[House Report 104-554]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-554
_______________________________________________________________________

 
                  COPYRIGHT CLARIFICATIONS ACT OF 1996
_______________________________________________________________________


  May 6, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______


   Mr. Moorhead, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1861]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 1861) to make technical corrections in the Satellite Home 
Viewer Act of 1994 and other provisions of title 17, United 
States Code, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
The Amendment in the Nature of a Substitute......................     1
Purpose and Summary..............................................     6
Background and Need for Legislation..............................     6
Hearings.........................................................     6
Committee Consideration..........................................     6
Committee Oversight Findings.....................................     7
Committee on Government Reform and Oversight.....................     7
New Budget Authority and Tax Expenditures........................     7
Congressional Budget Office Estimate.............................     7
Inflationary Impact Statement....................................    10
Section-by-Section Analysis and Discussion.......................    10
Agency Views.....................................................    20
Changes in Existing Law..........................................    22

  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Copyright Clarifications Act of 
1996''.

SEC. 2. SATELLITE HOME VIEWER ACT.

  The Satellite Home Viewer Act of 1994 (Public Law 103-369) is amended 
as follows:
          (1) Section 2(3)(A) is amended to read as follows:
                  ``(A) in clause (i) by striking `12 cents' and 
                inserting `17.5 cents per subscriber in the case of 
                superstations that as retransmitted by the satellite 
                carrier include any program which, if delivered by any 
                cable system in the United States, would be subject to 
                the syndicated exclusivity rules of the Federal 
                Communications Commission, and 14 cents per subscriber 
                in the case of superstations that are syndex-proof as 
                defined in section 258.2 of title 37, Code of Federal 
                Regulations; and' ''.
          (2) Section 2(4) is amended to read as follows:
          ``(4) Subsection (c) is amended--
                  ``(A) in paragraph (1)--
                          ``(i) by striking `until December 31, 1992,';
                          ``(ii) by striking `(2), (3) or (4)' and 
                        inserting `(2) or (3)'; and
                          ``(iii) by striking the second sentence;
                  ``(B) in paragraph (2)--
                          ``(i) in subparagraph (A) by striking `July 
                        1, 1991' and inserting `July 1, 1996'; and
                          ``(ii) in subparagraph (D) by striking 
                        `December 31, 1994' and inserting `December 31, 
                        1999, or in accordance with the terms of the 
                        agreement, whichever is later'; and
                  ``(C) in paragraph (3)--
                          ``(i) in subparagraph (A) by striking 
                        `December 31, 1991' and inserting `January 1, 
                        1997';
                          ``(ii) by amending subparagraph (B) to read 
                        as follows:
                  `(B) Establishment of royalty fees.--In determining 
                royalty fees under this paragraph, the copyright 
                arbitration royalty panel appointed under chapter 8 
                shall establish fees for the retransmission of network 
                stations and superstations that most clearly represent 
                the fair market value of secondary transmissions. In 
                determining the fair market value, the panel shall base 
                its decision on economic, competitive, and programming 
                information presented by the parties, including--
                          `(i) the competitive environment in which 
                        such programming is distributed, the cost of 
                        similar signals in similar private and 
                        compulsory license marketplaces, and any 
                        special features and conditions of the 
                        retransmission marketplace;
                          `(ii) the economic impact of such fees on 
                        copyright owners and satellite carriers; and
                          `(iii) the impact on the continued 
                        availability of secondary transmissions to the 
                        public.'; and
                          ``(iii) in subparagraph (C), by inserting `or 
                        July 1, 1997, whichever is later' after 
                        `section 802(g)'.''.
          (3) Section 2(5)(A) is amended to read as follows:
                  ``(A) in paragraph (5)(C) by striking `the date of 
                the enactment of the Satellite Home Viewer Act of 1988' 
                and inserting `November 16, 1988'; and''.

SEC. 3. COPYRIGHT IN RESTORED WORKS.

  Section 104A of title 17, United States Code, is amended as follows:
          (1) Subsection (d)(3)(A) is amended to read as follows:
          ``(3) Existing derivative works.--(A) In the case of a 
        derivative work that is based upon a restored work and is 
        created--
                  ``(i) before the date of the enactment of the Uruguay 
                Round Agreements Act, if the source country of the 
                restored work is an eligible country on such date, or
                  ``(ii) before the date of adherence or proclamation, 
                if the source country of the restored work is not an 
                eligible country on such date of enactment, a reliance 
                party may continue to exploit that derivative work for 
                the duration of the restored copyright if the reliance 
                party pays to the owner of the restored copyright 
                reasonable compensation for conduct which would be 
                subject to a remedy for infringement but for the 
                provisions of this paragraph.''.
          (2) Subsection (e)(1)(B)(ii) is amended by striking the last 
        sentence.
          (3) Subsection (h)(2) is amended to read as follows:
          ``(2) The `date of restoration' of a restored copyright is 
        the later of--
                  ``(A) January 1, 1996, the date on which the 
                Agreement on Trade-Related Aspects of Intellectual 
                Property referred to in section 101(d)(15) of the 
                Uruguay Round Agreements Act enters into force with 
                respect to the United States, if the source country of 
                the restored work is a nation adhering to the Berne 
                Convention or a WTO member country on such date, or
                  ``(B) the date of adherence or proclamation, in the 
                case of any other source country of the restored 
                work.''.
          (4) Subsection (h)(3) is amended to read as follows:
          ``(3) The term `eligible country' means a nation, other than 
        the United States, that, after the date of the enactment of the 
        Uruguay Round Agreements Act--
                  ``(A) becomes a WTO member,
                  ``(B) is or becomes a member of the Berne Convention, 
                or
                  ``(C) becomes subject to a proclamation under 
                subsection (g).''.

SEC. 4. LICENSES FOR NONEXEMPT SUBSCRIPTION TRANSMISSIONS.

  Section 114(f) of title 17, United States Code, is amended--
          (1) in paragraph (1), by inserting ``, or ending 30 days 
        after the Librarian issues and publishes in the Federal 
        Register an order adopting or rejecting the report of the 
        copyright arbitration royalty panel, if such panel is 
        convened'' after ``December 31, 2000''; and
          (2) in paragraph (2), by striking ``and publish in the 
        Federal Register''.

SEC. 5. ROYALTY PAYABLE UNDER COMPULSORY LICENSE.

  Section 115(c)(3)(D) of title 17, United States Code, is amended by 
striking ``and publish in the Federal Register''.

SEC. 6. NEGOTIATED LICENSE FOR JUKEBOXES.

  Section 116 of title 17, United States Code, is amended--
          (1) by amending subsection (b)(2) to read as follows:
          ``(2) Arbitration.--Parties not subject to such a negotiation 
        may determine the result of the negotiation by arbitration in 
        accordance with the provisions of chapter 8.''; and
          (2) by adding at the end the following new subsection:
  ``(d) Definitions.--As used in this section, the following terms mean 
the following:
          ``(1) A `coin-operated phonorecord player' is a machine or 
        device that--
                  ``(A) is employed solely for the performance of 
                nondramatic musical works by means of phonorecords upon 
                being activated by the insertion of coins, currency, 
                tokens, or other monetary units or their equivalent;
                  ``(B) is located in an establishment making no direct 
                or indirect charge for admission;
                  ``(C) is accompanied by a list which is comprised of 
                the titles of all the musical works available for 
                performance on it, and is affixed to the phonorecord 
                player or posted in the establishment in a prominent 
                position where it can be readily examined by the 
                public; and
                  ``(D) affords a choice of works available for 
                performance and permits the choice to be made by the 
                patrons of the establishment in which it is located.
          ``(2) An `operator' is any person who, alone or jointly with 
        others--
                  ``(A) owns a coin-operated phonorecord player;
                  ``(B) has the power to make a coin-operated 
                phonorecord player available for placement in an 
                establishment for purposes of public performance; or
                  ``(C) has the power to exercise primary control over 
                the selection of the musical works made available for 
                public performance on a coin-operated phonorecord 
                player.''.

SEC. 7. LIMITATIONS ON EXCLUSIVE RIGHTS; COMPUTER PROGRAMS.

  Section 117 of title 17, United States Code, is amended as follows:
  (1) Strike ``Notwithstanding'' and insert the following:
  ``(a) Making of Additional Copy or Adaptation by Owner of Copy.--
Notwithstanding''.
  (2) Strike ``Any exact'' and insert the following:
  ``(b) Lease, Sale, or Other Transfer of Additional Copy or 
Adaptation.--Any exact''.
  (3) Add at the end the following:
  ``(c) Machine Maintenance or Repair.--Notwithstanding the provisions 
of section 106, it is not an infringement for the owner or lessee of a 
machine to make or authorize the making of a copy of a computer program 
if such copy is made solely by virtue of the activation of a machine 
that lawfully contains an authorized copy of the computer program, for 
purposes only of maintenance or repair of that machine, provided that--
          ``(1) such new copy is used in no other manner and is 
        destroyed immediately after the maintenance or repair is 
        completed, and
          ``(2) with respect to any computer program or part thereof 
        that is not necessary for that machine to be activated, such 
        program or part thereof is not accessed or used other than to 
        make such new copy by virtue of the activation of the machine.
  ``(d) Definitions.--For purposes of this section--
          ``(1) the term `maintenance' of a machine means servicing the 
        machine in order to make it work in accordance with its 
        original specifications and any changes to those specifications 
        authorized for that machine; and
          ``(2) the term `repair' of a machine means restoring it to 
        the state of working in accordance with its original 
        specifications and any changes to those specifications 
        authorized for that machine.''.

SEC. 8. PUBLIC BROADCASTING COMPULSORY LICENSE.

  Section 118 of title 17, United States Code, is amended as follows:
          (1) Subsection (b) is amended by striking paragraph (1) and 
        redesignating paragraphs (2) and (3) as paragraphs (1) and (2), 
        respectively.
          (2) Subsection (b)(2) (as redesignated by paragraph (1) of 
        this section) is amended by striking ``(2)'' each place it 
        appears and inserting ``(1)''.
          (3) Subsection (e) is amended to read as follows:
  ``(e)(1) Except as expressly provided in this subsection, this 
section shall not apply to works other than those specified in 
subsection (b).
  ``(2) Owners of copyright in nondramatic literary works and public 
broadcasting entities may, during the course of voluntary negotiations, 
agree among themselves, respectively, as to the terms and rates of 
royalty payments without liability under the antitrust laws. Any such 
terms and rates of royalty payments shall be effective upon being filed 
in the Copyright Office, in accordance with regulations that the 
Register of Copyrights shall prescribe.''.

SEC. 9. REGISTRATION AND INFRINGEMENT ACTIONS.

  Section 411(b)(1) of title 17, United States Code, is amended to read 
as follows:
          ``(1) serves notice upon the infringer, not less than 48 
        hours before such fixation, identifying the work and the 
        specific time and source of its first transmission, and 
        declaring an intention to secure copyright in the work; and''.

SEC. 10. COPYRIGHT OFFICE FEES.

  (a) Fee Increases.--Section 708(b) of title 17, United States Code, 
is amended to read as follows:
  ``(b) In calendar year 1996 and in any subsequent calendar year, the 
Register of Copyrights, by regulation, may increase the fees specified 
in subsection (a) in the following manner:
          ``(1) The Register shall conduct a study of the costs 
        incurred by the Copyright Office for the registration of 
        claims, the recordation of documents, and the provision of 
        services. The study shall also consider the timing of any 
        increase in fees and the authority to use such fees consistent 
        with the budget.
          ``(2) The Register shall have discretion to increase fees up 
        to the reasonable costs incurred by the Copyright Office for 
        the services described in paragraph (1) plus a reasonable 
        inflation adjustment to account for any estimated increase in 
        costs.
          ``(3) Any newly established fee based on paragraph (2) shall 
        be rounded off to the nearest dollar, or for a fee less than 
        $12, rounded off to the nearest 50 cents.
          ``(4) The fees shall be fair and equitable and give due 
        consideration to the objectives of the copyright system.
          ``(5) If upon completion of the study, the Register 
        determines that the fees should be increased, the Register 
        shall prepare a proposed fee schedule and submit the schedule 
        with the accompanying economic analysis to the Congress. The 
        fees proposed by the Register may be instituted after the end 
        of 120 days after the schedule is submitted to the Congress 
        unless, within that 120-day period, a law is enacted stating in 
        substance that the Congress does not approve the schedule.''.
  (b) Deposit of Fees.--Section 708(d) of such title is amended to read 
as follows:
  ``(d)(1) Except as provided in paragraph (2), all fees received under 
this section shall be deposited by the Register of Copyrights in the 
Treasury of the United States and shall be credited to the 
appropriations for necessary expenses of the Copyright Office. Such 
fees that are collected shall remain available until expended. The 
Register may, in accordance with regulations that he or she shall 
prescribe, refund any sum paid by mistake or in excess of the fee 
required by this section.
  ``(2) In the case of fees deposited against future services, the 
Register of Copyrights shall request the Secretary of the Treasury to 
invest in interest-bearing securities in the United States Treasury any 
portion of the fees that, as determined by the Register, is not 
required to meet current deposit account demands. Funds shall be 
invested in securities that permit funds to be available to the 
Copyright Office at all times if they are determined to be necessary to 
meet current deposit account demands. Such investments shall be in 
public debt securities with maturities suitable to the needs of the 
fund, as determined by the Register of Copyrights, and bearing interest 
at rates determined by the Secretary of the Treasury, taking into 
consideration current market yields on outstanding marketable 
obligations of the United States of comparable maturities.
  ``(3) The income on such investments shall be deposited in the 
Treasury of the United States and shall be credited to the 
appropriations for necessary expenses of the Copyright Office.''.

SEC. 11. COPYRIGHT ARBITRATION ROYALTY PANELS.

  (a) Establishment and Purpose.--Section 801 of title 17, United 
States Code, is amended--
          (1) in subsection (b)(1) by striking ``and 116'' in the first 
        sentence and inserting ``116, and 119'';
          (2) in subsection (c) by inserting after ``panel'' at the end 
        of the sentence the following:
``, including--
          ``(1) authorizing the distribution of those royalty fees 
        collected under sections 111, 119, and 1005 that the Librarian 
        has found are not subject to controversy; and
          ``(2) accepting or rejecting royalty claims filed under 
        sections 111, 119, and 1007 on the basis of timeliness or the 
        failure to establish the basis for a claim''; and
          (3) by amending subsection (d) to read as follows:
  ``(d) Support and Reimbursement of Arbitration Panels.--The Librarian 
of Congress, upon the recommendation of the Register of Copyrights, 
shall provide the copyright arbitration royalty panels with the 
necessary administrative services related to proceedings under this 
chapter, and shall reimburse the arbitrators at such intervals and in 
such manner as the Librarian shall provide by regulation. Each such 
arbitrator is an independent contractor acting on behalf of the United 
States, and shall be paid pursuant to a signed agreement between the 
Library of Congress and the arbitrator. Payments to the arbitrators 
shall be considered costs incurred by the Library of Congress and the 
Copyright Office for purposes of section 802(h)(1).''.
  (b) Proceedings.--Section 802(h)(1) of title 17, United States Code, 
is amended--
          (1) by amending the heading to read ``Deduction of costs of 
        library of congress and copyright office from royalty fees.--
        '';
          (2) in the first sentence by inserting ``to support 
        distribution proceedings'' after ``Copyright Office''; and
          (3) by amending the third sentence to read as follows: ``In 
        ratemaking proceedings, the Librarian of Congress and the 
        Copyright Office may assess their reasonable costs directly to 
        the parties to the most recent relevant arbitration proceeding, 
        50 percent of the costs to the parties who would receive 
        royalties from the royalty rate adopted in the proceeding and 
        50 percent of the costs to the parties who would pay the 
        royalty rate so adopted, subject to the discretion of the 
        arbitrators to assess costs under subsection (c).''.

SEC. 12. DIGITAL AUDIO RECORDING DEVICES AND MEDIA.

  Section 1007(b) of title 17, United States Code, is amended by 
striking ``Within 30 days after'' in the first sentence and inserting 
``After''.

SEC. 13. TREATMENT OF PRE-1978 PUBLICATION OF SOUND RECORDINGS.

  Section 303 of title 17, United States Code, is amended--
          (1) by striking ``Copyright'' and inserting ``(a) 
        Copyright''; and
          (2) by adding at the end the following:
  ``(b) The distribution before January 1, 1978, of a phonorecord shall 
not for any purpose constitute a publication of the musical work 
embodied therein.''.

SEC. 14. CONFORMING AMENDMENT.

  Paragraph (5) of section 4 of the Digital Performance Right in Sound 
Recordings Act of 1995 is redesignated as paragraph (4).

SEC. 15. EFFECTIVE DATES.

  (a) In General.--Except as provided in subsection (b), the amendments 
made by this Act shall take effect on the date of the enactment of this 
Act.
  (b) Satellite Home Viewer Act.--The amendments made by section 1 
shall be effective as if enacted as part of the Satellite Home Viewer 
Act of 1994 (Public Law 103-369).

                          Purpose and Summary

    H.R. 1861 accomplishes many purposes. Some of its 
provisions will assist the U.S. Copyright Office in carrying 
out its duties, including giving the Office the ability to set 
reasonable fees for basic services, subject to congressional 
approval. Others correct or clarify the language in several 
recent amendments to the law so that Congress' original intent 
can be better achieved. Two provisions resolve problems created 
by recent judicial interpretations of provisions of the 
copyright law. One of these amendments makes clear that the 
distribution of musical disks or tapes before 1978 did not 
publish the musical compositions embodied in the disks or 
tapes. The other amendment ensures that independent service 
organizations have the ability to activate a computer to 
maintain and repair its hardware components without being held 
liable by a court for copyright infringement due to that 
activation alone.

                Background and Need for the Legislation

    The Copyright Act was last generally revised in 1976, in 
response to the many technological changes that had occurred 
since the enactment of the 1909 Act. Since 1976, Congress 
regularly has had to address new issues, especially those 
raised by new technologies or new methods of exploitation. Each 
session of Congress has produced at least one major amendment 
to the Copyright Act.
    The U.S. Copyright Office is the agency charged with 
primary responsibility for implementing the provisions of the 
Copyright Act. In early 1995, the Copyright Office submitted to 
the Subcommittee on Courts and Intellectual Property a number 
of recommendations to clarify or correct the following: the 
Copyright Fees and Technical Amendments Act of 1989, the Audio 
Home Recording Act of 1992, the Copyright Royalty Tribunal 
Reform Act of 1993, the Satellite Home Viewer Act of 1994, and 
the Digital Performance Right in Sound Recordings Act of 1995. 
On June 15, 1995, H.R. 1861 was introduced.

                                Hearings

    The Committee's Subcommittee on Courts and Intellectual 
Property held a hearing on H.R. 1861 on November 9, 1995 in 
Room 2237 Rayburn House Office Building. Testimony was received 
from Ms. Marybeth Peters, Register of Copyrights, United States 
Copyright Office, The Library of Congress (Serial #32).

                        Committee Consideration

    On December 13, 1995, the Subcommittee held a markup on 
H.R. 1861. The Subcommittee adopted, by voice vote, an 
amendment in the nature of a substitute to H.R. 1861 offered by 
Chairman Moorhead, and favorably reported, by voice vote, a 
quorum being present, the amendment in the nature of a 
substitute to the full Committee. On March 12, 1996, the 
Committee adopted, by voice vote, an amendment offered by Mr. 
Moorhead to the amendment in the nature of a substitute, and 
favorably reported, by voice vote, a quorum being present, the 
amendment in the nature of a substitute, as amended, to the 
Committee of the Whole House on the State of the Union.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(C)(3) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 1861, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 17, 1996.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary, House of Representatives, 
        Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1861, the 
Copyright Clarifications Act of 1996.
    Enactment of H.R. 1861 would affect direct spending and 
receipts; therefore, pay-as-you-go procedures would apply to 
the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).
    Enclosure.

               congressional budget office cost estimate

    1. Bill number: H.R. 1861.
    2. Bill title: Copyright Clarification Act of 1996.
    3. Bill status: As ordered reported by the House Committee 
on the Judiciary on March 12, 1996.
    4. Bill purpose: H.R. 1861 would amend the United States 
Copyright Act to make numerous technical corrections and 
clarifications. Specifically, the bill would:
          eliminate certain reporting requirements;
          enable the Librarian of Congress to distribute 
        uncontested royalties without convening a Copyright 
        Arbitration Royalty Panel (CARP);
          authorize the Librarian of Congress to deduct 
        expenses for the CARP from the royalties collected and 
        distributed by the government;
          clarify the arbitration proceedings with regard to 
        jukebox copyright licenses;
          shorten the amount of time in which transmitters of 
        live broadcasts must serve notice that they wish to 
        copyright a broadcast from 10 days to 48 hours; and
          enable the owner or lessee of a computer to duplicate 
        a copyrighted computer program in order to protect the 
        program if the computer needs to be repaired or 
        maintained.
    In addition, the bill would authorize the Register of 
Copyrights to adjust the current Copyright Office fees in order 
to reflect the fair cost of registering claims and providing 
services. The bill specifies that the fees would be credited as 
offsetting collections to the appropriations account.
    5. Estimated Cost to the Federal Government: Under current 
law, the Copyright Office has the authority to collect and 
spend user fees; H.R. 1861 would enable the office to increase 
the amount of such fees to cover its expenses, thus eliminating 
the need for an annual appropriation starting in 1998. (The 
1996 appropriation--net of offsetting collections--is $11 
million.) Because H.R. 1861 would enable the Copyright Office 
to collect and spend the fees without further authorization, 
the net impact of the fees on direct spending would be roughly 
zero.
    H.R. 1861 also would also authorize the Librarian of 
Congress to collect and distribute fees for rate making. These 
fees would increase federal receipts and outlays by about $1 
million each fiscal year 1997-2000.

----------------------------------------------------------------------------------------------------------------
                                                                  1996      1997      1998      1999      2000  
----------------------------------------------------------------------------------------------------------------
Changes to direct spending and revenues:                                                                        
    Estimated budget authority................................  ........         1         1         1         1
    Estimated outlays.........................................  ........         1         0         1         1
    Estimated revenues........................................  ........         1         1         1         1
----------------------------------------------------------------------------------------------------------------

    The costs of this bill fall within budget function 370.
    6. Basis of estimate.

                           mandatory spending

    Copyright Office Fees.--Under current law, the Copyright 
office is authorized to collect and spend about $20 million in 
fees each year. In fiscal year 1996 the Copyright Office 
received an additional $11 million in appropriations for total 
net budget authority of $31 million. H.R. 1861 would authorize 
the Copyright Office to set fees according to the fair cost of 
registering copyright claims and providing services. CBO 
estimates that the Copyright Office would conduct a study on 
fees in 1997 and would become fully fee-funded in fiscal year 
1998, eliminating the need for appropriations.
    Under current law, the Copyright Office assesses most of 
its fees on copyright registration claims. CBO expects that as 
the office begins to raise fees the number of copyright 
registrations will begin to fall. As a result of the decrease 
in demand and the expiration of a certain fee in 1998, CBO 
expects the Copyright Office to collect slightly less in fiscal 
years 1998-2000 than the $31 million in budget authority 
appropriated in 1996. CBO estimates that the office would raise 
an additional $8 million in fees for total budget authority of 
$28 million. Although the Copyright Office could collect and 
spend the fees without further authorization, we would expect 
the appropriations acts to specify in advance the amount of 
fees that could be spent in any fiscal year.
    Changes to Royalty Fees.--H.R. 1861 would change certain 
statutory royalty payments for carriage of network signals by 
satellite carriers. These royalty payments are collected by the 
federal government as governmental receipts and are distributed 
without appropriation as direct spending. Because H.R. 1861 
would raise the statutory rates to the amounts currently in 
effect as the result of a 1992 arbitration ruling, CBO 
estimates that the bill would cause no change in direct 
spending or receipts.
    Under current law, the Copyright Office convenes a 
Copyright Arbitration Royalty Panel to arbitrate disputes 
between copyright owners and users. The members of the CARP, 
who are not government employees, bill the parties to the 
arbitration directly for their expenses. H.R. 1861 would allow 
the Librarian of Congress to deduct the expenses of the CARP 
for distribution proceedings from the royalties held in escrow 
by the government. CBO estimates that this provision would have 
no budgetary impact because it would not affect the amount of 
royalties collected or the amount of money disbursed by the 
government.
    The Copyright Office also convenes a CARP to set royalty 
rates. H.R. 1861 would authorize the Librarian of Congress to 
collect fees from parties to a ratemaking proceeding and 
distribute those fees to members of the CARP to cover their 
expenses. Based on information from the Copyright Office, CBO 
estimates that the Librarian would collect and distribute fees 
of about $1 million each year. These fees would increase 
federal receipts and outlays by about $1 million each year. The 
net budgetary impact of such fees would be roughly zero over 
time.
    H.R. 1861 would require the Librarian of Congress to 
convene a CARP to establish royalty rates if copyright owners 
and jukebox operators fail to negotiate an agreement on rates. 
If a CARP were to be convened when the current licensing 
agreement expires in 1999, the office would likely collect and 
distribute disputed royalties of about $7 million a year. Based 
on information from the Copyright Office, CBO expects that the 
jukebox owners will successfully negotiate another agreement 
with copyright owners in 1999 and that the royalty payments 
will not be collected and distributed by the office. Therefore, 
we do not expect that this provision would affect direct 
spending and receipts.

                   Spending Subject to Appropriations

    CBO estimates that eliminating certain reporting 
requirements would save the Copyright Office about $150,000 in 
each of fiscal years 1997-1998. Because additional fee income 
would be available to cover the office's expenses, net outlays 
from appropriations would decline from $11 million in 1996 to 
close to zero in 1998 and subsequent years.
    CBO estimates that the other provisions of the bill would 
have no budgetary impact.
    7. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending or receipts through 1998. CBO estimates that enactment 
of H.R. 1861 would affect direct spending and receipts, as 
shown in the following table.

------------------------------------------------------------------------
                                              1996      1997      1998  
------------------------------------------------------------------------
Change in outlays.........................         0         1         0
Change in receipts........................         0         1         1
------------------------------------------------------------------------

    8. Estimated impact on State, local, and tribal 
governments: H.R. 1861 contains no intergovernmental mandates 
as defined in Public Law 104-4 and would impose no direct costs 
on state, local, or tribal governments.
    9. Estimated impact on the private sector: This bill would 
impose no new private sector mandates that would exceed the 
$100 million threshold specified in Public Law 104-4. The 
increases in copyright fees authorized by the bill would total 
less than $10 million a year
    10. Previous CBO estimate: None.
    11. Estimate prepared by: Federal Cost Estimate: Rachel 
Forward State and Local Government Impact: Karen McVey; Private 
Sector Impact: Matt Eyles.
    12. Estimate approved by: Robert A. Sunshine, (for Paul N. 
Van de Water, Assistant Director for Budget Analysis).

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that H.R. 
1861 will have no significant inflationary impact on prices and 
costs in the national economy.

                      Section-by-Section Analysis

Section 1--Short title

    This section sets forth the title of the Act as the 
``Copyright Clarifications Act of 1996.''

Section 2--Satellite Home Viewer Act

    The Satellite Home Viewer Act of 1994 contained certain 
drafting errors which were the result of amending the Copyright 
Act without taking into account changes made by the Copyright 
Royalty Tribunal Reform Act of 1993.
    Subsection (1) clarifies the royalty rates that are paid by 
satellite carriers for retransmission of network and 
superstation broadcast signals to satellite dish owners for 
private home viewing. Congress intended that the rates adopted 
in the law should be the same as the rates that were set by 
arbitration in 1992. However, the Satellite Home Viewer Act of 
1994 reversed the rates; the current law states that 17.5 cents 
should be paid for signals not subject to the FCC's syndicated 
exclusivity blackout rules, and 14 cents per subscriber for 
signals subject to such rules. Subsection (1) corrects that 
reversal.
    Subsection (2) corrects the section numbers, and 
accompanying references, to take into account the changes made 
to title 17 by the Copyright Royalty Tribunal Reform Act of 
1993.
    Subsection (3) deletes reference to the effective date of 
the Satellite Home Viewer Act of 1988 to avoid any confusion 
that might result from two Acts of the same name, and inserts 
the effective date of the Satellite Home Viewer Act of 1988, 
which was November 16, 1988.

Section 3--Copyright in restored works

    In 1994, a new Section 104A was created to restore 
copyright protection to certain preexisting works from other 
World Trade Organization (``WTO'') and Berne Convention member 
countries that had fallen into the public domain in the United 
States. During the drafting process, some inadvertent errors 
were made. These errors alter the intended meaning of the 
statute or create accidental ambiguities. In order to avoid 
constitutional challenges and unnecessary litigation, the 
amendments to Section 104A in H.R. 1861 correct the errors.
            1. Provision for already-created derivative works
    The first part of the amendment to section 104A deals with 
establishing special treatment for already-created derivative 
works. The problem with this subsection was created by a word 
change in the bill during technical and conforming revisions. 
This change inadvertently altered the effect of the subsection 
and in large part nullified its purpose. The amendment in H.R. 
1861 substitutes the word ``restored'' for the word 
``derivative'' in two places in subsection (3), entitled 
``Existing Derivative Works,'' in order to reverse that 
mistaken change, and inserts the word ``derivative'' in one 
other place in that subsection in order to ensure clarity.
    In enacting section 104A, Congress considered the fact that 
restoring copyright in works that are currently in the public 
domain creates a potential problem: people may have used these 
works as the basis for new derivative works, such as motion 
pictures made from novels. At the time the new derivative work 
was created, the use of the underlying work was completely 
lawful, since it was in the public domain. Once copyright in 
the underlying work is restored, however, the continued use of 
the derivative work without the consent of the owner of the 
copyright in the underlying work would constitute copyright 
infringement. See Stewart v. Abend, 495 U.S. 207 (1990).
    Witnesses at the hearings on the bill testified that 
preventing the creators of derivative works from making use of 
those works might raise Constitutional problems under both the 
Copyright Clause and the Takings Clause of the Fifth Amendment. 
Accordingly, Congress included a special provision for 
derivative works based on restored works where the derivative 
work was created before the date of restoration, allowing the 
owner of the derivative work to continue to use it even after 
the one-year sell-off period provided to all reliance parties, 
upon payment of reasonable compensation to the copyright owner 
of the restored work. See SAA at paragraph B.1.c.(3), 1994 
U.S.C.C.A.N. 4040, 4292.
    In a drafting error, the phrase ``if the source country of 
the restored work is an eligible country'' was changed to ``if 
the source country of the derivative work is an eligible 
country.'' Since ``eligible country'' is defined in the statute 
to exclude the United States, the effect of this word change 
was to exclude all U.S. derivative works from the benefit of 
this provision--the major constituency of works that the 
provision was meant to protect. In other words, U.S. derivative 
works based on now-restored foreign works that were in the 
public domain at the time the derivative works were created can 
no longer legally be exploited in this country without the 
consent of the owner of the foreign work. The amendment 
corrects that unintended inequity.
            2. Publication of list of notices of intent
    The second part of the amendment deletes the requirement 
for the Copyright Office to publish in the Federal Register a 
cumulative annual list of notices of intent to enforce restored 
copyrights filed with the Office. The Office is already 
required to publish a list of such notices every four months, 
and publication of a cumulative annual list would be expensive 
and duplicative.
            3. Date of copyright restoration
    The third part of the amendment adds the phrase ``January 
1, 1996'' to the statute's definition of ``date of 
restoration'' to make explicit the date on which these foreign 
copyrights were restored.
    Despite Congressional intent that the restoration date be 
January 1, 1996, the statutory language is potentially 
ambiguous on this point. The ``date of restoration'' is defined 
as the date on which the Trade Related Aspects of Intellectual 
Property Agreement (``TRIPs'') entered into force with respect 
to the United States for works from countries that are members 
of the Berne Convention or the WTO on that date. The question 
of when the TRIPs agreement entered into force is subject to 
interpretation. TRIPs is part of the overall WTO agreement, 
which generally entered into force on January 1, 1995. However, 
the WTO agreement allowed a one-year grace period before 
compliance with TRIPs itself was required. The TRIPs portion of 
the agreement can therefore be considered to have its own 
effective date of January 1, 1996.
    In enacting new section 104A, Congress intended a 1996 date 
for the restoration of foreign copyrights. The statute itself 
requires the Copyright Office to issue regulations governing 
restored copyrights no later than 90 days before the TRIPs 
agreement entered into force with respect to the United States. 
Sec. 104A(e)(1)(D)(i). If the TRIPs effective date (and 
therefore the restoration date) were January 1, 1995, the 
statute did not become law until 3 weeks prior to that date, 
making it impossible for the Copyright Office to comply with a 
deadline of 90 days in advance.
    The Statement of Administrative Action (``SAA''), approved 
by Congress and the statute's legislative history both confirm 
this interpretation. The SAA unambiguously states that the 
foreign copyrights will be restored on the date ``when the 
TRIPs Agreement's obligations take effect for the United 
States.'' The Joint Report on the Senate version makes this 
explicit, stating that the ``bill would automatically restore 
copyright protection for qualifying works * * * one year after 
the WTO comes into being.'' Joint Report of the Committee on 
Finance, Committee on Agriculture, Nutrition and Forestry, and 
Committee on Governmental Affairs of the United States Senate 
to accompany the Uruguay Round Agreements Act, S. 2467, S. Rep. 
No. 412, 103d Cong., 2d Sess. 225 (1994).
    Since enactment of the TRIPs Agreement, the Copyright 
Office and the White House have attempted to resolve any 
ambiguity. The Copyright Office published a notice of policy 
decision concluding that January 1, 1996 is the date of 
restoration. 60 Fed. Reg. 7793 (February 9, 1995). The 
President issued a proclamation declaring January 1, 1996 to be 
the date on which the TRIPs obligations take effect for the 
United States. Proclamation 6780 of March 23, 1995, 60 Fed. 
Reg. 15845 (1995).
    Nevertheless, some commentators have concluded that the 
language of the statute requires a restoration date of January 
1, 1995. See, e.g., William F. Patry, Copyright and the GATT: 
An Interpretation and Legislative History of the Uruguay Round 
Agreements Act 31-36 (1995). Apart from the inconsistency with 
legislative intent, this reading causes problems. First, since 
the Copyright Office did not (and could not administratively) 
start to accept notices of intent to enforce restored 
copyrights until January 1,1996, it would effectively reduce 
the window of opportunity to file such notices from two years 
to one. Second, it would affect which foreign works would be 
restored, and therefore made unavailable for free use by the 
American public.
            4. Definition of ``eligible country'' for purposes of 
                    determining who qualifies as ``reliance party''
    Finally, the definition of ``eligible country'' creates a 
potential unintended problem when read in the context of the 
definition of who qualifies as a ``reliance party.'' The 
amendment revises the definition of ``eligible country'' to 
resolve this problem.
    A ``reliance party'' is given certain limited rights to 
continue exploiting restored works. In order to qualify as a 
reliance party, the time period of when one engaged in acts 
with respect to the restored work is critical. Ordinarily, 
these acts must have begun prior to the date of the statute's 
enactment (December 8, 1994). If the source country of the work 
has become an ``eligible country'' after that date, however, 
the acts must have begun prior to the date it became an 
eligible country. The problem is that ``eligible country'' is 
defined as ``a nation, other than the United States, that is a 
WTO member country, adheres to the Berne Convention, or is 
subject to a presidential proclamation.'' In the context of 
determining whether someone is a reliance party, this could be 
read to mean that the party's acts must have begun prior to the 
date that the source country became an eligible country by 
joining the Berne Convention. Some countries joined the Berne 
Convention when it was established in 1886; others joined at 
subsequent points between that date and December 8, 1994. 
Obviously, no one will be able to qualify as a reliance party 
if his or her use of a work had to begin before 1886.
    The amendment therefore expands the definition of 
``eligible country'' to clarify the relevant dates of the 
events leading to eligibility. The reference to a country that 
``is a WTO member'' is changed to refer to a country that 
``after the date of enactment of this Act, becomes a WTO 
member''; the reference to a country that ``adheres to the 
Berne Convention'' is changed to refer to a country that ``on 
such date [of enactment] is, or after such date becomes, a 
member of the Berne Convention''; and the relevant presidential 
proclamation is defined as one that takes place ``after such 
date.''

Section 4.--Licenses for nonexempt subscription transmissions

    Subsection (1) is intended to avoid the possibility of a 
gap in the effective dates of the royalty rates established in 
1996 and 2000-2001 for the public performance of sound 
recordings by nonexempt subscription digital transmission 
services. The Digital Performance Right in Sound Recordings Act 
of 1995 directed that the rates established in 1996 are to 
expire on December 31, 2000. New rates are to be established 
during 2000. However, it is possible that the work of the 
copyright arbitration royalty panel (``CARP'') and of the 
Librarian of Congress in reviewing the CARP's report will not 
be concluded by December 31, 2000, thereby creating a period in 
which no rates apply. Subsection (1) avoids this result by 
stating that the effective date of the rates set in 1996 last 
until December 31, 2000, or until 30 days after the Librarian 
has published in the Federal Register his or her decision to 
adopt or reject the CARP's rate adjustment decision. Resorting 
to this second option will be unnecessary if a CARP is not 
convened, or if the CARP and the Librarian conclude their 
functions before December 31, 2000.
    Subsection (2) deletes the phrase from Section 114(f) which 
authorizes a copyright arbitration royalty panel to publish its 
decision in the Federal Register. This was an inadvertent 
mistake, since only government agencies may publish in the 
Federal Register. Any decision of a CARP will be published by 
the Librarian of Congress pursuant to the provisions of chapter 
8 of the Copyright Act.

Section 5.--Royalty payable under compulsory license

    This section deletes the phrase from Section 115(c) which 
authorizes a copyright arbitration royalty panel to publish its 
decision in the Federal Register. Since only agencies may 
publish in the Federal Register, the decision of the CARP will 
be published by the Librarian of Congress pursuant to the 
provisions of chapter 8 of the Copyright Act.

Section 6.--Negotiated license for jukeboxes

    The Copyright Royalty Tribunal Reform Act of 1993 
eliminated the old Sec. 116 jukebox compulsory license and 
replaced it with the Sec. 116A negotiated jukebox license 
adopted in the Berne Convention implementing legislation in 
1988. This produced two unintended results. It eliminated the 
definitions of a ``jukebox'' and a ``jukebox operator,'' and it 
sanctioned the possibility of an arbitration proceeding which 
is not a copyright arbitration royalty panel (CARP) 
arbitration. This section restores the original definitions as 
they appeared in the Copyright Act in 1978, and it clarifies 
that any jukebox negotiated license which requires arbitration 
is to be a CARP proceeding.

Section 7. Limitations on exclusive rights; computer programs

    This legislation amends Section 117 to ensure that 
independent service organizations do not inadvertently become 
liable for copyright infringement merely because they have 
turned on a machine in order to service its hardware 
components.
    When a computer is activated, that is when it is turned on, 
certain software or parts thereof (generally the machine's 
operating system software) is automatically copied into the 
machine's random access memory, or ``RAM''. During the course 
of activating the computer, different parts of the operating 
system may reside in the RAM at different times because the 
operating system is sometimes larger than the capacity of the 
RAM. Because such copying has been held to constitute a 
``reproduction'' under Sec. 106 of the Copyright Act,1 a 
person who activated the machine without the authorization of 
the copyright owner of that software could be liable for 
copyright infringement. This legislation has the narrow and 
specific intent of relieving independent service providers, 
persons unaffiliated with either the owner or lessee of the 
machine, from liability under the Copyright Act when, solely by 
virtue of activating the machine in which a computer program 
resides, they inadvertently cause an unauthorized copy of that 
program to be made.
---------------------------------------------------------------------------
    \1\ See MAI Sys. Corp. v. Peak Computer, 991 F.2d 511 (9th Cir. 
1993), cert. dismissed, 114 S.Ct. 671 (1994).
---------------------------------------------------------------------------
    The legislation is narrowly crafted to achieve the 
foregoing objective without prejudicing the rights of copyright 
owners of computer software. Thus, for example, the amendment 
does not relieve from liability persons who make unauthorized 
adaptations, modifications or other changes to the software. 
The amendment also does not relieve from liability persons who 
make any unauthorized copies of software other than those 
caused solely by activation of the machine.
    The operative provisions, and limitations, are in two new 
subsections to Section 117: subsections (c) and (d).
    Subsection (c) delineates the specific circumstances under 
which a reproduction of a computer program would not constitute 
infringement of copyright. The goal is to maintain undiminished 
copyright protection afforded under the Copyright Act to 
authors of computer programs, while making it possible for 
third parties to perform servicing of the hardware. It states 
that it is not an infringement of copyright for the owner or 
lessee of a machine to make or authorize the making of a copy 
of a computer program provided that the following conditions 
are met:
    First, subsection (c) itself makes clear that the copy of 
the computer program must have been made solely and 
automatically by virtue of turning on the machine in order to 
perform repairs or maintenance on the hardware components of 
the machine. Moreover, the copy of the computer program which 
is reproduced as a direct and sole consequence of activation 
must be an authorized copy that has lawfully been installed in 
the machine. Authorized copies of computer programs are only 
those copies that have been made available with the consent of 
the copyright owner. Also, the acts performed by the service 
provider must be authorized by the owner or lessee of the 
machine.
    Second, in accordance with paragraph (c)(1), the resulting 
copy may not be used by the person performing repairs or 
maintenance of the hardware components of the machine in any 
manner other than to effectuate the repair or maintenance of 
the machine. Once these tasks are completed, the copy of the 
program must be destroyed, which generally will happen 
automatically once the machine is turned off.
    Third, as is made clear in paragraph (c)(2), the amendment 
is not intended to diminish the rights of copyright owners of 
those computer programs, or parts thereof, that also may be 
loaded into RAM when the computer is turned on, but which did 
not need to be so loaded in order for the machine to be turned 
on. A hardware manufacturer or software developer might, for 
example, provide diagnostic and utility programs that load into 
RAM along with or as part of the operating system, even though 
they market those programs as separate products--either as 
freestanding programs, or pursuant to separate licensing 
agreements. Indeed, a password or other technical access device 
is sometimes required for the owner of the machine to be able 
to gain access to such programs. In other cases, it is not the 
hardware or software developer that has arranged for certain 
programs automatically to be reproduced when the machine is 
turned on; rather, the owner of the machine may have configured 
its computer to load certain applications programs into RAM as 
part of the boot-up process (such as a word processing program 
on a personal computer). This amendment is not intended to 
derogate from the rights of the copyright owners of such 
programs. In order to avoid inadvertent copyright infringement, 
these programs need to be covered by subsection (c), but only 
to the extent that they are automatically reproduced when the 
machine is turned on. This legislation is not intended to 
legitimize unauthorized access to and use of such programs just 
because they happen to be resident in the machine itself and 
are reproduced with or as part of the operating system when the 
machine is turned on. According to paragraph (c)(2), if such a 
program is accessed or used without the authorization of the 
copyright owner, the initial reproduction of the program shall 
not be deemed exempt from infringement under subsection (c).
    Subsection (d) defines two terms not previously defined by 
the Copyright Act. Paragraph (1) defines the term 
``maintenance.'' These acts can include, but are not limited 
to, cleaning the machine, tightening connections, installing 
new components such as memory chips, circuit boards and hard 
disks, checking the proper functioning of these components, and 
other similar acts.
     Paragraph (2) of subsection (d) defines the term 
``repair.'' Acts of repairing the hardware include, but are not 
limited to, replacing worn or defective components such as 
memory chips, circuit boards and hard disks, correcting the 
improper installation of new components, and other similar 
acts.
     Both paragraphs (1) and (2) of subsection (d) are subject 
to the same limitations, which are intended to clarify that 
activating a machine in order to perform maintenance or repair 
does not constitute infringement under subsection (c) if the 
maintenance or repair is undertaken to make the machine work in 
accordance with the parameters specified for such a machine and 
its component parts. Because technological improvements may 
lead customers to upgrade their machines, the language of both 
definitions authorizes service providers to maintain those 
components of the hardware that have been installed since the 
time the machine was originally acquired, or to install new 
components. But their acts shall be deemed non-infringing under 
subsection (c) only if the components being serviced have been 
lawfully acquired and installed. Finally, the terms 
``maintenance'' and ``repair'' do not include unauthorized 
adaptations, modifications, error corrections or any other 
changes to any software which may be in the machine being 
serviced.

Section 8.--Public broadcasting compulsory license

    This section eliminates an inconsistency created by the 
Copyright Royalty Tribunal Reform Act of 1993. This Act directs 
the Librarian of Congress to collect royalty rate proposals 
from public broadcasters and copyright owners and then to 
``proceed on the basis of the proposals.'' Formerly, the 
Copyright Royalty Tribunal received such proposals and then 
conducted a proceeding. The Tribunal Reform Act replaced the 
Tribunal's name with that of the Librarian's each place it 
appeared in Sec. 118. Ratemaking authority to decide 
conflicting rate proposals, however, is within the jurisdiction 
of the copyright arbitration royalty panels, and therefore the 
Librarian cannot ``proceed'' with the rate proposals. This 
section therefore eliminates the provision.
     However, the Committee notes 37 C.F.R. 251.63(b) of the 
Copyright Office's rules which permits the Librarian to adopt 
uncontested, settled rate proposals. No action taken under this 
Act is intended to adversely affect the operation of that rule.
     This section also eliminates as obsolete subsection (e)(2) 
of Sec. 118, which required the Register of Copyrights to 
submit a report to Congress in 1980 as to the extent of 
voluntarily negotiated public broadcasting licenses.

Section 9.--Registration and infringement actions

    This section amends section 411(b) of the Copyright Act, 
which covers works that are being transmitted ``live'' at the 
same time that they are being fixed in tangible form for the 
first time. Currently, copyright owners must give the would-be 
infringer at least a 10-day advance notice that a copyright is 
being claimed in the work. When notice is given, an injunction 
can be obtained to prevent the unauthorized use of the work.
    This provision has proven problematic when applied to a 
number of sporting events, especially elimination play-offs. In 
many instances the teams and the times of the games are not 
known 10 days in advance. Therefore, this notice provision is 
amended to provide for notice of not less than 48 hours.

Section 10.--Copyright Office fees

    The Copyright Fees and Technical Amendments Act of 1989 
established a fee schedule for Copyright Office services which 
could be adjusted in 1995 and every fifth year thereafter 
according to changes in the Consumer Price Index.
    Actual experience with the fee adjustment mechanism, 
however, has highlighted certain problems that underscore the 
need for reform. Because of the relatively low inflation of the 
early 1990s, the change in the Consumer Price Index was not 
great enough to justify incurring the costs associated with 
publicizing and administering a new fee schedule. Therefore, 
the Copyright Office did not publish a new fee schedule in 
1995, and is required by the current statute to wait until 2000 
to modify its fees.
    However, it is not clear from the current wording of the 
law whether, if the Copyright Office were to adopt a new fee 
schedule in 2000, it could take into account the inflation of 
the entire ten-year period since the last fee schedule was 
adopted, 1990-2000, or whether it could only take into account 
the inflation of the period 1995-2000. The fee schedule adopted 
in 1989 is not based on a cost recovery model. Consequently, 
merely adjusting fees based on rises in the Consumer Price 
Index will not solve all of the problems. Therefore, subsection 
(a) gives the Register the authority to set the basic fees.
    Subsection (a) allows fees to be raised beginning in 1996 
and in any subsequent year. Based on a study to determine the 
costs incurred by the Copyright Office, the Register may 
increase fees up to the reasonable costs incurred by the 
Copyright Office plus a reasonable inflation adjustment to 
account for future increases in costs. The fees shall be 
rounded off to the nearest dollar, or, if the fee is less than 
$12, to the nearest half-dollar. The fees must be fair and 
equitable and give due consideration to the objectives of the 
copyright system. This allows the Register to decide that fees 
may be less than the costs of the services provided, if that 
furthers the objectives of the copyright system.
    If the Register wants to increase fees, he or she shall 
submit the proposed fee schedule with the study and its 
economic analysis to Congress. The fees proposed by the 
Register may be instituted after the end of 120 days after the 
schedule is submitted to the Congress unless, within that 120-
day period, a law is enacted stating in substance that the 
Congress does not approve the schedule.
    Subsection (b) of this section gives the Register of 
Copyrights the discretion to invest funds from the Copyright 
Office's prepaid fees (``Deposit Accounts'') that are not 
needed to meet current demands for services in interest-bearing 
securities in the United States Treasury, and to use the income 
from such investments for necessary expenses of the Copyright 
Office. The Copyright Office is currently engaged in developing 
its new electronic registration, recordation and deposit 
system, CORDS (Copyright Office Registration, Recordation and 
Deposit System), and the Committee expects that the Copyright 
Office will, where feasible, use the interest on deposit 
account funds for the development and operation of CORDS.

Section 11.--Copyright arbitration royalty panels

    Subsection (1) makes clear that the 1997 satellite carrier 
rate adjustment is a CARP proceeding. That proceeding was left 
out of section 801 when the Copyright Royalty Tribunal Reform 
Act of 1993 was passed, because, at that time, the satellite 
carrier compulsory license was set to expire in 1994 without 
any further rate adjustment. With the passage of the Satellite 
Home Viewer Act of 1994, the satellite carrier compulsory 
license is extended to December 31, 1999, and the rate 
adjustment proceeding which has been scheduled for 1997 needs 
to be reflected in section 801.
    Subsection (2) gives two concrete examples of the 
procedural and evidentiary rulings the Librarian of Congress 
may render related to CARP proceedings. They include the 
authority to determine the amount and distribute the royalty 
fees that are not in controversy, and the authority to reject 
royalty claims that are untimely or do not establish the basis 
for a claim as required by the Copyright Office's regulations. 
By setting out these examples, the Committee does not intend to 
abridge the authority of the Librarian to make other procedural 
and evidentiary rulings that would apply to a CARP proceeding, 
such as precontroversy discovery rulings.
    Subsection (3) gives the Librarian of Congress the 
authority to pay the CARP arbitrators directly according to a 
signed agreement and any regulations that the Librarian may 
adopt. Currently, the parties to an arbitration proceeding pay 
the arbitrators.
    Subsection (3) further provides that in distribution 
proceedings, the payments made to the arbitrators by the 
Librarian, as well as the costs of the Library and the 
Copyright Office, come from the relevant royalty pool. In 
ratemaking proceedings, the costs are paid by assessing the 
parties to the proceeding, 50 percent from the copyright owners 
and 50 percent from the copyright users. However, this 
assessment of the arbitrators' costs may be modified by the 
arbitrators if they find in their discretion that a different 
assessment should apply.
    Subsection (3) also clarifies the status of the 
arbitrators. They are independent contractors acting on behalf 
of the United States. The phrase ``acting on behalf of the 
United States'' is intended to make clear that the laws 
governing the conduct and standards of behavior of government 
employees and those who deal with them in a professional 
capacity apply to the CARP arbitrators.

Section 12--Digital audio recording devices and media

    The Audio Home Recording Act of 1992 requires the Librarian 
to determine by March 30th of each year whether there are any 
controversies among the claimants in the distribution of 
digital audio recording technology (DART) royalties. However, 
DART royalty claimants file their claims, in person or by mail, 
in January and February of each year. Because claims mailed in 
February may not reach the Copyright Office until early March, 
there is very little time for the Office to compile its 
official claimant list and for the claimants to negotiate with 
each other to determine whether they can settle their 
differences before the March 30th deadline. The March 30th 
deadline has proved to be impracticable. This section removes 
the deadline, and gives the Librarian the flexibility to 
reasonably set the length of the negotiation period in order to 
promote settlements.

Section 13--Effect of pre-1978 distribution of recordings containing 
        musical compositions.

    This section affirms that the distribution of phonorecords 
to the public before January 1, 1978 did not constitute 
publication of the musical composition embodied in that 
phonorecord under the 1909 Copyright Act. It is intended to 
restore the law to what it was before the decision of the Ninth 
Circuit Court of Appeals in La Cienega Music Co. v. Z. Z. Top. 
\2\
---------------------------------------------------------------------------
    \2\ 44 F.3d 813 (9th Cir.), cert. denied, 64 U.S.L.W. 3262 (Oct. 
10, 1995).
---------------------------------------------------------------------------
    Until that decision, it was the long-standing view of the 
Copyright Office and the understanding of the music industry, 
as reflected in their business practices, that the sale or 
distribution of recordings to the public before January 1, 
1978, did not constitute publication of the musical composition 
embodied on the recording. This view was confirmed by the 
Second Circuit Court of Appeals in Rosette v. Rainbo Record 
Mfg. Corp. \3\
---------------------------------------------------------------------------
    \3\ 354 F. Supp. 1183 (S.D.N.Y.), aff'd per curiam, 546 F.2d 461 
(2d Cir. 1976).
---------------------------------------------------------------------------
    The La Cienega decision has, therefore, placed a cloud over 
the legal status of a large number of musical works recorded 
and sold before January 1, 1978. Moreover, it has called into 
question the long established practices of the Copyright 
Office. It is the intent of this section to remove the cloud 
and bring the law into conformity with the Second Circuit 
opinion and Copyright Office practices.

Section 14--Conforming amendment

    This section corrects a numbering mistake in the Digital 
Performance Right in Sound Recordings Act of 1995.

Section 15--Effective dates.

    All amendments to the Copyright Act included in this bill 
take effect on the date of enactment of the legislation, with 
the exception of Section 2, the satellite carrier provisions, 
which are effective on the date of enactment of the Satellite 
Home Viewer Act of 1994, October 18, 1994.

                              Agency Views

                               Library of Congress,
                                The Register of Copyrights,
                                 Washington, DC, November 17, 1995.
Mr. Howard Coble,
Subcommittee on Courts and Intellectual Property, Committee on the 
        Judiciary, House of Representatives, Washington, DC.
    Dear Mr. Coble: As you know, from my answer to your 
question in the hearing on November 9th, I am extremely 
concerned about the cloud hanging over the copyrights of 
thousands of pre-1978 musical compositions. I am writing to you 
now to solicit your support to clarify, through legislation, 
the status of these songs. As I mentioned, last month the 
Supreme Court denied a petition for certiorari in La Cienega 
Music Co. v. Z.Z. Top, 44 F.3d 813 (1995) cert. denied, 64 
U.S.L.W. 3262 (Oct. 10, 1995). The U.S. Court of Appeals for 
the Ninth Circuit held on January 10, 1995, that selling 
records constituted ``publication'' of the recorded musical 
composition under the Copyright Act of 1909. The Ninth Circuit 
also implicitly held that recordings were copies of the musical 
compositions and that unless they bore the required copyright 
notice, the musical compositions entered the public domain in 
the United States--the exact wording of the court was ``his 
compositions entered the public domain immediately upon the 
sale of the recordings to the public.''
    This position conflicts with the decision of the Second 
Circuit in Rosette v. Rainbo Record Mfg. Corp., 354 F. Supp. 
1183 (S.D.NY.), aff'd per curiam, 546 F.2d 461 (2d Cir. 1976) 
that the sale of recordings did not constitute publication of 
the musical compositions embodied on the recordings under the 
1909 Act. The position of the Second Circuit agrees with the 
established music practice. It also agrees with the long 
standing practices of the Copyright Office.
    For many years, the Copyright Office has espoused the view 
that recordings sold before January 1, 1978, i.e., those that 
were released under the 1909 Act, were not copies of the 
musical compositions embodied on them, and therefore the 
distribution of recordings did not constitute publication under 
the federal copyright statute. Moreover, if by chance a 
recording bore an appropriate copyright notice for the musical 
composition embodied on it and registration for the music was 
sought on this basis, registration was refused. The Office 
would state that copies had to be visually perceptible, e.g. 
sheet music copies, and that unless such copies had been sold, 
placed on sale or offered to the public, registration for the 
music as a published work was not possible. The Office would 
suggest registration for the work as an unpublished work and 
ask for the deposit of a lead sheet. See, for example, the 
enclosed samples of our practices and our publications 
(Compendium of Copyright Office Practices I (1975) and II 
(1984); Copyright Office Circular 50, ``Copyright for Musical 
Compositions'' and Circular 56, ``Copyright for Sound 
Recordings'' (1974); and a form letter, FL 50C.)
    In 1972 when sound recordings were added to the statute, 
the law made it clear that phonorecords constituted copies of 
only the sound recording--they were not copies of the musical 
compositions embodied on them. Under the 1909 act all 
copyrightable works were embodied in copies. The 1976 Act, 
however, includes two separate forms of fixation--copies and 
phonorecords. Moreover, in the 1976 Act a copyright notice was 
only required on visually perceptible copies of works and on 
phonorecords of sound recordings. Thus, there was no 
requirement that a recording of a musical composition needed to 
include a separate copyright notice for the music.
    The November 6th Billboard article, ``Trade Scrambles to 
Protect Copyrights: Court's Inaction Could Jeopardize Pre-78 
Songs'' tells the story. The decision of the Ninth Circuit has 
effectively cast a cloud over a number of musical compositions. 
What is at stake here is whether or not to pay mechanical and 
performance royalties, the validity of contracts and licenses 
as well as the value of entire song catalogs.
    Musical compositions, including classical music, were 
generally recorded. Under the Ninth Circuit decision they would 
be considered published and since most recordings would not 
have contained a copyright notice for the musical compositions 
contained in the recording, they would be considered in the 
public domain. Copyright notices on recordings were usually for 
liner notes, song lyrics, or album artwork and most likely 
would not have contained the name of the copyright owner of the 
music.
    In any case, the Office refused registration for these 
works as published works. Many of these works were instead 
registered as unpublished works; as mentioned above, this was 
what the Copyright Office suggested. Renewal registrations 
based on these unpublished registrations may have been made. 
Later published sheet music editions may have been registered, 
and renewals based on these registration may also have been 
made. Despite all of this, copyright for these works could now 
be considered to be lost by publication of recordings at any 
time before January 1, 1978.
    It seems incongruous that at the time when Congress is 
considering lengthening the copyright term for musical 
compositions that we are faced with the possibility that many 
of these works will be found to be in the public domain under 
the logic of the Ninth Circuit.
    I believe that the drafters of the 1909 law and also of the 
1976 law did not intend that distribution of recordings would 
place the musical compositions embodied in them in the public 
domain. It is unfortunate that after years in which the law was 
believed to be settled, this issue has once again been raised. 
I was hoping the issue would be resolved by the Supreme Court. 
Since that will not be the case and because these issues 
present themselves daily to the Copyright Office as well as to 
those in the music business, it would be very helpful if this 
Congress could settle the question once and for all.
    Enclosed is proposed language for a bill, which hopefully 
could be added to the Satellite Home Viewer Act Correction bill 
(H.R. 1861) or could be enacted with the extension of term bill 
(H.R. 989); the proposal is a simple declaration that under the 
1909 Act distribution of phonorecords did not publish the 
musical compositions embodied in them.
            Sincerely,
                                           Marybeth Peters,
                                            Register of Copyrights.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

           SECTION 2 OF THE SATELLITE HOME VIEWER ACT OF 1994

SEC. 2. STATUTORY LICENSE FOR SATELLITE CARRIERS.

  Section 119 of title 17, United States Code, is amended as 
follows:
          (1) * * *
          * * * * * * *
          (3) Subsection (b)(1)(B) is amended--
                  [(A) in clause (i) by striking ``12 cents'' 
                and inserting ``17.5 cents per subscriber in 
                the case of superstations not subject to 
                syndicated exclusivity under the regulations of 
                the Federal Communications Commission, and 14 
                cents per subscriber in the case of 
                superstations subject to such syndicated 
                exclusivity''; and]
                  (A) in clause (i) by striking ``12 cents'' 
                and inserting ``17.5 cents per subscriber in 
                the case of superstations that as retransmitted 
                by the satellite carrier include any program 
                which, if delivered by any cable system in the 
                United States, would be subject to the 
                syndicated exclusivity rules of the Federal 
                Communications Commission, and 14 cents per 
                subscriber in the case of superstations that 
                are syndex-proof as defined in section 258.2 of 
                title 37, Code of Federal Regulations; and''
          * * * * * * *
          [(4) Subsection (c) is amended--
                  [(A) in paragraph (1) by striking ``December 
                31, 1992,'';
                  [(B) in paragraph (2)--
                          [(i) in subparagraph (A) by striking 
                        ``July 1, 1991'' and inserting ``July 
                        1, 1996''; and
                          [(ii) in subparagraph (D) by striking 
                        ``December 31, 1994'' and inserting 
                        ``December 31, 1999, or in accordance 
                        with the terms of the agreement, 
                        whichever is later''; and
                  [(C) in paragraph (3)--
                          [(i) in subparagraph (A) by striking 
                        ``December 31, 1991'' and inserting 
                        ``January 1, 1997'';
                          [(ii) by amending subparagraph (D) to 
                        read as follows:
                  [``(D) Establishment of royalty fees.--In 
                determining royalty fees under this paragraph, 
                the Copyright Arbitration Panel shall establish 
                fees for the retransmission of network stations 
                and superstations that most clearly represent 
                the fair market value of secondary 
                transmissions. In determining the fair market 
                value, the Panel shall base its decision on 
                economic, competitive, and programming 
                information presented by the parties, 
                including--
                          [``(i) the competitive environment in 
                        which such programming is distributed, 
                        the cost for similar signals in similar 
                        private and compulsory license 
                        marketplaces, and any special features 
                        and conditions of the retransmission 
                        marketplace;
                          [``(ii) the economic impact of such 
                        fees on copyright owners and satellite 
                        carriers; and
                          [``(iii) the impact on the continued 
                        availability of secondary transmissions 
                        to the public.'';
                          [(iii) in subparagraph (E) by 
                        striking ``60'' and inserting ``180''; 
                        and
                          [(iv) in subparagraph (C)--
                                  [(I) by striking ``, or until 
                                December 31, 1994''; and
                                  [(II) by inserting ``or July 
                                1, 1997, whichever is later'' 
                                after ``section 802(g)''.]
          (4) Subsection (c) is amended--
                  (A) in paragraph (1)--
                          (i) by striking ``until December 31, 
                        1992,'';
                          (ii) by striking ``(2), (3) or (4)'' 
                        and inserting ``(2) or (3)''; and
                          (iii) by striking the second 
                        sentence;
                  (B) in paragraph (2)--
                          (i) in subparagraph (A) by striking 
                        ``July 1, 1991'' and inserting ``July 
                        1, 1996''; and
                          (ii) in subparagraph (D) by striking 
                        ``December 31, 1994'' and inserting 
                        ``December 31, 1999, or in accordance 
                        with the terms of the agreement, 
                        whichever is later''; and
                  (C) in paragraph (3)--
                          (i) in subparagraph (A) by striking 
                        ``December 31, 1991'' and inserting 
                        ``January 1, 1997'';
                          (ii) by amending subparagraph (B) to 
                        read as follows:
                  ``(B) Establishment of royalty fees.--In 
                determining royalty fees under this paragraph, 
                the copyright arbitration royalty panel 
                appointed under chapter 8 shall establish fees 
                for the retransmission of network stations and 
                superstations that most clearly represent the 
                fair market value of secondary transmissions. 
                In determining the fair market value, the panel 
                shall base its decision on economic, 
                competitive, and programming information 
                presented by the parties, including--
                          ``(i) the competitive environment in 
                        which such programming is distributed, 
                        the cost of similar signals in similar 
                        private and compulsory license 
                        marketplaces, and any special features 
                        and conditions of the retransmission 
                        marketplace;
                          ``(ii) the economic impact of such 
                        fees on copyright owners and satellite 
                        carriers; and
                          ``(iii) the impact on the continued 
                        availability of secondary transmissions 
                        to the public.''; and
                          (iii) in subparagraph (C), by 
                        inserting ``or July 1, 1997, whichever 
                        is later'' after ``section 802(g)''.
          (5) Subsection (a) is amended--
                  [(A) in paragraph (5)(C) by striking ``the 
                Satellite Home Viewer Act of 1988'' and 
                inserting ``this section''; and]
                  (A) in paragraph (5)(C) by striking ``the 
                date of the enactment of the Satellite Home 
                Viewer Act of 1988'' and inserting ``November 
                16, 1988''; and
          * * * * * * *
                              ----------                              


                      TITLE 17, UNITED STATES CODE

            CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT

          * * * * * * *

Sec. 104A. Copyright in restored works

  (a) * * *
          * * * * * * *
  (d) Remedies for Infringement of Restored Copyrights.--
          (1) * * *
          * * * * * * *
          [(3) Existing derivative works.--(A) In the case of a 
        derivative work that is based upon a restored work and 
        is created--
                  [(i) before the date of the enactment of the 
                Uruguay Round Agreements Act, if the source 
                country of the derivative work is an eligible 
                country on such date, or
                  [(ii) before the date of adherence or 
                proclamation, if the source country of the 
                derivative work is not an eligible country on 
                such date of enactment, a reliance party may 
                continue to exploit that work for the duration 
                of the restored copyright if the reliance party 
                pays to the owner of the restored copyright 
                reasonable compensation for conduct which would 
                be subject to a remedy for infringement but for 
                the provisions of this paragraph.]
          (3) Existing derivative works.--(A) In the case of a 
        derivative work that is based upon a restored work and 
        is created--
                  (i) before the date of the enactment of the 
                Uruguay Round Agreements Act, if the source 
                country of the restored work is an eligible 
                country on such date, or
                  (ii) before the date of adherence or 
                proclamation, if the source country of the 
                restored work is not an eligible country on 
                such date of enactment,a reliance party may 
                continue to exploit that derivative work for 
                the duration of the restored copyright if the 
                reliance party pays to the owner of the 
                restored copyright reasonable compensation for 
                conduct which would be subject to a remedy for 
                infringement but for the provisions of this 
                paragraph.
          * * * * * * *
  (e) Notices of Intent To Enforce a Restored Copyright.--
          (1) Notices of intent filed with the copyright 
        office--
                  (A) * * *
                  (B)(i) * * *
                  (ii) Not less than 1 list containing all 
                notices of intent to enforce shall be 
                maintained in the Public Information Office of 
                the Copyright Office and shall be available for 
                public inspection and copying during regular 
                business hours pursuant to sections 705 and 
                708. [Such list shall also be published in the 
                Federal Register on an annual basis for the 
                first 2 years after the applicable date of 
                restoration.]
          * * * * * * *
  (h) Definitions.--For purposes of this section and section 
109(a):
          (1) * * *
          [(2) The ``date of restoration'' of a restored 
        copyright is the later of--
                  [(A) the date on which the Agreement on 
                Trade-Related Aspects of Intellectual Property 
                referred to in section 101(d)(15) of the 
                Uruguay Round Agreements Act enters into force 
                with respect to the United States, if the 
                source country of the restored work is a nation 
                adhering to the Berne Convention or a WTO 
                member country on such date; or
                  [(B) the date of adherence or proclamation, 
                in the case of any other source country of the 
                restored work.
          [(3) The term ``eligible country'' means a nation, 
        other than the United States, that is a WTO member 
        country, adheres to the Berne Convention, or is subject 
        to a proclamation under section 104A(g).]
          (2) The ``date of restoration'' of a restored 
        copyright is the later of--
                  (A) January 1, 1996, the date on which the 
                Agreement on Trade-Related Aspects of 
                Intellectual Property referred to in section 
                101(d)(15) of the Uruguay Round Agreements Act 
                enters into force with respect to the United 
                States, if the source country of the restored 
                work is a nation adhering to the Berne 
                Convention or a WTO member country on such 
                date, or
                  (B) the date of adherence or proclamation, in 
                the case of any other source country of the 
                restored work.
          (3) The term ``eligible country'' means a nation, 
        other than the United States, that, after the date of 
        the enactment of the Uruguay Round Agreements Act--
                  (A) becomes a WTO member,
                  (B) is or becomes a member of the Berne 
                Convention, or
                  (C) becomes subject to a proclamation under 
                subsection (g).
          * * * * * * *

Sec. 114. Scope of exclusive rights in sound recordings

  (a) * * *
          * * * * * * *
  (f) Licenses for Nonexempt Subscription Transmissions.--
          (1) No later than 30 days after the enactment of the 
        Digital Performance Right in Sound Recordings Act of 
        1995, the Librarian of Congress shall cause notice to 
        be published in the Federal Register of the initiation 
        of voluntary negotiation proceedings for the purpose of 
        determining reasonable terms and rates of royalty 
        payments for the activities specified by subsection 
        (d)(2) of this section during the period beginning on 
        the effective date of such Act and ending on December 
        31, 2000, or ending 30 days after the Librarian issues 
        and publishes in the Federal Register an order adopting 
        or rejecting the report of the copyright arbitration 
        royalty panel, if such panel is convened. Such terms 
        and rates shall distinguish among the different types 
        of digital audio transmission services then in 
        operation. Any copyright owners of sound recordings or 
        any entities performing sound recordings affected by 
        this section may submit to the Librarian of Congress 
        licenses covering such activities with respect to such 
        sound recordings. The parties to each negotiation 
        proceeding shall bear their own costs.
          (2) In the absence of license agreements negotiated 
        under paragraph (1), during the 60-day period 
        commencing 6 months after publication of the notice 
        specified in paragraph (1), and upon the filing of a 
        petition in accordance with section 803(a)(1), the 
        Librarian of Congress shall, pursuant to chapter 8, 
        convene a copyright arbitration royalty panel to 
        determine [and publish in the Federal Register] a 
        schedule of rates and terms which, subject to paragraph 
        (3), shall be binding on all copyright owners of sound 
        recordings and entities performing sound recordings. In 
        addition to the objectives set forth in section 
        801(b)(1), in establishing such rates and terms, the 
        copyright arbitration royalty panel may consider the 
        rates and terms for comparable types of digital audio 
        transmission services and comparable circumstances 
        under voluntary license agreements negotiated as 
        provided in paragraph (1). The Librarian of Congress 
        shall also establish requirements by which copyright 
        owners may receive reasonable notice of the use of 
        their sound recordings under this section, and under 
        which records of such use shall be kept and made 
        available by entities performing sound recordings.
          * * * * * * *

Sec. 115. Scope of exclusive rights in nondramatic musical works: 
                    Compulsory license for making and distributing 
                    phonorecords

  In the case of nondramatic musical works, the exclusive 
rights provided by clauses (1) and (3) of section 106, to make 
and to distribute phonorecords of such works, are subject to 
compulsory licensing under the conditions specified by this 
section.
  (a) * * *
          * * * * * * *
  (c) Royalty Payable Under Compulsory License.--
          (1) * * *
          * * * * * * *
          (3)(A) * * *
          * * * * * * *
          (D) In the absence of license agreements negotiated 
        under subparagraphs (B) and (C), upon the filing of a 
        petition in accordance with section 803(a)(1), the 
        Librarian of Congress shall, pursuant to chapter 8, 
        convene a copyright arbitration royalty panel to 
        determine [and publish in the Federal Register] a 
        schedule of rates and terms which, subject to 
        subparagraph (E), shall be binding on all copyright 
        owners of nondramatic musical works and persons 
        entitled to obtain a compulsory license under 
        subsection (a)(1) during the period beginning January 
        1, 1998, and ending on the effective date of any new 
        terms and rates established pursuant to subparagraph 
        (C), (D) or (F), or such other date (regarding digital 
        phonorecord deliveries) as may be determined pursuant 
        to subparagraphs (B) and (C). Such terms and rates 
        shall distinguish between (i) digital phonorecord 
        deliveries where the reproduction or distribution of a 
        phonorecord is incidental to the transmission which 
        constitutes the digital phonorecord delivery, and (ii) 
        digital phonorecord deliveries in general. In addition 
        to the objectives set forth in section 801(b)(1), in 
        establishing such rates and terms, the copyright 
        arbitration royalty panel may consider rates and terms 
        under voluntary license agreements negotiated as 
        provided in subparagraphs (B) and (C). The royalty 
        rates payable for a compulsory license for a digital 
        phonorecord delivery under this section shall be 
        established de novo and no precedential effect shall be 
        given to the amount of the royalty payable by a 
        compulsory licensee for digital phonorecord deliveries 
        on or before December 31, 1997. The Librarian of 
        Congress shall also establish requirements by which 
        copyright owners may receive reasonable notice of the 
        use of their works under this section, and under which 
        records of such use shall be kept and made available by 
        persons making digital phonorecord deliveries.
          * * * * * * *

Sec. 116. Negotiated licenses for public performances by means of coin-
                    operated phonorecord players

  (a) * * *
  (b) Negotiated Licenses.--
          (1) * * *
          [(2) Arbitration.--Parties to such a negotiation, 
        within such time as may be specified by the Librarian 
        of Congress by regulation, may determine the result of 
        the negotiation by arbitration. Such arbitration shall 
        be governed by the provisions of title 9, to the extent 
        such title is not inconsistent with this section. The 
        parties shall give notice to the Librarian of Congress 
        of any determination reached by arbitration and any 
        such determination shall, as between the parties to the 
        arbitration, be dispositive of the issues to which it 
        relates.]
          (2) Arbitration.--Parties not subject to such a 
        negotiation may determine the result of the negotiation 
        by arbitration in accordance with the provisions of 
        chapter 8.
          * * * * * * *
  (d) Definitions.--As used in this section, the following 
terms mean the following:
          (1) A ``coin-operated phonorecord player'' is a 
        machine or device that--
                  (A) is employed solely for the performance of 
                nondramatic musical works by means of 
                phonorecords upon being activated by the 
                insertion of coins, currency, tokens, or other 
                monetary units or their equivalent;
                  (B) is located in an establishment making no 
                direct or indirect charge for admission;
                  (C) is accompanied by a list which is 
                comprised of the titles of all the musical 
                works available for performance on it, and is 
                affixed to the phonorecord player or posted in 
                the establishment in a prominent position where 
                it can be readily examined by the public; and
                  (D) affords a choice of works available for 
                performance and permits the choice to be made 
                by the patrons of the establishment in which it 
                is located.
          (2) An ``operator'' is any person who, alone or 
        jointly with others--
                  (A) owns a coin-operated phonorecord player;
                  (B) has the power to make a coin-operated 
                phonorecord player available for placement in 
                an establishment for purposes of public 
                performance; or
                  (C) has the power to exercise primary control 
                over the selection of the musical works made 
                available for public performance on a coin-
                operated phonorecord player.

Sec. 117. Limitations on exclusive rights: Computer programs

  [Notwithstanding] (a) Making of Additional Copy or Adaptation 
by Owner of Copy.--Notwithstanding the provisions of section 
106, it is not an infringement for the owner of a copy of a 
computer program to make or authorize the making of another 
copy or adaptation of that computer program provided:
          (1) that such a new copy or adaptation is created as 
        an essential step in the utilization of the computer 
        program in conjunction with a machine and that it is 
        used in no other manner, or
          (2) that such new copy or adaptation is for archival 
        purposes only and that all archival copies are 
        destroyed in the event that continued possession of the 
        computer program should cease to be rightful.
  [Any exact] (b) Lease, Sale, or Other Transfer of Additional 
Copy or Adaptation.--Any exact copies prepared in accordance 
with the provisions of this section may be leased, sold, or 
otherwise transferred, along with the copy from which such 
copies were prepared, only as part of the lease, sale, or other 
transfer of all rights in the program. Adaptations so prepared 
may be transferred only with the authorization of the copyright 
owner.
  (c) Machine Maintenance or Repair.--Notwithstanding the 
provisions of section 106, it is not an infringement for the 
owner or lessee of a machine to make or authorize the making of 
a copy of a computer program if such copy is made solely by 
virtue of the activation of a machine that lawfully contains an 
authorized copy of the computer program, for purposes only of 
maintenance or repair of that machine, provided that--
          (1) such new copy is used in no other manner and is 
        destroyed immediately after the maintenance or repair 
        is completed, and
          (2) with respect to any computer program or part 
        thereof that is not necessary for that machine to be 
        activated, such program or part thereof is not accessed 
        or used other than to make such new copy by virtue of 
        the activation of the machine.
  (d) Definitions.--For purposes of this section--
          (1) the term ``maintenance'' of a machine means 
        servicing the machine in order to make it work in 
        accordance with its original specifications and any 
        changes to those specifications authorized for that 
        machine; and
          (2) the term ``repair'' of a machine means restoring 
        it to the state of working in accordance with its 
        original specifications and any changes to those 
        specifications authorized for that machine.

Sec. 118. Scope of exclusive rights: Use of certain works in connection 
                    with noncommercial broadcasting

  (a) * * *
  (b) Notwithstanding any provision of the antitrust laws, any 
owners of copyright in published nondramatic musical works and 
published pictorial, graphic, and sculptural works and any 
public broadcasting entities, respectively, may negotiate and 
agree upon the terms and rates of royalty payments and the 
proportionate division of fees paid among various copyright 
owners, and may designate common agents to negotiate, agree to, 
pay, or receive payments.
          [(1) Any owner of copyright in a work specified in 
        this subsection or any public broadcasting entity may 
        submit to the Librarian of Congress proposed licenses 
        covering such activities with respect to such works. 
        The Librarian of Congress shall proceed on the basis of 
        the proposals submitted to it as well as any other 
        relevant information. The Librarian of Congress shall 
        permit any interested party to submit information 
        relevant to such proceedings.]
          [(2)] (1) License agreements, voluntarily negotiated 
        at any time between one or more copyright owners and 
        one or more public broadcasting entities shall be given 
        effect in lieu of any determination by the Librarian of 
        Congress: Provided, That copies of such agreements are 
        filed in the Copyright Office within thirty days of 
        execution in accordance with regulations that the 
        Register of Copyrights shall prescribe.
          [(3)] (2) In the absence of license agreements 
        negotiated under paragraph [(2)] (1), the Librarian of 
        Congress shall, pursuant to chapter 8, convene a 
        copyright arbitration royalty panel to determine and 
        publish in the Federal Register a schedule of rates and 
        terms which, subject to paragraph [(2)] (1), 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 Librarian of Congress. In 
        establishing such rates and terms the copyright 
        arbitration royalty panel may consider the rates for 
        comparable circumstances under voluntary license 
        agreements negotiated as provided in paragraph [(2)] 
        (1). The Librarian of Congress shall also establish 
        requirements by which copyright owners may receive 
        reasonable notice of the use of their works under this 
        section, and under which records of such use shall be 
        kept by public broadcasting entities.
          * * * * * * *
  [(e) Except as expressly provided in this subsection, this 
section shall have no applicability to works other than those 
specified in subsection (b).
          [(1) Owners of copyright in nondramatic literary 
        works and public broadcasting entities may, during the 
        course of voluntary negotiations, agree among 
        themselves, respectively, as to the terms and rates of 
        royalty payments without liability under the antitrust 
        laws. Any such terms and rates of royalty payments 
        shall be effective upon filing in the Copyright Office, 
        in accordance with regulations that the Register of 
        Copyrights shall prescribe.
          [(2) On January 3, 1980, the Register of Copyrights, 
        after consulting with authors and other owners of 
        copyright in nondramatic literary works and their 
        representatives, and with public broadcasting entities 
        and their representatives, shall submit to the Congress 
        a report setting forth the extent to which voluntary 
        licensing arrangements have been reached with respect 
        to the use of nondramatic literary works by such 
        broadcast stations. The report should also describe any 
        problems that may have arisen, and present legislative 
        or other recommendations, if warranted.]
  (e)(1) Except as expressly provided in this subsection, this 
section shall not apply to works other than those specified in 
subsection (b).
  (2) Owners of copyright in nondramatic literary works and 
public broadcasting entities may, during the course of 
voluntary negotiations, agree among themselves, respectively, 
as to the terms and rates of royalty payments without liability 
under the antitrust laws. Any such terms and rates of royalty 
payments shall be effective upon being filed in the Copyright 
Office, in accordance with regulations that the Register of 
Copyrights shall prescribe.
          * * * * * * *

                    CHAPTER 3--DURATION OF COPYRIGHT

          * * * * * * *

Sec. 303. Duration of copyright: Works created but not published or 
                    copyrighted before January 1, 1978

  (a) Copyright in a work created before January 1, 1978, but 
not theretofore in the public domain or copyrighted, subsists 
from January 1, 1978, and endures for the term provided by 
section 302. In no case, however, shall the term of copyright 
in such a work expire before December 31, 2002; and, if the 
work is published on or before December 31, 2002, the term of 
copyright shall not expire before December 31, 2027.
  (b) The distribution before January 1, 1978, of a phonorecord 
shall not for any purpose constitute a publication of the 
musical work embodied therein.
          * * * * * * *

         CHAPTER 4--COPYRIGHT NOTICE, DEPOSIT, AND REGISTRATION

          * * * * * * *

Sec. 411. Registration and infringement actions

  (a) * * *
  (b) In the case of a work consisting of sounds, images, or 
both, the first fixation of which is made simultaneously with 
its transmission, the copyright owner may, either before or 
after such fixation takes place, institute an action for 
infringement under section 501, fully subject to the remedies 
provided by sections 502 through 506 and sections 509 and 510, 
if, in accordance with requirements that the Register of 
Copyrights shall prescribe by regulation, the copyright owner--
          [(1) serves notice upon the infringer, not less than 
        ten or more than thirty days before such fixation, 
        identifying the work and the specific time and source 
        of its first transmission, and declaring an intention 
        to secure copyright in the work; and]
          (1) serves notice upon the infringer, not less than 
        48 hours before such fixation, identifying the work and 
        the specific time and source of its first transmission, 
        and declaring an intention to secure copyright in the 
        work; and
          * * * * * * *

                      CHAPTER 7--COPYRIGHT OFFICE

          * * * * * * *

Sec. 708. Copyright Office fees

  (a) * * *
  [(b) In calendar year 1995 and in each subsequent fifth 
calendar year, the Register of Copyrights, by regulation, may 
increase the fees specified in subsection (a) by the percent 
change in the annual average, for the preceding calendar year, 
of the Consumer Price Index published by the Bureau of Labor 
Statistics, over the annual average of the Consumer Price Index 
for the fifth calendar year preceding the calendar year in 
which such increase is authorized.]
  (b) In calendar year 1996 and in any subsequent calendar 
year, the Register of Copyrights, by regulation, may increase 
the fees specified in subsection (a) in the following manner:
          (1) The Register shall conduct a study of the costs 
        incurred by the Copyright Office for the registration 
        of claims, the recordation of documents, and the 
        provision of services. The study shall also consider 
        the timing of any increase in fees and the authority to 
        use such fees consistent with the budget.
          (2) The Register shall have discretion to increase 
        fees up to the reasonable costs incurred by the 
        Copyright Office for the services described in 
        paragraph (1) plus a reasonable inflation adjustment to 
        account for any estimated increase in costs.
          (3) Any newly established fee based on paragraph (2) 
        shall be rounded off to the nearest dollar, or for a 
        fee less than $12, rounded off to the nearest 50 cents.
          (4) The fees shall be fair and equitable and give due 
        consideration to the objectives of the copyright 
        system.
          (5) If upon completion of the study, the Register 
        determines that the fees should be increased, the 
        Register shall prepare a proposed fee schedule and 
        submit the schedule with the accompanying economic 
        analysis to the Congress. The fees proposed by the 
        Register may be instituted after the end of 120 days 
        after the schedule is submitted to the Congress unless, 
        within that 120-day period, a law is enacted stating in 
        substance that the Congress does not approve the 
        schedule.
          * * * * * * *
  [(d) All fees received under this section shall be deposited 
by the Register of Copyrights in the Treasury of the United 
States and shall be credited to the appropriation for necessary 
expenses of the Copyright Office. The Register may, in 
accordance with regulations that he or she shall prescribe, 
refund any sum paid by mistake or in excess of the fee required 
by this section.]
  (d)(1) Except as provided in paragraph (2), all fees received 
under this section shall be deposited by the Register of 
Copyrights in the Treasury of the United States and shall be 
credited to the appropriations for necessary expenses of the 
Copyright Office. Such fees that are collected shall remain 
available until expended. The Register may, in accordance with 
regulations that he or she shall prescribe, refund any sum paid 
by mistake or in excess of the fee required by this section.
  (2) In the case of fees deposited against future services, 
the Register of Copyrights shall request the Secretary of the 
Treasury to invest in interest-bearing securities in the United 
States Treasury any portion of the fees that, as determined by 
the Register, is not required to meet current deposit account 
demands. Funds shall be invested in securities that permit 
funds to be available to the Copyright Office at all times if 
they are determined to be necessary to meet current deposit 
account demands. Such investments shall be in public debt 
securities with maturities suitable to the needs of the fund, 
as determined by the Register of Copyrights, and bearing 
interest at rates determined by the Secretary of the Treasury, 
taking into consideration current market yields on outstanding 
marketable obligations of the United States of comparable 
maturities.
  (3) The income on such investments shall be deposited in the 
Treasury of the United States and shall be credited to the 
appropriations for necessary expenses of the Copyright Office.
          * * * * * * *

            CHAPTER 8--COPYRIGHT ARBITRATION ROYALTY PANELS

Sec. 801. Copyright arbitration royalty panels: Establishment and 
                    purpose

  (a) * * *
  (b) Purposes.--Subject to the provisions of this chapter, the 
purposes of the copyright arbitration royalty panels shall be--
          (1) to make determinations concerning the adjustment 
        of reasonable copyright royalty rates as provided in 
        sections 114, 115, [and 116] 116, and 119, and to make 
        determinations as to reasonable terms and rates of 
        royalty payments as provided in section 118. The rates 
        applicable under sections 114, 115, and 116 shall be 
        calculated to achieve the following objectives:
                  (A) * * *
          * * * * * * *
  (c) Rulings.--The Librarian of Congress, upon the 
recommendation of the Register of Copyrights, may, before a 
copyright arbitration royalty panel is convened, make any 
necessary procedural or evidentiary rulings that would apply to 
the proceedings conducted by such panel, including--
          (1) authorizing the distribution of those royalty 
        fees collected under sections 111, 119, and 1005 that 
        the Librarian has found are not subject to controversy; 
        and
          (2) accepting or rejecting royalty claims filed under 
        sections 111, 119, and 1007 on the basis of timeliness 
        or the failure to establish the basis for a claim.
  [(d) Administrative Support of Copyright Arbitration Royalty 
Panels.--The Library of Congress, upon the recommendation of 
the Register of Copyrights, shall provide the copyright 
arbitration royalty panels with the necessary administrative 
services related to proceedings under this chapter.]
  (d) Support and Reimbursement of Arbitration Panels.--The 
Librarian of Congress, upon the recommendation of the Register 
of Copyrights, shall provide the copyright arbitration royalty 
panels with the necessary administrative services related to 
proceedings under this chapter, and shall reimburse the 
arbitrators at such intervals and in such manner as the 
Librarian shall provide by regulation. Each such arbitrator is 
an independent contractor acting on behalf of the United 
States, and shall be paid pursuant to a signed agreement 
between the Library of Congress and the arbitrator. Payments to 
the arbitrators shall be considered costs incurred by the 
Library of Congress and the Copyright Office for purposes of 
section 802(h)(1).

Sec. 802. Membership and proceedings of copyright arbitration royalty 
                    panels

  (a) * * *
          * * * * * * *
  (h) Administrative Matters.--
          (1) [Deduction of costs from royalty fees.--] 
        Deduction of costs of library of congress and copyright 
        office from royalty fees.--The Librarian of Congress 
        and the Register of Copyrights may, to the extent not 
        otherwise provided under this title, deduct from 
        royalty fees deposited or collected under this title 
        the reasonable costs incurred by the Library of 
        Congress and the Copyright Office to support 
        distribution proceedings under this chapter. Such 
        deduction may be made before the fees are distributed 
        to any copyright claimants. [If no royalty pool exists 
        from which their costs can be deducted, the Librarian 
        of Congress and the Copyright Office may assess their 
        reasonable costs directly to the parties to the most 
        recent relevant arbitration proceeding.] In ratemaking 
        proceedings, the Librarian of Congress and the 
        Copyright Office may assess their reasonable costs 
        directly to the parties to the most recent relevant 
        arbitration proceeding, 50 percent of the costs to the 
        parties who would receive royalties from the royalty 
        rate adopted in the proceeding and 50 percent of the 
        costs to the parties who would pay the royalty rate so 
        adopted, subject to the discretion of the arbitrators 
        to assess costs under subsection (c).
          * * * * * * *

         CHAPTER 10--DIGITAL AUDIO RECORDING DEVICES AND MEDIA

          * * * * * * *

                     SUBCHAPTER C--ROYALTY PAYMENTS

          * * * * * * *

Sec. 1007. Procedures for distributing royalty payments

  (a) * * *
  (b) Distribution of Payments in the Absence of a Dispute.--
[Within 30 days after] After the period established for the 
filing of claims under subsection (a), in each year after the 
year in which this section takes effect, the Librarian of 
Congress shall determine whether there exists a controversy 
concerning the distribution of royalty payments under section 
1006(c). If the Librarian of Congress determines 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 
such section (a), after deducting its reasonable administrative 
costs under this section.
          * * * * * * *
                              ----------                              


 SECTION 4 OF THE DIGITAL PERFORMANCE RIGHT IN SOUND RECORDINGS ACT OF 
                                  1995

SEC. 4. MECHANICAL ROYALTIES IN DIGITAL PHONORECORD DELIVERIES.

  Section 115 of title 17, United States Code, is amended--
          (1) * * *
          * * * * * * *
          [(5)] (4) by adding after subsection (c) the 
        following:
  ``(d) Definition.--As used in this section, the following 
term has the following meaning: A `digital phonorecord 
delivery' is each individual delivery of a phonorecord by 
digital transmission of a sound recording which results in a 
specifically identifiable reproduction by or for any 
transmission recipient of a phonorecord of that sound 
recording, regardless of whether the digital transmission is 
also a public performance of the sound recording or any 
nondramatic musical work embodied therein. A digital 
phonorecord delivery does not result from a real-time, non-
interactive subscription transmission of a sound recording 
where no reproduction of the sound recording or the musical 
work embodied therein is made from the inception of the 
transmission through to its receipt by the transmission 
recipient in order to make the sound recording audible.''.

                                
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