs to conduct 
discovery conferences for the purpose of setting a schedule for 
completing discovery.
  The bill retains the discovery rules currently used in CARP 
distribution proceedings because distribution participants expressed 
general satisfaction with those rules. In rate-setting proceedings, the 
amendment limits discovery to relevant and material information, and 
allows the CRJs to deny discovery for good cause. The circumstances 
that constitute ``good cause'' include where the discovery requests are 
unreasonably cumulative or duplicative, easily obtainable from another 
source, the burden or expense outweighs its likely benefit, and other 
circumstances.
  H.R. 1417 clarifies the rules regarding participation on CARP 
proceedings. It also ensures that only parties who have fully 
participated in the proceeding, and are bound by its determination, 
will have the right to appeal that determination.
  H.R. 1417 also retains the ability of copyright owners and users, 
under a number of statutory licenses, to negotiate voluntary agreements 
rather than suffer through full-blown rate-setting and distribution 
proceedings. While H.R. 1417 maintains the ability of various statutory 
licensors and licensees to agree to out-of-cycle rate determinations 
through voluntary agreements adopted by the CRJs, it allows the CRJs to 
reject such out-of-cycle determinations if workload concerns so merit.
  H.R. 1417 also rationalizes the ability to engage in voluntary 
negotiations in the context of the section 115 statutory license for 
reproductions of musical compositions. The section 115 license 
currently provides copyright owners and users a limited antitrust 
exemption to collectively negotiate rates and terms for Digital 
Phonorecord Deliveries of musical compositions. With the acquiescence 
of the Justice Department, H.R. 1417 extends this narrow antitrust 
exemption to all of section 115, so that it now covers similar 
negotiations for mechanical reproductions of musical compositions.
  A comprehensive description of this seventy-page bill would take more 
time than I am allotted, so I will leave off there. However, I will 
note that adoption of the CARP reform bill is not the end of the story 
for reforming the CARP system.
  Unlike the current CARP system, the bill requires appropriated funds 
to pay for the new CRJ process. Since Congress has decided the public 
interest is served by the creation of compulsory licenses in certain 
instances, it is entirely appropriate that Congress should provide the 
funds necessary to make the licenses work. CARP costs should not 
dissipate the meager Government-set royalties received by copyright 
owners, nor make participation by licensees uneconomical. However, if 
adequate appropriations are not secured, this legislation will only 
create further chaos. In this time of record budget deficits, it will 
take a concerted effort by all interested parties to ensure sufficient 
appropriations are forthcoming.
  In conclusion, Mr. Speaker, I think H.R. 1417 will substantially 
improve the CARP process, and I ask my colleagues to support it.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise in support of this 
legislation, H.R. 1417, the Copyright Royalty and Distribution Reform 
Act. In September 2003, I offered my support during a full Judiciary 
Committee markup hearing. Mr. Smith, Mr. Berman, and Ranking Member 
Conyers are to be commended for their hard work in crafting this 
legislation.

[[Page 3307]]

  The bill would replace the existing administrative procedures within 
the U.S. Copyright Office that determine copyright royalty rates and 
the distribution of related royalties under various compulsory 
licenses.
  Under the Copyright Royalty Tribunal Reform Act of 1993, the 
Librarian of Congress has the authority to convene Copyright 
Arbitration Royalty Panels, or ``CARPs,'' to resolve failed private 
negotiations between parties that fail to establish rates or to 
distribute royalties regarding the commercial use of movies, music and 
other specified copyrighted works.
  For years, the CARP system has been criticized for rendering 
unpredictable and inconsistent decisions, employing arbitrators lacking 
the expertise to render sound decisions, and for being unnecessarily 
expensive.
  H.R. 1417 is a reasonable bill to cure these concerns and is based on 
the input and recommendations of Government and industry experts.
  H.R. 1417 addresses the problem of lack of arbitrator expertise by 
appointing a ``Copyright Judge'' to preside over the new process. The 
Copyright Judge will be appointed by the Librarian of Congress, have 
full adjudicatory responsibility, and have the authority to make 
rulings on both the law and rates. The Copyright Judge will select two 
professional staff members with knowledge of economics, business, and 
finance. These staff qualifications will also improve the quality of 
the decisions rendered.
  H.R. 1417 redefines the role of the Copyright Office. Presently, acts 
as an intake agency answering initial case intake questions, as well as 
an appellate court for CARP decisions by advising the Librarian on 
cases. This dual role forces the Copyright Office to often decline to 
answer threshold intake questions for fear of having to review its own 
decisions at the appellate stage. Under H.R. 1417, the Copyright 
Office's appellate responsibilities will be removed and the Office will 
only act in an administrative and advisory capacity by counseling the 
Copyright Judge on substantive issues as requested.
  For small claimants who participate in the CARP process, the 
substantial expenses are practically preclusive. H.R. 1417 contains 
provisions to make the process more accessible. First, claimants must 
declare an ``amount in controversy'' during a distribution 
determination phase of the proceedings. If the dollar figure is $500 or 
less, the claimant will be assigned to the small claims process which 
is a less expensive, ``all-paper'' claim resolution method.
  Another provision of H.R. 1417, that benefits both large and small 
claimants requires the filing of a ``notice of intent to participate'' 
in either a rate-making or distribution proceeding. This notice 
requirement will discourage entities from disrupting the process by 
participating at the last minute. If a party failure to file in a 
timely manner or fails to pay the required fee, they will be an 
exclusion of either written or oral participation in that 
determination. Those exempted as small claimants would not be affected 
by this requirement.
  H.R. contains several procedural changes to make the claim resolution 
process more convenient for the parties. H.R. 1417 expands the duration 
of the discovery phase from 45 to 60 days to give parties more time to 
file their claims. Additionally, the 180-day time-frame for completing 
the CARP hearing process is amended to require parties complete the 
hearing phase of a rate-making or distribution determination in six 
months. The Copyright Judge, at their discretion, could extend this 
period up to a maximum of 6 additional months.
  Mr. Speaker, H.R. 1417 will make changes to the CARP system that 
promise to benefit the parties as well as the agents of the copyright 
adjudication system. I support H.R. 1417, and I urge my colleagues to 
do likewise.
  Mr. CONYERS. Mr. Speaker, I rise in support of this legislation. In 
the past 2 years, the Committee has held two hearings on concerns with 
the CARP, the system that sets royalty rates for copyrighted content. 
People on both sides, the owners and buyers, agree that the current 
system needs changes. Based on that, subcommittee Chairman Smith, 
subcommittee Ranking Member Berman, and I introduced legislation, H.R. 
1417, that would make substantial procedural changes.
  We heard the current system is costly because the copyright owners 
and users have to pay for the arbitrators. Because copyright law 
subjects copyright owners and users to a compulsory process, we believe 
the law should not place this additional financial burden on them. Our 
bill creates three Copyright Royalty Judges who would be paid from 
appropriated funds to set royalty rates and distribute royalty fees.
  Another complaint was that the CARP does not have adequate rules on 
how to address hearsay evidence. This bill explicitly requires that the 
Judges treat hearsay evidence in the same manner that it is treated in 
Federal court. This will bring uniformity to the proceedings for 
parties on both sides of royalty disputes.
  This bill also alters the terms for which certain royalty rates are 
in effect. Rates that are determined by the Judges will be in effect 
for 5 years. This should create some predictability and uniformity for 
those who rely on the Judges' determinations.
  Finally, parties on both sides argued that the substantive standards 
that the CARP uses to set royalty rates should be changed somehow. In 
an effort to reach a compromise and pass a bill that does not alter any 
substantive rights, this bill changes only the procedure for rate 
settings and distributions.
  There will be a substitute amendment to the bill that was worked out 
by the majority, minority, and all groups interested in the CARP 
process. I hope we can continue to work on resolving any outstanding 
issues and moving this bill through the other body.
  I urge my colleagues to vote ``yes'' on this bill as amended.
  Mr. BERMAN. Mr. Speaker, seeing no other speakers seeking recognition 
on my side of the aisle, I yield back the balance of my time.
  Mr. SENSENBRENNER. Mr. Speaker, I have no further requests for time, 
and I yield back the balance of my time as well.
  The SPEAKER pro tempore (Mr. Shaw). 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. 1417, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.
  Mr. SENSENBRENNER. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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