[Senate Report 115-339]
[From the U.S. Government Publishing Office]


                                                      Calendar No. 569
115th Congress      }                                   {       Report
                                 SENATE
 2d Session         }                                   {      115-339

======================================================================



 
                        MUSIC MODERNIZATION ACT

                                _______
                                

               September 17, 2018.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 2823]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to which was referred the 
bill (S. 2823) a bill to modernize copyright law, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment in the nature of a substitute and recommends 
that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Background and Purpose of the Music Modernization Act............1
 II. History of the Bill and Committee Consideration.................21
III. Section-by-Section Summary of the Bill..........................22
 IV. Congressional Budget Office Cost Estimate.......................29
  V. Regulatory Impact Evaluation....................................34
 VI. Conclusion......................................................35
VII. Changes to Existing Law Made by the Bill, as Reported...........35

        I. Background and Purpose of the Music Modernization Act


                             A. BACKGROUND

    The United States' copyright laws have helped make this 
nation the center of the music world. Copyright laws protect 
creators and artists, allowing them to thrive by granting them 
exclusive rights and protections to their works. However, the 
law has not kept pace with the music industry to reflect 
changes in consumer preferences and technological developments. 
The current statutory scheme applies inconsistent rules that 
place certain technologies at a disadvantage and result in 
inequitable compensation variances for music creators. These 
inconsistencies have drawn criticism that music copyright and 
licensing laws are too difficult to comply with and do not 
adequately reward the artists and professionals responsible for 
creating American music.
    To address these issues, multiple bills were introduced in 
the Senate and House of Representatives. Songwriters, artists, 
publishers, producers, distributors, and other stakeholders 
involved in the creation and distribution of music collaborated 
with legislators in both the Senate and the House to find a 
path forward on music reform. Legislative options were 
discussed with copyright experts and the Copyright Office. 
Hearings and briefings were held on music licensing reform and 
multiple bills were introduced.
    In the Senate, Mr. Hatch introduced S. 2823, the Music 
Modernization Act, which is identical to the text of the House-
passed bill, H.R. 5447, introduced by Mr. Goodlatte. S. 2823 
contains three titles consisting of updated versions of three 
previously introduced bills:
           S. 2334, the Music Modernization Act, 
        introduced by Mr. Hatch (Title I);
           S. 2393, the Compensating Legacy Artists for 
        their Songs, Service, and Important Contributions to 
        Society Act (CLASSICS Act), introduced by Mr. Coons 
        (Title II); and
           S. 2625, the Allocation for Music Producers 
        Act (AMP Act), introduced by Mr. Grassley (Title III).

                               B. PURPOSE

    S. 2823 updates music copyright laws by creating a new 
compulsory blanket licensing system for mechanical works, 
updating the rate standards applicable to music licensing, 
modifying the rate setting process in the Southern District of 
New York, providing copyright royalties to pre-1972 artists, 
and ensuring that producers, mixers, and sound engineers are 
able to receive compensation for their creativity.

1. Title I--Music Licensing Modernization

    The first title of S. 2823 is an amended version of S. 
2334, the ``Music Modernization Act.''
            17 U.S.C. 115(a) Availability and scope of compulsory 
                    license clause
    Clause (ii) in subparagraph (A) of paragraph (1) creates a 
new method by which a digital music provider may obtain a 
compulsory license for a nondramatic musical work. Under the 
current Section 115, the musical work copyright owner has the 
right to authorize the first recording of her musical work, 
sometimes referred to as the ``first use'' right. Historically, 
the first use was cleared by the record label, which obtained 
the right to make a sound recording from the songwriter or her 
music publisher and distribute the phonorecords derived from 
that sound recording. A record label may continue to obtain a 
compulsory license under clause (i) when it is the first to 
record and distribute recordings of the musical work.
    Clause (ii) applies in the situation in which a digital 
music provider is the first person to make and distribute 
digital phonorecord deliveries (DPDs) of a sound recording 
embodying a musical work (i.e., in cases for which clause (i) 
does not apply). In such instances, the digital music provider 
may obtain a compulsory license if it satisfies three criteria: 
(1) the first fixation of the musical work in a sound recording 
is made under the authority of the musical work copyright 
owner; (2) the sound recording copyright owner who first fixes 
such sound recording has the authority of the musical work 
copyright owner to make and distribute digital phonorecord 
deliveries of such musical work to the public in the United 
States; and (3) the sound recording copyright owner (or its 
authorized distributor) authorizes the digital music provider 
to make and distribute digital phonorecords of the sound 
recording to the public in the United States.
    Under the current language of section 115(a)(1), a 
compulsory license is available to ``any other person'' after a 
sound recording embodying a musical work has been distributed 
to the public in the United States under the authority of the 
musical work copyright owner. The new language is intended to 
eliminate any ambiguity under existing law as to whether a 
digital music provider may obtain a compulsory license when the 
digital music provider is the first person to distribute 
digital phonorecord deliveries of such musical work. The new 
language makes clear that a digital music provider may obtain a 
compulsory license in those instances in which the digital 
music provider is the first person to make and distribute 
digital phonorecord deliveries of a sound recording embodying a 
musical work.
            17 U.S.C. 115(b) Procedures to obtain a compulsory license
    The amended section 115 provides two separate means of 
obtaining a compulsory mechanical license. Subsection (b)(1) 
maintains the ability to obtain a compulsory license to 
reproduce and distribute phonorecords other than DPDs on a 
work-by-work basis. This is the historical method by which 
record labels have obtained compulsory licenses.
    A new subsection (b)(2) provides the blanket mechanical 
license for digital music providers to make and distribute 
DPDs. If the digital music provider is making and distributing 
the DPDs before the date the blanket license is available, 
which is defined in subsection (e)(15) as January 1 following 
the expiration of the 2 year period beginning on the date the 
legislation is enacted, then the digital music provider must 
file a notice of intent on the musical work copyright owner, if 
the identity and location of the musical work copyright owner 
is known. Unlike the current section 115, however, under the 
legislation, in the event the musical work copyright owner is 
unknown, the digital music provider does not file a notice of 
intent on the Copyright Office. Instead, the digital music 
provider continues to search for the musical work copyright 
owner until the license availability date and, if the musical 
work copyright owner has not been located by such time, the 
digital music provider is required to turn over to the 
mechanical licensing collective any accrued royalties and 
reports of usage for such unmatched works pursuant to 
subsection (d)(10). If the digital music provider is making and 
distributing DPDs after the date the blanket license is 
available, then the digital music provider may obtain the 
blanket license by submitting a notice of license to the 
mechanical licensing collective as described in subsection 
(d)(2).
    Subsection (b)(3) maintains the ``pass-through'' license 
for record labels to obtain and pass through mechanical license 
rights for individual permanent downloads. Under the Music 
Modernization Act, a record label will no longer be eligible to 
obtain and pass through a Section 115 license to a digital 
music provider to engage in activities related to interactive 
streams or limited downloads.
    Subsection (b)(4)(A) maintains the current practice whereby 
record labels that fail to serve or file a notice of intent are 
foreclosed from the possibility of obtaining a compulsory 
license for that work. Subsection (b)(4)(B) provides penalties 
for a digital music provider for failing to file a notice of 
intent or notice of license. Again, this subsection 
distinguishes between activities that occur prior to the date 
of availability of the blanket license and activities that 
occur after. Before the date of availability of the blanket 
license, if the digital music provider fails to serve a notice 
of intent on the musical work copyright owner (as described in 
subsection (b)(2)), then the digital music provider is 
foreclosed from obtaining a compulsory license for use of that 
particular work under such subsection. After the date the 
blanket license is available, if the digital music provider 
fails to submit the notice of license on the mechanical 
licensing collective, then the digital music provider is 
foreclosed from obtaining a blanket license for 3 years.
            17 U.S.C. 115(c) Royalty payable under compulsory license
    The amendments to subsection (c) change the current rate-
setting standard from that currently found at 801(b) to the 
``willing buyer/willing seller'' standard now applicable to 
setting rates for the public performance of sound recordings by 
noninteractive webcasters under the section 114(d)(2) and 
section 112 statutory licenses. Consistent with the current 115 
compulsory license, subsection (c)(2)(A) makes clear that 
voluntary licenses entered into between musical work copyright 
owners and digital music providers are given effect in lieu of 
the rates established for the blanket license.
            17 U.S.C. 115(d) Blanket license for digital uses, 
                    mechanical licensing collective, and digital 
                    licensee coordinator
    The majority of Title I creates a new section 115(d) that 
establishes a blanket compulsory licensing system for qualified 
digital music providers. The Committee has regularly heard from 
various parties in the music industry that the existing music 
licensing system does not functionally work to meet the needs 
of the digital music economy where commercial services strive 
to have available to their customers as much music as possible. 
Song-by-song licensing negotiations increase the transaction 
costs to the extent that only a limited amount of music would 
be worth engaging in such licensing discussions, depriving 
artists of revenue for less popular works and encouraging 
piracy of such works by customers looking for such music.
            The new mechanical licensing collective
    The Board of Directors of the new collective is required to 
be composed of individuals matching specific criteria. The 
detailed requirements concerning the overall framework of the 
Board of Directors of the collective and its three committees, 
the criteria used to select individuals to serve on them, and 
the advance publication of their names and affiliations all 
highlight the importance of selecting the appropriate 
individuals. Service on the Board or its committees is not a 
reward for past actions, but is instead a serious 
responsibility that must not be underestimated. With the 
advance notification requirement, the Register is expected to 
allow the public to submit comments on whether the individuals 
and their affiliations meet the criteria specified in the 
legislation; make some effort of its own as it deems 
appropriate to verify that the individuals and their 
affiliations actually meet the criteria specified in the 
legislation; and allow the public to submit comments on whether 
they support such individuals being appointed for these 
positions. It has been agreed to by all parties that 
songwriters should be responsible for identifying and choosing 
representatives that faithfully reflect the entire songwriting 
community on the Board.
    To ensure that the collective's officers are independent, 
individuals serving as officers of the collective may not, at 
the same time, also be an employee or agent of any member of 
the collective's Board of Directors or any entity represented 
by a member of the collective's Board of Directors.
    Given their importance, the three committees established by 
the collective must operate in a transparent manner to the 
greatest extent possible in order to avoid unnecessary 
litigation as well as to gain the trust of the entire music 
community. Although it would be desirable that the committees 
reach unanimous decisions, that will not always be possible in 
which case a majority vote will control the outcome of a 
decision. It is expected that the Board of Directors will 
establish rules on how to resolve tie vote decisions. For the 
responsibilities described in subparagraphs (J) and (K) of 
paragraph (3), the collective is only liable to a party for its 
actions if the collective is grossly negligent in carrying out 
the policies and procedures adopted by the Board of Directors 
pursuant to section 115(d)(11)(D). Since the Register has broad 
regulatory authority under paragraph (12) of subsection (d), it 
is expected that such policies and procedures will be 
thoroughly reviewed by the Register to ensure the fair 
treatment of interested parties in such proceedings given the 
high bar in seeking redress.
    Not later than 1 year after designation by the Register, 
the collective must establish and make public bylaws relating 
to the governance of the collective.
    The Register is allowed to re-designate an entity to serve 
as the collective every 5 years after the initial designation. 
Although there is no guarantee of a continued designation by 
the collective, continuity in the collective would be 
beneficial to copyright owners so long as the entity previously 
chosen to be the collective has regularly demonstrated its 
efficient and fair administration of the collective in a manner 
that respects varying interests and concerns. In contrast, 
evidence of fraud, waste, or abuse, including the failure to 
follow the relevant regulations adopted by the Copyright 
Office, over the prior five years should raise serious concerns 
within the Copyright Office as to whether that same entity has 
the administrative capabilities necessary to perform the 
required functions of the collective. In such cases, where the 
record of fraud, waste, or abuse is clear, the Register should 
give serious consideration to the selection of a new entity 
even if not all criteria are met pursuant to section 
115(d)(3)(B)(iii).
            Reasonable cost shifting of the mechanical licensing 
                    collective
    Digital music services and musical works copyright owners 
reached an agreement to transfer the reasonable costs of the 
new mechanical licensing collective to the licensees. The 
Committee supports a true free market for copyrighted works 
and, in the limited number of situations in which a compulsory 
license exists, believes that the licensees benefit most from 
the reduction in transaction costs. The Committee rejects 
statements that copyright owners benefit from paying for the 
costs of collectives to administer compulsory licenses in lieu 
of a free market. Therefore, the legislation directs that 
licensees should bear the reasonable costs of establishing and 
operating the new mechanical licensing collective. This 
transfer of costs is not unlimited, however, since it is 
strongly cabined by the term ``reasonable.''
    The legislation directs the Copyright Royalty Judges to 
undertake a proceeding to determine the amount of an 
administrative assessment fee to be paid by blanket and 
significant nonblanket licensees for the reasonable costs of 
starting up and continuing to operate the new mechanical 
licensing collective. There are several other licensing 
collectives, such as SoundExchange, American Society of 
Composers, Authors and Publishers (ASCAP), and Broadcast Music 
Inc. (BMI), that the Copyright Royalty Judges should look to 
for comparison points, although their expenditures are simply 
comparison points. The Copyright Royalty Judges shall make 
their own determination(s) based upon the evidence provided to 
them about the appropriate administrative assessment for such 
reasonable costs that are identified with specificity.
    It is expected that not all reasonable expenditures in the 
first years of the collective may be identifiable in advance, 
especially as they relate to startup costs, but that future 
reasonable costs are more likely to be able to be determined in 
advance with some certainty. When anticipated startup and 
operational costs are different than anticipated, the Copyright 
Royalty Judges are expected to use their best judgement as to 
what has or has not been a reasonable expenditure of the 
collective and use their authority to adjust the fee subject to 
prior under or over collection of fees for reasonable costs, as 
well as lesser or greater reasonable costs than anticipated.
    The legislation is focused on the transfer of the 
collective's reasonable startup and operating costs to blanket 
and nonblanket licensees. It is expected that the collective 
will only accrue reasonable costs and not expend unreasonable 
costs either on a one-off or continuing basis. It is not the 
responsibility of any other party other than the collective to 
ensure that it only expends reasonable amounts of funds for its 
activities. Although other parties such as the digital licensee 
coordinator may choose to notify the collective of any concerns 
of unreasonable spending, they do not have the legal burden to 
do so and do not waive their right to object to the Copyright 
Royalty Judges or a federal court of any unreasonable spending 
by not notifying them of it when suspected or discovered. 
Although the licensees are free to voluntarily pay some or all 
unreasonable costs of the collective if they so choose, the 
legislation does not require that and makes clear that all such 
unreasonable costs as determined by the Copyright Royalty 
Judges are not the responsibility of the licensees. Any such 
unreasonable costs, to the extent that they are accrued, should 
be borne by either the collective itself and/or the copyright 
owners that benefit from the collective. Nor should any 
unreasonable costs be offset by unmatched royalties or taken 
from artist revenue. The legislation requires that the 
collective pay out accrued royalties under a set schedule. With 
the exception of future adjustments to the administrative 
assessment, if so determined by the Copyright Royalty Judges, 
once the licensees meet the terms of the legislation in paying 
the applicable royalties with the administrative assessment and 
providing the accompanying usage data for the covered 
activities, their obligation ends for any additional payments 
for such usage. This includes any need to pay replacement 
royalties should the collective engage in waste, fraud, or 
abuse of such royalties. In the event that an employee of the 
collective engages in fraud by diverting royalty payments, it 
is not the responsibility of the licensee(s) to replace these 
stolen royalties.
    Because of the importance to the music community that the 
collective begin operating as soon as possible, even before any 
administrative assessment fees are collected, the legislation 
includes provisions to allow voluntary contributions by digital 
music providers to the collective to offset some or all of its 
startup and operational costs, as well as the adoption of 
voluntary agreements to determine the administrative 
assessment. Such contributions are to be voluntarily made and 
accounted for and, unless explicitly agreed to, shall not cover 
expenses deemed unreasonable by the Copyright Royalty Judges.
            Oversight and accountability
    The collective is expected to operate in a transparent and 
accountable manner. The legislation specifically requires that 
the collective shall ensure that its policies and practices are 
transparent and accountable. The collective must identify a 
point of contact for inquiries and complaints with timely 
redress. It must also establish an anti-comingling policy for 
funds.
            Audit
    To ensure that the collective does not engage in waste, 
fraud and abuse, the collective is required to submit to 
periodic audits to examine its operations and procedures. 
Beginning in the fourth full calendar year that begins after 
the initial designation of the collective by the Register, and 
in every fifth calendar year thereafter, the collective shall 
retain a qualified auditor to examine the collective's books, 
records and operations and prepare a report for the Board of 
Directors to be delivered no later than December 31 of the year 
in which the auditor is retained. The auditor's report shall 
address the implementation and efficacy of procedures of the 
collective's (1) receipt, handling and distribution of royalty 
funds, including any amounts held as unclaimed royalties; (2) 
efforts to guard against fraud, abuse, waste, and unreasonable 
use of funds; and (3) efforts to protect the confidentiality of 
financial, proprietary, and other sensitive information. The 
collective shall submit the report to the Register and make it 
available via the internet to the public.
            Musical works database
    The legislation mandates the creation of a new musical 
works database. For far too long, it has been difficult to 
identify the copyright owner of most copyrighted works, 
especially in the music industry where works are routinely 
commercialized before all of the rights have been cleared and 
documented. This has led to significant challenges in ensuring 
fair and timely payment to all creators even when the licensee 
can identify the proper individuals to pay. With millions of 
songs now available to subscribers worldwide, technology also 
has a role to play through digital fingerprinting of a sound 
recording. However, there is no reliable, public database to 
link sound recordings with their underlying musical works. 
Unmatched works routinely occur as a result of different 
spellings of artist names and song titles. Even differing 
punctuation in the name of a work has been enough to create 
unmatched works. There have been several attempts to create a 
unified music database, most notably the 2008 Global Repertoire 
Database project that brought together numerous music industry 
participants in an attempt to solve the music industry's data 
problem. Despite hopes that this effort would succeed where 
others had failed, this project too ended without success due 
to cost and data ownership issues. Music metadata has more 
often been seen as a competitive advantage for the party that 
controls the database, rather than as a resource for building 
an industry on. In an era in which Americans can buy millions 
of products via an app on their phone based upon the UPC code 
on the product, the failure of the music industry to develop 
and maintain a master database has led to significant 
litigation and underpaid royalties for decades. This situation 
must end so that all artists are paid for their creations and 
that so-called ``black box'' revenue is not a drain on the 
success of the entire industry.
    The database that is required by this legislation will 
contain information such as the title of a work, its copyright 
owner(s) and shares thereof, contact information for the 
copyright owner(s), International Standard Recordings Codes 
(ISRC) and International Standard Work Codes (ISWC), relevant 
information for the sound recordings a work is embodied in, and 
any other information that the Register of Copyrights may 
prescribe by regulation. Using standardized metadata such as 
ISRC and ISWC codes, is a major step forward in reducing the 
number of unmatched works. For example, the Register may at 
some point wish to consider after an appropriate rulemaking 
whether standardized identifiers for individuals would be 
appropriate, or even audio fingerprints. The Register shall use 
its judgement to determine what is an appropriate expansion of 
the required fields, but shall not adopt new fields that have 
not become reasonably accessible and used within the industry 
unless there is widespread support for the inclusion of such 
fields.
    Given the importance of this database, the legislation 
makes clear that it shall be made available to the Copyright 
Office and the public without charge, with the exception of 
recovery of the marginal cost of providing access in bulk to 
the public. Individual lookups of works shall be free although 
the collective may implement reasonable steps to block efforts 
to bypass the marginal cost recovery for bulk access if it 
appears that one or more entities are attempting to download 
the database in bulk through repeated queries. However, there 
shall be no requirement that a database user must register or 
otherwise turn over personal information in order to obtain the 
free access required by the legislation. The collective is 
required under the legislation to routinely undertake its own 
efforts to identify the musical works embodied in particular 
sound recordings, as well as to identify and locate the 
copyright owners of such works so that they can update the 
database as appropriate. With only the exception of the 
efficient and accurate collection and distribution of 
royalties, such actions are the highest responsibility of the 
collective.
            Records of the collective
    Beyond the new database, the legislation requires that the 
collective's material records be kept for not less than 7 years 
after the date of creation or receipt, whichever occurs later. 
The records applicable to a particular copyright owner are to 
be accessible to that copyright owner or their representative. 
Beyond the seven-year limit, there are no such limitations that 
apply to the access of any record by the Copyright Office.
            Annual report
    Not later than June 30 of each year after the first license 
availability date, the mechanical licensing collective shall 
publicly release an annual report that sets forth information 
regarding the collective's operational and licensing practices; 
how royalties are collected and distributed; budgeting and 
expenditures; the collective's total costs for the preceding 
calendar year; the projected annual collective budget; 
aggregated royalty receipts and payments; expenses that are 
more than 10% of the annual collective budget; and the efforts 
of the collective to locate and identify copyright owners of 
unmatched musical works and shares of works. It is expected 
that the collective will create reports similar to that of 
other collectives, while recognizing that certain reported 
activities of other collectives, involving lobbying and 
marketing that this collective is prohibited from doing, will 
not be applicable.
            Digital licensee coordinator
    The legislation anticipates, but does not require, the 
designation of a digital licensee coordinator to coordinate the 
activities of the licensees. Similar to the collective, the 
choice of the coordinator is subject to a review by the 
Register of Copyrights every five years, has specified duties, 
and is prohibited from engaging in lobbying. The coordinator 
shall make reasonable, good-faith efforts to assist the 
collective in locating and identifying copyright owners of 
unmatched musical works (and shares of such works) by 
encouraging digital music providers to publicize the existence 
of the collective and the ability of copyright owners to claim 
unclaimed accrued royalties, including by (1) posting contact 
information for the collective at reasonably prominent 
locations on digital music provider websites and applications, 
and (2) conducting in-person outreach with songwriters. Both 
the collective and the coordinator have the right to commence 
an action in federal court for specified damages, injunctive 
relief, attorneys' fees, costs, and other relief deemed 
appropriate by a federal court against a significant nonblanket 
licensee that fails to provide monthly usage reports or pay the 
required administrative fee. Any financial recovery shall be 
used to offset the costs of the collective's total costs.
            Voluntary licenses
    Although the primary focus of the legislation is the 
creation of a new compulsory blanket license, voluntary 
licenses remain in effect and are excluded from the blanket 
license and individual licenses. However, such voluntary 
licenses that rise to the threshold of a significant nonblanket 
license must meet the conditions imposed upon such licensees. 
Musical work copyright owners may designate the mechanical 
licensing collective to administer voluntary licenses so long 
as the rates and terms of the voluntary license were negotiated 
individually between a musical work copyright owner and digital 
music provider. Musical work copyright owners may not require 
as a condition for entering into a direct license that the 
mechanical licensing collective administer a voluntary license.
            Transition to a blanket license
    The legislation creates a transition period in order to 
move from the current work-by-work license to the new blanket 
license. After the date of enactment, a digital music provider 
will no longer be able to serve notices of intent on the 
Copyright Office for uses of musical works for which the 
musical work copyright owner cannot be identified or located. 
Notices of intent filed before the enactment date will no 
longer be effective. However, prior to the blanket license 
availability date a digital music provider is immune from 
copyright infringement liability for any use of any musical 
work for which the digital music provider was unable to 
identify or locate the musical work copyright owner so long as 
the digital music provider engages in good-faith, commercially 
reasonable efforts to identify and locate musical work 
copyright owners. The digital music provider is required to use 
one or more bulk electronic matching processes, and must 
continue using these processes, on a monthly basis for so long 
as the musical work copyright owner is unidentified.
    If the musical work copyright owner is identified or 
located during this search process, then the digital music 
provider is required to report and pay that copyright owner any 
royalties owed. If the musical work copyright owner remains 
unidentified between the date of enactment and the date the 
blanket license is available, then the digital music provider 
is required to provide a cumulative usage report and accrued 
royalties to the mechanical licensing collective. There are no 
late fees associated with these accrued royalties.
    When the blanket license becomes available, the blanket 
license will be substituted automatically for the compulsory 
licenses obtained pursuant to notices of intent, without any 
interruption in license authority. Because the new blanket 
license replaces the previous work-by-work compulsory license, 
the compulsory licenses obtained under notices of intent served 
on musical work copyright owners prior to the availability of 
the blanket license will no longer be valid. However, any 
voluntary license agreement between a digital music provider 
and a musical work copyright owner continues to be effective 
and takes precedence over the blanket license until such 
license expires according to its own terms.
            Obtaining a blanket license
    After the blanket license availability date, digital music 
services interested in obtaining a blanket license shall 
provide advance notice to the mechanical licensing collective. 
The collective has 30 calendar days to reject such notice in 
writing, listing with specificity why such notice was rejected, 
either because it does meet the requirements of the legislation 
or applicable regulations established the Copyright Office or 
if the digital music service provider has had a blanket license 
terminated by the collective within the past three years. There 
is an additional 30-day cure period for a potential licensee. 
Should a provider believe that their notice was improperly 
rejected, they have the right to seek review in federal 
district court on a de novo basis. Once obtained, the license 
covers the making and distribution of server, intermediate, 
archival, and incidental reproductions of musical works that 
are reasonable and necessary.
            Default and termination of a blanket license
    Although it would be far preferable for every digital music 
provider that obtains a compulsory license to meet all of the 
terms of such license, there may be occasions when that will 
not be the case. The legislation anticipates the imposition of 
a late fee to be determined in advance by the Copyright Royalty 
Judges to address late payments. However, the legislation also 
recognizes that such late fees may not be enough to bring a 
provider back into compliance and therefore identifies the 
conditions upon which digital music providers shall be deemed 
in default of such compulsory licenses, and thus allow the 
collective to terminate such license automatically.
    A provider that believes their blanket license was 
improperly terminated has the right to seek review in federal 
court on a de novo basis. However, the court should recognize 
that the conditions for determining default and permitting 
termination are quite specific. So long as those conditions are 
met, a court may not impose additional termination requirements 
or waive clear deadlines in an attempt to continue the blanket 
license. If a party wants to obtain and then maintain a blanket 
license, it must meet the stated terms specified in the 
statute. Efforts by the collective to participate in such 
proceedings, including its own reasonable attorneys' fees, are 
a reasonable expense of the collective. Since the digital music 
providers that benefit from the new licensing system are 
responsible for paying such reasonable costs, other digital 
music providers may wish to consider joining the case in 
opposition to a defaulting licensee under Rule 24 of the 
Federal Rules of Civil Procedure. However, a court could 
determine that the collective has attempted to impose new 
conditions beyond those permitted by the legislation. Should a 
court make such determination, the court has the authority to 
revoke such attempted termination and grant any other relief it 
determines to be appropriate. The Committee strongly encourages 
the court to make the Copyright Office aware of such 
determination since any financial cost to the collective that 
results from such relief or related litigation efforts shall 
not be considered a reasonable cost of the collective.
            Performance saving clause
    Section (d)(13) contains two savings clauses intended to 
protect the licensing of the public performing right in musical 
works from interference by the mechanical compulsory license. 
The clauses clarify that subsection 115(d) applies solely to 
section 115 mechanical reproduction and distribution rights. 
Subsection (d)(13)(A) clarifies that the section 115 blanket 
license shall not extend to any other activity or right other 
than exclusive rights of reproduction and distribution of 
musical works with respect to covered activities. Subsection 
(d)(13)(B) clarifies that subsection (d) does not extend to, 
limit or affect any musical work public performance works. This 
administration function can include a voluntary mechanical 
license that bundles the public performance of musical works 
when such licenses are entered into by the copyright owner 
directly with a digital transmission services. However, the 
mechanical license collective may not itself own, control, 
grant or be granted the public performance right in musical 
works. It is further intended that a performing rights society 
or other entity licensing the public performing right to 
musical works or administering voluntary licenses shall not be 
required to use information from the mechanical licensing 
collective's musical works database for the calculation or 
distribution of license fees or other payments for public 
performances of musical works licensed and/or administered by 
such performing rights society or entity.
            Audit rights
    The legislation contains two different audit rights, one 
for copyright owners due royalties from the collective and one 
for the collective due royalties from licensees. Both audit 
rights are subject to certain specified time limits and other 
requirements including the ability to choose alternative 
procedures if both parties agree. The key difference is that 
only the audit right for the collective contains a shifting of 
the cost of the audit to the digital music provider being 
audited if there was an underpayment of 10 percent or more. The 
reason for this difference is that the collective is assumed to 
be operating in its members' best interests while digital music 
services have no such underlying responsibility.
            Significant nonblanket licensees
    The legislation creates a category of licensees, identified 
as significant nonblanket licensees, who operate outside the 
blanket licensing context, but who are required to provide 
notice to the collective of their existence and to help pay for 
the operation of the new collective. Such licensees are subject 
to a cause of action in federal court brought by either the 
mechanical licensing collective or the digital licensee 
coordinator if they fail to make monthly usage reports or pay 
the administrative assessment fee. This fee is made applicable 
to such licensees because they are presumed to benefit from the 
new database and as a way to avoid parties attempting to avoid 
funding of the mechanical licensing collective by engaging in 
direct deals outside the blanket license. Two specific 
exceptions to the definition of a significant nonblanket 
licensee are incorporated in the definition of such licensee, 
one concerning certain free-to-the-user streams of less than 90 
seconds and the other in regards to public broadcasting 
entities.
            Royalty distribution of matched works
    Usage reports from digital music services must include the 
number of digital phonorecord deliveries, specifying the number 
of limited downloads and interactive streams. Any reports 
should be consistent with then-current industry practices 
regarding how such limited downloads and interactive streams 
are tracked and reported. The digital music provider must also 
identify all musical work copyright owners with whom the 
digital music provider has an effective voluntary license and 
is not relying on the blanket license. Using this information, 
the collective is then required to collect and distribute 
royalties on a specific schedule set forth in the legislation. 
All copyright owners shall have their royalties distributed 
fairly and no copyright owner may receive special treatment as 
a result of their position on the Board, its committees, or for 
any other reason without a reasonable basis. For example, it 
may be required for the Board and its committees to focus on 
specific copyright owners for legitimate, specific reasons such 
as representing them in a bankruptcy proceeding that not all 
copyright owners are part of. Absent such legitimate reasons, 
any such special treatment should be viewed by the Register and 
federal courts as waste, fraud, and abuse.
    It is expected that over time one or more music services 
will file bankruptcy and the collective may represent its 
copyright owners in related court proceedings in order to 
recover as much of the royalties due as possible. The Board 
shall then distribute any lesser amounts of royalties collected 
through such bankruptcy proceedings to copyright owners using 
the best usage data available. Since a bankruptcy proceeding 
may conclude long after the relevant employees at the music 
service have long since departed, there may be discrepancies in 
the usage data that cannot be resolved. With a recorded vote, 
the Board shall determine how best to proceed with 
distribution(s) related to bankrupt music services. Although 
not required by the legislation, the collective may wish to 
consult with the Register for his or her opinion if a 
particular approach is reasonable in which case the Register 
shall provide a timely response.
            Royalty distribution of unmatched works
    It is expected that there will be some percentage of 
unmatched works that generate royalties that will decline over 
time as the collective's database becomes more robust and the 
music industry continues to recognize the importance of 
obtaining and sharing proper metadata in advance of the initial 
distribution of a work. Since the legislation permits the 
distribution of unclaimed royalties that were accrued on 
unmatched works for which the creators will not be paid, a 
significantly higher bar to such distributions is required 
compared to the more routine royalty distributions of matched 
works.
    For unmatched works, the collective must wait for the 
prescribed holding period of three years before making such 
distribution. This is intended to give the collective time to 
actively search for the copyright owner. SoundExchange, a 
collective for royalties under Section 114 of the Copyright 
Act, has an admirable history of undertaking significant 
efforts to locate copyright owners who may not know they are 
due royalties. Despite their robust efforts, however, even 
SoundExchange distributes unmatched royalties after its 
detailed search efforts conclude. This legislation requires the 
new collective to undertake its own efforts to locate the 
copyright owner and update its database accordingly if so 
identified. If such efforts fail, then the unclaimed royalties 
oversight committee shall establish such policies identified in 
the legislation that the Committee believes are necessary to 
undertake a fair distribution of such unclaimed royalties. 
These policies include gathering of required information to 
make such distributions, 90 calendar days' advance public 
notice, and a requirement that at least 50 percent of such 
unclaimed royalties be credited or paid to the songwriter(s) 
represented by that copyright owner. It is the intent of 
Congress to ensure that songwriters receive their fair share of 
monies distributed to copyright owners under subsection 
(d)(3)(J), while at the same time respecting contractual 
relationships. To that end, payments and credits to songwriters 
shall be allocated in proportion to the reported usage of 
individual musical works by digital music providers during the 
relevant reporting periods. The 50% payment or credit to a 
songwriter referenced in subsection (d)(3)(J)(iv)(II) is 
intended to be treated as a floor, not a ceiling, and is not 
meant to override any applicable contractual arrangement 
providing for a higher payment or credit of such monies to a 
songwriter.
    This process ensures that copyright owners and artists 
benefit. While there may be some copyright owners and/or 
artists who would prefer that such money be escrowed 
indefinitely until claimed, the simple way to avoid any 
distribution to other copyright owners and artists is to step 
forward and identify oneself and one's works to the collective, 
an exceedingly low bar to claiming one's royalties.
            Public notice of unclaimed accrued royalties
    The collective shall maintain a publicly accessible online 
facility with contact information for the collective that lists 
unmatched musical works (and shares of works), through which a 
copyright owner may assert an ownership claim with respect to 
such a work (and a share of such a work). The collective shall 
engage in diligent, good-faith efforts to publicize the 
collective and ability to claim unclaimed accrued royalties for 
unmatched musical works (and shares of such works), the 
procedures with respect to receiving accrued royalty payments, 
and information on accrued royalty transfers and pending 
distribution of unclaimed accrued royalties and accrued 
interest.
            Termination of prior litigation
    The legislation contains a key component that was necessary 
to bring the various parties together in an effort to reach 
common ground by limiting liability for digital music providers 
after January 1, 2018, so long as they undertake certain 
payment and matching obligations. Such agreement is welcomed 
since continued litigation generates unnecessary administrative 
costs, diverting royalties from artists. Congress routinely 
preempts such unnecessary litigation in other contexts and 
views the application here of such date as warranted. The 
imposition of detailed statutory requirements for obtaining 
such a limitation of liability ensure that more artist 
royalties will be paid than otherwise would be the case through 
continual litigation.
            Copyright Office regulations
    Pursuant to paragraph (12) of subsection (d), the Register 
is expected to promulgate the necessary regulations required by 
the legislation in a manner that balances the need to protect 
the public's interest with the need to let the new collective 
operate without over-regulation. The Copyright Office has the 
knowledge and expertise regarding music licensing through its 
past rulemakings and recent assistance to the Committee during 
the drafting of this legislation. Although the legislation 
provides specific criteria for the collective to operate, it is 
to be expected that situations will arise that were not 
contemplated by the legislation. The Office is expected to use 
its best judgement in determining the appropriate steps in 
those situations. The Register of Copyrights can also turn to 
another legislative branch agency, the Government 
Accountability Office, for assistance in determining if artists 
are being properly compensated for their works.
            Copyright Office activities
    The legislation requires the Register to engage in public 
outreach and educational activities. The legislation also 
requires the Register, after soliciting and reviewing comments 
and relevant information from music industry stakeholders, to 
submit a report to the Judiciary Committees of the Senate and 
House recommending best practices that the collective may 
implement in order to identify and locate musical work 
copyright owners with unclaimed accrued royalties held by the 
collective, to encourage musical work copyright owners to claim 
their royalties, and to reduce the incidence of unclaimed 
royalties. The collective shall carefully consider and give 
substantial weight to the Register's recommendations when 
establishing procedures relative to these issues.
            Uniform rate standards
    Section 103(a) of the legislation creates a uniform willing 
buyer, willing seller rate standard in section 114(f). This 
fair standard for sound recordings ensures that copyright 
owners are appropriately compensated for their works using a 
standard that most approximates the rates that would have been 
negotiated in a free market. It has long been a goal of the 
Committee to move towards such a standard and move beyond 
earlier unfair standards, such as the now unnecessary discount 
for so-called ``pre-existing services.'' There is no current 
justification for such 40-year old discounts that harm 
copyright owners as well as competitors of such pre-existing 
services. It is also in the interest of facilitating greater 
competition in these areas that such discounts are eliminated. 
Whatever justification for the discounts has long since 
vanished.
    Section 103(a) of the legislation repeals section 114(i), 
to address the longstanding concern that songwriters have not 
been adequately compensated for their contributions and section 
114(i) prevents songwriters from introducing potentially 
relevant evidence in rate court proceedings. Section 103(a) 
creates a specific exception for taking into account license 
fees payable for the public performance of sound recordings 
under section 106(6) related to certain transmissions by 
broadcasters although these new definitions are not to be given 
effect in interpreting other provisions in Title 17. In 
addition, the repeal shall not be taken into account in 
proceedings to determine royalties for sound recordings and has 
no impact upon the past precedents of such proceedings. 
Furthermore, as used in this section of the legislation, the 
term ``digital audio transmission'' is intended to incorporate 
the definition of that term found in section 114(j)(5). 
Therefore, as used in this section, the term ``digital audio 
transmission'' does not include the transmission of any 
audiovisual work.
            Consent decree rate proceedings
    Section 104 of the legislation modifies the selection of 
rate court judges and related proceedings for performing rights 
societies subject to a consent decree, currently ASCAP and BMI. 
In lieu of the current system, the district court shall use a 
random process, commonly known as the wheel, to determine which 
judge shall hear rate setting cases involving a performing 
rights society's license fees. However, the original judge(s) 
who oversee(s) the interpretation of the consent decree(s) 
shall not be permitted to oversee any rate proceedings. Under 
the present situation, this would mean that the two judges who 
oversee the ASCAP and the BMI consent decrees would not hear 
any rate proceedings involving either performing rights 
society. This change is not a reflection upon any past actions 
by the Southern District of New York--rather, it is believed 
that rate decisions should be assigned on a random basis to 
judges not involved in the underlying consent decree cases.
            Consent decree review
    In April 2018, the Antitrust Division of the Department of 
Justice announced its intention to review over 1300 ``legacy'' 
consent decrees, including those governing ASCAP and BMI. 
Collectively, ASCAP and BMI license over 90 percent of musical 
works to licensees that publicly perform music, including 
restaurants, retail stores, bars, radio and television 
broadcasters, and digital music services.
    Since the 1940s, ASCAP and BMI have been subject to consent 
decrees with the U.S. Department of Justice to address 
antitrust concerns arising from an entity collectively 
licensing works from competitors and offering them at a single 
price. As a result, the ASCAP and BMI consent decrees have 
fundamentally shaped the marketplace for licensing public 
performance rights in musical works for nearly 80 years and 
entire industries have developed around them. In 2016, the 
Department of Justice concluded a multi-year review of these 
decrees, determined that they still serve the public interest, 
and declined to modify the decrees.
    There is serious concern that terminating the ASCAP and BMI 
decrees without a clear alternative framework in place would 
result in serious disruption in the marketplace, harming 
creators, copyright owners, licensees, and consumers. In fact, 
sections of the legislation assume the continued existence of 
the decrees and alter the rate-setting system established by 
the decrees, including what evidence may be submitted in a rate 
dispute and how judges will be assigned to such disputes.
    The legislation will improve how music is licensed and how 
songwriters, recording artists, record producers, engineers and 
copyright owners are paid. Enacting the legislation only to see 
the Department of Justice move forward with seeking termination 
of the decrees without a workable alternative framework could 
displace the legislation's improvements to the marketplace with 
new questions and uncertainties for songwriters, copyright 
owners, licensees and consumers.
    Given these ongoing concerns, section 105 of the 
legislation creates a formal role for Congress during any 
review by the Department of Justice of a consent decree with a 
performing rights society, such as ASCAP or BMI. During any 
review of such a decree, the Department of Justice shall 
provide upon request timely briefings to any Member of the 
Senate and House Judiciary Committees regarding the status of 
such review. The Department of Justice shall also share with 
such Members detailed and timely information and pertinent 
documents related to the review, subject to confidentiality and 
rules of agency deliberative process.
    Additionally, section 105 of the legislation requires the 
Department of Justice to notify Members of the Senate and House 
Judiciary Committees before filing a motion to terminate, 
including a motion to terminate after a specified period of 
time, also referred to as ``sunsetting'', any consent decree 
with a performing rights society and provide information 
regarding the impact of the proposed termination on the market 
for licensing the public performance for musical works should 
the motion be granted.
    The Department of Justice is required to submit such 
notification in writing to the Chairmen and Ranking Members of 
the Senate and House Judiciary Committees not later than 90 
days prior to filing such motion. This notification shall 
include a written report setting forth an explanation of the 
process used by the Department of Justice to review the decree, 
a summary of the public comments received by the Department of 
Justice during its review, and any other information requested 
by Congress.
    This section applies only to the Department of Justice's 
review of and potential motion to terminate consent decrees 
governing performing rights societies. Nothing in this section 
broadly impacts the Department of Justice's independent 
authority to seek whatever modifications to a consent decree, 
including termination, it determines are within the public 
interest. Moreover, nothing in this section changes the process 
a district court would use to review a motion to modify or 
terminate a consent decree between the United States and a 
performing rights society.

2. Title II--Compensating Legacy Artists for Their Songs, Service, and 
        Important Contributions to Society

    The second title of S. 2823 is an amended version of S. 
2393, the ``Compensating Legacy Artists for their Songs, 
Service, and Important Contributions to Society', or the 
``CLASSICS Act.'' The legislation amends Title 17 to create 
royalties for so-called ``pre-72 works'' using the same rates 
and distribution system for royalties already applicable to 
post-72 works. These sound recordings that were fixed prior to 
February 15, 1972 generate no royalties for older artists who 
have highlighted the negative impact upon their ability to 
survive economically as they increasingly enter their 
retirement years, including from testimony received at the 
Committee hearing on May 15, 2018, from Mr. Smokey Robinson, a 
pre-72 recording artist. Among the few options artists with 
pre-72 works have for generating income from such works are 
grueling touring schedules that older artists are increasingly 
less able to undertake. In contrast, artists with post-72 works 
face lesser burdens since they are able to earn royalties for 
such works outside of touring.
    Despite this discrepancy in royalties payable for works, 
music services have been able to successfully operate while 
paying royalties for post-72 works. Thus, these same services 
should be able to continue to successfully operate with a 
statutory requirement to pay royalties for pre-72 works to 
enable older artists and their families to benefit financially 
from their creativity.
    There have been several class action suits regarding pre-72 
royalties in states including California, Florida, and New York 
with varying outcomes. A benefit of the CLASSICS Act is that, 
in addition to providing for financial income for older 
artists, it will end the need for state litigation by extending 
the existing federal royalty payment system for eligible, 
authorized digital transmissions, as defined in new section 
1401(b), for works fixed between January 1, 1923, and February 
15, 1972, while pre-empting state laws for common law copyright 
or equivalent rights under the laws of any State that would 
conflict with these provisions. The legislation also leaves 
those existing settlements untouched.
    Section 1401(d)(1)(C)(ii)(II) provides there should be no 
liability under state laws protecting pre-1972 (and post-1922) 
recordings for voluntary agreements between rights owners and 
digital music services reached before the enactment of the 
CLASSICS Act if the voluntary agreement 1) either licenses the 
service to make, or releases the service from liability for, 
digital audio transmissions or reproductions that would 
otherwise have been eligible for statutory licensing, and 2) 
the service complies with the terms of the agreement. This 
would be the effect of such a license or settlement under state 
contract law, but the provison was included to remove any doubt 
about potential liability.
    Title II includes several limitations on remedies in the 
new section 1401(e), including fair use; certain uses by 
libraries, archives, and educational institutions; section 507; 
section 512; section 230 safe harbors; and a new filing 
requirement for obtaining statutory damages and attorneys' 
fees. This new filing requirement is designed to operate in 
place of a formal registration requirement that normally 
applies to claims involving statutory damages.
    Section 1401(e)(1)(B) clarifies the application of section 
108 of the Copyright Act to a claim against unauthorized 
performances of pre-1972 (and post-1922) sound recordings by a 
library or archive under new section 1401(a). Specifically, 
section 108(h) allows libraries and archives to make certain 
uses of published works during the last 20 years of the 
copyright term of those works, if certain conditions are met. 
The CLASSICS Act does not provide a term of copyright for pre-
1972 recordings; rather, it provides a special federal sui 
generis form of protection for digital performances that aligns 
with the term of other state law pre-1972 recording rights. In 
the absence of a federal copyright term that would dictate when 
the limitation would apply, section 180(h) should apply 
commencing with the date of enactment of the CLASSICS Act. 
Section 108(h) does not apply to other uses of pre-1972 
recordings, including public performance of a pre-1923 
recording by means of a digital audio transmission by a library 
or archive, because such uses remain solely subject to state 
law.
    In the absence of full federalization of these pre-72 
works, the new section 1401(e)(5) requires that the copyright 
owners file a schedule of works subject to potential claims of 
statutory damages or attorneys' fees with the Copyright Office 
under regulations that it will promulgate not later than 180 
days after the date of enactment of this section. Before this 
system is operating, the Copyright Office shall also promulgate 
regulations within 30 days of enactment for the filing of 
contact information for transmitting entities. This contact 
information database will operate up to 180 days after 
enactment after which the database of works by copyright owners 
will control whether statutory damages and attorneys' fees are 
available. Copyright owners must provide a 90-day notice to 
transmitting entities about a claim for royalties up to 180 
days after enactment after which time transmitting entities 
must search the new database established by the Copyright 
Office for such works.
    To ensure that works currently in the public domain remain 
in the public domain, works fixed prior to January 1, 1923, are 
specifically excluded from the payment of any royalties under 
this provision.

3. Title III--Allocation for Music Producers

    The third title of S. 2823 is a modified version of S. 
2625, the ``Allocation for Music Producers,'' or the ``AMP 
Act.'' Currently, the provisions included in this title would 
only impact the one collective designated by the Copyright 
Royalty Judges to distribute royalties under section 114(f), 
SoundExchange. SoundExchange has gained widespread industry 
support with its efforts to efficiently distribute webcasting 
royalties to copyright owners and artists that proactively 
identify themselves as due such royalties or, in the absence of 
such identification, can be identified through the efforts of 
SoundExchange. It is hoped that the culture of transparency 
that SoundExchange has brought to the music industry will be 
duplicated elsewhere, including in the new mechanical licensing 
collective established by the first title of this legislation.
    In order to pay certain creators, such as producers, 
mixers, and sound engineers, who were not by statute receiving 
royalties under section 114, SoundExchange has had a policy 
since 2004 of honoring ``letters of direction'' to pay these 
creators a portion of the featured performer's royalties. 
According to information supplied by SoundExchange, 
approximately 2,000 active letters of direction are on file 
with them generating royalties for these creators, although 
more such letters of direction that do not have any royalty 
payments due are on file with them. SoundExchange has received 
only a limited number of letter of direction submissions that 
do not meet its conditions for execution and has worked with 
the interested parties to ensure proper execution of them once 
corrected by the creators.
    It is expected that SoundExchange will continue to 
implement such policies in a transparent and efficient manner, 
and to the extent that any other distribution collective 
designated in the future by the Copyright Royalty Judges for 
the distribution of receipts from the licensing of 
transmissions in accordance with section 114(f), also do so. 
Nothing in section 114(g)(5) requires that SoundExchange modify 
any of its current policies in place for letters of direction 
for recordings fixed on or after November 1, 1995. Section 
114(g)(5) simply makes the provision of the letter of direction 
system a statutory requirement while giving SoundExchange, and 
any future designated distribution collective, the discretion 
necessary to operate such a system. The effective date of 
section 114(g)(5)(B) is set as January 1, 2020, by Section 303 
of the legislation to correspond both to the need for 
SoundExchange to update its internal systems and the alignment 
with the beginning of a calendar tax year.
    Although Section 302(a) creates a brief statutory framework 
for a SoundExchange system already in operation, section 302(b) 
creates a more detailed statutory framework for a letter of 
direction system for works fixed before November 1, 1995, which 
was the date of enactment of P.L. 104-39, the Digital 
Performance Right in Sound Recordings Act of 1995. Prior to 
this date, producers, mixers, and sound engineers would not 
have contemplated or predicted the payment of digital royalties 
in their contracts with an artist. The legislation identifies 
the manner in which a letter of direction for two percent of 
total royalties can be submitted for such works; what 
additional efforts the collective and qualifying person must 
make over a four-month period to notify the featured performers 
in advance of any royalty distribution to one or more 
producers, mixers, or sound engineers; and the process for 
objecting to such letters of direction. After a valid letter of 
direction for a specific work goes into effect, the payout of 
total royalties through SoundExchange or another collective 
designated in the future for such distributions would be 
allocated as follows:
           50 percent of the receipts shall be paid to 
        the copyright owner of the exclusive right under 
        section 106(6) to publicly perform a sound recording by 
        means of a digital audio transmission.
           2.5 percent of the receipts shall be 
        deposited in an escrow account managed by an 
        independent administrator jointly appointed by 
        copyright owners of sound recordings and the American 
        Federation of Musicians (or any successor entity) to be 
        distributed to nonfeatured musicians (whether or not 
        members of the American Federation of Musicians) who 
        have performed on sound recordings.
           2.5 percent of the receipts shall be 
        deposited in an escrow account managed by an 
        independent administrator jointly appointed by 
        copyright owners of sound recordings and the American 
        Federation of Television and Radio Artists (or any 
        successor entity) to be distributed to nonfeatured 
        vocalists (whether or not members of the American 
        Federation of Television and Radio Artists) who have 
        performed on sound recordings.
           43 percent of the receipts shall be paid, on 
        a per sound recording basis, to the recording artist or 
        artists featured on such sound recording (or the 
        persons conveying rights in the artists' performance in 
        the sound recordings).
           2 percent of the receipts shall be paid, on 
        a per sound recording basis, to those eligible for 
        payment(s) identified in section 114(g)(6)(B).
    Similar to section 114(g)(5)(B), section 303 of the 
legislation delays the effective date of the new section 
114(g)(6)(E) to January 1, 2020, to accomodate the need for 
SoundExchange to update its internal systems and align with the 
beginning of a calendar tax year.
    Section 302(c) makes several technical and conforming 
amendments to section 114(g) that should have no operative 
impact upon any entity operating currently or in the future.

          II. History of the Bill and Committee Consideration


                      A. INTRODUCTION OF THE BILL

    On March 15, 2018, the Senate Judiciary Committee hosted a 
bipartisan staff briefing led by Judiciary Committee staff to 
discuss pending music legislation. Briefers included Mr. David 
Israelite, President and CEO, National Music Publishers 
Association; Mr. Bart Herbison, Executive Director, Nashville 
Songwriters Association International; Mr. Chris Harrison, CEO, 
Digital Media Association; Ms. Clara Kim, General Counsel, 
American Society of Composers, Authors and Publishers; Mr. Stu 
Rosen, General Counsel, Broadcast Music, Inc.; Mr. Michael 
Lewan, Director of Government Relations, Recording Academy; Mr. 
Mitch Glazier, President, Recording Industry Association of 
America; Mr. Michael Beckerman, CEO, Internet Association; Ms. 
Paula Calhoun, Executive Vice President and General Counsel, 
Music Choice; Ms. Cynthia Greer, Vice President and Associate 
General Counsel, SiriusXM; Ms. Meredith Rose, Policy Counsel, 
Public Knowledge; and Mr. Curtis LeGeyt, Executive Vice 
President-Government Relations, National Association of 
Broadcasters.
    On May 10, 2018, Mr. Hatch introduced S. 2823, the Music 
Modernization Act. Senators Grassley, Whitehouse, Alexander, 
Coons, Kennedy, Harris, Corker, Durbin, Isakson, Leahy, Crapo, 
Jones, Tillis, Perdue, Capito, Nelson and Blunt were original 
cosponsors. The bill was referred to the Committee on the 
Judiciary.
    On May 15, 2018, the Committee on the Judiciary held a 
hearing entitled ``Protecting and Promoting Music Creation for 
the 21st Century.'' Testimony regarding S. 2823 was received 
from Mr. Smokey Robinson, Recording Artist, Songwriter, and 
Producer; Mr. David Israelite, President and CEO, National 
Music Publishers Association; Ms. Meredith Rose, Policy 
Counsel, Public Knowledge; Mr. Justin Roberts, GRAMMY-Nominated 
Singer/Songwriter, Trustee, Recording Academy; Mr. Chris 
Harrison, CEO, Digital Media Association, Mr. Dave Del Beccaro, 
CEO, Music Choice; Mr. Mitch Glazier, President, Recording 
Industry Association of America; and, Mr. Josh Kear, 
Songwriter.

                       B. COMMITTEE CONSIDERATION

    The Committee on the Judiciary considered S. 2823 on June 
28, 2018. Mr. Grassley offered a substitute amendment which was 
adopted by unanimous consent. The Committee voted to report S. 
2823 as amended, favorably to the Senate, by a voice vote.

              III. Section-by-Section Summary of the Bill

    The following discussion describes the bill as reported by 
the Committee.

                TITLE I. MUSICAL LICENSING MODERNIZATION

Section 101. Short Title

    Section 101 sets forth the short title of Title I as the 
``Musical Works Modernization Act.''

Sec. 102. Blanket license for digital uses and mechanical licensing 
        collective.

    Section 102 comprises the vast majority of the overall 
legislation.
    The first part of Section 102 updates existing 17 U.S.C. 
Sec. 115 (a)-(c), partly to accommodate the new provisions 
added by 115(d).
    Subsection 115(a) is amended to clarify what requirements 
for obtaining a compulsory license exist for digital music 
providers, and it specifies when a person may seek a license 
for the duplication of a sound recording.
    Subsection 115(b) is amended by removing the ability of 
persons seeking to make digital phonorecord deliveries to file 
a notice of intent with the Copyright Office and instead 
requiring such notice to be filed with the copyright owner. In 
the event that a party does not file such notice for non-
digital phonorecord deliveries, that party is permanently 
ineligible for the compulsory licenses, although they may 
obtain voluntary licenses from the copyright owner(s). In the 
case of digital phonorecord deliveries, the failure to obtain a 
license forecloses the ability of a party to obtain such 
license for three years.
    Subsection 115(c) is amended to account for the new blanket 
licensing system created by the new legislation in 115(d).
    The latter part of section 102 strikes the existing 
subsection 115(d) of Title 17 that currently contains only one 
definition and replaces it with a significantly expanded 
subsection to create a new compulsory blanket licensing system 
as follows:
    Paragraph 1 of the new subsection 115(d) defines the scope 
of the new compulsory license and how it interacts with other 
existing licenses, such as a voluntary license. By obtaining 
and complying with the terms of such license, a digital music 
provider is not subject to an infringement action under 
paragraphs (1) and (3) of section 106.
    Paragraph 2 sets forth the availability of the blanket 
license, including related Copyright Office regulations, its 
effective date, and dispute resolution in federal district 
court.
    Paragraph 3 creates the framework of the new mechanical 
licensing collective created by the legislation beginning with 
subparagraph A that identifies the requirement for a new 
``mechanical licensing collective'' that shall meet specified 
minimum criteria including being: (1) a nonprofit single 
entity, (2) endorsed by and enjoying support from the majority 
of musical works copyright owners as measured over the 
preceding three years, (3) able to demonstrate that it has or 
will have prior to the license availability date the necessary 
capabilities to perform the required functions, and (4) 
designated by the Register of Copyrights, with the approval of 
the Librarian of Congress pursuant to section 702.
    Subparagraph B sets forth the initial process for 
designation of the collective by the Register as well as 
periodic opportunities every five years for re-designation. The 
Register is authorized to choose a closest alternate 
designation in case every condition set forth in subparagraph 
(A) is not met. However, before an initial designation is made, 
all members of the Board of Directors and the various 
committees, along with contact information for the collective, 
are required to be identified with their affiliations so that 
interested parties can submit comments to the Register on 
whether the parties meet the requirements set forth in 
subparagraph (D) of the bill. This requirement is not waivable 
by the Register and is not subject to the alternate designation 
language.
    Subparagraph C identifies the authorities and functions of 
the collective along with three specific provisions: the 
ability of the collective to administer voluntary licenses, a 
restriction on negotiating or granting licenses for public 
performance rights, and a restriction on lobbying.
    Subparagraph D sets forth the governance of the collective. 
The collective's Board of Directors will consist of 14 voting 
members and 3 nonvoting members, and will establish bylaws that 
will be available to the public. The Board of Directors will 
meet no less than twice a year. The Board of Directors will 
establish an operations advisory committee, an unclaimed 
royalties oversight committee, and a dispute resolution 
committee. The collective is also required to produce a public 
annual report, in addition to an independent officers 
requirement providing that individuals serving as officers of 
the collective may not, at the same time, also be an employee 
or agent of any member of the Board of Directors or any entity 
represented by a member of the Board of Directors. Since the 
Board of Directors and committee member requirements along with 
the annual report are statutory in nature, these requirements 
are not waivable by the Register or subject to modification by 
the Board of Directors. The subparagraph also requires the 
collective to ensure that its policies and practices are 
transparent and accountable, identify a point of contact for 
inquiries and complaints, and establish an anti-comingling 
policy. Finally the subparagraph requires that an audit be 
conducted, beginning in the fourth full calendar year after the 
initial designation of the collective by the Register and in 
every fifth year thereafter, to examine the implementation and 
efficacy of the collective's procedures on royalty funds, how 
well the collective guards against fraud, abuse, waste, and the 
unreasonable use of funds, and how it protects the 
confidentiality of financial, proprietary and other sensitive 
information. The audit will be made available to the Register 
and the public.
    Subparagraph E explains in detail the fields in the new 
musical works database that the collective is required to 
create based upon information provided to them by digital music 
services and under what conditions the information is made 
available to others, including the public. The required 
information in the database depends upon whether a work is 
considered matched or unmatched. To the extent that information 
is missing, musical works copyright owners with works in the 
database are required to undertake commercially reasonable 
efforts to deliver the names of the sound recording in which 
their works are embodied. The database ought also to be 
accessible.
    Subparagraph F requires the collective to maintain publicly 
accessible lists of blanket and significant nonblanket 
licensees.
    Subparagraph G sets forth how royalties are collected and 
then distributed along with efforts to collect royalties from 
bankrupt licensees.
    Subparagraph H clarifies that any unmatched royalties shall 
be held by the collective for at least three years after they 
were first accrued and must be kept in an interest bearing 
account.
    Subparagraph I sets forth the claiming process for works 
that are originally deemed unmatched. The collective is 
required to undertake a process to publicize the existence of a 
searchable database. Once a work is claimed, the royalties and 
accrued interest for such work shall be paid out and the 
musical works database shall be updated for future matching.
    Subparagraph J determines how unclaimed royalties are 
distributed on a market share basis after the holding period 
specified in subparagraph H. The unclaimed royalties oversight 
committee shall establish policies and procedures for such 
distributions subject to the approval of the Board of Directors 
of the collective. The collective shall maintain a publicly 
accessible online facility with contact information listing 
unmatched musical works (and shares of works), through which a 
copyright owner may assert an ownership claim with respect to 
such a work (and share of such work), and engage in good faith 
efforts to publicize the existence of the collective and 
ability to claim unclaimed royalties, the procedures by which 
copyright owners may receive royalties, and information on 
transfers of accrued royalties and pending unclaimed royalties. 
The collective shall also participate in music industry 
conferences and events to publicize these matters. Unclaimed 
royalties are to be distributed based upon market share data 
that is confidentially provided to the collective by copyright 
owners. Ninety calendar days notice is required for such 
distributions and songwriters must be credited at least 50 
percent of the royalty paid to their publisher.
    Subparagraph K sets forth the functions of the dispute 
resolution committee concerning ownership disputes among 
musical works copyright owners. Pursuant to subparagraph (D) 
the collective is only liable for gross negligence in these 
functions. It will hold disputed funds in accordance with 
subparagraph (H)(ii). However, a copyright owner has the 
ultimate right to seek redress in a federal district court 
pursuant to paragraph (10)(E).
    Subparagraph L sets forth the verification and audit 
process for copyright owners to audit the collective, although 
parties may agree on alternate procedures.
    Subparagraph M concerns the ability of copyright owners and 
their agents to access the records of the collective subject to 
confidentiality agreements prescribed by the Register.
    Paragraph 4 specifies the terms and conditions for a 
blanket license.
    Subparagraph A identifies the data that must be reported to 
the collective by a digital music provider along with its 
royalty payments not later than 45 calendar days after the end 
of a monthly reporting period. The Register shall specify 
information technology requirements of such reports along with 
the maintenance of the records of use.
    Subparagraph B requires digital music providers to engage 
in good-faith, commercially reasonable efforts to obtain 
information from sound recording copyright owners for use by 
the collective, including in its database.
    Subparagraph C requires digital music providers and 
significant nonblanket licensees to pay the administrative 
assessment established under paragraph (7)(D).
    Subparagraph D sets forth the verification and audit 
process for the collective to audit the digital music 
providers, although the parties may agree on alternate 
procedures.
    Subparagraph E identifies the conditions by which a digital 
music provider may be considered in default and the 
consequences of such default. A digital music provider may seek 
review of such default on a de novo basis in a federal district 
court of competent jurisdiction.
    Paragraph 5 identifies the role of the digital licensee 
coordinator, its initial designation and potential 
redesignation, as well as its authorities and functions. Like 
the collective, the coordinator is prohibited from lobbying. 
However, unlike as would be the case with the collective, it is 
possible for the new blanket licensing system to proceed in the 
event a digital licensee coordinator cannot be chosen. The 
coordinator is authorized to perform a number of functions, 
including assisting the mechanical licensing collective in 
publicizing the existence of the collective and the ability of 
copyright owners to claim royalties for unmatched musical 
works.
    Paragraph 6 sets forth the requirements for significant 
nonblanket licensees as defined in subsection (e)(31), 
including reporting requirements and payment of the 
administrative assessment. Should a significant nonblanket 
licensee fail to pay the assessment or submit the required 
reports, either is actionable in a federal district court for 
damages up to three times the amount of the unpaid assessment, 
injunctive relief, costs, and attorneys' fees.
    Paragraph 7 details the funding of the new collective by 
the digital music providers and significant nonblanket 
licensees through a combination of voluntary contributions and 
an administrative assessment determined by the Copyright 
Royalty Judges in a separate proceeding. The fee shall be 
determined on either a percentage of royalties basis or other 
usage-based formula with a minimum amount due that covers the 
reasonable costs of the collective. Timelines for the adoption 
of the initial and future administrative assessments are 
established in this paragraph along with granting the Copyright 
Royalty Judges continuing authority to amend their decisions.
    Paragraph 8 provides guidance to the Copyright Royalty 
Judges as to how interim rates should be established as well as 
the new late fee for nonpayment of royalties to the collective 
under the blanket license. Neither the mechanical licensing 
collective nor the digital licensee coordinator may participate 
in such rate setting activities except to provide information 
to other parties in the proceeding.
    Paragraph 9 identifies the process to transfer the existing 
licensing system to the blanket system. Existing compulsory 
licenses will automatically become blanket licenses on the 
license availability date and existing voluntary licenses will 
continue unchanged until they expire or parties agree to amend 
or discontinue them. Immediately after enactment of the 
legislation, the Copyright Office shall discontinue accepting 
notices of intention with regards to works that would be 
covered by the new blanket license. However, prior to the 
license availability date, liability is waived if a valid 
notice was filed prior to the enactment date.
    Paragraph 10 provides for a limitation on liability for 
prior unlicensed uses that have occurred after January 1, 2018, 
so long as digital music providers engage in at least monthly 
good-faith efforts to locate copyright owners and pay their 
royalties prior to the license availability date. Not later 
than 45 days after the blanket license is available, any non-
matched royalties must be turned over to the collective, along 
with as much information about usage and ownership information 
as possible. Late fees and infringement causes of action are 
also limited subject to these conditions. Two savings clauses 
are included to clarify that nothing in this paragraph limits 
or alters any existing right of action and that any aggrieved 
party may seek an action in federal district court if there is 
an issue that is not adequately resolved by the Board.
    Paragraph 11 details the legal protections for various 
licensing activities, including antitrust exemptions and common 
agent exemptions. The collective is not liable for good-faith 
activities under a gross negligence standard, but none of its 
activities are immune from suit in federal district court. Due 
to the distribution of unclaimed royalties to other copyright 
owners, state laws on abandoned property are preempted.
    Paragraph 12 gives the Register authority to conduct 
proceedings and adopt any necessary regulations as necessary or 
appropriate with the exception of the administrative assessment 
that is to be determined by the Copyright Royalty Judges. Among 
the regulations required to be established are those necessary 
to govern business confidentiality. All such regulations are 
subject to judicial review.
    Paragraph 13 contains two savings clauses for limiting the 
scope of the blanket license and making clear that rights of 
public performance are not affected.
    A new subsection 115(e) is created that contains 36 new 
definitions.
    Section 102(b) amends the existing 801(b) standard such 
that the administrative assessment will henceforth be 
determined under the provisions created by this legislation, 
rather than the procedures of existing law.
    Section 102(c) sets the effective date of certain new 
provisions.
    Section 102(d) directs the Copyright Royalty Judges to 
update their regulations within nine months to be consistent 
with the legislation.
    Section 102(e) requires the Register to engage in public 
outreach and educational activities.
    Section 102(f) requires the Register to submit to the 
Senate and House Judiciary Committees a report recommending 
best practices for the collective to implement regarding 
identification and location of musical work copyright owners, 
claims of royalties, and reduction of unclaimed royalties.

Sec. 103. Amendments to section 114

    Section 103 creates a uniform willing buyer, willing seller 
rate standard by amending 17 U.S.C. 114(f), repealing 17 U.S.C. 
114(i), and modifying 801(b), while ensuring that certain 
transmissions by a broadcaster shall not take into account 
license fees for public performances of sound recordings under 
17 U.S.C. 106(6). The discounted ``pre-existing services'' rate 
standard established in 1976 is removed in order to equalize 
the rate setting process for all licensees. Further, it is 
clarified that the repeal of 114(i) shall not be taken into 
account for the setting of rates for sound recordings under 
section 112(e) or 114(f). A series of additional technical and 
conforming amendments rearranges several other provisions in 
response to these changes.

Sec. 104. Random assignment of rate court proceedings

    Section 104 creates an updated system to randomly assign 
ASCAP and BMI rate court cases to judges of the Southern 
District of New York other than the two judges who oversee the 
consent decrees. These two judges will no longer hear rate 
court proceedings.

Sec. 105. Performing rights society consent decrees

    Section 105 requires the Department of Justice to provide 
timely briefings upon request of any Member of the Senate and 
House Judiciary Committees regarding the status of any review 
of a consent decree with a performing rights society, such as 
ASCAP or BMI. The Department of Justice shall also share with 
such Members detailed and timely information and pertinent 
documents related to the review, subject to rules of 
confidentiality and agency deliberative process. Before filing 
a motion to terminate a consent decree between the United 
States and a performing rights society, the Department of 
Justice is required to notify such Members and provide them 
with information regarding the impact of the proposed 
termination on the market for licensing the public performance 
of musical works should the motion be granted. The notification 
will be provided in writing to the Chairmen and Ranking Members 
of the Senate and House Judiciary Committees not later than 90 
days prior to the filing of the motion, and will include an 
explanation of the process used to review the decree, a summary 
of the public comments, and any other information requested by 
Congress. This section only applies to consent decrees between 
the United States and a performing rights society.

Sec. 106. Effective date

    Section 106 provides that Title I and the amendments made 
by this Title shall take effect on the date of enactment of 
this Act.

  TITLE II. COMPENSATING LEGACY ARTISTS FOR THEIR SONGS, SERVICE, AND 
                 IMPORTANT CONTRIBUTIONS TO SOCIETY ACT

Section 201. Short title

    Section 201 designates the short title of this Title of the 
bill as the ``Compensating Legacy Artists for Their Songs, 
Service, and Important Contributions to Society Act'' or the 
``CLASSICS Act.''

Sec. 202. Unauthorized digital performance of pre-1972 sound recordings

    Section 202 amends Title 17 by adding a new Chapter 14 
concerning pre-1972 works titled ``Chapter 14--Unauthorized 
Digital Performance of Pre-1972 Sound Recordings'' as follows:

    Chapter 14 creates a remedy under section 502 through 505 
for the use of works fixed between January 1, 1923, and 
February 14, 1972, when no federal right existed. However, 
should a transmitting entity make such transmissions as they do 
for those works fixed on or after February 15, 1972, including 
statutory royalties equivalent to those works, these 
transmissions are considered authorized. Direct licensing of 
such works from the copyright owners is recognized so long as 
the collective that receives and distributes such payments is 
paid 50% of the proceeds with 50% of the performance royalties 
credited as payments due under the license. State common law 
copyrights or other equivalent rights are preempted as are 
claims under them. Fair use and library use privileges in 
sections 108, 110(1), and 110(2) are available as a defense 
along with section 512. A rule of construction for section 
108(h) provides that with respect to the application of setion 
108(h) to a claim for unauthorized performance of a sound 
recording first fixed on or after January 1, 1923, and before 
February 15, 1972, under subsection (a) of this section, the 
phrase ``during the last 20 years of any term of copyright of a 
published work'' in such section 108(h) shall be construed to 
mean at any time after the effective date of this section. In 
order to obtain statutory damages, a copyright owner must file 
a schedule of pre-1972 works for which the copyright owner is 
seeking royalties. No suits may arise until 90 days have passed 
since the works are first indexed into the public records of 
the Copyright Office. Transmitting entities must also submit 
their contact information to the Copyright Office so that 
copyright owners can identify which services are transmitting 
their works and send them a notice to stop using such works in 
the event they choose not to receive webcasting royalties. Such 
notice will prevent an award of statutory damages or attorney's 
fees from being imposed for activities within the first 90 days 
a notice is sent to the transmitter. In case the notice is 
undeliverable, the 90-day period begins on the date of the 
attempted delivery. Section 230 safe harbors also apply in the 
use of such works.

Sec. 203. Effective date

    Section 203 sets the effective date of Title II as the date 
of enactment of the overall bill.

          TITLE III. ALLOCATION FOR MUSIC PRODUCERS (AMP) ACT

Section 301. Short title

    Section 301 designates the short title of this section of 
the bill as the ``Allocation for Music Producers Act'' or the 
``AMP Act.''

Sec. 302. Payment of statutory performance royalties

    Section 302(a) codifies an existing practice of 
SoundExchange to accept letters of direction in order to pay 
producers, sound engineers, and mixers a portion of the 
webcasting royalties that it collects. Section 302(b) expands 
this program to cover new royalties for pre-1995 works that 
will be received by SoundExchange due to enactment of Title II. 
The new program requires, in the absence of a letter of 
direction, at least four months' notice to a copyright owner 
with no objections from the copyright owner before a set 
percentage of royalties (2% of all webcasting royalties from a 
particular work) is then paid to producers, sound engineers, 
and mixers.

Sec. 303. Effective date

    Section 303 sets the effective date of all three Titles of 
the bill as the date of enactment with the exception of certain 
changes to 114(g) made in Title III.

             IV. Congressional Budget Office Cost Estimate

    The Committee sets forth, with respect to the bill, S. 
2823, the following estimate and comparison prepared by the 
Director of the Congressional Budget Office under section 402 
of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 17, 2018.
Hon. Chuck Grassley,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed revised cost estimate for S. 2823, the 
Music Modernization Act. This cost estimate supersedes the 
estimate for S. 2823 that CBO transmitted on August 13, 2018. 
The earlier cost estimate did not have the correct short title 
for S. 2823. This cost estimate corrects that error.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Raben.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

S. 2823--Music Modernization Act

    Summary: Under current law, a digital music provider (such 
as Spotify, Apple Music, or Pandora) must pay the copyright 
owner a royalty fee to use a protected work of music. If it 
does not otherwise have a voluntary license agreement with the 
copyright owner to use the work, the music provider must file a 
notice of intent--on a song-by-song or record-by-record basis--
with the copyright owner or the U.S. Copyright Office when it 
seeks to use any copyrighted digital musical work.
    S. 2823 would eliminate notice-of-intent licensing for 
digital musical works and direct the Copyright Office to 
designate a nonprofit entity--a mechanical licensing 
collective, or MLC--to administer a new blanket-licensing 
system. Under such a license, a digital music provider could 
use certain copyrighted musical works without filing a notice 
of intent to do so. S. 2823 also would require the MLC to 
collect royalties from digital music providers using the 
blanket license and distribute them to copyright owners.
    CBO estimates that enacting S. 2823 would increase deficits 
by $47 million over the 2021-2028 period. That amount comprises 
an increase in direct spending of $222 million and an increase 
in revenues of $175 million. In addition, CBO estimates that, 
over the 2019-2023 period, it would cost $1 million to 
implement the bill, subject to the availability of appropriated 
funds.
    Because enacting S. 2823 would affect direct spending and 
revenues, pay-as-you-go procedures apply.
    CBO estimates that enacting S. 2823 would not increase net 
direct spending by more than $2.5 billion or on-budget deficits 
by more than $5 billion in any of the four consecutive 10-year 
periods beginning in 2029.
    S. 2823 would impose intergovernmental mandates, as defined 
in the Unfunded Mandates Reform Act (UMRA), in the form of 
preemptions of state laws, but CBO estimates that the costs of 
those mandates would fall well below the threshold established 
in UMRA for intergovernmental mandates ($80 million in 2018, 
adjusted annually for inflation).
    The bill would impose private-sector mandates on companies 
that provide digital music services by:
           Requiring those companies to pay higher fees 
        when they apply for licenses issued by the MLC to cover 
        the administrative costs of the organization;
           Requiring those companies to provide usage 
        reports to the MLC each month detailing the artists and 
        works that have been streamed; and
           Changing the processes used to resolve 
        disputes over claims of copyright infringement in 
        certain cases.
    Because of the uncertainty in determining the effect on 
settlements due to copyright holders under the new dispute 
resolution process, CBO cannot determine whether the aggregate 
cost of the mandates on private entities would exceed the 
annual threshold established in UMRA for private-sector 
mandates ($160 million in 2018, adjusted annually for 
inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of S. 2823 is shown in the following table. 
The costs of the legislation fall within budget function 370 
(commerce and housing credit).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2018   2019   2020   2021   2022   2023   2024   2025   2026   2027   2028  2019-2023  2019-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              INCREASES IN DIRECT SPENDING
 
Estimated Budget Authority...........................      0      0      0     20     28     28     29     29     30     31     31        76        227
Estimated Outlays....................................      0      0      0     17     27     28     29     29     30     31     31        72        222
 
                                                                  INCREASES IN REVENUES
 
Estimated Revenues...................................      0      0      0     16     22     22     22     23     23     23     24        59        175
 
                                       NET INCREASE IN THE DEFICIT FROM INCREASES IN DIRECT SPENDING AND REVENUES
 
Impact on Deficit....................................      0      0      0      1      5      6      6      7      7      7      8        13         47
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components may not sum to totals because of rounding.
CBO estimates that discretionary spending to implement S. 2823 would total $1 million over the 2019-2023 period, subject to the availability of
  appropriated funds.

    Basis of estimate: For this estimate, CBO assumes that S. 
2823 will be enacted near the end of fiscal year 2018 and that 
the necessary amounts will be available each year. Estimated 
outlays are based on historical patterns for similar 
activities.
    Under S. 2823, the Copyright Office would designate an 
entity to act as the MLC and the judges of the Copyright 
Royalty Board would establish an administrative assessment to 
be paid by users of the blanket license and by certain other 
large users of copyrighted digital musical works. That 
assessment would be designed to cover the costs of 
establishing, maintaining, and operating the MLC. Payment of 
the assessment would be compulsory and could be enforced 
through a court order. In CBO's view, in keeping with guidance 
in the 1967 Report of the President's Commission on Budget 
Concepts, the cash flows from the assessment and subsequent 
spending should be recorded in the federal budget.\1\ Under the 
bill, the initial administrative assessment would be effective 
on January 1 two years after the date of enactment of the 
legislation and CBO expects that collections would begin in 
fiscal year 2021.
---------------------------------------------------------------------------
    \1\For more information, see Congressional Budget Office, How CBO 
Determines Whether to Classify an Activity as Governmental When 
Estimating Its Budgetary Effects (June 2017), www.cbo.gov/publication/
52803.
---------------------------------------------------------------------------
    S. 2823 would make several changes to royalty rates and to 
protections for certain copyright holders of sound recordings 
and musical works. Because royalty amounts collected by the 
U.S. Copyright Office or its designated agents and later 
distributed to copyright owners are not recorded in the federal 
budget, CBO estimates that implementing those provisions would 
have no budgetary effect.

Direct Spending

    S. 2823 would authorize the MLC to spend amounts collected 
under the administrative assessment levied by the Copyright 
Royalty Judges, without further appropriation, to cover the 
MLC's costs. Such expenditures would be considered direct 
spending. For this estimate, CBO expects that the Copyright 
Royalty Judges would estimate the operating costs of the MLC 
accurately and set an assessment rate to equal those costs each 
year. Using information from industry experts and the 
administrative costs to operate entities that engage in similar 
activities, CBO estimates that expenditures by the MLC would 
average $30 million annually and would total $227 million over 
the 2021-2028 period.

Revenues

    S. 2823 would authorize the Copyright Royalty Judges to 
levy an assessment on digital music providers with blanket 
licenses and on certain other digital music providers that 
instead obtain voluntary licenses to use specific copyrighted 
musical works. The assessment would be based on the entities' 
use of musical works and set at a rate intended to fund the 
operations of the MLC. For this estimate, CBO expects that the 
assessment would be set to recover all of the allowable costs 
of the MLC and would be collected in full in each year; 
therefore, CBO estimates that collections would average about 
$30 million annually. Those amounts would be recorded in the 
budget as revenues. CBO estimates that enacting S. 2823 would 
increase gross revenues by $227 million over the 2021-2028 
period.
    Because excise taxes and other indirect business taxes 
(like the bill's proposed assessment) reduce the base of income 
and payroll taxes, the amounts collected would lead to 
reductions in revenues from income and payroll taxes.\2\ As a 
result, the gross assessments under the bill would be partially 
offset by a loss of receipts of 22 percent to 24 percent of 
that gross amount each year. Thus, CBO estimates that enacting 
S. 2823 would increase net revenues by $175 million over the 
2021-2028 period.
---------------------------------------------------------------------------
    \2\See Congressional Budget Office, The Role of the 25 Percent 
Revenue Offset in Estimating the Budgetary Effects of Legislation 
(January 2009), www.cbo.gov/publication/20110.
---------------------------------------------------------------------------

Spending Subject to Appropriation

    S. 2823 would require the Copyright Office and Copyright 
Royalty Judges to make rules that create the MLC, establish a 
digital licensee coordinator, establish a blanket-licensing 
system, and set new rates for royalty payments. Under the bill, 
the Copyright Office also would be required to engage in 
outreach efforts regarding changes to the copyright royalty 
system and to complete a report with recommendations to the MLC 
to identify copyright owners with unclaimed royalties and to 
reduce the incidence of unclaimed royalties. Using information 
from the Copyright Office, CBO estimates that those activities 
would cost the agency $1 million over the 2019-2023 period.
    S. 2823 also would require the Department of Justice (DOJ) 
to provide briefings upon request to members of the House and 
Senate Committees on the Judiciary regarding the status of its 
review of consent decrees between the U.S. government and a 
performing- rights society. DOJ also would be required to 
notify and provide certain information to members of Congress 
before filing a motion to terminate such a consent decree. CBO 
estimates that any administrative costs associated with such 
briefings and notifications would be insignificant and would be 
subject to the availability of appropriated funds.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table.

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 2823, THE MUSIC MODERNIZATION ACT, AS ORDERED REPORTED BY THE SENATE COMMITTEE ON THE JUDICIARY ON JUNE 28,
                                                                          2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2018   2019   2020   2021   2022   2023   2024   2025   2026   2027   2028  2018-2023  2018-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Effect.......................      0      0      0      1      5      6      6      6      7      7      8        13         47
Memorandum:
    Changes in Outlays...............................      0      0      0     17     27     28     29     29     30     31     31        72        222
    Changes in Revenues..............................      0      0      0     16     22     22     22     23     23     23     24        59        175
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term direct spending and deficits: CBO 
estimates that enacting S. 2823 would not increase net direct 
spending by more than $2.5 billion or on-budget deficits by 
more than $5 billion in any of the four consecutive 10-year 
periods beginning in 2029.
    Mandates: S. 2823 would impose intergovernmental and 
private-sector mandates as defined in UMRA. CBO estimates that, 
in the aggregate, the cost of mandates imposed on public 
entities would not exceed the annual threshold established in 
that act ($80 million in 2018, adjusted annually for 
inflation). CBO cannot determine whether the aggregate cost of 
mandates on private entities would exceed the annual threshold 
established in UMRA for private-sector mandates ($160 million 
in 2018, adjusted annually for inflation).

Mandates That Apply to State Governments Only

    S. 2823 would impose intergovernmental mandates as defined 
in UMRA by preempting state laws. In establishing a new system 
for collecting and distributing royalties through the MLC, S. 
2823 would preempt state laws that allow states to collect 
royalties that remain unclaimed for a certain period. Using 
information from music industry sources about current unclaimed 
royalties and the efforts states make to claim them, CBO 
estimates that the amount of revenue that states might forgo as 
a result of the preemption would be small.
    S. 2823 also would establish federal copyright protections 
for musical works recorded before 1972 and would preempt state 
property laws that govern infringement claims regarding those 
works. Although the preemption would limit the application of 
state laws, it would impose no duty on states that would result 
in additional spending or a loss of revenues.
    In addition, S. 2823 would give producers, mixers, and 
sound engineers a statutory right to seek payment of their 
royalties through a nonprofit collective designated by the 
Copyright Royalty Judges. The nonprofit collective would adopt 
and implement a policy to provide for royalty distributions 
that would supersede and preempt any state law, including 
common law, concerning abandoned property. CBO estimates that 
the preemption would not affect the budgets or revenues of 
state governments.

Mandates That Apply to Private Entities

    S. 2823 would impose private-sector mandates on companies 
that provide digital music services. Under current law, digital 
music providers negotiate directly with copyright owners for 
the right to use musical works or, when the copyright owner 
cannot be identified, pay fees to the Copyright Office for the 
right to use the music. S. 2823 would direct those companies to 
pay fees instead to the MLC to administer a new blanket-
licensing system. Using information from the Copyright Office 
and music industry sources, CBO estimates that the fees 
companies would pay to the MLC would range from $22 million to 
$28 million annually, beginning in 2021. (Those amounts include 
a small savings that would result from companies' no longer 
paying fees to the Copyright Office for the covered services.)
    As a condition of receiving a blanket license, companies 
that provide digital music services would be required to submit 
reports to the MLC detailing the artists and works streamed 
each month. Because such companies already maintain and provide 
similar information under current law, CBO estimates that the 
costs of compliance would not be significant.
    Finally, the bill would establish new processes for 
settling legal disputes over the infringement of copyrights for 
musical works by ending outstanding--or prohibiting future--
lawsuits by copyright owners in certain cases. In the case of 
lawsuits alleging copyright infringement filed after January 1, 
2018, the bill would terminate those lawsuits. In lieu of 
settlement under the terminated lawsuits, copyright owners 
would be entitled to royalties under the rates set by the MLC 
for music streamed during the three years preceding the suit 
(the period of the federal statute of limitations on claims of 
copyright infringement); in exchange, digital music companies 
would receive liability protection as long as they made good-
faith efforts to aid the MLC in matching works with their 
copyright owners and to make timely payments of royalties.
    Similarly, in the case of lawsuits involving musical works 
recorded before 1972 and brought under state law, the bill 
would nullify those claims and substitute a federal process 
under which copyright holders would be entitled to three years' 
worth of back royalties; in exchange, music companies would 
receive protection from further claims.
    In substituting those new processes for rights of legal 
action under current federal or state law, S. 2823 would impose 
mandates on copyright holders by terminating their existing 
rights to make infringement claims. The costs of the mandates 
would be the forgone value of awards and settlements for those 
claims to the extent that the legislation resulted in lower 
compensation than under current law. CBO is uncertain how the 
value of royalties claimed by copyright owners in lawsuits 
would be affected under the bill or how much those amounts 
might differ relative to current law.
    Previous CBO estimate: On April 25, 2018, CBO transmitted a 
cost estimate for H.R. 5447, the Music Modernization Act, as 
ordered reported by the House Committee on the Judiciary on 
April 11, 2018. The estimated increases in direct spending and 
revenues are the same for both pieces of legislation. S. 2823 
includes provisions that would direct the Copyright Office to 
engage in additional outreach efforts and to complete a report. 
S. 2823 also includes provisions requiring DOJ to provide 
briefings and additional information to members of Congress. 
CBO's cost estimates for the two pieces of legislation reflect 
those differences.
    This estimate supersedes the cost estimate for S. 2823 that 
CBO transmitted on August 13, 2018. The earlier cost estimate 
did not have the correct short title for S. 2823. This cost 
estimate corrects that error.
    Estimate prepared by: Federal costs: Stephen Rabent and 
Jacob Fabian; Mandates: Rachel Austin.
    Estimate reviewed by: Kim P. Cawley, Chief, Natural and 
Physical Resources Cost Estimates Unit; Susan Willie, Chief, 
Mandates Unit; H. Samuel Papenfuss, Deputy Assistant Director 
for Budget Analysis.

                    V. Regulatory Impact Evaluation

    In compliance with rule XXVI of the Standing Rules of the 
Senate, the Committee finds that no significant regulatory 
impact will result from the enactment of S. 2823.

                             VI. Conclusion

    The Music Modernization Act, S. 2823, will update music 
copyright laws and improve the ability of artists and 
professionals to receive compensation for their music 
creativity.

       VII. Changes to Existing Law made by the Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
S. 2823, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                           UNITED STATES CODE

                          TITLE 17--COPYRIGHTS

Chap.                                                               Sec.
101bject Matter and Scope of Copyright..........................

           *       *       *       *       *       *       *

14. Unauthorized digital performance of pre-1972 sound recordings.  1401

CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT

           *       *       *       *       *       *       *



Sec. 114. Scope of exclusive rights in sound recordings

    (a) The exclusive rights of the owner of copyright in a 
sound recording are limited to the rights specified by clauses 
(1), (2), (3) and (6) of section 106, and do not include any 
right of performance under section 106(4).
    (b) The exclusive right of the owner of copyright in a 
sound recording under clause (1) of section 106 is limited to 
the right to duplicate the sound recording in the form of 
phonorecords or copies that directly or indirectly recapture 
the actual sounds fixed in the recording. The exclusive right 
of the owner of copyright in a sound recording under clause (2) 
of section 106 is limited to the right to prepare a derivative 
work in which the actual sounds fixed in the sound recording 
are rearranged, remixed, or otherwise altered in sequence or 
quality. The exclusive rights of the owner of copyright in a 
sound recording under clauses (1) and (2) of section 106 do not 
extend to the making or duplication of another sound recording 
that consists entirely of an independent fixation of other 
sounds, even though such sounds imitate or simulate those in 
the copyrighted sound recording. The exclusive rights of the 
owner of copyright in a sound recording under clauses (1), (2), 
and (3) of section 106 do not apply to sound recordings 
included in educational television and radio programs (as 
defined in section 397 of title 47) distributed or transmitted 
by or through public broadcasting entities (as defined by 
section 118(f)): Provided, That copies or phonorecords of said 
programs are not commercially distributed by or through public 
broadcasting entities to the general public.
    (c) This section does not limit or impair the exclusive 
right to perform publicly, by means of a phonorecord, any of 
the works specified by section 106(4).
    (d) Limitations on Exclusive Right.--Notwithstanding the 
provisions of section 106(6)--
          (1) Exempt transmissions and retransmissions.--The 
        performance of a sound recording publicly by means of a 
        digital audio transmission, other than as a part of an 
        interactive service, is not an infringement of section 
        106(6) if the performance is part of--
                  (A) a nonsubscription broadcast transmission;
                  (B) a retransmission of a nonsubscription 
                broadcast transmission: Provided, That, in the 
                case of a retransmission of a radio station's 
                broadcast transmission--
                          (i) the radio station's broadcast 
                        transmission is not willfully or 
                        repeatedly retransmitted more than a 
                        radius of 150 miles from the site of 
                        the radio broadcast transmitter, 
                        however--
                                  (I) the 150 mile limitation 
                                under this clause shall not 
                                apply when a nonsubscription 
                                broadcast transmission by a 
                                radio station licensed by the 
                                Federal Communications 
                                Commission is retransmitted on 
                                a nonsubscription basis by a 
                                terrestrial broadcast station, 
                                terrestrial translator, or 
                                terrestrial repeater licensed 
                                by the Federal Communications 
                                Commission; and
                                  (II) in the case of a 
                                subscription retransmission of 
                                a nonsubscription broadcast 
                                retransmission covered by 
                                subclause (I), the 150 mile 
                                radius shall be measured from 
                                the transmitter site of such 
                                broadcast retransmitter;
                          (ii) the retransmission is of radio 
                        station broadcast transmissions that 
                        are--
                                  (I) obtained by the 
                                retransmitter over the air;
                                  (II) not electronically 
                                processed by the retransmitter 
                                to deliver separate and 
                                discrete signals; and
                                  (III) retransmitted only 
                                within the local communities 
                                served by the retransmitter;
                          (iii) the radio station's broadcast 
                        transmission was being retransmitted to 
                        cable systems (as defined in section 
                        111(f)) by a satellite carrier on 
                        January 1, 1995, and that 
                        retransmission was being retransmitted 
                        by cable systems as a separate and 
                        discrete signal, and the satellite 
                        carrier obtains the radio station's 
                        broadcast transmission in an analog 
                        format: Provided, That the broadcast 
                        transmission being retransmitted may 
                        embody the programming of no more than 
                        one radio station; or
                          (iv) the radio station's broadcast 
                        transmission is made by a noncommercial 
                        educational broadcast station funded on 
                        or after January 1, 1995, under section 
                        396(k) of the Communications Act of 
                        1934 (47 U.S.C. 396(k)), consists 
                        solely of noncommercial educational and 
                        cultural radio programs, and the 
                        retransmission, whether or not 
                        simultaneous, is a nonsubscription 
                        terrestrial broadcast retransmission; 
                        or
                  (C) a transmission that comes within any of 
                the following categories--
                          (i) a prior or simultaneous 
                        transmission incidental to an exempt 
                        transmission, such as a feed received 
                        by and then retransmitted by an exempt 
                        transmitter: Provided, That such 
                        incidental transmissions do not include 
                        any subscription transmission directly 
                        for reception by members of the public;
                          (ii) a transmission within a business 
                        establishment, confined to its premises 
                        or the immediately surrounding 
                        vicinity;
                          (iii) a retransmission by any 
                        retransmitter, including a multichannel 
                        video programming distributor as 
                        defined in section 602(12) of the 
                        Communications Act of 1934 (47 U.S.C. 
                        522(12)), of a transmission by a 
                        transmitter licensed to publicly 
                        perform the sound recording as a part 
                        of that transmission, if the 
                        retransmission is simultaneous with the 
                        licensed transmission and authorized by 
                        the transmitter; or
                          (iv) a transmission to a business 
                        establishment for use in the ordinary 
                        course of its business: Provided, That 
                        the business recipient does not 
                        retransmit the transmission outside of 
                        its premises or the immediately 
                        surrounding vicinity, and that the 
                        transmission does not exceed the sound 
                        recording performance complement. 
                        Nothing in this clause shall limit the 
                        scope of the exemption in clause (ii).
          (2) Statutory licensing of certain transmissions.--
        The performance of a sound recording publicly by means 
        of a subscription digital audio transmission not exempt 
        under paragraph (1), an eligible nonsubscription 
        transmission, or a transmission not exempt under 
        paragraph (1) that is made by a preexisting satellite 
        digital audio radio service shall be subject to 
        statutory licensing, in accordance with subsection (f) 
        if--
                  (A)(i) the transmission is not part of an 
                interactive service;
                  (ii) except in the case of a transmission to 
                a business establishment, the transmitting 
                entity does not automatically and intentionally 
                cause any device receiving the transmission to 
                switch from one program channel to another; and
                  (iii) except as provided in section 1002(e), 
                the transmission of the sound recording is 
                accompanied, if technically feasible, by the 
                information encoded in that sound recording, if 
                any, by or under the authority of the copyright 
                owner of that sound recording, that identifies 
                the title of the sound recording, the featured 
                recording artist who performs on the sound 
                recording, and related information, including 
                information concerning the underlying musical 
                work and its writer;
                  (B) in the case of a subscription 
                transmission not exempt under paragraph (1) 
                that is made by a preexisting subscription 
                service in the same transmission medium used by 
                such service on July 31, 1998, or in the case 
                of a transmission not exempt under paragraph 
                (1) that is made by a preexisting satellite 
                digital audio radio service--
                          (i) the transmission does not exceed 
                        the sound recording performance 
                        complement; and
                          (ii) the transmitting entity does not 
                        cause to be published by means of an 
                        advance program schedule or prior 
                        announcement the titles of the specific 
                        sound recordings or phonorecords 
                        embodying such sound recordings to be 
                        transmitted; and
                  (C) in the case of an eligible 
                nonsubscription transmission or a subscription 
                transmission not exempt under paragraph (1) 
                that is made by a new subscription service or 
                by a preexisting subscription service other 
                than in the same transmission medium used by 
                such service on July 31, 1998--
                          (i) the transmission does not exceed 
                        the sound recording performance 
                        complement, except that this 
                        requirement shall not apply in the case 
                        of a retransmission of a broadcast 
                        transmission if the retransmission is 
                        made by a transmitting entity that does 
                        not have the right or ability to 
                        control the programming of the 
                        broadcast station making the broadcast 
                        transmission, unless--
                                  (I) the broadcast station 
                                makes broadcast transmissions--
                                          (aa) in digital 
                                        format that regularly 
                                        exceed the sound 
                                        recording performance 
                                        complement; or
                                          (bb) in analog 
                                        format, a substantial 
                                        portion of which, on a 
                                        weekly basis, exceed 
                                        the sound recording 
                                        performance complement; 
                                        and
                                  (II) the sound recording 
                                copyright owner or its 
                                representative has notified the 
                                transmitting entity in writing 
                                that broadcast transmissions of 
                                the copyright owner's sound 
                                recordings exceed the sound 
                                recording performance 
                                complement as provided in this 
                                clause;
                          (ii) the transmitting entity does not 
                        cause to be published, or induce or 
                        facilitate the publication, by means of 
                        an advance program schedule or prior 
                        announcement, the titles of the 
                        specific sound recordings to be 
                        transmitted, the phonorecords embodying 
                        such sound recordings, or, other than 
                        for illustrative purposes, the names of 
                        the featured recording artists, except 
                        that this clause does not disqualify a 
                        transmitting entity that makes a prior 
                        announcement that a particular artist 
                        will be featured within an unspecified 
                        future time period, and in the case of 
                        a retransmission of a broadcast 
                        transmission by a transmitting entity 
                        that does not have the right or ability 
                        to control the programming of the 
                        broadcast transmission, the requirement 
                        of this clause shall not apply to a 
                        prior oral announcement by the 
                        broadcast station, or to an advance 
                        program schedule published, induced, or 
                        facilitated by the broadcast station, 
                        if the transmitting entity does not 
                        have actual knowledge and has not 
                        received written notice from the 
                        copyright owner or its representative 
                        that the broadcast station publishes or 
                        induces or facilitates the publication 
                        of such advance program schedule, or if 
                        such advance program schedule is a 
                        schedule of classical music programming 
                        published by the broadcast station in 
                        the same manner as published by that 
                        broadcast station on or before 
                        September 30, 1998;
                          (iii) the transmission--
                                  (I) is not part of an 
                                archived program of less than 5 
                                hours duration;
                                  (II) is not part of an 
                                archived program of 5 hours or 
                                greater in duration that is 
                                made available for a period 
                                exceeding 2 weeks;
                                  (III) is not part of a 
                                continuous program which is of 
                                less than 3 hours duration; or
                                  (IV) is not part of an 
                                identifiable program in which 
                                performances of sound 
                                recordings are rendered in a 
                                predetermined order, other than 
                                an archived or continuous 
                                program, that is transmitted 
                                at--
                                          (aa) more than 3 
                                        times in any 2-week 
                                        period that have been 
                                        publicly announced in 
                                        advance, in the case of 
                                        a program of less than 
                                        1 hour in duration, or
                                          (bb) more than 4 
                                        times in any 2-week 
                                        period that have been 
                                        publicly announced in 
                                        advance, in the case of 
                                        a program of 1 hour or 
                                        more in duration,
                                except that the requirement of 
                                this subclause shall not apply 
                                in the case of a retransmission 
                                of a broadcast transmission by 
                                a transmitting entity that does 
                                not have the right or ability 
                                to control the programming of 
                                the broadcast transmission, 
                                unless the transmitting entity 
                                is given notice in writing by 
                                the copyright owner of the 
                                sound recording that the 
                                broadcast station makes 
                                broadcast transmissions that 
                                regularly violate such 
                                requirement;
                          (iv) the transmitting entity does not 
                        knowingly perform the sound recording, 
                        as part of a service that offers 
                        transmissions of visual images 
                        contemporaneously with transmissions of 
                        sound recordings, in a manner that is 
                        likely to cause confusion, to cause 
                        mistake, or to deceive, as to the 
                        affiliation, connection, or association 
                        of the copyright owner or featured 
                        recording artist with the transmitting 
                        entity or a particular product or 
                        service advertised by the transmitting 
                        entity, or as to the origin, 
                        sponsorship, or approval by the 
                        copyright owner or featured recording 
                        artist of the activities of the 
                        transmitting entity other than the 
                        performance of the sound recording 
                        itself;
                          (v) the transmitting entity 
                        cooperates to prevent, to the extent 
                        feasible without imposing substantial 
                        costs or burdens, a transmission 
                        recipient or any other person or entity 
                        from automatically scanning the 
                        transmitting entity's transmissions 
                        alone or together with transmissions by 
                        other transmitting entities in order to 
                        select a particular sound recording to 
                        be transmitted to the transmission 
                        recipient, except that the requirement 
                        of this clause shall not apply to a 
                        satellite digital audio service that is 
                        in operation, or that is licensed by 
                        the Federal Communications Commission, 
                        on or before July 31, 1998;
                          (vi) the transmitting entity takes no 
                        affirmative steps to cause or induce 
                        the making of a phonorecord by the 
                        transmission recipient, and if the 
                        technology used by the transmitting 
                        entity enables the transmitting entity 
                        to limit the making by the transmission 
                        recipient of phonorecords of the 
                        transmission directly in a digital 
                        format, the transmitting entity sets 
                        such technology to limit such making of 
                        phonorecords to the extent permitted by 
                        such technology;
                          (vii) phonorecords of the sound 
                        recording have been distributed to the 
                        public under the authority of the 
                        copyright owner or the copyright owner 
                        authorizes the transmitting entity to 
                        transmit the sound recording, and the 
                        transmitting entity makes the 
                        transmission from a phonorecord 
                        lawfully made under the authority of 
                        the copyright owner, except that the 
                        requirement of this clause shall not 
                        apply to a retransmission of a 
                        broadcast transmission by a 
                        transmitting entity that does not have 
                        the right or ability to control the 
                        programming of the broadcast 
                        transmission, unless the transmitting 
                        entity is given notice in writing by 
                        the copyright owner of the sound 
                        recording that the broadcast station 
                        makes broadcast transmissions that 
                        regularly violate such requirement;
                          (viii) the transmitting entity 
                        accommodates and does not interfere 
                        with the transmission of technical 
                        measures that are widely used by sound 
                        recording copyright owners to identify 
                        or protect copyrighted works, and that 
                        are technically feasible of being 
                        transmitted by the transmitting entity 
                        without imposing substantial costs on 
                        the transmitting entity or resulting in 
                        perceptible aural or visual degradation 
                        of the digital signal, except that the 
                        requirement of this clause shall not 
                        apply to a satellite digital audio 
                        service that is in operation, or that 
                        is licensed under the authority of the 
                        Federal Communications Commission, on 
                        or before July 31, 1998, to the extent 
                        that such service has designed, 
                        developed, or made commitments to 
                        procure equipment or technology that is 
                        not compatible with such technical 
                        measures before such technical measures 
                        are widely adopted by sound recording 
                        copyright owners; and
                          (ix) the transmitting entity 
                        identifies in textual data the sound 
                        recording during, but not before, the 
                        time it is performed, including the 
                        title of the sound recording, the title 
                        of the phonorecord embodying such sound 
                        recording, if any, and the featured 
                        recording artist, in a manner to permit 
                        it to be displayed to the transmission 
                        recipient by the device or technology 
                        intended for receiving the service 
                        provided by the transmitting entity, 
                        except that the obligation in this 
                        clause shall not take effect until 1 
                        year after the date of the enactment of 
                        the Digital Millennium Copyright Act 
                        and shall not apply in the case of a 
                        retransmission of a broadcast 
                        transmission by a transmitting entity 
                        that does not have the right or ability 
                        to control the programming of the 
                        broadcast transmission, or in the case 
                        in which devices or technology intended 
                        for receiving the service provided by 
                        the transmitting entity that have the 
                        capability to display such textual data 
                        are not common in the marketplace.
          (3) Licenses for transmissions by interactive 
        services.--
                  (A) No interactive service shall be granted 
                an exclusive license under section 106(6) for 
                the performance of a sound recording publicly 
                by means of digital audio transmission for a 
                period in excess of 12 months, except that with 
                respect to an exclusive license granted to an 
                interactive service by a licensor that holds 
                the copyright to 1,000 or fewer sound 
                recordings, the period of such license shall 
                not exceed 24 months: Provided, however, That 
                the grantee of such exclusive license shall be 
                ineligible to receive another exclusive license 
                for the performance of that sound recording for 
                a period of 13 months from the expiration of 
                the prior exclusive license.
                  (B) The limitation set forth in subparagraph 
                (A) of this paragraph shall not apply if--
                          (i) the licensor has granted and 
                        there remain in effect licenses under 
                        section 106(6) for the public 
                        performance of sound recordings by 
                        means of digital audio transmission by 
                        at least 5 different interactive 
                        services: Provided, however, That each 
                        such license must be for a minimum of 
                        10 percent of the copyrighted sound 
                        recordings owned by the licensor that 
                        have been licensed to interactive 
                        services, but in no event less than 50 
                        sound recordings; or
                          (ii) the exclusive license is granted 
                        to perform publicly up to 45 seconds of 
                        a sound recording and the sole purpose 
                        of the performance is to promote the 
                        distribution or performance of that 
                        sound recording.
                  (C) Notwithstanding the grant of an exclusive 
                or nonexclusive license of the right of public 
                performance under section 106(6), an 
                interactive service may not publicly perform a 
                sound recording unless a license has been 
                granted for the public performance of any 
                copyrighted musical work contained in the sound 
                recording: Provided, That such license to 
                publicly perform the copyrighted musical work 
                may be granted either by a performing rights 
                society representing the copyright owner or by 
                the copyright owner.
                  (D) The performance of a sound recording by 
                means of a retransmission of a digital audio 
                transmission is not an infringement of section 
                106(6) if--
                          (i) the retransmission is of a 
                        transmission by an interactive service 
                        licensed to publicly perform the sound 
                        recording to a particular member of the 
                        public as part of that transmission; 
                        and
                          (ii) the retransmission is 
                        simultaneous with the licensed 
                        transmission, authorized by the 
                        transmitter, and limited to that 
                        particular member of the public 
                        intended by the interactive service to 
                        be the recipient of the transmission.
                  (E) For the purposes of this paragraph--
                          (i) a ``licensor'' shall include the 
                        licensing entity and any other entity 
                        under any material degree of common 
                        ownership, management, or control that 
                        owns copyrights in sound recordings; 
                        and
                          (ii) a ``performing rights society'' 
                        is an association or corporation that 
                        licenses the public performance of 
                        nondramatic musical works on behalf of 
                        the copyright owner, such as the 
                        American Society of Composers, Authors 
                        and Publishers, Broadcast Music, Inc., 
                        and SESAC, Inc.
          (4) Rights not otherwise limited.--
                  (A) Except as expressly provided in this 
                section, this section does not limit or impair 
                the exclusive right to perform a sound 
                recording publicly by means of a digital audio 
                transmission under section 106(6).
                  (B) Nothing in this section annuls or limits 
                in any way--
                          (i) the exclusive right to publicly 
                        perform a musical work, including by 
                        means of a digital audio transmission, 
                        under section 106(4);
                          (ii) the exclusive rights in a sound 
                        recording or the musical work embodied 
                        therein under sections 106(1), 106(2) 
                        and 106(3); or
                          (iii) any other rights under any 
                        other clause of section 106, or 
                        remedies available under this title, as 
                        such rights or remedies exist either 
                        before or after the date of enactment 
                        of the Digital Performance Right in 
                        Sound Recordings Act of 1995.
                  (C) Any limitations in this section on the 
                exclusive right under section 106(6) apply only 
                to the exclusive right under section 106(6) and 
                not to any other exclusive rights under section 
                106. Nothing in this section shall be construed 
                to annul, limit, impair or otherwise affect in 
                any way the ability of the owner of a copyright 
                in a sound recording to exercise the rights 
                under sections 106(1), 106(2) and 106(3), or to 
                obtain the remedies available under this title 
                pursuant to such rights, as such rights and 
                remedies exist either before or after the date 
                of enactment of the Digital Performance Right 
                in Sound Recordings Act of 1995.
    (e) Authority for Negotiations.--
          (1) Notwithstanding any provision of the antitrust 
        laws, in negotiating statutory licenses in accordance 
        with subsection (f), any copyright owners of sound 
        recordings and any entities performing sound recordings 
        affected by this section may negotiate and agree upon 
        the royalty rates and license terms and conditions for 
        the performance of such sound recordings and the 
        proportionate division of fees paid among copyright 
        owners, and may designate common agents on a 
        nonexclusive basis to negotiate, agree to, pay, or 
        receive payments.
          (2) For licenses granted under section 106(6), other 
        than statutory licenses, such as for performances by 
        interactive services or performances that exceed the 
        sound recording performance complement--
                  (A) copyright owners of sound recordings 
                affected by this section may designate common 
                agents to act on their behalf to grant licenses 
                and receive and remit royalty payments: 
                Provided, That each copyright owner shall 
                establish the royalty rates and material 
                license terms and conditions unilaterally, that 
                is, not in agreement, combination, or concert 
                with other copyright owners of sound 
                recordings; and
                  (B) entities performing sound recordings 
                affected by this section may designate common 
                agents to act on their behalf to obtain 
                licenses and collect and pay royalty fees: 
                Provided, That each entity performing sound 
                recordings shall determine the royalty rates 
                and material license terms and conditions 
                unilaterally, that is, not in agreement, 
                combination, or concert with other entities 
                performing sound recordings.
    (f) Licenses for Certain Nonexempt Transmissions.--
          [(1)(A) Proceedings under chapter 8 shall determine 
        reasonable rates and terms of royalty payments for 
        subscription transmissions by preexisting subscription 
        services and transmissions by preexisting satellite 
        digital audio radio services specified by subsection 
        (d)(2) during the 5-year period beginning on January 1 
        of the second year following the year in which the 
        proceedings are to be commenced, except in the case of 
        a different transitional period provided under section 
        6(b)(3) of the Copyright Royalty and Distribution 
        Reform Act of 2004, or such other period as the parties 
        may agree. Such terms and rates shall distinguish among 
        the different types of digital audio transmission 
        services then in operation. Any copyright owners of 
        sound recordings, preexisting subscription services, or 
        preexisting satellite digital audio radio services may 
        submit to the Copyright Royalty Judges licenses 
        covering such subscription transmissions with respect 
        to such sound recordings. The parties to each 
        proceeding shall bear their own costs.
          [(B) The schedule of reasonable rates and terms 
        determined by the Copyright Royalty Judges shall, 
        subject to paragraph (3), be binding on all copyright 
        owners of sound recordings and entities performing 
        sound recordings affected by this paragraph during the 
        5-year period specified in subparagraph (A), a 
        transitional period provided under section 6(b)(3) of 
        the Copyright Royalty and Distribution Reform Act of 
        2004, or such other period as the parties may agree. In 
        establishing rates and terms for preexisting 
        subscription services and preexisting satellite digital 
        audio radio services, in addition to the objectives set 
        forth in section 801(b)(1), the Copyright Royalty 
        Judges may consider the rates and terms for comparable 
        types of subscription digital audio transmission 
        services and comparable circumstances under voluntary 
        license agreements described in subparagraph (A).
          [(C) The procedures under subparagraphs (A) and (B) 
        also shall be initiated pursuant to a petition filed by 
        any copyright owners of sound recordings, any 
        preexisting subscription services, or any preexisting 
        satellite digital audio radio services indicating that 
        a new type of subscription digital audio transmission 
        service on which sound recordings are performed is or 
        is about to become operational, for the purpose of 
        determining reasonable terms and rates of royalty 
        payments with respect to such new type of transmission 
        service for the period beginning with the inception of 
        such new type of service and ending on the date on 
        which the royalty rates and terms for subscription 
        digital audio transmission services most recently 
        determined under subparagraph (A) or (B) and chapter 8 
        expire, or such other period as the parties may agree.
          [(2)(A) Proceedings under chapter 8 shall determine 
        reasonable rates and terms of royalty payments for 
        public performances of sound recordings by means of 
        eligible nonsubscription transmission services and new 
        subscription services specified by subsection (d)(2) 
        during the 5-year period beginning on January 1 of the 
        second year following the year in which the proceedings 
        are to be commenced, except in the case of a different 
        transitional period provided under section 6(b)(3) of 
        the Copyright Royalty and Distribution Reform Act of 
        2004, or such other period as the parties may agree. 
        Such rates and terms shall distinguish among the 
        different types of eligible nonsubscription 
        transmission services and new subscription services 
        then in operation and shall include a minimum fee for 
        each such type of service. Any copyright owners of 
        sound recordings or any entities performing sound 
        recordings affected by this paragraph may submit to the 
        Copyright Royalty Judges licenses covering such 
        eligible nonsubscription transmissions and new 
        subscription services with respect to such sound 
        recordings. The parties to each proceeding shall bear 
        their own costs.
          [(B) The schedule of reasonable rates and terms 
        determined by the Copyright Royalty Judges shall, 
        subject to paragraph (3), be binding on all copyright 
        owners of sound recordings and entities performing 
        sound recordings affected by this paragraph during the 
        5-year period specified in subparagraph (A), a 
        transitional period provided under section 6(b)(3) of 
        the Copyright Royalty and Distribution Act of 2004, or 
        such other period as the parties may agree. Such rates 
        and terms shall distinguish among the different types 
        of eligible nonsubscription transmission services then 
        in operation and shall include a minimum fee for each 
        such type of service, such differences to be based on 
        criteria including, but not limited to, the quantity 
        and nature of the use of sound recordings and the 
        degree to which use of the service may substitute for 
        or may promote the purchase of phonorecords by 
        consumers. In establishing rates and terms for 
        transmissions by eligible nonsubscription services and 
        new subscription services, the Copyright Royalty Judges 
        shall establish rates and terms that most clearly 
        represent the rates and terms that would have been 
        negotiated in the marketplace between a willing buyer 
        and a willing seller. In determining such rates and 
        terms, the Copyright Royalty Judges shall base their 
        decision on economic, competitive and programming 
        information presented by the parties, including--
                  [(i) whether use of the service may 
                substitute for or may promote the sales of 
                phonorecords or otherwise may interfere with or 
                may enhance the sound recording copyright 
                owner's other streams of revenue from its sound 
                recordings; and
                  [(ii) the relative roles of the copyright 
                owner and the transmitting entity in the 
                copyrighted work and the service made available 
                to the public with respect to relative creative 
                contribution, technological contribution, 
                capital investment, cost, and risk.
        In establishing such rates and terms, the Copyright 
        Royalty Judges may consider the rates and terms for 
        comparable types of digital audio transmission services 
        and comparable circumstances under voluntary license 
        agreements described in subparagraph (A).
          [(C) The procedures under subparagraphs (A) and (B) 
        shall also be initiated pursuant to a petition filed by 
        any copyright owners of sound recordings or any 
        eligible nonsubscription service or new subscription 
        service indicating that a new type of eligible 
        nonsubscription service or new subscription service on 
        which sound recordings are performed is or is about to 
        become operational, for the purpose of determining 
        reasonable terms and rates of royalty payments with 
        respect to such new type of service for the period 
        beginning with the inception of such new type of 
        service and ending on the date on which the royalty 
        rates and terms for eligible nonsubscription services 
        and new subscription services, as the case may be, most 
        recently determined under subparagraph (A) or (B) and 
        chapter 8 expire, or such other period as the parties 
        may agree.]
          (1)(A) Proceedings under chapter 8 shall determine 
        reasonable rates and terms of royalty payments for 
        transmissions subject to statutory licensing under 
        subsection (d)(2) during the 5-year period beginning on 
        January 1 of the second year following the year in 
        which the proceedings are to be commenced pursuant to 
        subparagraph (A) or (B) of section 804(b)(3), as the 
        case may be, or such other period as the parties may 
        agree. The parties to each proceeding shall bear their 
        own costs.
          (B) The schedule of reasonable rates and terms 
        determined by the Copyright Royalty Judges shall, 
        subject to paragraph (2), be binding on all copyright 
        owners of sound recordings and entities performing 
        sound recordings affected by this paragraph during the 
        5-year period specified in subparagraph (A), or such 
        other period as the parties may agree. Such rates and 
        terms shall distinguish among the different types of 
        services then in operation and shall include a minimum 
        fee for each such type of service, such differences to 
        be based on criteria including the quantity and nature 
        of the use of sound recordings and the degree to which 
        use of the service may substitute for or may promote 
        the purchase of phonorecords by consumers. The 
        Copyright Royalty Judges shall establish rates and 
        terms that most clearly represent the rates and terms 
        that would have been negotiated in the marketplace 
        between a willing buyer and a willing seller. In 
        determining such rates and terms, the Copyright Royalty 
        Judges--
                  (i) shall base their decision on economic, 
                competitive, and programming information 
                presented by the parties, including--
                          (I) whether use of the service may 
                        substitute for or may promote the sales 
                        of phonorecords or otherwise may 
                        interfere with or may enhance the sound 
                        recording copyright owner's other 
                        streams of revenue from the copyright 
                        owner's sound recordings; and
                          (II) the relative roles of the 
                        copyright owner and the transmitting 
                        entity in the copyrighted work and the 
                        service made available to the public 
                        with respect to relative creative 
                        contribution, technological 
                        contribution, capital investment, cost, 
                        and risk; and
                  (ii) may consider the rates and terms for 
                comparable types of audio transmission services 
                and comparable circumstances under voluntary 
                license agreements.
          (C) The procedures under subparagraphs (A) and (B) 
        shall also be initiated pursuant to a petition filed by 
        any sound recording copyright owner or any transmitting 
        entity indicating that a new type of service on which 
        sound recordings are performed is or is about to become 
        operational, for the purpose of determining reasonable 
        terms and rates of royalty payments with respect to 
        such new type of service for the period beginning with 
        the inception of such new type of service and ending on 
        the date on which the royalty rates and terms for 
        eligible nonsubscription services and new subscription 
        services, or preexisting subscription services and 
        preexisting satellite digital audio radio services, as 
        the case may be, most recently determined under 
        subparagraph (A) or (B) and chapter 8 expire, or such 
        other period as the parties may agree.
          [(3)] (2) License agreements voluntarily negotiated 
        at any time between 1 or more copyright owners of sound 
        recordings and 1 or more entities performing sound 
        recordings shall be given effect in lieu of any 
        decision by the Librarian of Congress or determination 
        by the Copyright Royalty Judges.
          [(4)] (3)(A) The Copyright Royalty Judges 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. The notice and 
        recordkeeping rules in effect on the day before the 
        effective date of the Copyright Royalty and 
        Distribution Reform Act of 2004 shall remain in effect 
        unless and until new regulations are promulgated by the 
        Copyright Royalty Judges. If new regulations are 
        promulgated under this subparagraph, the Copyright 
        Royalty Judges shall take into account the substance 
        and effect of the rules in effect on the day before the 
        effective date of the Copyright Royalty and 
        Distribution Reform Act of 2004 and shall, to the 
        extent practicable, avoid significant disruption of the 
        functions of any designated agent authorized to collect 
        and distribute royalty fees.
          (B) Any person who wishes to perform a sound 
        recording publicly by means of a transmission eligible 
        for statutory licensing under this subsection may do so 
        without infringing the exclusive right of the copyright 
        owner of the sound recording--
                  (i) by complying with such notice 
                requirements as the Copyright Royalty Judges 
                shall prescribe by regulation and by paying 
                royalty fees in accordance with this 
                subsection; or
                  (ii) if such royalty fees have not been set, 
                by agreeing to pay such royalty fees as shall 
                be determined in accordance with this 
                subsection.
          (C) Any royalty payments in arrears shall be made on 
        or before the twentieth day of the month next 
        succeeding the month in which the royalty fees are set.
          [(5)] (4)(A) Notwithstanding section 112(e) and the 
        other provisions of this subsection, the receiving 
        agent may enter into agreements for the reproduction 
        and performance of sound recordings under section 
        112(e) and this section by any 1 or more commercial 
        webcasters or noncommercial webcasters for a period of 
        not more than 11 years beginning on January 1, 2005, 
        that, once published in the Federal Register pursuant 
        to subparagraph (B), shall be binding on all copyright 
        owners of sound recordings and other persons entitled 
        to payment under this section, in lieu of any 
        determination by the Copyright Royalty Judges. Any such 
        agreement for commercial webcasters may include 
        provisions for payment of royalties on the basis of a 
        percentage of revenue or expenses, or both, and include 
        a minimum fee. Any such agreement may include other 
        terms and conditions, including requirements by which 
        copyright owners may receive notice of the use of their 
        sound recordings and under which records of such use 
        shall be kept and made available by commercial 
        webcasters or noncommercial webcasters. The receiving 
        agent shall be under no obligation to negotiate any 
        such agreement. The receiving agent shall have no 
        obligation to any copyright owner of sound recordings 
        or any other person entitled to payment under this 
        section in negotiating any such agreement, and no 
        liability to any copyright owner of sound recordings or 
        any other person entitled to payment under this section 
        for having entered into such agreement.
          (B) The Copyright Office shall cause to be published 
        in the Federal Register any agreement entered into 
        pursuant to subparagraph (A). Such publication shall 
        include a statement containing the substance of 
        subparagraph (C). Such agreements shall not be included 
        in the Code of Federal Regulations. Thereafter, the 
        terms of such agreement shall be available, as an 
        option, to any commercial webcaster or noncommercial 
        webcaster meeting the eligibility conditions of such 
        agreement.
          (C) Neither subparagraph (A) nor any provisions of 
        any agreement entered into pursuant to subparagraph 
        (A), including any rate structure, fees, terms, 
        conditions, or notice and recordkeeping requirements 
        set forth therein, shall be admissible as evidence or 
        otherwise taken into account in any administrative, 
        judicial, or other government proceeding involving the 
        setting or adjustment of the royalties payable for the 
        public performance or reproduction in ephemeral 
        phonorecords or copies of sound recordings, the 
        determination of terms or conditions related thereto, 
        or the establishment of notice or recordkeeping 
        requirements by the Copyright Royalty Judges [under 
        paragraph (4)] under paragraph (3) or section 
        112(e)(4). It is the intent of Congress that any 
        royalty rates, rate structure, definitions, terms, 
        conditions, or notice and recordkeeping requirements, 
        included in such agreements shall be considered as a 
        compromise motivated by the unique business, economic 
        and political circumstances of webcasters, copyright 
        owners, and performers rather than as matters that 
        would have been negotiated in the marketplace between a 
        willing buyer and a willing seller, or otherwise meet 
        the objectives set forth in section 801(b). This 
        subparagraph shall not apply to the extent that the 
        receiving agent and a webcaster that is party to an 
        agreement entered into pursuant to subparagraph (A) 
        expressly authorize the submission of the agreement in 
        a proceeding under this subsection.
          (D) Nothing in the Webcaster Settlement Act of 2008, 
        the Webcaster Settlement Act of 2009, or any agreement 
        entered into pursuant to subparagraph (A) shall be 
        taken into account by the United States Court of 
        Appeals for the District of Columbia Circuit in its 
        review of the determination by the Copyright Royalty 
        Judges of May 1, 2007, of rates and terms for the 
        digital performance of sound recordings and ephemeral 
        recordings, pursuant to sections 112 and 114.
          (E) As used in this paragraph--
                  (i) the term ``noncommercial webcaster'' 
                means a webcaster that--
                          (I) is exempt from taxation under 
                        section 501 of the Internal Revenue 
                        Code of 1986 (26 U.S.C. 501);
                          (II) has applied in good faith to the 
                        Internal Revenue Service for exemption 
                        from taxation under section 501 of the 
                        Internal Revenue Code and has a 
                        commercially reasonable expectation 
                        that such exemption shall be granted; 
                        or
                          (III) is operated by a State or 
                        possession or any governmental entity 
                        or subordinate thereof, or by the 
                        United States or District of Columbia, 
                        for exclusively public purposes;
                  (ii) the term ``receiving agent'' shall have 
                the meaning given that term in section 261.2 of 
                title 37, Code of Federal Regulations, as 
                published in the Federal Register on July 8, 
                2002; and
                  (iii) the term ``webcaster'' means a person 
                or entity that has obtained a compulsory 
                license under section 112 or 114 and the 
                implementing regulations therefor.
          (F) The authority to make settlements pursuant to 
        subparagraph (A) shall expire at 11:59 p.m. Eastern 
        time on the 30th day after the date of the enactment of 
        the Webcaster Settlement Act of 2009.
    (g) Proceeds From Licensing of Transmissions.--
          (1) Except in the case of a transmission licensed 
        under a statutory license in accordance with subsection 
        (f) of this section--
                  (A) a featured recording artist who performs 
                on a sound recording that has been licensed for 
                a transmission shall be entitled to receive 
                payments from the copyright owner of the sound 
                recording in accordance with the terms of the 
                artist's contract; and
                  (B) a nonfeatured recording artist who 
                performs on a sound recording that has been 
                licensed for a transmission shall be entitled 
                to receive payments from the copyright owner of 
                the sound recording in accordance with the 
                terms of the nonfeatured recording artist's 
                applicable contract or other applicable 
                agreement.
          (2) [An agent designated] Except as provided for in 
        paragraph (6), a nonprofit collective designated by the 
        Copyright Royalty Judges to distribute receipts from 
        the licensing of transmissions in accordance with 
        subsection (f) shall distribute such receipts as 
        follows:
                  (A) 50 percent of the receipts shall be paid 
                to the copyright owner of the exclusive right 
                under section 106(6) of this title to publicly 
                perform a sound recording by means of a digital 
                audio transmission.
                  (B) 2\1/2\ percent of the receipts shall be 
                deposited in an escrow account managed by an 
                independent administrator jointly appointed by 
                copyright owners of sound recordings and the 
                American Federation of Musicians (or any 
                successor entity) to be distributed to 
                nonfeatured musicians (whether or not members 
                of the American Federation of Musicians) who 
                have performed on sound recordings.
                  (C) 2\1/2\ percent of the receipts shall be 
                deposited in an escrow account managed by an 
                independent administrator jointly appointed by 
                copyright owners of sound recordings and the 
                American Federation of Television and Radio 
                Artists (or any successor entity) to be 
                distributed to nonfeatured vocalists (whether 
                or not members of the American Federation of 
                Television and Radio Artists) who have 
                performed on sound recordings.
                  (D) 45 percent of the receipts shall be paid, 
                on a per sound recording basis, to the 
                recording artist or artists featured on such 
                sound recording (or the persons conveying 
                rights in the artists' performance in the sound 
                recordings).
          (3) A [nonprofit agent designated] nonprofit 
        collective designated by the Copyright Royalty Judges 
        to distribute receipts from the licensing of 
        transmissions in accordance with subsection (f) may 
        deduct from any of its receipts, prior to the 
        distribution of such receipts to any person or entity 
        entitled thereto other than copyright owners and 
        performers who have elected to receive royalties from 
        [another designated agent] another designated nonprofit 
        collective and have notified such nonprofit [agent] 
        collective in writing of such election, the reasonable 
        costs of such [agent] collective incurred after 
        November 1, 1995, in--
                  (A) the administration of the collection, 
                distribution, and calculation of the royalties;
                  (B) the settlement of disputes relating to 
                the collection and calculation of the 
                royalties; and
                  (C) the licensing and enforcement of rights 
                with respect to the making of ephemeral 
                recordings and performances subject to 
                licensing under section 112 and this section, 
                including those incurred in participating in 
                negotiations or arbitration proceedings under 
                section 112 and this section, except that all 
                costs incurred relating to the section 112 
                ephemeral recordings right may only be deducted 
                from the royalties received pursuant to section 
                112.
          (4) Notwithstanding paragraph (3), any [designated 
        agent] nonprofit collective designated to distribute 
        receipts from the licensing of transmissions in 
        accordance with subsection (f) may deduct from any of 
        its receipts, prior to the distribution of such 
        receipts, the reasonable costs identified in paragraph 
        (3) of such [agent] collective incurred after November 
        1, 1995, with respect to such copyright owners and 
        performers who have entered with such [agent] 
        collective a contractual relationship that specifies 
        that such costs may be deducted from such royalty 
        receipts.
          (5) Letter of Direction.--
                  (A) In general.--A nonprofit collective 
                designated by the Copyright Royalty Judges to 
                distribute receipts from the licensing of 
                transmissions in accordance with subsection (f) 
                shall adopt and reasonably implement a policy 
                that provides, in circumstances determined by 
                the collective to be appropriate, for 
                acceptance of instructions from an artist payee 
                identified under subparagraph (A) or (D) of 
                paragraph (2) to distribute, to a producer, 
                mixer, or sound engineer who was part of the 
                creative process that created a sound 
                recording, a portion of the payments to which 
                the artist payee would otherwise be entitled 
                from the licensing of transmissions of the 
                sound recording. In this section, such 
                instructions shall be referred to as a ``letter 
                of direction''.
                  (B) Acceptance of letter.--To the extent that 
                a collective described in subparagraph (A) 
                accepts a letter of direction under that 
                subparagraph, the person entitled to payment 
                pursuant to the letter of direction shall, 
                during the period in which the letter of 
                direction is in effect and carried out by the 
                collective, be treated for all purposes as the 
                owner of the right to receive such payment, and 
                the artist payee providing the letter of 
                direction to the collective shall be treated as 
                having no interest in such payment.
                  (C) Authority of collective.--This paragraph 
                shall not be construed in such a manner so that 
                the collective is not authorized to accept or 
                act upon payment instructions in circumstances 
                other than those to which this paragraph 
                applies.
          (6) Sound Recordings Fixed Before November 1, 1995.--
                  (A) Payment absent letter of direction.--A 
                nonprofit collective designated by the 
                Copyright Royalty Judges to distribute receipts 
                from the licensing of transmissions in 
                accordance with subsection (f) (in this 
                paragraph referred to as the ``collective'') 
                shall adopt and reasonably implement a policy 
                that provides, in circumstances determined by 
                the collective to be appropriate, for the 
                deduction of 2 percent of all the receipts that 
                are collected from the licensing of 
                transmissions of a sound recording fixed before 
                November 1, 1995, but which is withdrawn from 
                the amount otherwise payable under paragraph 
                (2)(D) to the recording artist or artists 
                featured on the sound recording (or the persons 
                conveying rights in the artists' performance in 
                the sound recording), and the distribution of 
                such amount to one or more persons described in 
                subparagraph (B) of this paragraph, after 
                deduction of costs described in paragraph (3) 
                or (4), as applicable, if each of the following 
                requirements is met:
                  (i) Certification of attempt to obtain a 
                letter of direction.--The person described in 
                subparagraph (B) who is to receive the 
                distribution has certified to the collective, 
                under penalty of perjury, that--
                                  (I) for a period not less 
                                than 120 days, that person made 
                                reasonable efforts to contact 
                                the artist payee for such sound 
                                recording to request and obtain 
                                a letter of direction 
                                instructing the collective to 
                                pay to that person a portion of 
                                the royalties payable to the 
                                featured recording artist or 
                                artists; and
                                  (II) during the period 
                                beginning on the date that 
                                person began the reasonable 
                                efforts described in subclause 
                                (I) and ending on the date of 
                                that person's certification to 
                                the collective, the artist 
                                payee did not affirm or deny in 
                                writing the request for a 
                                letter of direction.
                          (ii) Collective attempt to contact 
                        artist.--After receipt of the 
                        certification described in clause (i) 
                        and for a period not less than 120 days 
                        before the first distribution by the 
                        collective to the person described in 
                        subparagraph (B), the collective 
                        attempts, in a reasonable manner as 
                        determined by the collective, to notify 
                        the artist payee of the certification 
                        made by the person described in 
                        subparagraph (B).
                          (iii) No objection received.--The 
                        artist payee does not, as of the date 
                        that was 10 business days before the 
                        date on which the first distribution is 
                        made, submit to the collective in 
                        writing an objection to the 
                        distribution.
                  (B) Eligibility for payment.--A person shall 
                be eligible for payment under subparagraph (A) 
                if the person--
                          (i) is a producer, mixer, or sound 
                        engineer of the sound recording;
                          (ii) has entered into a written 
                        contract with a record company involved 
                        in the creation or lawful exploitation 
                        of the sound recording, or with the 
                        recording artist or artists featured on 
                        the sound recording (or the persons 
                        conveying rights in the artists' 
                        performance in the sound recording), 
                        under which the person seeking payment 
                        is entitled to participate in royalty 
                        payments that are based on the 
                        exploitation of the sound recording and 
                        are payable from royalties otherwise 
                        payable to the recording artist or 
                        artists featured on the sound recording 
                        (or the persons conveying rights in the 
                        artists' performance in the sound 
                        recording);
                          (iii) made a creative contribution to 
                        the creation of the sound recording; 
                        and (iv) submits to the collective--
                                  (I) a written certification 
                                stating, under penalty of 
                                perjury, that the person meets 
                                the requirements in clauses (i) 
                                through (iii); and
                                  (II) a true copy of the 
                                contract described in clause 
                                (ii).
                  (C) Multiple certifications.--Subject to 
                subparagraph (D), in a case in which more than 
                one person described in subparagraph (B) has 
                met the requirements for a distribution under 
                subparagraph (A) with respect to a sound 
                recording as of the date that is 10 business 
                days before the date on which the distribution 
                is made, the collective shall divide the 2 
                percent distribution equally among all such 
                persons.
                  (D) Objection to payment.--Not later than 10 
                business days after the date on which the 
                collective receives from the artist payee a 
                written objection to a distribution made 
                pursuant to subparagraph (A), the collective 
                shall cease making any further payment relating 
                to such distribution. In any case in which the 
                collective has made one or more distributions 
                pursuant to subparagraph (A) to a person 
                described in subparagraph (B) before the date 
                that is 10 business days after the date on 
                which the collective receives from the artist 
                payee an objection to such distribution, the 
                objection shall not affect that person's 
                entitlement to any distribution made before the 
                collective ceases such distribution under this 
                subparagraph.
                  (E) Ownership of the right to receive 
                payments.--To the extent that the collective 
                determines that a distribution will be made 
                under subparagraph (A) to a person described in 
                subparagraph (B), such person shall, during the 
                period covered by such distribution, be treated 
                for all purposes as the owner of the right to 
                receive such payments, and the artist payee to 
                whom such payments would otherwise be payable 
                shall be treated as having no interest in such 
                payments.
                  (F) Artist payee defined.--In this paragraph, 
                the term ``artist payee'' means a person, other 
                than a person described in subparagraph (B), 
                who owns the right to receive all or part of 
                the receipts payable under paragraph (2)(D) 
                with respect to a sound recording. In a case in 
                which there are multiple artist payees with 
                respect to a sound recording, an objection by 
                one such payee shall apply only to that payee's 
                share of the receipts payable under paragraph 
                (2)(D), and shall not preclude payment under 
                subparagraph (A) from the share of an artist 
                payee that does not so object.
          (7) Preemption of state property laws.--The holding 
        and distribution of receipts under section 112 and this 
        section by a nonprofit collective designated by the 
        Copyright Royalty Judges in accordance with this 
        subsection and regulations adopted by the Copyright 
        Royalty Judges shall supersede and preempt any State 
        law (including common law) concerning escheatment or 
        abandoned property, or any analogous provision, that 
        might otherwise apply.
    (h) Licensing to Affiliates.--
          (1) If the copyright owner of a sound recording 
        licenses an affiliated entity the right to publicly 
        perform a sound recording by means of a digital audio 
        transmission under section 106(6), the copyright owner 
        shall make the licensed sound recording available under 
        section 106(6) on no less favorable terms and 
        conditions to all bona fide entities that offer similar 
        services, except that, if there are material 
        differences in the scope of the requested license with 
        respect to the type of service, the particular sound 
        recordings licensed, the frequency of use, the number 
        of subscribers served, or the duration, then the 
        copyright owner may establish different terms and 
        conditions for such other services.
          (2) The limitation set forth in paragraph (1) of this 
        subsection shall not apply in the case where the 
        copyright owner of a sound recording licenses--
                  (A) an interactive service; or
                  (B) an entity to perform publicly up to 45 
                seconds of the sound recording and the sole 
                purpose of the performance is to promote the 
                distribution or performance of that sound 
                recording.
    [(i) No Effect on Royalties for Underlying Works.--License 
fees payable for the public performance of sound recordings 
under section 106(6) shall not be taken into account in any 
administrative, judicial, or other governmental proceeding to 
set or adjust the royalties payable to copyright owners of 
musical works for the public performance of their works. It is 
the intent of Congress that royalties payable to copyright 
owners of musical works for the public performance of their 
works shall not be diminished in any respect as a result of the 
rights granted by section 106(6).]
    (j) Definitions.--As used in this section, the following 
terms have the following meanings:
          (1) An ``affiliated entity'' is an entity engaging in 
        digital audio transmissions covered by section 106(6), 
        other than an interactive service, in which the 
        licensor has any direct or indirect partnership or any 
        ownership interest amounting to 5 percent or more of 
        the outstanding voting or non-voting stock.
          (2) An ``archived program'' is a predetermined 
        program that is available repeatedly on the demand of 
        the transmission recipient and that is performed in the 
        same order from the beginning, except that an archived 
        program shall not include a recorded event or broadcast 
        transmission that makes no more than an incidental use 
        of sound recordings, as long as such recorded event or 
        broadcast transmission does not contain an entire sound 
        recording or feature a particular sound recording.
          (3) A ``broadcast'' transmission is a transmission 
        made by a terrestrial broadcast station licensed as 
        such by the Federal Communications Commission.
          (4) A ``continuous program'' is a predetermined 
        program that is continuously performed in the same 
        order and that is accessed at a point in the program 
        that is beyond the control of the transmission 
        recipient.
          (5) A ``digital audio transmission'' is a digital 
        transmission as defined in section 101, that embodies 
        the transmission of a sound recording. This term does 
        not include the transmission of any audiovisual work.
          (6) An ``eligible nonsubscription transmission'' is a 
        noninteractive nonsubscription digital audio 
        transmission not exempt under subsection (d)(1) that is 
        made as part of a service that provides audio 
        programming consisting, in whole or in part, of 
        performances of sound recordings, including 
        retransmissions of broadcast transmissions, if the 
        primary purpose of the service is to provide to the 
        public such audio or other entertainment programming, 
        and the primary purpose of the service is not to sell, 
        advertise, or promote particular products or services 
        other than sound recordings, live concerts, or other 
        music-related events.
          (7) An ``interactive service'' is one that enables a 
        member of the public to receive a transmission of a 
        program specially created for the recipient, or on 
        request, a transmission of a particular sound 
        recording, whether or not as part of a program, which 
        is selected by or on behalf of the recipient. The 
        ability of individuals to request that particular sound 
        recordings be performed for reception by the public at 
        large, or in the case of a subscription service, by all 
        subscribers of the service, does not make a service 
        interactive, if the programming on each channel of the 
        service does not substantially consist of sound 
        recordings that are performed within 1 hour of the 
        request or at a time designated by either the 
        transmitting entity or the individual making such 
        request. If an entity offers both interactive and 
        noninteractive services (either concurrently or at 
        different times), the noninteractive component shall 
        not be treated as part of an interactive service.
          (8) A ``new subscription service'' is a service that 
        performs sound recordings by means of noninteractive 
        subscription digital audio transmissions and that is 
        not a preexisting subscription service or a preexisting 
        satellite digital audio radio service.
          (9) A ``nonsubscription'' transmission is any 
        transmission that is not a subscription transmission.
          (10) A ``preexisting satellite digital audio radio 
        service'' is a subscription satellite digital audio 
        radio service provided pursuant to a satellite digital 
        audio radio service license issued by the Federal 
        Communications Commission on or before July 31, 1998, 
        and any renewal of such license to the extent of the 
        scope of the original license, and may include a 
        limited number of sample channels representative of the 
        subscription service that are made available on a 
        nonsubscription basis in order to promote the 
        subscription service.
          (11) A ``preexisting subscription service'' is a 
        service that performs sound recordings by means of 
        noninteractive audio-only subscription digital audio 
        transmissions, which was in existence and was making 
        such transmissions to the public for a fee on or before 
        July 31, 1998, and may include a limited number of 
        sample channels representative of the subscription 
        service that are made available on a nonsubscription 
        basis in order to promote the subscription service.
          (12) A ``retransmission'' is a further transmission 
        of an initial transmission, and includes any further 
        retransmission of the same transmission. Except as 
        provided in this section, a transmission qualifies as a 
        ``retransmission'' only if it is simultaneous with the 
        initial transmission. Nothing in this definition shall 
        be construed to exempt a transmission that fails to 
        satisfy a separate element required to qualify for an 
        exemption under section 114(d)(1).
          (13) The ``sound recording performance complement'' 
        is the transmission during any 3-hour period, on a 
        particular channel used by a transmitting entity, of no 
        more than--
                  (A) 3 different selections of sound 
                recordings from any one phonorecord lawfully 
                distributed for public performance or sale in 
                the United States, if no more than 2 such 
                selections are transmitted consecutively; or
                  (B) 4 different selections of sound 
                recordings--
                          (i) by the same featured recording 
                        artist; or
                          (ii) from any set or compilation of 
                        phonorecords lawfully distributed 
                        together as a unit for public 
                        performance or sale in the United 
                        States,
                if no more than three such selections are 
                transmitted consecutively:
        Provided, That the transmission of selections in excess 
        of the numerical limits provided for in clauses (A) and 
        (B) from multiple phonorecords shall nonetheless 
        qualify as a sound recording performance complement if 
        the programming of the multiple phonorecords was not 
        willfully intended to avoid the numerical limitations 
        prescribed in such clauses.
          (14) A ``subscription'' transmission is a 
        transmission that is controlled and limited to 
        particular recipients, and for which consideration is 
        required to be paid or otherwise given by or on behalf 
        of the recipient to receive the transmission or a 
        package of transmissions including the transmission.
          (15) A ``transmission'' is either an initial 
        transmission or a retransmission.

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) Availability and Scope of Compulsory License in 
General.--
          [(1) When phonorecords of a nondramatic musical work 
        have been distributed to the public in the United 
        States under the authority of the copyright owner, any 
        other person, including those who make phonorecords or 
        digital phonorecord deliveries, may, by complying with 
        the provisions of this section, obtain a compulsory 
        license to make and distribute phonorecords of the 
        work. A person may obtain a compulsory license only if 
        his or her primary purpose in making phonorecords is to 
        distribute them to the public for private use, 
        including by means of a digital phonorecord delivery. A 
        person may not obtain a compulsory license for use of 
        the work in the making of phonorecords duplicating a 
        sound recording fixed by another, unless: (i) such 
        sound recording was fixed lawfully; and (ii) the making 
        of the phonorecords was authorized by the owner of 
        copyright in the sound recording or, if the sound 
        recording was fixed before February 15, 1972, by any 
        person who fixed the sound recording pursuant to an 
        express license from the owner of the copyright in the 
        musical work or pursuant to a valid compulsory license 
        for use of such work in a sound recording.]
          (1) Eligibility for compulsory license.--
                  (A) Conditions for compulsory license.--A 
                person may by complying with the provisions of 
                this section obtain a compulsory license to 
                make and distribute phonorecords of a 
                nondramatic musical work, including by means of 
                digital phonorecord delivery. A person may 
                obtain a compulsory license only if the primary 
                purpose in making phonorecords of the musical 
                work is to distribute them to the public for 
                private use, including by means of digital 
                phonorecord delivery, and--
                          (i) phonorecords of such musical work 
                        have previously been distributed to the 
                        public in the United States under the 
                        authority of the copyright owner of the 
                        work, including by means of digital 
                        phonorecord delivery; or
                          (ii) in the case of a digital music 
                        provider seeking to make and distribute 
                        digital phonorecord deliveries of a 
                        sound recording embodying a musical 
                        work under a compulsory license for 
                        which clause (i) does not apply--
                                  (I) the first fixation of 
                                such sound recording was made 
                                under the authority of the 
                                musical work copyright owner, 
                                and the sound recording 
                                copyright owner has the 
                                authority of the musical work 
                                copyright owner to make and 
                                distribute digital phonorecord 
                                deliveries embodying such work 
                                to the public in the United 
                                States; and
                                  (II) the sound recording 
                                copyright owner, or the 
                                authorized distributor of the 
                                sound recording copyright 
                                owner, has authorized the 
                                digital music provider to make 
                                and distribute digital 
                                phonorecord deliveries of the 
                                sound recording to the public 
                                in the United States.
                  (B) Duplication of sound recording.--A person 
                may not obtain a compulsory license for the use 
                of the work in the making of phonorecords 
                duplicating a sound recording fixed by another, 
                including by means of digital phonorecord 
                delivery, unless--
                          (i) such sound recording was fixed 
                        lawfully; and
                          (ii) the making of the phonorecords 
                        was authorized by the owner of the 
                        copyright in the sound recording or, if 
                        the sound recording was fixed before 
                        February 15, 1972, by any person who 
                        fixed the sound recording pursuant to 
                        an express license from the owner of 
                        the copyright in the musical work or 
                        pursuant to a valid compulsory license 
                        for use of such work in a sound 
                        recording.
          (2) [A compulsory license] Musical arrangement.--A 
        compulsory license includes the privilege of making a 
        musical arrangement of the work to the extent necessary 
        to conform it to the style or manner of interpretation 
        of the performance involved, but the arrangement shall 
        not change the basic melody or fundamental character of 
        the work, and shall not be subject to protection as a 
        derivative work under this title, except with the 
        express consent of the copyright owner.
    [(b) Notice of Intention to Obtain Compulsory License.--
          [(1) Any person who wishes to obtain a compulsory 
        license under this section shall, before or within 
        thirty days after making, and before distributing any 
        phonorecords of the work, serve notice of intention to 
        do so on the copyright owner. If the registration or 
        other public records of the Copyright Office do not 
        identify the copyright owner and include an address at 
        which notice can be served, it shall be sufficient to 
        file the notice of intention in the Copyright Office. 
        The notice shall comply, in form, content, and manner 
        of service, with requirements that the Register of 
        Copyrights shall prescribe by regulation.
          [(2) Failure to serve or file the notice required by 
        clause (1) forecloses the possibility of a compulsory 
        license and, in the absence of a negotiated license, 
        renders the making and distribution of phonorecords 
        actionable as acts of infringement under section 501 
        and fully subject to the remedies provided by sections 
        502 through 506 and 509.
    [(c) Royalty Payable Under Compulsory License.--
          [(1) To be entitled to receive royalties under a 
        compulsory license, the copyright owner must be 
        identified in the registration or other public records 
        of the Copyright Office. The owner is entitled to 
        royalties for phonorecords made and distributed after 
        being so identified, but is not entitled to recover for 
        any phonorecords previously made and distributed.
          [(2) Except as provided by clause (1), the royalty 
        under a compulsory license shall be payable for every 
        phonorecord made and distributed in accordance with the 
        license. For this purpose, and other than as provided 
        in paragraph (3), a phonorecord is considered 
        ``distributed'' if the person exercising the compulsory 
        license has voluntarily and permanently parted with its 
        possession. With respect to each work embodied in the 
        phonorecord, the royalty shall be either two and three-
        fourths cents, or one-half of one cent per minute of 
        playing time or fraction thereof, whichever amount is 
        larger.
          [(3)(A) A compulsory license under this section 
        includes the right of the compulsory licensee to 
        distribute or authorize the distribution of a 
        phonorecord of a nondramatic musical work by means of a 
        digital transmission which constitutes a digital 
        phonorecord delivery, regardless of whether the digital 
        transmission is also a public performance of the sound 
        recording under section 106(6) of this title or of any 
        nondramatic musical work embodied therein under section 
        106(4) of this title. For every digital phonorecord 
        delivery by or under the authority of the compulsory 
        licensee--
                  [(i) on or before December 31, 1997, the 
                royalty payable by the compulsory licensee 
                shall be the royalty prescribed under paragraph 
                (2) and chapter 8 of this title; and
                  [(ii) on or after January 1, 1998, the 
                royalty payable by the compulsory licensee 
                shall be the royalty prescribed under 
                subparagraphs (B) through (E) and chapter 8 of 
                this title.
          [(B) Notwithstanding any provision of the antitrust 
        laws, any copyright owners of nondramatic musical works 
        and any persons entitled to obtain a compulsory license 
        under subsection (a)(1) may negotiate and agree upon 
        the terms and rates of royalty payments under this 
        section and the proportionate division of fees paid 
        among copyright owners, and may designate common agents 
        on a nonexclusive basis to negotiate, agree to, pay or 
        receive such royalty payments. Such authority to 
        negotiate the terms and rates of royalty payments 
        includes, but is not limited to, the authority to 
        negotiate the year during which the royalty rates 
        prescribed under this subparagraph and subparagraphs 
        (C) through (E) and chapter 8 of this title shall next 
        be determined.
          [(C) Proceedings under chapter 8 shall determine 
        reasonable rates and terms of royalty payments for the 
        activities specified by this section during the period 
        beginning with the effective date of such rates and 
        terms, but not earlier than January 1 of the second 
        year following the year in which the petition 
        requesting the proceeding is filed, and ending on the 
        effective date of successor rates and terms, or such 
        other period as the parties may agree. Such terms and 
        rates shall distinguish between (i) digital phonorecord 
        deliveries where the reproduction or distribution of a 
        phonorecord is incidental to the transmission which 
        constitutes the digital phonorecord delivery, and (ii) 
        digital phonorecord deliveries in general. Any 
        copyright owners of nondramatic musical works and any 
        persons entitled to obtain a compulsory license under 
        subsection (a)(1) may submit to the Copyright Royalty 
        Judges licenses covering such activities. The parties 
        to each proceeding shall bear their own costs.
          [(D) The schedule of reasonable rates and terms 
        determined by the Copyright Royalty Judges shall, 
        subject to subparagraph (E), be binding on all 
        copyright owners of nondramatic musical works and 
        persons entitled to obtain a compulsory license under 
        subsection (a)(1) during the period specified in 
        subparagraph (C), such other period as may be 
        determined pursuant to subparagraphs (B) and (C), or 
        such other period as the parties may agree. Such terms 
        and rates shall distinguish between (i) digital 
        phonorecord deliveries where the reproduction or 
        distribution of a phonorecord is incidental to the 
        transmission which constitutes the digital phonorecord 
        delivery, and (ii) digital phonorecord deliveries in 
        general. In addition to the objectives set forth in 
        section 801(b)(1), in establishing such rates and 
        terms, the Copyright Royalty Judges may consider rates 
        and terms under voluntary license agreements described 
        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 Copyright Royalty Judges shall 
        also establish requirements by which copyright owners 
        may receive reasonable notice of the use of their works 
        under this section, and under which records of such use 
        shall be kept and made available by persons making 
        digital phonorecord deliveries.
          [(E)(i) License agreements voluntarily negotiated at 
        any time between one or more copyright owners of 
        nondramatic musical works and one or more persons 
        entitled to obtain a compulsory license under 
        subsection (a)(1) shall be given effect in lieu of any 
        determination by the Librarian of Congress and 
        Copyright Royalty Judges. Subject to clause (ii), the 
        royalty rates determined pursuant to subparagraph (C) 
        and (D) shall be given effect as to digital phonorecord 
        deliveries in lieu of any contrary royalty rates 
        specified in a contract pursuant to which a recording 
        artist who is the author of a nondramatic musical work 
        grants a license under that person's exclusive rights 
        in the musical work under paragraphs (1) and (3) of 
        section 106 or commits another person to grant a 
        license in that musical work under paragraphs (1) and 
        (3) of section 106, to a person desiring to fix in a 
        tangible medium of expression a sound recording 
        embodying the musical work.
          [(ii) The second sentence of clause (i) shall not 
        apply to--
                  [(I) a contract entered into on or before 
                June 22, 1995, and not modified thereafter for 
                the purpose of reducing the royalty rates 
                determined pursuant to subparagraph (C) and (D) 
                or of increasing the number of musical works 
                within the scope of the contract covered by the 
                reduced rates, except if a contract entered 
                into on or before June 22, 1995, is modified 
                thereafter for the purpose of increasing the 
                number of musical works within the scope of the 
                contract, any contrary royalty rates specified 
                in the contract shall be given effect in lieu 
                of royalty rates determined pursuant to 
                subparagraph (C) and (D) for the number of 
                musical works within the scope of the contract 
                as of June 22, 1995; and
                  [(II) a contract entered into after the date 
                that the sound recording is fixed in a tangible 
                medium of expression substantially in a form 
                intended for commercial release, if at the time 
                the contract is entered into, the recording 
                artist retains the right to grant licenses as 
                to the musical work under paragraphs (1) and 
                (3) of section 106.
          [(F) Except as provided in section 1002(e) of this 
        title, a digital phonorecord delivery licensed under 
        this paragraph shall be accompanied by the information 
        encoded in the sound recording, if any, by or under the 
        authority of the copyright owner of that sound 
        recording, that identifies the title of the sound 
        recording, the featured recording artist who performs 
        on the sound recording, and related information, 
        including information concerning the underlying musical 
        work and its writer.
          [(G)(i) A digital phonorecord delivery of a sound 
        recording is actionable as an act of infringement under 
        section 501, and is fully subject to the remedies 
        provided by sections 502 through 506, unless--
                  [(I) the digital phonorecord delivery has 
                been authorized by the copyright owner of the 
                sound recording; and
                  [(II) the owner of the copyright in the sound 
                recording or the entity making the digital 
                phonorecord delivery has obtained a compulsory 
                license under this section or has otherwise 
                been authorized by the copyright owner of the 
                musical work to distribute or authorize the 
                distribution, by means of a digital phonorecord 
                delivery, of each musical work embodied in the 
                sound recording.
          [(ii) Any cause of action under this subparagraph 
        shall be in addition to those available to the owner of 
        the copyright in the nondramatic musical work under 
        subsection (c)(6) and section 106(4) and the owner of 
        the copyright in the sound recording under section 
        106(6).
          [(H) The liability of the copyright owner of a sound 
        recording for infringement of the copyright in a 
        nondramatic musical work embodied in the sound 
        recording shall be determined in accordance with 
        applicable law, except that the owner of a copyright in 
        a sound recording shall not be liable for a digital 
        phonorecord delivery by a third party if the owner of 
        the copyright in the sound recording does not license 
        the distribution of a phonorecord of the nondramatic 
        musical work.
          [(I) Nothing in section 1008 shall be construed to 
        prevent the exercise of the rights and remedies allowed 
        by this paragraph, paragraph (6), and chapter 5 in the 
        event of a digital phonorecord delivery, except that no 
        action alleging infringement of copyright may be 
        brought under this title against a manufacturer, 
        importer or distributor of a digital audio recording 
        device, a digital audio recording medium, an analog 
        recording device, or an analog recording medium, or 
        against a consumer, based on the actions described in 
        such section.
          [(J) Nothing in this section annuls or limits (i) the 
        exclusive right to publicly perform a sound recording 
        or the musical work embodied therein, including by 
        means of a digital transmission, under sections 106(4) 
        and 106(6), (ii) except for compulsory licensing under 
        the conditions specified by this section, the exclusive 
        rights to reproduce and distribute the sound recording 
        and the musical work embodied therein under sections 
        106(1) and 106(3), including by means of a digital 
        phonorecord delivery, or (iii) any other rights under 
        any other provision of section 106, or remedies 
        available under this title, as such rights or remedies 
        exist either before or after the date of enactment of 
        the Digital Performance Right in Sound Recordings Act 
        of 1995.
          [(K) The provisions of this section concerning 
        digital phonorecord deliveries shall not apply to any 
        exempt transmissions or retransmissions under section 
        114(d)(1). The exemptions created in section 114(d)(1) 
        do not expand or reduce the rights of copyright owners 
        under section 106(1) through (5) with respect to such 
        transmissions and retransmissions.
          [(4) A compulsory license under this section includes 
        the right of the maker of a phonorecord of a 
        nondramatic musical work under subsection (a)(1) to 
        distribute or authorize distribution of such 
        phonorecord by rental, lease, or lending (or by acts or 
        practices in the nature of rental, lease, or lending). 
        In addition to any royalty payable under clause (2) and 
        chapter 8 of this title, a royalty shall be payable by 
        the compulsory licensee for every act of distribution 
        of a phonorecord by or in the nature of rental, lease, 
        or lending, by or under the authority of the compulsory 
        licensee. With respect to each nondramatic musical work 
        embodied in the phonorecord, the royalty shall be a 
        proportion of the revenue received by the compulsory 
        licensee from every such act of distribution of the 
        phonorecord under this clause equal to the proportion 
        of the revenue received by the compulsory licensee from 
        distribution of the phonorecord under clause (2) that 
        is payable by a compulsory licensee under that clause 
        and under chapter 8. The Register of Copyrights shall 
        issue regulations to carry out the purpose of this 
        clause.
          [(5) Royalty payments shall be made on or before the 
        twentieth day of each month and shall include all 
        royalties for the month next preceding. Each monthly 
        payment shall be made under oath and shall comply with 
        requirements that the Register of Copyrights shall 
        prescribe by regulation. The Register shall also 
        prescribe regulations under which detailed cumulative 
        annual statements of account, certified by a certified 
        public accountant, shall be filed for every compulsory 
        license under this section. The regulations covering 
        both the monthly and the annual statements of account 
        shall prescribe the form, content, and manner of 
        certification with respect to the number of records 
        made and the number of records distributed.
          [(6) If the copyright owner does not receive the 
        monthly payment and the monthly and annual statements 
        of account when due, the owner may give written notice 
        to the licensee that, unless the default is remedied 
        within thirty days from the date of the notice, the 
        compulsory license will be automatically terminated. 
        Such termination renders either the making or the 
        distribution, or both, of all phonorecords for which 
        the royalty has not been paid, actionable as acts of 
        infringement under section 501 and fully subject to the 
        remedies provided by sections 502 through 506.
    [(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.]
    (b) Procedures to Obtain a Compulsory License.--
          (1) Phonorecords other than digital phonorecord 
        deliveries.--A person who seeks to obtain a compulsory 
        license under subsection (a) to make and distribute 
        phonorecords of a musical work other than by means of 
        digital phonorecord delivery shall, before or not later 
        than 30 calendar days after making, and before 
        distributing, any phonorecord of the work, serve notice 
        of intention to do so on the copyright owner. If the 
        registration or other public records of the Copyright 
        Office do not identify the copyright owner and include 
        an address at which notice can be served, it shall be 
        sufficient to file the notice of intention with the 
        Copyright Office. The notice shall comply, in form, 
        content, and manner of service, with requirements that 
        the Register of Copyrights shall prescribe by 
        regulation.
          (2) Digital phonorecord deliveries.--A person who 
        seeks to obtain a compulsory license under subsection 
        (a) to make and distribute phonorecords of a musical 
        work by means of digital phonorecord delivery--
                  (A) prior to the license availability date, 
                shall, before or not later than 30 calendar 
                days after first making any such digital 
                phonorecord delivery, serve a notice of 
                intention to do so on the copyright owner (but 
                may not file the notice with the Copyright 
                Office, even if the public records of the 
                Office do not identify the owner or the owner's 
                address), and such notice shall comply, in 
                form, content, and manner of service, with 
                requirements that the Register of Copyrights 
                shall prescribe by regulation; or
                  (B) on or after the license availability 
                date, shall, before making any such digital 
                phonorecord delivery, follow the procedure 
                described in subsection (d)(2), except as 
                provided in paragraph (3).
          (3) Record company individual download licenses.--
        Notwithstanding paragraph (2)(B), a record company may, 
        on or after the license availability date, obtain an 
        individual download license in accordance with the 
        notice requirements described in paragraph (2)(A) 
        (except for the requirement that notice occur prior to 
        the license availability date). A record company that 
        obtains an individual download license as permitted 
        under this paragraph shall provide statements of 
        account and pay royalties as provided in subsection 
        (c)(2)(I).
          (4) Failure to obtain license.--
                  (A) Phonorecords other than digital 
                phonorecord deliveries.--In the case of 
                phonorecords made and distributed other than by 
                means of digital phonorecord delivery, the 
                failure to serve or file the notice of 
                intention required by paragraph (1) forecloses 
                the possibility of a compulsory license under 
                paragraph (1). In the absence of a voluntary 
                license, the failure to obtain a compulsory 
                license renders the making and distribution of 
                phonorecords actionable as acts of infringement 
                under section 501 and subject to the remedies 
                provided by sections 502 through 506.
                  (B) Digital phonorecord deliveries.--
                          (i) In general.--In the case of 
                        phonorecords made and distributed by 
                        means of digital phonorecord delivery:
                                  (I) The failure to serve the 
                                notice of intention required by 
                                paragraph (2)(A) or paragraph 
                                (3), as applicable, forecloses 
                                the possibility of a compulsory 
                                license under such paragraph.
                                  (II) The failure to comply 
                                with paragraph (2)(B) 
                                forecloses the possibility of a 
                                blanket license for a period of 
                                3 years after the last calendar 
                                day on which the notice of 
                                license was required to be 
                                submitted to the mechanical 
                                licensing collective under such 
                                paragraph.
                          (ii) Effect of failure.--In either 
                        case described in subclause (I) or (II) 
                        of clause (i), in the absence of a 
                        voluntary license, the failure to 
                        obtain a compulsory license renders the 
                        making and distribution of phonorecords 
                        by means of digital phonorecord 
                        delivery actionable as acts of 
                        infringement under section 501 and 
                        subject to the remedies provided by 
                        sections 502 through 506.
    (c) General Conditions Applicable to Compulsory License.--
          (1) Royalty Payable Under Compulsory License.--
                  (A) Identification requirement.--To be 
                entitled to receive royalties under a 
                compulsory license obtained under subsection 
                (b)(1) the copyright owner must be identified 
                in the registration or other public records of 
                the Copyright Office. The owner is entitled to 
                royalties for phonorecords made and distributed 
                after being so identified, but is not entitled 
                to recover for any phonorecords previously made 
                and distributed.
                  (B) Royalty for phonorecords other than 
                digital phonorecord deliveries.--Except as 
                provided by subparagraph (A), for every 
                phonorecord made and distributed under a 
                compulsory license under subsection (a) other 
                than by means of digital phonorecord delivery, 
                with respect to each work embodied in the 
                phonorecord, the royalty shall be the royalty 
                prescribed under subparagraphs (D) through (F) 
                and paragraph (2)(A) and chapter 8. For 
                purposes of this subparagraph, a phonorecord is 
                considered ``distributed'' if the person 
                exercising the compulsory license has 
                voluntarily and permanently parted with its 
                possession.
                  (C) Royalty for digital phonorecord 
                deliveries.--For every digital phonorecord 
                delivery of a musical work made under a 
                compulsory license under this section, the 
                royalty payable shall be the royalty prescribed 
                under subparagraphs (D) through (F) paragraph 
                (2)(A) and chapter 8.
                  (D) Authority to negotiate.--Notwithstanding 
                any provision of the antitrust laws, any 
                copyright owners of nondramatic musical works 
                and any persons entitled to obtain a compulsory 
                license under subsection (a) may negotiate and 
                agree upon the terms and rates of royalty 
                payments under this section and the 
                proportionate division of fees paid among 
                copyright owners, and may designate common 
                agents on a nonexclusive basis to negotiate, 
                agree to, pay or receive such royalty payments. 
                Such authority to negotiate the terms and rates 
                of royalty payments includes, but is not 
                limited to, the authority to negotiate the year 
                during which the royalty rates prescribed under 
                this subparagraph, subparagraphs (E) and (F), 
                paragraph (2)(A) and chapter 8 shall next be 
                determined.
                  (E) Determination of reasonable rates and 
                terms.--Proceedings under chapter 8 shall 
                determine reasonable rates and terms of royalty 
                payments for the activities specified by this 
                section during the period beginning with the 
                effective date of such rates and terms, but not 
                earlier than January 1 of the second year 
                following the year in which the petition 
                requesting the proceeding is filed, and ending 
                on the effective date of successor rates and 
                terms, or such other period as the parties may 
                agree. Any copyright owners of nondramatic 
                musical works and any persons entitled to 
                obtain a compulsory license under subsection 
                (a) may submit to the Copyright Royalty Judges 
                licenses covering such activities. The parties 
                to each proceeding shall bear their own costs.
                  (F) Schedule of reasonable rates.--The 
                schedule of reasonable rates and terms 
                determined by the Copyright Royalty Judges 
                shall, subject to paragraph (2)(A), be binding 
                on all copyright owners of nondramatic musical 
                works and persons entitled to obtain a 
                compulsory license under subsection (a) during 
                the period specified in subparagraph (E), such 
                other period as may be determined pursuant to 
                subparagraphs (D) and (E), or such other period 
                as the parties may agree. The Copyright Royalty 
                Judges shall establish rates and terms that 
                most clearly represent the rates and terms that 
                would have been negotiated in the marketplace 
                between a willing buyer and a willing seller. 
                In determining such rates and terms for digital 
                phonorecord deliveries, the Copyright Royalty 
                Judges shall base their decision on economic, 
                competitive, and programming information 
                presented by the parties, including--
                          (i) whether use of the compulsory 
                        licensee's service may substitute for 
                        or may promote the sales of 
                        phonorecords or otherwise may interfere 
                        with or may enhance the musical work 
                        copyright owner's other streams of 
                        revenue from its musical works; and
                          (ii) the relative roles of the 
                        copyright owner and the compulsory 
                        licensee in the copyrighted work and 
                        the service made available to the 
                        public with respect to the relative 
                        creative contribution, technological 
                        contribution, capital investment, cost, 
                        and risk.
          (2) Additional terms and conditions.--
                  (A) Voluntary licenses and contractual 
                royalty rates.--
                          (i) In general.--License agreements 
                        voluntarily negotiated at any time 
                        between one or more copyright owners of 
                        nondramatic musical works and one or 
                        more persons entitled to obtain a 
                        compulsory license under subsection (a) 
                        shall be given effect in lieu of any 
                        determination by the Copyright Royalty 
                        Judges. Subject to clause (ii), the 
                        royalty rates determined pursuant to 
                        subparagraphs (E) and (F) of paragraph 
                        (1) shall be given effect as to digital 
                        phonorecord deliveries in lieu of any 
                        contrary royalty rates specified in a 
                        contract pursuant to which a recording 
                        artist who is the author of a 
                        nondramatic musical work grants a 
                        license under that person's exclusive 
                        rights in the musical work under 
                        paragraphs (1) and (3) of section 106 
                        or commits another person to grant a 
                        license in that musical work under 
                        paragraphs (1) and (3) of section 106, 
                        to a person desiring to fix in a 
                        tangible medium of expression a sound 
                        recording embodying the musical work.
                          (ii) Applicability.--The second 
                        sentence of clause (i) shall not apply 
                        to--
                                  (I) a contract entered into 
                                on or before June 22, 1995, and 
                                not modified thereafter for the 
                                purpose of reducing the royalty 
                                rates determined pursuant to 
                                subparagraphs (E) and (F) of 
                                paragraph (1) or of increasing 
                                the number of musical works 
                                within the scope of the 
                                contract covered by the reduced 
                                rates, except if a contract 
                                entered into on or before June 
                                22, 1995, is modified 
                                thereafter for the purpose of 
                                increasing the number of 
                                musical works within the scope 
                                of the contract, any contrary 
                                royalty rates specified in the 
                                contract shall be given effect 
                                in lieu of royalty rates 
                                determined pursuant to 
                                subparagraphs (E) and (F) of 
                                paragraph (1) for the number of 
                                musical works within the scope 
                                of the contract as of June 22, 
                                1995; and
                                  (II) a contract entered into 
                                after the date that the sound 
                                recording is fixed in a 
                                tangible medium of expression 
                                substantially in a form 
                                intended for commercial 
                                release, if at the time the 
                                contract is entered into, the 
                                recording artist retains the 
                                right to grant licenses as to 
                                the musical work under 
                                paragraphs (1) and (3) of 
                                section 106.
                  (B) Sound recording information.--Except as 
                provided in section 1002(e), a digital 
                phonorecord delivery licensed under this 
                paragraph shall be accompanied by the 
                information encoded in the sound recording, if 
                any, by or under the authority of the copyright 
                owner of that sound recording, that identifies 
                the title of the sound recording, the featured 
                recording artist who performs on the sound 
                recording, and related information, including 
                information concerning the underlying musical 
                work and its writer.
                  (C) Infringement remedies.--
                          (i) In general.--A digital 
                        phonorecord delivery of a sound 
                        recording is actionable as an act of 
                        infringement under section 501, and is 
                        fully subject to the remedies provided 
                        by sections 502 through 506, unless--
                                  (I) the digital phonorecord 
                                delivery has been authorized by 
                                the sound recording copyright 
                                owner; and
                                  (II) the entity making the 
                                digital phonorecord delivery 
                                has obtained a compulsory 
                                license under subsection (a) or 
                                has otherwise been authorized 
                                by the musical work copyright 
                                owner, or by a record company 
                                pursuant to an individual 
                                download license, to make and 
                                distribute phonorecords of each 
                                musical work embodied in the 
                                sound recording by means of 
                                digital phonorecord delivery.
                          (ii) Other remedies.--Any cause of 
                        action under this subparagraph shall be 
                        in addition to those available to the 
                        owner of the copyright in the 
                        nondramatic musical work under 
                        subparagraph (J) and section 106(4) and 
                        the owner of the copyright in the sound 
                        recording under section 106(6).
                  (D) Liability of sound recording owners.--The 
                liability of the copyright owner of a sound 
                recording for infringement of the copyright in 
                a nondramatic musical work embodied in the 
                sound recording shall be determined in 
                accordance with applicable law, except that the 
                owner of a copyright in a sound recording shall 
                not be liable for a digital phonorecord 
                delivery by a third party if the owner of the 
                copyright in the sound recording does not 
                license the distribution of a phonorecord of 
                the nondramatic musical work.
                  (E) Recording devices and media.--Nothing in 
                section 1008 shall be construed to prevent the 
                exercise of the rights and remedies allowed by 
                this paragraph, subparagraph (J), and chapter 5 
                in the event of a digital phonorecord delivery, 
                except that no action alleging infringement of 
                copyright may be brought under this title 
                against a manufacturer, importer or distributor 
                of a digital audio recording device, a digital 
                audio recording medium, an analog recording 
                device, or an analog recording medium, or 
                against a consumer, based on the actions 
                described in such section.
                  (F) Preservation of rights.--Nothing in this 
                section annuls or limits--
                          (i) the exclusive right to publicly 
                        perform a sound recording or the 
                        musical work embodied therein, 
                        including by means of a digital 
                        transmission, under sections paragraphs 
                        (4) and (6) of section 106;
                          (ii) except for compulsory licensing 
                        under the conditions specified by this 
                        section, the exclusive rights to 
                        reproduce and distribute the sound 
                        recording and the musical work embodied 
                        therein under paragraphs (1) and (3) of 
                        section 106, including by means of a 
                        digital phonorecord delivery; or
                          (iii) any other rights under any 
                        other provision of section 106, or 
                        remedies available under this title, as 
                        such rights or remedies exist before, 
                        on, or after the date of enactment of 
                        the Digital Performance Right in Sound 
                        Recordings Act of 1995.
                  (G) Exempt transmissions and 
                retransmissions.--The provisions of this 
                section concerning digital phonorecord 
                deliveries shall not apply to any exempt 
                transmissions or retransmissions under section 
                114(d)(1). The exemptions created in section 
                114(d)(1) do not expand or reduce the rights of 
                copyright owners under paragraphs (1) through 
                (5) of section 106 with respect to such 
                transmissions and retransmissions.
                  (H) Distribution by rental, lease, or 
                lending.--A compulsory license obtained under 
                subsection (b)(1) to make and distribute 
                phonorecords includes the right of the maker of 
                such a phonorecord to distribute or authorize 
                distribution of such phonorecord, other than by 
                means of a digital phonorecord delivery, by 
                rental, lease, or lending (or by acts or 
                practices in the nature of rental, lease, or 
                lending). With respect to each nondramatic 
                musical work embodied in the phonorecord, the 
                royalty shall be a proportion of the revenue 
                received by the compulsory licensee from every 
                such act of distribution of the phonorecord 
                under this clause equal to the proportion of 
                the revenue received by the compulsory licensee 
                from distribution of the phonorecord under 
                subsection (a)(1)(A)(ii)(II) that is payable by 
                a compulsory licensee under that clause and 
                under chapter 8. The Register of Copyrights 
                shall issue regulations to carry out the 
                purpose of this subparagraph.
                  (I) Payment of royalties and statements of 
                account.--Except as provided in paragraphs 
                (4)(A)(i) and (10)(B) of subsection (d), 
                royalty payments shall be made on or before the 
                twentieth day of each month and shall include 
                all royalties for the month next preceding. 
                Each monthly payment shall be made under oath 
                and shall comply with requirements that the 
                Register of Copyrights shall prescribe by 
                regulation. The Register shall also prescribe 
                regulations under which detailed cumulative 
                annual statements of account, certified by a 
                certified public accountant, shall be filed for 
                every compulsory license under subsection (a). 
                The regulations covering both the monthly and 
                the annual statements of account shall 
                prescribe the form, content, and manner of 
                certification with respect to the number of 
                records made and the number of records 
                distributed.
                  (J) Notice of default and termination of 
                compulsory license.--In the case of a license 
                obtained under paragraph (1), (2)(A), or (3) of 
                subsection (b), if the copyright owner does not 
                receive the monthly payment and the monthly and 
                annual statements of account when due, the 
                owner may give written notice to the licensee 
                that, unless the default is remedied not later 
                than 30 days after the date on which the notice 
                is sent, the compulsory license will be 
                automatically terminated. Such termination 
                renders either the making or the distribution, 
                or both, of all phonorecords for which the 
                royalty has not been paid, actionable as acts 
                of infringement under section 501 and fully 
                subject to the remedies provided by sections 
                502 through 506. In the case of a license 
                obtained under subsection (b)(2)(B), license 
                authority under the compulsory license may be 
                terminated as provided in subsection (d)(4)(E).
    (d) Blanket License for Digital Uses, Mechanical Licensing 
Collective, and Digital Licensee Coordinator.--
          (1) Blanket license for digital uses.--
                  (A) In general.--A digital music provider 
                that qualifies for a compulsory license under 
                subsection (a) may, by complying with the terms 
                and conditions of this subsection, obtain a 
                blanket license from copyright owners through 
                the mechanical licensing collective to make and 
                distribute digital phonorecord deliveries of 
                musical works through one or more covered 
                activities.
                  (B) Included activities.--A blanket license--
                          (i) covers all musical works (or 
                        shares of such works) available for 
                        compulsory licensing under this section 
                        for purposes of engaging in covered 
                        activities, except as provided in 
                        subparagraph (C);
                          (ii) includes the making and 
                        distribution of server, intermediate, 
                        archival, and incidental reproductions 
                        of musical works that are reasonable 
                        and necessary for the digital music 
                        provider to engage in covered 
                        activities licensed under this 
                        subsection, solely for the purpose of 
                        engaging in such covered activities; 
                        and
                          (iii) does not cover or include any 
                        rights or uses other than those 
                        described in clauses (i) and (ii).
                  (C) Other licenses.--A voluntary license for 
                covered activities entered into by or under the 
                authority of 1 or more copyright owners and 1 
                or more digital music providers, or authority 
                to make and distribute permanent downloads of a 
                musical work obtained by a digital music 
                provider from a sound recording copyright owner 
                pursuant to an individual download license, 
                shall be given effect in lieu of a blanket 
                license under this subsection with respect to 
                the musical works (or shares thereof) covered 
                by such voluntary license or individual 
                download authority and the following conditions 
                apply:
                          (i) Where a voluntary license or 
                        individual download license applies, 
                        the license authority provided under 
                        the blanket license shall exclude any 
                        musical works (or shares thereof) 
                        subject to the voluntary license or 
                        individual download license.
                          (ii) An entity engaged in covered 
                        activities under a voluntary license or 
                        authority obtained pursuant to an 
                        individual download license that is a 
                        significant nonblanket licensee shall 
                        comply with paragraph (6)(A).
                          (iii) The rates and terms of any 
                        voluntary license shall be subject to 
                        the second sentence of clause (i) and 
                        clause (ii) of subsection (c)(2)(A) and 
                        paragraph (9)(C), as applicable.
                  (D) Protection against infringement 
                actions.--A digital music provider that obtains 
                and complies with the terms of a valid blanket 
                license under this subsection shall not be 
                subject to an action for infringement of the 
                exclusive rights provided by paragraphs (1) and 
                (3) of section 106 under this title arising 
                from use of a musical work (or share thereof) 
                to engage in covered activities authorized by 
                such license, subject to paragraph (4)(E).
                  (E) Other requirements and conditions 
                apply.--Except as expressly provided in this 
                subsection, each requirement, limitation, 
                condition, privilege, right, and remedy 
                otherwise applicable to compulsory licenses 
                under this section shall apply to compulsory 
                blanket licenses under this subsection.
          (2) Availability of blanket license.--
                  (A) Procedure for obtaining license.--A 
                digital music provider may obtain a blanket 
                license by submitting a notice of license to 
                the mechanical licensing collective that 
                specifies the particular covered activities in 
                which the digital music provider seeks to 
                engage, as follows:
                          (i) The notice of license shall 
                        comply in form and substance with 
                        requirements that the Register of 
                        Copyrights shall establish by 
                        regulation.
                          (ii) Unless rejected in writing by 
                        the mechanical licensing collective not 
                        later than 30 calendar days after the 
                        date on which the mechanical licensing 
                        collective receives the notice, the 
                        blanket license shall be effective as 
                        of the date on which the notice of 
                        license was sent by the digital music 
                        provider as shown by a physical or 
                        electronic record.
                          (iii) A notice of license may only be 
                        rejected by the mechanical licensing 
                        collective if--
                                  (I) the digital music 
                                provider or notice of license 
                                does not meet the requirements 
                                of this section or applicable 
                                regulations, in which case the 
                                requirements at issue shall be 
                                specified with reasonable 
                                particularity in the notice of 
                                rejection; or
                                  (II) the digital music 
                                provider has had a blanket 
                                license terminated by the 
                                mechanical licensing collective 
                                during the 3-year period 
                                preceding the date on which the 
                                mechanical licensing collectice 
                                receives the notice pursuant to 
                                paragraph (4)(E).
                          (iv) If a notice of license is 
                        rejected under clause (iii)(I), the 
                        digital music provider shall have 30 
                        calendar days after receipt of the 
                        notice of rejection to cure any 
                        deficiency and submit an amended notice 
                        of license to the mechanical licensing 
                        collective. If the deficiency has been 
                        cured, the mechanical licensing 
                        collective shall so confirm in writing, 
                        and the license shall be effective as 
                        of the date that the original notice of 
                        license was provided by the digital 
                        music provider.
                          (v) A digital music provider that 
                        believes a notice of license was 
                        improperly rejected by the mechanical 
                        licensing collective may seek review of 
                        such rejection in an appropriate 
                        district court of the United States. 
                        The district court shall determine the 
                        matter de novo based on the record 
                        before the mechanical licensing 
                        collective and any additional evidence 
                        presented by the parties.
                  (B) Blanket license effective date.--Blanket 
                licenses shall be made available by the 
                mechanical licensing collective on and after 
                the license availability date. No such license 
                shall be effective prior to the license 
                availability date.
          (3) Mechanical licensing collective.--
                  (A) In general.--The mechanical licensing 
                collective shall be a single entity that--
                          (i) is a nonprofit entity, not owned 
                        by any other entity, that is created by 
                        copyright owners to carry out 
                        responsibilities under this subsection;
                          (ii) is endorsed by and enjoys 
                        substantial support from musical work 
                        copyright owners that together 
                        represent the greatest percentage of 
                        the licensor market for uses of such 
                        works in covered activities, as 
                        measured over the preceding 3 full 
                        calendar years;
                          (iii) is able to demonstrate to the 
                        Register of Copyrights that the entity 
                        has, or will have prior to the license 
                        availability date, the administrative 
                        and technological capabilities to 
                        perform the required functions of the 
                        mechanical licensing collective under 
                        this subsection and that is governed by 
                        a board of directors in accordance with 
                        subparagraph (D)(i); and
                          (iv) has been designated by the 
                        Register of Copyrights, with the 
                        approval of the Librarian of Congress 
                        pursuant to section 702, in accordance 
                        with subparagraph (B).
                  (B) Designation of mechanical licensing 
                collective.--
                          (i) Initial designation.--Not later 
                        than 270 days after the enactment date, 
                        the Register of Copyrights shall 
                        initially designate the mechanical 
                        licensing collective as follows:
                                  (I) Not later than 90 
                                calendar days after the 
                                enactment date, the Register 
                                shall publish notice in the 
                                Federal Register soliciting 
                                information to assist in 
                                identifying the appropriate 
                                entity to serve as the 
                                mechanical licensing 
                                collective, including the name 
                                and affiliation of each member 
                                of the board of directors 
                                described under subparagraph 
                                (D)(i) and each committee 
                                established pursuant to clauses 
                                (iii), (iv), and (v) of 
                                subparagraph (D).
                                  (II) After reviewing the 
                                information requested under 
                                subclause (I) and making a 
                                designation, the Register shall 
                                publish notice in the Federal 
                                Register setting forth--
                                          (aa) the identity of 
                                        and contact information 
                                        for the mechanical 
                                        licensing collective; 
                                        and
                                          (bb) the reasons for 
                                        the designation.
                          (ii) Periodic review of 
                        designation.--Following the initial 
                        designation of the mechanical licensing 
                        collective, the Register shall, every 5 
                        years, beginning with the fifth full 
                        calendar year to commence after the 
                        initial designation, publish notice in 
                        the Federal Register in the month of 
                        January soliciting information 
                        concerning whether the existing 
                        designation should be continued, or a 
                        different entity meeting the criteria 
                        described in clauses (i) through (iii) 
                        of subparagraph (A) shall be 
                        designated. Following publication of 
                        such notice, the Register shall--
                                  (I) after reviewing the 
                                information submitted and 
                                conducting additional 
                                proceedings as appropriate, 
                                publish notice in the Federal 
                                Register of a continuing 
                                designation or new designation 
                                of the mechanical licensing 
                                collective, as the case may be, 
                                and the reasons for such a 
                                designation with any new 
                                designation to be effective as 
                                of the first day of a month 
                                that is not less than 6 months 
                                and not longer than 9 months 
                                after the date on which the 
                                Register publishes the notice, 
                                as specified by the Register; 
                                and
                                  (II) if a new entity is 
                                designated as the mechanical 
                                licensing collective, adopt 
                                regulations to govern the 
                                transfer of licenses, funds, 
                                records, data, and 
                                administrative responsibilities 
                                from the existing mechanical 
                                licensing collective to the new 
                                entity.
                          (iii) Closest alternative 
                        designation.--If the Register is unable 
                        to identify an entity that fulfills 
                        each of the qualifications set forth in 
                        clauses (i) through (iii) of 
                        subparagraph (A), the Register shall 
                        designate the entity that most nearly 
                        fulfills such qualifications for 
                        purposes of carrying out the 
                        responsibilities of the mechanical 
                        licensing collective.
                  (C) Authorities and functions.--
                          (i) In general.--The mechanical 
                        licensing collective is authorized to 
                        perform the following functions, 
                        subject to more particular requirements 
                        as described in this subsection:
                                  (I) Offer and administer 
                                blanket licenses, including 
                                receipt of notices of license 
                                and reports of usage from 
                                digital music providers.
                                  (II) Collect and distribute 
                                royalties from digital music 
                                providers for covered 
                                activities.
                                  (III) Engage in efforts to 
                                identify musical works (and 
                                shares of such works) embodied 
                                in particular sound recordings, 
                                and to identify and locate the 
                                copyright owners of such 
                                musical works (and shares of 
                                such works).
                                  (IV) Maintain the musical 
                                works database and other 
                                information relevant to the 
                                administration of licensing 
                                activities under this section.
                                  (V) Administer a process by 
                                which copyright owners can 
                                claim ownership of musical 
                                works (and shares of such 
                                works), and a process by which 
                                royalties for works for which 
                                the owner is not identified or 
                                located are equitably 
                                distributed to known copyright 
                                owners.
                                  (VI) Administer collections 
                                of the administrative 
                                assessment from digital music 
                                providers and significant 
                                nonblanket licensees, including 
                                receipt of notices of 
                                nonblanket activity.
                                  (VII) Invest in relevant 
                                resources, and arrange for 
                                services of outside vendors and 
                                others, to support the 
                                activities of the mechanical 
                                licensing collective.
                                  (VIII) Engage in legal and 
                                other efforts to enforce rights 
                                and obligations under this 
                                subsection, including by filing 
                                bankruptcy proofs of claims for 
                                amounts owed under licenses, 
                                and acting in coordination with 
                                the digital licensee 
                                coordinator.
                                  (IX) Initiate and participate 
                                in proceedings before the 
                                Copyright Royalty Judges to 
                                establish the administrative 
                                assessment under this 
                                subsection.
                                  (X) Initiate and participate 
                                in proceedings before the 
                                Copyright Office with respect 
                                to activities under this 
                                subsection.
                                  (XI) Gather and provide 
                                documentation for use in 
                                proceedings before the 
                                Copyright Royalty Judges to set 
                                rates and terms under this 
                                section.
                                  (XII) Maintain records of the 
                                activities of the mechanical 
                                licensing collective and engage 
                                in and respond to audits 
                                described in this subsection.
                                  (XIII) Engage in such other 
                                activities as may be necessary 
                                or appropriate to fulfill the 
                                responsibilities of the 
                                mechanical licensing 
                                collectuive under this 
                                subsection.
                          (ii) Additional administrative 
                        activities.--Subject to clause (iii) 
                        and paragraph (11)(C), the mechanical 
                        licensing collective may also 
                        administer, or assist in administering, 
                        voluntary licenses issued by or 
                        individual download licenses obtained 
                        from copyright owners for uses of 
                        musical works, for which the mechanical 
                        licensing collective shall charge 
                        reasonable fees for such services.
                          (iii) Restriction concerning public 
                        performance rights.--The mechanical 
                        licensing collective--
                                  (I) may, pursuant to clause 
                                (ii), provide administration 
                                services with respect to 
                                voluntary licenses that include 
                                the right of public performance 
                                in musical works; and
                                  (II) may not--
                                          (aa) negotiate or 
                                        grant licenses for the 
                                        right of public 
                                        performance in musical 
                                        works; or
                                          (bb) be the exclusive 
                                        or nonexclusive 
                                        assignee or grantee of 
                                        the right of public 
                                        performance in musical 
                                        works.
                          (iv) Restriction on lobbying.--The 
                        mechanical licensing collective may not 
                        engage in government lobbying 
                        activities, but may engage in the 
                        activities described in subclauses 
                        (IX), (X), and (XI) of clause (i).
                  (D) Governance.--
                          (i) Board of directors.--The 
                        mechanical licensing collective shall 
                        have a board of directors consisting of 
                        14 voting members and 3 nonvoting 
                        members, as follows:
                                  (I) Ten voting members shall 
                                be representatives of music 
                                publishers--
                                          (aa) to which 
                                        songwriters have 
                                        assigned exclusive 
                                        rights of reproduction 
                                        and distribution of 
                                        musical works with 
                                        respect to covered 
                                        activities; and
                                          (bb) none of which 
                                        may be owned by, or 
                                        under common control 
                                        with, any other board 
                                        member.
                                  (II) Four voting members 
                                shall be professional 
                                songwriters who have retained 
                                and exercise exclusive rights 
                                of reproduction and 
                                distribution with respect to 
                                covered activities with respect 
                                to musical works they have 
                                authored.
                                  (III) One nonvoting member 
                                shall be a representative of 
                                the nonprofit trade association 
                                of music publishers that 
                                represents the greatest 
                                percentage of the licensor 
                                market for uses of musical 
                                works in covered activities, as 
                                measured for the 3-year period 
                                preceding the date on which the 
                                member is appointed.
                                  (IV) One nonvoting member 
                                shall be a representative of 
                                the digital licensee 
                                coordinator, provided that a 
                                digital licensee coordinator 
                                has been designated pursuant to 
                                paragraph (5)(B). Otherwise, 
                                the nonvoting member shall be 
                                the nonprofit trade association 
                                of digital licensees that 
                                represents the greatest 
                                percentage of the licensee 
                                market for uses of musical 
                                works in covered activities, as 
                                measured over the preceding 3 
                                full calendar years.
                                  (V) One nonvoting member 
                                shall be a representative of a 
                                nationally recognized nonprofit 
                                trade association whose primary 
                                mission is advocacy on behalf 
                                of songwriters in the United 
                                States.
                          (ii) Bylaws.--
                                  (I) Establishment.--Not later 
                                than 1 year after the date on 
                                which the mechanical licensing 
                                collective is initially 
                                designated by the Register of 
                                Copyrights under subparagraph 
                                (B)(i), the collective shall 
                                establish bylaws to determine 
                                issues relating to the 
                                governance of the collective, 
                                including, but not limited to--
                                          (aa) the length of 
                                        the term for each 
                                        member of the board of 
                                        directors;
                                          (bb) the staggering 
                                        of the terms of the 
                                        members of the board of 
                                        directors;
                                          (cc) a process for 
                                        filling a seat on the 
                                        board of directors that 
                                        is vacated before the 
                                        end of the term with 
                                        respect to that seat;
                                          (dd) a process for 
                                        electing a member to 
                                        the board of directors; 
                                        and
                                          (ee) a management 
                                        structure for daily 
                                        operations of the 
                                        collective.
                                  (II) Public availability.--
                                The mechanical licesing 
                                collective shall make the 
                                bylaws established under 
                                subclause (I) available to the 
                                public.
                          (iii) Board meetings.--The board of 
                        directors shall meet not less 
                        frequently than biannually and discuss 
                        matters pertinent to the operations of 
                        the mechanical licensing collective, 
                        including the mechanical licensing 
                        collective budget.
                          (iv) Operations advisory committee.--
                        The board of directors of the 
                        mechanical licensing collective shall 
                        establish an operations advisory 
                        committee consisting of not fewer than 
                        6 members to make recommendations to 
                        the board of directors concerning the 
                        operations of the mechanical licensing 
                        collective, including the efficient 
                        investment in and deployment of 
                        information technology and data 
                        resources. Such committee shall have an 
                        equal number of members of the 
                        committee who are--
                                  (I) musical work copyright 
                                owners who are appointed by the 
                                board of directors of the 
                                mechanical licensing 
                                collective; and
                                  (II) representatives of 
                                digital music providers who are 
                                appointed by the digital 
                                licensee coordinator.
                          (v) Unclaimed royalties oversight 
                        committee.--The board of directors of 
                        the mechanical licensing collective 
                        shall establish and appoint an 
                        unclaimed royalties oversight committee 
                        consisting of 10 members, 5 of which 
                        shall be musical work copyright owners 
                        and 5 of which shall be professional 
                        songwriters whose works are used in 
                        covered activities.
                          (vi) Dispute resolution committee.--
                        The board of directors of the 
                        mechanical licensing collective shall 
                        establish and appoint a dispute 
                        resolution committee that shall
                                  (I) consist of not fewer than 
                                6 members; and
                                  (II) include an equal number 
                                of representatives of musical 
                                work copyright owners and 
                                professional songwriters.
                          (vii) Mechanical licensing collective 
                        annual report.--
                                  (I) In general.--Not later 
                                than June 30 of each year 
                                commencing after the license 
                                availability date, the 
                                mechanical licensing collective 
                                shall post, and make available 
                                online for a period of not less 
                                than 3 years, an annual report 
                                that sets forth information 
                                regarding--
                                          (aa) the operational 
                                        and licensing practices 
                                        of the collective;
                                          (bb) how royalties 
                                        are collected and 
                                        distributed, and ;
                                          (cc) budgeting and 
                                        expenditures;
                                          (dd) the collective 
                                        total costs for the 
                                        preceding calendar 
                                        year;
                                          (ee) the projected 
                                        annual mechanical 
                                        licensing collective 
                                        budget;
                                          (ff) aggregated 
                                        royalty receipts and 
                                        payments;
                                          (gg) expenses that 
                                        are more than 10 
                                        percent of the annual 
                                        mechanical licensing 
                                        collective budget; and
                                          (hh) the efforts of 
                                        the collective to 
                                        locate and identify 
                                        copyright owners of 
                                        unmatched musical works 
                                        (and shares of works).
                                  (II) Submission.--On the date 
                                on which the mechanical 
                                licensing collective posts each 
                                report required under subclause 
                                (I), the collective shall 
                                provide a copy of the report to 
                                the Register of Copyrights.
                          (viii) Independent officers.--An 
                        individual serving as an officer of the 
                        mechanical licensing collective may 
                        not, at the same time, also be an 
                        employee or agent of any member of the 
                        board of directors of the collective or 
                        any entity represented by a member of 
                        the board of directors, as described in 
                        clause (i).
                          (ix) Oversight and accountability.--
                                  (I) In general.--The 
                                mechanical licensing collective 
                                shall--
                                          (aa) ensure that the 
                                        policies and practices 
                                        of the collective are 
                                        transparent and 
                                        accountable;
                                          (bb) identify a point 
                                        of contact for 
                                        publisher inquiries and 
                                        complaints with timely 
                                        redress; and
                                          (cc) establish an 
                                        anti-comingling policy 
                                        for funds not collected 
                                        under this section and 
                                        royalties collected 
                                        under this section.
                                  (II) Audits.--
                                          (aa) In general.--
                                        Beginning in the fourth 
                                        full calendar year that 
                                        begins after the 
                                        initial designation of 
                                        the mechanical 
                                        licensing collective by 
                                        the Register of 
                                        Copyrights under 
                                        subparagraph (B)(i), 
                                        and in every fifth 
                                        calendar year 
                                        thereafter, the 
                                        collective shall retain 
                                        a qualified auditor 
                                        that shall--
                                                  (AA) examine 
                                                the books, 
                                                records, and 
                                                operations of 
                                                the collective;
                                                  (BB) prepare 
                                                a report for 
                                                the board of 
                                                directors of 
                                                the collective 
                                                with respect to 
                                                the matters 
                                                described in 
                                                item (bb); and
                                                  (CC) not 
                                                later than 
                                                December 31 of 
                                                the year in 
                                                which the 
                                                qualified 
                                                auditor is 
                                                retained, 
                                                deliver the 
                                                report 
                                                described in 
                                                subitem (BB) to 
                                                the board of 
                                                directors of 
                                                the collective.
                                          (bb) Matters 
                                        addressed.--Each report 
                                        prepared under item 
                                        (aa) shall address the 
                                        implementation and 
                                        efficacy of procedures 
                                        of the mechanical 
                                        licensing collective--
                                                  (AA) for the 
                                                receipt, 
                                                handling, and 
                                                distribution of 
                                                royalty funds, 
                                                including any 
                                                amounts held as 
                                                unclaimed 
                                                royalties;
                                                  (BB) to guard 
                                                against fraud, 
                                                abuse, waste, 
                                                and the 
                                                unreasonable 
                                                use of funds; 
                                                and
                                                  (CC) to 
                                                protect the 
                                                confidentiality 
                                                of financial, 
                                                proprietary, 
                                                and other 
                                                sensitive 
                                                information.
                                          (cc) Public 
                                        availability.--With 
                                        respect to each report 
                                        prepared under item 
                                        (aa), the mechanical 
                                        licensing collective 
                                        shall--
                                                  (AA) submit 
                                                the report to 
                                                the Register of 
                                                Copyrights; and
                                                  (BB) make the 
                                                report 
                                                available to 
                                                the public.
                  (E) Musical works database.--
                          (i) Establishment and maintenance of 
                        database.--The mechanical licensing 
                        collective shall establish and maintain 
                        a database containing information 
                        relating to musical works (and shares 
                        of such works) and, to the extent 
                        known, the identity and location of the 
                        copyright owners of such works (and 
                        shares thereof) and the sound 
                        recordings in which the musical works 
                        are embodied. In furtherance of 
                        maintaining such database, the 
                        mechanical licensing collective shall 
                        engage in efforts to identify the 
                        musical works embodied in particular 
                        sound recordings, as well as to 
                        identify and locate the copyright 
                        owners of such works (and shares 
                        thereof), and update such data as 
                        appropriate.
                          (ii) Matched works.--With respect to 
                        musical works (and shares thereof) that 
                        have been matched to copyright owners, 
                        the musical works database shall 
                        include--
                                  (I) the title of the musical 
                                work;
                                  (II) the copyright owner of 
                                the work (or share thereof), 
                                and the ownership percentage of 
                                that owner;
                                  (III) contact information for 
                                such copyright owner;
                                  (IV) to the extent reasonably 
                                available to the mechanical 
                                licensing collective--
                                          (aa) the 
                                        international standard 
                                        musical work code for 
                                        the work; and
                                          (bb) identifying 
                                        information for sound 
                                        recordings in which the 
                                        musical work is 
                                        embodied, including the 
                                        name of the sound 
                                        recording, featured 
                                        artist, sound recording 
                                        copyright owner, 
                                        producer, international 
                                        standard recording 
                                        code, and other 
                                        information commonly 
                                        used to assist in 
                                        associating sound 
                                        recordings with musical 
                                        works; and
                                  (V) such other information as 
                                the Register of Copyrights may 
                                prescribe by regulation.
                          (iii) Unmatched works.--With respect 
                        to unmatched musical works (and shares 
                        of works) in the database, the musical 
                        works database shall include--
                                  (I) to the extent reasonably 
                                available to the mechanical 
                                licensing collective--
                                          (aa) the title of the 
                                        musical work;
                                          (bb) the ownership 
                                        percentage for which an 
                                        owner has not been 
                                        identified;
                                          (cc) if a copyright 
                                        owner has been 
                                        identified but not 
                                        located, the identity 
                                        of such owner and the 
                                        ownership percentage of 
                                        that owner;
                                          (dd) identifying 
                                        information for sound 
                                        recordings in which the 
                                        work is embodied, 
                                        including sound 
                                        recording name, 
                                        featured artist, sound 
                                        recording copyright 
                                        owner, producer, 
                                        international standard 
                                        recording code, and 
                                        other information 
                                        commonly used to assist 
                                        in associating sound 
                                        recordings with musical 
                                        works; and
                                          (ee) any additional 
                                        information reported to 
                                        the mechanical 
                                        licensing collective 
                                        that may assist in 
                                        identifying the work; 
                                        and
                          (II) such other information relating 
                        to the identity and ownership of 
                        musical works (and shares of such 
                        works) as the Register of Copyrights 
                        may prescribe by regulation.
                          (iv) Sound recording information.--
                        Each musical work copyright owner with 
                        any musical work listed in the musical 
                        works database shall engage in 
                        commercially reasonable efforts to 
                        deliver to the mechanical licensing 
                        collective, including for use in the 
                        musical works database, to the extent 
                        such information is not then available 
                        in the database, information regarding 
                        the names of the sound recordings in 
                        which that copyright owner's musical 
                        works (or shares thereof) are embodied, 
                        to the extent practicable.
                          (v) Accessibility of database.--The 
                        musical works database shall be made 
                        available to members of the public in a 
                        searchable, online format, free of 
                        charge. The mechanical licensing 
                        collective shall make such database 
                        available in a bulk, machine-readable 
                        format, through a widely available 
                        software application, to the following 
                        entities:
                                  (I) Digital music providers 
                                operating under the authority 
                                of valid notices of license, 
                                free of charge.
                                  (II) Significant nonblanket 
                                licensees in compliance with 
                                their obligations under 
                                paragraph (6), free of charge.
                                  (III) Authorized vendors of 
                                the entities described in 
                                subclauses (I) and (II), free 
                                of charge.
                                  (IV) The Register of 
                                Copyrights, free of charge (but 
                                the Register shall not treat 
                                such database or any 
                                information therein as a 
                                Government record).
                                  (V) Any member of the public, 
                                for a fee not to exceed the 
                                marginal cost to the mechanical 
                                licensing collective of 
                                providing the database to such 
                                person.
                          (vi) Additional requirements.--The 
                        Register of Copyrights shall establish 
                        requirements by regulations to ensure 
                        the usability, interoperability, and 
                        usage restrictions of the musical works 
                        database.
                  (F) Notices of license and nonblanket 
                activity.--
                          (i) Notices of licenses.--The 
                        mechanical licensing collective shall 
                        receive, review, and confirm or reject 
                        notices of license from digital music 
                        providers, as provided in paragraph 
                        (2)(A). The collective shall maintain a 
                        current, publicly accessible list of 
                        blanket licenses that includes contact 
                        information for the licensees and the 
                        effective dates of such licenses.
                          (ii) Notices of nonblanket 
                        activity.--The mechanical licensing 
                        collective shall receive notices of 
                        nonblanket activity from significant 
                        nonblanket licensees, as provided in 
                        paragraph (6)(A). The collective shall 
                        maintain a current, publicly accessible 
                        list of notices of nonblanket activity 
                        that includes contact information for 
                        significant nonblanket licensees and 
                        the dates of receipt of such notices.
                  (G) Collection and distribution of 
                royalties.--
                          (i) In general.--Upon receiving 
                        reports of usage and payments of 
                        royalties from digital music providers 
                        for covered activities, the mechanical 
                        licensing collective shall--
                                  (I) engage in efforts to--
                                          (aa) identify the 
                                        musical works embodied 
                                        in sound recordings 
                                        reflected in such 
                                        reports, and the 
                                        copyright owners of 
                                        such musical works (and 
                                        shares thereof);
                                          (bb) confirm uses of 
                                        musical works subject 
                                        to voluntary licenses 
                                        and individual download 
                                        licenses, and the 
                                        corresponding pro rata 
                                        amounts to be deducted 
                                        from royalties that 
                                        would otherwise be due 
                                        under the blanket 
                                        license; and
                                          (cc) confirm proper 
                                        payment of royalties 
                                        due;
                                  (II) distribute royalties to 
                                copyright owners in accordance 
                                with the usage and other 
                                information contained in such 
                                reports, as well as the 
                                ownership and other information 
                                contained in the records of the 
                                collective; and
                                  (III) deposit into an 
                                interest-bearing account, as 
                                provided in subparagraph 
                                (H)(ii), royalties that cannot 
                                be distributed due to--
                                          (aa) an inability to 
                                        identify or locate a 
                                        copyright owner of a 
                                        musical work (or share 
                                        thereof); or
                                          (bb) a pending 
                                        dispute before the 
                                        dispute resolution 
                                        committee of the 
                                        mechanical licensing 
                                        collective.
                          (ii) Other collection efforts.--Any 
                        royalties recovered by the mechanical 
                        licensing collective as a result of 
                        efforts to enforce rights or 
                        obligations under a blanket license, 
                        including through a bankruptcy 
                        proceeding or other legal action, shall 
                        be distributed to copyright owners 
                        based on available usage information 
                        and in accordance with the procedures 
                        described in subclauses (I) and (II) of 
                        clause (i), on a pro rata basis in 
                        proportion to the overall percentage 
                        recovery of the total royalties owed, 
                        with any pro rata share of royalties 
                        that cannot be distributed deposited in 
                        an interestbearing account as provided 
                        in subparagraph (H)(ii).
                  (H) Holding of accrued royalties.--
                          (i) Holding period.--The mechanical 
                        licensing collective shall hold accrued 
                        royalties associated with particular 
                        musical works (and shares of works) 
                        that remain unmatched for a period not 
                        less than 3 years after the date on 
                        which the funds were received by the 
                        mechanical licensing collective, or not 
                        less than 3 years after the date on 
                        which the funds were accrued by a 
                        digital music provider that 
                        subsequently transferred such funds to 
                        the mechanical licensing collective 
                        pursuant to paragraph (10)(B), 
                        whichever period expires sooner.
                          (ii) Interest-bearing account.--
                        Accrued royalties for unmatched works 
                        (and shares thereof) shall be 
                        maintained by the mechanical licensing 
                        collective in an interest-bearing 
                        account that earns monthly interest--
                                  (I) at the Federal, short-
                                term rate; and
                                  (II) that accrues for the 
                                benefit of copyright owners 
                                entitled to payment of such 
                                accrued royalties.
                  (I) Musical works claiming process.--When a 
                copyright owner of an unmatched work (or share 
                of a work) has been identified and located in 
                accordance with the procedures of the 
                mechanical licensing collective, the collective 
                shall--
                          (i) update the musical works database 
                        and the other records of the collective 
                        accordingly; and
                          (ii) provided that accrued royalties 
                        for the musical work (or share thereof) 
                        have not yet been included in a 
                        distribution pursuant to subparagraph 
                        (J)(i), pay such accrued royalties and 
                        a proportionate amount of accrued 
                        interest associated with that work (or 
                        share thereof) to the copyright owner, 
                        accompanied by a cumulative statement 
                        of account reflecting usage of such 
                        work and accrued royalties based on 
                        information provided by digital music 
                        providers to the mechanical licensing 
                        collective.
                  (J) Distribution of unclaimed accrued 
                royalties.--
                          (i) Distribution procedures.--After 
                        the expiration of the prescribed 
                        holding period for accrued royalties 
                        provided in subparagraph (H)(i), the 
                        mechanical licensing collective shall 
                        distribute such accrued royalties, 
                        along with a proportionate share of 
                        accrued interest, to copyright owners 
                        identified in the records of the 
                        collective, subject to the following 
                        requirements, and in accordance with 
                        the policies and procedures established 
                        under clause (ii):
                                  (I) The first such 
                                distribution shall occur on or 
                                after January 1 of the second 
                                full calendar year to commence 
                                after the license availability 
                                date, with not less than 1 such 
                                distribution to take place 
                                during each calendar year 
                                thereafter.
                                  (II) Copyright owners' 
                                payment shares for unclaimed 
                                accrued royalties for 
                                particular reporting periods 
                                shall be determined in a 
                                transparent and equitable 
                                manner based on data indicating 
                                the relative market shares of 
                                such copyright owners as 
                                reflected in reports of usage 
                                provided by digital music 
                                providers for covered 
                                activities for the periods in 
                                question, including, in 
                                addition to usage data provided 
                                to the mechanical licensing 
                                collective, usage data provided 
                                to copyright owners under 
                                voluntary licenses and 
                                individual download licenses 
                                for covered activities, to the 
                                extent such information is 
                                available to the mechanical 
                                licensing collective. In 
                                furtherance of the 
                                determination of equitable 
                                market shares under this 
                                subparagraph--
                                          (aa) the mechanical 
                                        licensing collective 
                                        may require copyright 
                                        owners seeking 
                                        distributions of 
                                        unclaimed accrued 
                                        royalties to provide, 
                                        or direct the provision 
                                        of, information 
                                        concerning the usage of 
                                        musical works under 
                                        voluntary licenses and 
                                        individual download 
                                        licenses for covered 
                                        activities, and
                                          (bb) the mechanical 
                                        licensing collective 
                                        shall take appropriate 
                                        steps to safeguard the 
                                        confidentiality and 
                                        security of usage, 
                                        financial and other 
                                        sensitive data used to 
                                        compute market shares 
                                        in accordance with the 
                                        confidentiality 
                                        provisions prescribed 
                                        by the Register of 
                                        Copyrights under 
                                        paragraph (12)(C).
                          (ii) Establishment of distribution 
                        policies.--The unclaimed royalties 
                        oversight committee established under 
                        subparagraph (D)(v) shall establish 
                        policies and procedures for the 
                        distribution of unclaimed accrued 
                        royalties and accrued interest in 
                        accordance with this subparagraph, 
                        including the provision of usage data 
                        to copyright owners to allocate 
                        payments and credits to songwriters 
                        pursuant to clause (v) subject to the 
                        approval of the board of directors of 
                        the mechanical licensing collective.
                          (iii) Public notice of unclaimed 
                        accrued royalties.--The mechanical 
                        licensing collective shall--
                                  (I) maintain a publicly 
                                accessible online facility with 
                                contact information for the 
                                collective that lists unmatched 
                                musical works (and shares of 
                                works), through which a 
                                copyright owner may assert an 
                                ownership claim with respect to 
                                such a work (and a share of 
                                such a work);
                                  (II) engage in diligent, 
                                good-faith efforts to 
                                publicize, throughout the music 
                                industry--
                                          (aa) the existence of 
                                        the collective and the 
                                        ability to claim 
                                        unclaimed accrued 
                                        royalties for unmatched 
                                        musical works (and 
                                        shares of such works) 
                                        held by the collective;
                                          (bb) the procedures 
                                        by which copyright 
                                        owners may identify 
                                        themselves and provide 
                                        contact, ownership, and 
                                        other relevant 
                                        information to the 
                                        collective in order to 
                                        receive payments of 
                                        accrued royalties;
                                          (cc) any transfer of 
                                        accrued royalties for 
                                        musical works under 
                                        paragraph (10)(B), not 
                                        later than 180 days 
                                        after the date on which 
                                        the transfer is 
                                        received; and
                                          (dd) any pending 
                                        distribution of 
                                        unclaimed accrued 
                                        royalties and accrued 
                                        interest, not less than 
                                        90 days before the date 
                                        on which the 
                                        distribution is made; 
                                        and
                                  (III) as appropriate, 
                                participate in music industry 
                                conferences and events for the 
                                purpose of publicizing the 
                                matters described in subclause 
                                (II).
                          (iv) Songwriter payments.--Copyright 
                        owners that receive a distribution of 
                        unclaimed accrued royalties and accrued 
                        interest shall pay or credit a portion 
                        to songwriters (or the authorized 
                        agents of songwriters) on whose behalf 
                        the copyright owners license or 
                        administer musical works for covered 
                        activities, in accordance with 
                        applicable contractual terms, but 
                        notwithstanding any agreement to the 
                        contrary--
                                  (I) such payments and credits 
                                to songwriters shall be 
                                allocated in proportion to 
                                reported usage of individual 
                                musical works by digital music 
                                providers during the reporting 
                                periods covered by the 
                                distribution from the 
                                mechanical licensing 
                                collective; and
                                  (II) in no case shall the 
                                payment or credit to an 
                                individual songwriter be less 
                                than 50 percent of the payment 
                                received by the copyright owner 
                                attributable to usage of 
                                musical works (or shares of 
                                works) of that songwriter.
                  (K) Dispute resolution.--The dispute 
                resolution committee established under 
                subparagraph (D)(vi) shall establish policies 
                and procedures--
                          (i) for compyright owners to address 
                        in a timely and equitable manner 
                        disputes relating to ownership 
                        interests in musical works licensed 
                        under this section and allocation and 
                        distribution of royalties by the 
                        mechanical licensing collective, 
                        subject to the approval of the board of 
                        directors of the mechanical licensing 
                        collective.--
                          (ii) that shall include a mechanism 
                        to hold disputed funds in accordance 
                        with the requirements described in 
                        subparagraph (H)(ii) pending resolution 
                        of the dispute; and
                          (iii) except as provided in paragraph 
                        (11)(D), that shall not affect any 
                        legal or equitable rights or remedies 
                        available to any copyright owner or 
                        songwriter concerning ownership of, and 
                        entitlement to royalties for, a musical 
                        work.
                  (L) Verification of payments by mechanical 
                licensing collective.--
                          (i) Verification process.--A 
                        copyright owner entitled to receive 
                        payments of royalties for covered 
                        activities from the mechanical 
                        licensing collective may, individually 
                        or with other copyright owners, conduct 
                        an audit of the mechanical licensing 
                        collective to verify the accuracy of 
                        royalty payments by the mechanical 
                        licensing collective to such copyright 
                        owner, as follows:
                                  (I) A copyright owner may 
                                audit the mechanical licensing 
                                collective only once in a year 
                                for any or all of the 3 
                                calendar years preceding the 
                                year in which the audit is 
                                commenced, and may not audit 
                                records for any calendar year 
                                more than once.
                                  (II) The audit shall be 
                                conducted by a qualified 
                                auditor, who shall perform the 
                                audit during the ordinary 
                                course of business by examining 
                                the books, records, and data of 
                                the mechanical licensing 
                                collective, according to 
                                generally accepted auditing 
                                standards and subject to 
                                applicable confidentiality 
                                requirements prescribed by the 
                                Register of Copyrights under 
                                paragraph (12)(C).
                                  (III) The mechanical 
                                licensing collective shall make 
                                such books, records, and data 
                                available to the qualified 
                                auditor and respond to 
                                reasonable requests for 
                                relevant information, and shall 
                                use commercially reasonable 
                                efforts to facilitate access to 
                                relevant information maintained 
                                by third parties.
                                  (IV) To commence the audit, 
                                any copyright owner shall file 
                                with the Copyright Office a 
                                notice of intent to conduct an 
                                audit of the mechanical 
                                licensing collective, 
                                identifying the period of time 
                                to be audited, and shall 
                                simultaneously deliver a copy 
                                of such notice to the 
                                mechanical licensing 
                                collective. The Register of 
                                Copyrights shall cause the 
                                notice of audit to be published 
                                in the Federal Register not 
                                later than 45 calendar days 
                                after the date on which the 
                                notice is received.
                                  (V) The qualified auditor 
                                shall determine the accuracy of 
                                royalty payments, including 
                                whether an underpayment or 
                                overpayment of royalties was 
                                made by the mechanical 
                                licensing collective to each 
                                auditing copyright owner, 
                                except that before providing a 
                                final audit report to any such 
                                copyright owner, the qualified 
                                auditor shall provide a 
                                tentative draft of the report 
                                to the mechanical licensing 
                                collective and allow the 
                                mechanical licensing collective 
                                a reasonable opportunity to 
                                respond to the findings, 
                                including by clarifying issues 
                                and correcting factual errors.
                                  (VI) The auditing copyright 
                                owner or owners shall bear the 
                                cost of the audit. In case of 
                                an underpayment to any 
                                copyright owner, the mechanical 
                                licensing collective shall pay 
                                the amounts of any such 
                                underpayment to such auditing 
                                copyright owner, as 
                                appropriate. In case of an 
                                overpayment by the mechanical 
                                licensing collective, the 
                                mechanical licensing collective 
                                may debit the account of the 
                                auditing copyright owner or 
                                owners for such overpaid 
                                amounts, or such owner or 
                                owners shall refund overpaid 
                                amounts to the mechanical 
                                licensing collective, as 
                                appropriate.
                          (ii) Alternative verification 
                        procedures.--Nothing in this 
                        subparagraph shall preclude a copyright 
                        owner and the mechanical licensing 
                        collective from agreeing to audit 
                        procedures different from those 
                        described in this subparagraph, except 
                        that, a notice of the audit shall be 
                        provided to and published by the 
                        Copyright Office as described in clause 
                        (i)(IV).
                  (M) Records of mechanical licensing 
                collective.--
                          (i) Records maintenance.--The 
                        mechanical licensing collective shall 
                        ensure that all material records of the 
                        operations of the mechanical licensing 
                        collective, including those relating to 
                        notices of license, the administration 
                        of the claims process of the mechanical 
                        licensing collective, reports of usage, 
                        royalty payments, receipt and 
                        maintenance of accrued royalties, 
                        royalty distribution processes, and 
                        legal matters, are preserved and 
                        maintained in a secure and reliable 
                        manner, with appropriate commercially 
                        reasonable safeguards against 
                        unauthorized access, copying, and 
                        disclosure, and subject to the 
                        confidentiality requirements prescribed 
                        by the Register of Copyrights under 
                        paragraph (12)(C) for a period of not 
                        less than 7 years after the date of 
                        creation or receipt, whichever occurs 
                        later.
                          (ii) Records access.--The mechanical 
                        licensing collective shall provide 
                        prompt access to electronic and other 
                        records pertaining to the 
                        administration of a copyright owner's 
                        musical works upon reasonable written 
                        request of the owner or the authorized 
                        representative of the owner.
          (4) Terms and conditions of blanket license.--A 
        blanket license is subject to, and conditioned upon, 
        the following requirements:
                  (A) Royalty reporting and payments.--
                          (i) Monthly reports and payment.--A 
                        digital music provider shall report and 
                        pay royalties to the mechanical 
                        licensing collective under the blanket 
                        license on a monthly basis in 
                        accordance with clause (ii) and 
                        subsection (c)(2)(I), except that the 
                        monthly reporting shall be due on the 
                        date that is 45 calendar days, rather 
                        than 20 calendar days, after the end of 
                        the monthly reporting period.
                          (ii) Data to be reported.--In 
                        reporting usage of musical works to the 
                        mechanical licensing collective, a 
                        digital music provider shall provide 
                        usage data for musical works used under 
                        the blanket license and usage data for 
                        musical works used in covered 
                        activities under voluntary licenses and 
                        individual download licenses. In the 
                        report of usage, the digital music 
                        provider shall--
                                  (I) with respect to each 
                                sound recording embodying a 
                                musical work--
                                          (aa) provide 
                                        identifying information 
                                        for the sound 
                                        recording, including 
                                        sound recording name, 
                                        featured artist, and, 
                                        to the extent 
                                        reasonably acquired by 
                                        the digital music 
                                        provider in connection 
                                        with its use of sound 
                                        recordings of musical 
                                        works to engage in 
                                        covered activities, 
                                        including pursuant to 
                                        subparagraph (B), sound 
                                        recording copyright 
                                        owner, producer, 
                                        international standard 
                                        recording code, and 
                                        other information 
                                        commonly used in the 
                                        industry to identify 
                                        sound recordings and 
                                        match them to the 
                                        musical works the sound 
                                        recordings embody;
                                          (bb) to the extent 
                                        reasonably acquired by 
                                        the digital music 
                                        provider in the 
                                        metadata provided by 
                                        sound recording 
                                        copyright owners or 
                                        other licensors of 
                                        sound recordings in 
                                        connection with the use 
                                        of sound recordings of 
                                        musical works to engage 
                                        in covered activities, 
                                        including pursuant to 
                                        subparagraph (B), 
                                        provide information 
                                        concerning authorship 
                                        and ownership of the 
                                        applicable rights in 
                                        the musical work 
                                        embodied in the sound 
                                        recording (including 
                                        each songwriter, 
                                        publisher name, and 
                                        respective ownership 
                                        share) and the 
                                        international standard 
                                        musical workcode;
                                          (cc) provide the 
                                        number of digital 
                                        phonorecord deliveries 
                                        of the sound recording, 
                                        including limited 
                                        downloads and 
                                        interactive streams;
                                  (II) identify and provide 
                                contact information for all 
                                musical work copyright owners 
                                for works embodied in sound 
                                recordings as to which a 
                                voluntary license, rather than 
                                the blanket license, is in 
                                effect with respect to the uses 
                                being reported; and
                                  (III) provide such other 
                                information as the Register of 
                                Copyrights shall require by 
                                regulation.
                          (iii) Format and maintenance of 
                        reports.--Reports of usage provided by 
                        digital music providers to the 
                        mechanical licensing collective shall 
                        be in a machine-readable format that is 
                        compatible with the information 
                        technology systems of the mechanical 
                        licensing collective and meets the 
                        requirements of regulations adopted by 
                        the Register of Copyrights. The 
                        Register shall also adopt regulations 
                        setting forth requirements under which 
                        records of use shall be maintained and 
                        made available to the mechanical 
                        licensing collective by digital music 
                        providers engaged in covered activities 
                        under a blanket license.
                          (iv) Adoption of regulations.--The 
                        Register of Copyrights shall adopt 
                        regulations--
                                  (I) setting forth 
                                requirements under which 
                                records of use shall be 
                                maintained and made available 
                                to the mechanical licensing 
                                collective by digital music 
                                providers engaged in covered 
                                activities under a blanket 
                                license; and
                                  (II) regarding adjustments to 
                                reports of usage by digital 
                                music providers, including 
                                mechanisms to account for 
                                overpayment and underpayment of 
                                royalties in prior periods.
                  (B) Collection of sound recording 
                information.--A digital music provider shall 
                engage in good-faith, commercially reasonable 
                efforts to obtain from sound recording 
                copyright owners and other licensors of sound 
                recordings made available through the service 
                of such digital music provider information 
                concerning--
                          (i) sound recording copyright owners, 
                        international standard recording codes, 
                        and other information commonly used in 
                        the industry to identify sound 
                        recordings and match them to the 
                        musical works the sound recordings 
                        embody; and
                          (ii) the authorship and ownership of 
                        musical works, including songwriters, 
                        publisher names, ownership shares, and 
                        international standard musical work 
                        codes.
                  (C) Payment of administrative assessment.--A 
                digital music provider and any significant 
                nonblanket licensee shall pay the 
                administrative assessment established under 
                paragraph (7)(D) in accordance with this 
                subsection and applicable regulations.
                  (D) Verification of payments by digital music 
                providers.--
                          (i) Verification process.--The 
                        mechanical licensing collective may 
                        conduct an audit of a digital music 
                        provider operating under the blanket 
                        license to verify the accuracy of 
                        royalty payments by the digital music 
                        provider to the mechanical licensing 
                        collective as follows:
                                  (I) The mechanical licensing 
                                collective may commence an 
                                audit of a digital music 
                                provider not more frequently 
                                than once in any 3-calendar-
                                year period to cover a 
                                verification period of not more 
                                than the 3 full calendar years 
                                preceding the date of 
                                commencement of the audit, and 
                                such audit may not audit 
                                records for any such 3-year 
                                verification period more than 
                                once.
                                  (II) The audit shall be 
                                conducted by a qualified 
                                auditor, who shall perform the 
                                audit during the ordinary 
                                course of business by examining 
                                the books, records, and data of 
                                the digital music provider, 
                                according to generally accepted 
                                auditing standards and subject 
                                to applicable confidentiality 
                                requirements prescribed by the 
                                Register of Copyrights under 
                                paragraph (12)(C).
                                  (III) The digital music 
                                provider shall make such books, 
                                records, and data available to 
                                the qualified auditor and 
                                respond to reasonable requests 
                                for relevant information, and 
                                shall use commercially 
                                reasonable efforts to provide 
                                access to relevant information 
                                maintained with respect to a 
                                digital music provider by third 
                                parties.
                                  (IV) To commence the audit, 
                                the mechanical licensing 
                                collective shall file with the 
                                Copyright Office a notice of 
                                intent to conduct an audit of 
                                the digital music provider, 
                                identifying the period of time 
                                to be audited, and shall 
                                simultaneously deliver a copy 
                                of such notice to the digital 
                                music provider. The Register of 
                                Copyrights shall cause the 
                                notice of audit to be published 
                                in the Federal Register not 
                                later than 45 calendar days 
                                after the date on which notice 
                                is received.
                                  (V) The qualified auditor 
                                shall determine the accuracy of 
                                royalty payments, including 
                                whether an underpayment or 
                                overpayment of royalties was 
                                made by the digital music 
                                provider to the mechanical 
                                licensing collective, except 
                                that before providing a final 
                                audit report to the mechanical 
                                licensing collective, the 
                                qualified auditor shall provide 
                                a tentative draft of the report 
                                to the digital music provider 
                                and allow the digital music 
                                provider a reasonable 
                                opportunity to respond to the 
                                findings, including by 
                                clarifying issues and 
                                correcting factual errors.
                                  (VI) The mechanical licensing 
                                collective shall pay the cost 
                                of the audit, unless the 
                                qualified auditor determines 
                                that there was an underpayment 
                                by the digital music provider 
                                of not less than 10 percent, in 
                                which case the digital music 
                                provider shall bear the 
                                reasonable costs of the audit, 
                                in addition to paying the 
                                amount of any underpayment to 
                                the mechanical licensing 
                                collective. In case of an 
                                overpayment by the digital 
                                music provider, the mechanical 
                                licensing collective shall 
                                provide a credit to the account 
                                of the digital music provider.
                                  (VII) A digital music 
                                provider may not assert section 
                                507 or any other Federal or 
                                State statute of limitations, 
                                doctrine of laches or estoppel, 
                                or similar provision as a 
                                defense to a legal action 
                                arising from an audit under 
                                this subparagraph if such legal 
                                action is commenced not more 
                                than 6 years after the 
                                commencement of the audit that 
                                is the basis for such action.
                          (ii) Alternative verification 
                        procedures.--Nothing in this 
                        subparagraph shall preclude the 
                        mechanical licensing collective and a 
                        digital music provider from agreeing to 
                        audit procedures different from those 
                        described in this subparagraph, except 
                        that a notice of the audit shall be 
                        provided to and published by the 
                        Copyright Office as described in clause 
                        (i)(IV).
                  (E) Default under blanket license.--
                          (i) Conditions of default.--A digital 
                        music provider shall be in default 
                        under a blanket license if the digital 
                        music provider--
                                  (I) fails to provide 1 or 
                                more monthly reports of usage 
                                to the mechanical licensing 
                                collective when due;
                                  (II) fails to make a monthly 
                                royalty or late fee payment to 
                                the mechanical licensing 
                                collective when due, in all or 
                                material part;
                                  (III) provides 1 or more 
                                monthly reports of usage to the 
                                mechanical licensing collective 
                                that, on the whole, is or are 
                                materially deficient as a 
                                result of inaccurate, missing, 
                                or unreadable data, where the 
                                correct data was available to 
                                the digital music provider and 
                                required to be reported under 
                                this section and applicable 
                                regulations;
                                  (IV) fails to pay the 
                                administrative assessment as 
                                required under this subsection 
                                and applicable regulations; or
                                  (V) after being provided 
                                written notice by the 
                                mechanical licensing 
                                collective, refuses to comply 
                                with any other material term or 
                                condition of the blanket 
                                license under this section for 
                                a period of not less than 60 
                                calendar days.
                          (ii) Notice of default and 
                        termination.--In case of a default by a 
                        digital music provider, the mechanical 
                        licensing collective may proceed to 
                        terminate the blanket license of the 
                        digital music provider as follows:
                                  (I) The mechanical licensing 
                                collective shall provide 
                                written notice to the digital 
                                music provider describing with 
                                reasonable particularity the 
                                default and advising that 
                                unless such default is cured 
                                not later than 60 calendar days 
                                after the date of the notice, 
                                the blanket license will 
                                automatically terminate at the 
                                end of that period.
                                  (II) If the digital music 
                                provider fails to remedy the 
                                default before the end of the 
                                60-day period described in 
                                subclause (I), the license 
                                shall terminate without any 
                                further action on the part of 
                                the mechanical licensing 
                                collective. Such termination 
                                renders the making of all 
                                digital phonorecord deliveries 
                                of all musical works (and 
                                shares thereof) covered by the 
                                blanket license for which the 
                                royalty or administrative 
                                assessment has not been paid 
                                actionable as acts of 
                                infringement under section 501 
                                and subject to the remedies 
                                provided by sections 502 
                                through 506.
                          (iii) Notice to copyright owners.--
                        The mechanical licensing collective 
                        shall provide written notice of any 
                        termination under this subparagraph to 
                        copyright owners of affected works.
                          (iv) Review by federal district 
                        court.--A digital music provider that 
                        believes a blanket license was 
                        improperly terminated by the mechanical 
                        licensing collective may seek review of 
                        such termination in an appropriate 
                        district court of the United States. 
                        The district court shall determine the 
                        matter de novo based on the record 
                        before the mechanical licensing 
                        collective and any additional 
                        supporting evidence presented by the 
                        parties.
          (5) Digital licensee coordinator.--
                  (A) In general.--The digital licensee 
                coordinator shall be a single entity that--
                          (i) is a nonprofit, not owned by any 
                        other entity, that is created to carry 
                        out responsibilities under this 
                        subsection;
                          (ii) is endorsed by and enjoys 
                        substantial support from digital music 
                        providers and significant nonblanket 
                        licensees that together represent the 
                        greatest percentage of the licensee 
                        market for uses of musical works in 
                        covered activities, as measured over 
                        the preceding 3 calendar years;
                          (iii) is able to demonstrate that it 
                        has, or will have prior to the license 
                        availability date, the administrative 
                        capabilities to perform the required 
                        functions of the digital licensee 
                        coordinator under this subsection; and
                          (iv) has been designated by the 
                        Register of Copyrights, with the 
                        approval of the Librarian of Congress 
                        pursuant to section 702, in accordance 
                        with subparagraph (B).
                  (B) Designation of digital licensee 
                coordinator.--
                          (i) Initial designation.--The 
                        Register of Copyrights shall initially 
                        designate the digital licensee 
                        coordinator not later than 270 days 
                        after the enactment date, in accordance 
                        with the same procedure described for 
                        designation of the mechanical licensing 
                        collective in paragraph (3)(B)(i).
                          (ii) Periodic review of 
                        designation.--Following the initial 
                        designation of the digital licensee 
                        coordinator, the Register of Copyrights 
                        shall, every 5 years, beginning with 
                        the fifth full calendar year to 
                        commence after the initial designation, 
                        determine whether the existing 
                        designation should be continued, or a 
                        different entity meeting the criteria 
                        described in clauses (i) through (iii) 
                        of subparagraph (A) should be 
                        designated, in accordance with the same 
                        procedure described for the mechanical 
                        licensing collective in paragraph 
                        (3)(B)(ii).
                          (iii) Inability to designate.--If the 
                        Register of Copyrights is unable to 
                        identify an entity that fulfills each 
                        of the qualifications described in 
                        clauses (i) through (iii) of 
                        subparagraph (A) to serve as the 
                        digital licensee coordinator, the 
                        Register may decline to designate a 
                        digital licensee coordinator. The 
                        determination of the Register not to 
                        designate a digital licensee 
                        coordinator shall not negate or 
                        otherwise affect any provision of this 
                        subsection except to the limited extent 
                        that a provision references the digital 
                        licensee coordinator. In such case, the 
                        reference to the digital licensee 
                        coordinator shall be without effect 
                        unless and until a new digital licensee 
                        coordinator is designated.
                  (C) Authorities and functions.--
                          (i) In general.--The digital licensee 
                        coordinator is authorized to perform 
                        the following functions, subject to 
                        more particular requirements as 
                        described in this subsection:
                                  (I) Establish a governance 
                                structure, criteria for 
                                membership, and any dues to be 
                                paid by its members.
                                  (II) Engage in efforts to 
                                enforce notice and payment 
                                obligations with respect to the 
                                administrative assessment, 
                                including by receiving 
                                information from and 
                                coordinating with the 
                                mechanical licensing 
                                collective.
                                  (III) Initiate and 
                                participate in proceedings 
                                before the Copyright Royalty 
                                Judges to establish the 
                                administrative assessment under 
                                this subsection.
                                  (IV) Initiate and participate 
                                in proceedings before the 
                                Copyright Office with respect 
                                to activities under this 
                                subsection.
                                  (V) Gather and provide 
                                documentation for use in 
                                proceedings before the 
                                Copyright Royalty Judges to set 
                                rates and terms under this 
                                section.
                                  (VI) Maintain records of its 
                                activities.
                                  (VII) Assist in publicizing 
                                the existence of the mechanical 
                                licensing collective and the 
                                ability of copyright owners to 
                                claim royalites for unmatched 
                                musical works (and shares of 
                                works) through the collective
                                  (VIII) Engage in such other 
                                activities as may be necessary 
                                or appropriate to fulfill its 
                                responsibilities under this 
                                subsection.
                          (ii) Restriction on lobbying.--The 
                        digital licensee coordinator may not 
                        engage in government lobbying 
                        activities, but may engage in the 
                        activities described in subclauses 
                        (III), (IV), and (V) of clause (i).
                          (iii) Assistance with publicity for 
                        unclaimed royalties.--The digital 
                        licensee coordinator shall make 
                        reasonable, good-faith efforts to 
                        assist the mechanical licensing 
                        collective in the efforts of the 
                        collective to locate and identify 
                        copyright owners of unmatched musical 
                        works (and shares of such works) by 
                        encouraging digital music providers to 
                        publicize the existence of the 
                        collective and the ability of copyright 
                        owners to claim unclaimed accrued 
                        royalties, including by--
                                  (I) posting contact 
                                information for the collective 
                                at reasonably prominent 
                                locations on digital music 
                                provider websites and 
                                applications; and
                                  (II) conducting in-person 
                                outreach activities with 
                                songwriters.
          (6) Requirements for significant nonblanket 
        licensees.--
                  (A) In general.--
                          (i) Notice of activity.--Not later 
                        than 45 calendar days after the license 
                        availability date, or 45 calendar days 
                        after the end of the first full 
                        calendar month in which an entity 
                        initially qualifies as a significant 
                        nonblanket licensee, whichever occurs 
                        later, a significant nonblanket 
                        licensee shall submit a notice of 
                        nonblanket activity to the mechanical 
                        licensing collective. The notice of 
                        nonblanket activity shall comply in 
                        form and substance with requirements 
                        that the Register of Copyrights shall 
                        establish by regulation, and a copy 
                        shall be made available to the digital 
                        licensee coordinator.
                          (ii) Reporting and payment 
                        obligations.--The notice of nonblanket 
                        activity submitted to the mechanical 
                        licensing collective shall be 
                        accompanied by a report of usage that 
                        contains the information described in 
                        paragraph (4)(A)(ii), as well as any 
                        payment of the administrative 
                        assessment required under this 
                        subsection and applicable regulations. 
                        Thereafter, subject to clause (iii), a 
                        significant nonblanket licensee shall 
                        continue to provide monthly reports of 
                        usage, accompanied by any required 
                        payment of the administrative 
                        assessment, to the mechanical licensing 
                        collective. Such reports and payments 
                        shall be submitted not later than 45 
                        calendar days after the end of the 
                        calendar month being reported.
                          (iii) Discontinuation of 
                        obligations.--An entity that has 
                        submitted a notice of nonblanket 
                        activity to the mechanical licensing 
                        collective that has ceased to qualify 
                        as a significant nonblanket licensee 
                        may so notify the collective in 
                        writing. In such case, as of the 
                        calendar month in which such notice is 
                        provided, such entity shall no longer 
                        be required to provide reports of usage 
                        or pay the administrative assessment, 
                        but if such entity later qualifies as a 
                        significant nonblanket licensee, such 
                        entity shall again be required to 
                        comply with clauses (i) and (ii).
                  (B) Reporting by mechanical licensing 
                collective to digital licensee coordinator.--
                          (i) Monthly reports of noncompliant 
                        licensees.--The mechanical licensing 
                        collective shall provide monthly 
                        reports to the digital licensee 
                        coordinator setting forth any 
                        significant nonblanket licensees of 
                        which the collective is aware that have 
                        failed to comply with subparagraph (A).
                          (ii) Treatment of confidential 
                        information.--The mechanical licensing 
                        collective and digital licensee 
                        coordinator shall take appropriate 
                        steps to safeguard the confidentiality 
                        and security of financial and other 
                        sensitive data shared under this 
                        subparagraph, in accordance with the 
                        confidentiality requirements prescribed 
                        by the Register of Copyrights under 
                        paragraph (12)(C).
                  (C) Legal enforcement efforts.--
                          (i) Federal court action.--Should the 
                        mechanical licensing collective or 
                        digital licensee coordinator become 
                        aware that a significant nonblanket 
                        licensee has failed to comply with 
                        subparagraph (A), either may commence 
                        an action in an appropriate district 
                        court of the United States for damages 
                        and injunctive relief. If the 
                        significant nonblanket licensee is 
                        found liable, the court shall, absent a 
                        finding of excusable neglect, award 
                        damages in an amount equal to three 
                        times the total amount of the unpaid 
                        administrative assessment and, 
                        notwithstanding anything to the 
                        contrary in section 505, reasonable 
                        attorney's fees and costs, as well as 
                        such other relief as the court 
                        determines appropriate. In all other 
                        cases, the court shall award relief as 
                        appropriate. Any recovery of damages 
                        shall be payable to the mechanical 
                        licensing collective as an offset to 
                        the collective total costs.
                          (ii) Statute of limitations for 
                        enforcement action.--Any action 
                        described in this subparagraph shall be 
                        commenced within the time period 
                        described in section 507(b).
                          (iii) Other rights and remedies 
                        preserved.--The ability of the 
                        mechanical licensing collective or 
                        digital licensee coordinator to bring 
                        an action under this subparagraph shall 
                        in no way alter, limit or negate any 
                        other right or remedy that may be 
                        available to any party at law or in 
                        equity.
          (7) Funding of mechanical licensing collective.--
                  (A) In general.--The collective total costs 
                shall be funded by--
                          (i) an administrative assessment, as 
                        such assessment is established by the 
                        Copyright Royalty Judges pursuant to 
                        subparagraph (D) from time to time, to 
                        be paid by--
                                  (I) digital music providers 
                                that are engaged, in all or in 
                                part, in covered activities 
                                pursuant to a blanket license; 
                                and
                                  (II) significant nonblanket 
                                licensees; and
                          (ii) voluntary contributions from 
                        digital music providers and significant 
                        nonblanket licensees as may be agreed 
                        with copyright owners.
                  (B) Voluntary contributions.--
                          (i) Agreements concerning 
                        contributions.--Except as provided in 
                        clause (ii), voluntary contributions by 
                        digital music providers and significant 
                        nonblanket licensees shall be 
                        determined by private negotiation and 
                        agreement, and the following conditions 
                        apply:
                                  (I) The date and amount of 
                                each voluntary contribution to 
                                the mechanical licensing 
                                collective shall be documented 
                                in a writing signed by an 
                                authorized agent of the 
                                mechanical licensing collective 
                                and the contributing party.
                                  (II) Such agreement shall be 
                                made available as required in 
                                proceedings before the 
                                Copyright Royalty Judges to 
                                establish or adjust the 
                                administrative assessment in 
                                accordance with applicable 
                                statutory and regulatory 
                                provisions and rulings of the 
                                Copyright Royalty Judges.
                          (ii) Treatment of contributions.--
                        Each voluntary contribution described 
                        in clause (i) shall be treated for 
                        purposes of an administrative 
                        assessment proceeding as an offset to 
                        the collective total costs that would 
                        otherwise be recovered through the 
                        administrative assessment. Any 
                        allocation or reallocation of voluntary 
                        contributions between or among 
                        individual digital music providers or 
                        significant nonblanket licensees shall 
                        be a matter of private negotiation and 
                        agreement among such parties and 
                        outside the scope of the administrative 
                        assessment proceeding.
                  (C) Interim application of accrued 
                royalties.--In the event that the 
                administrative assessment, together with any 
                funding from voluntary contributions as 
                provided in subparagraphs (A) and (B), is 
                inadequate to cover current collective total 
                costs, the collective, with approval of its 
                board of directors, may apply unclaimed accrued 
                royalties on an interim basis to defray such 
                costs, subject to future reimbursement of such 
                royalties from future collections of the 
                assessment.
                  (D) Determination of administrative 
                assessment.--
                          (i) Administrative assessment to 
                        cover collective total costs.--The 
                        administrative assessment shall be used 
                        solely and exclusively to fund the 
                        collective total costs.
                          (ii) Separate proceeding before 
                        copyright royalty judges.--The amount 
                        and terms of the administrative 
                        assessment shall be determined and 
                        established in a separate and 
                        independent proceeding before the 
                        Copyright Royalty Judges, according to 
                        the procedures described in clauses 
                        (iii) and (iv). The administrative 
                        assessment determined in such 
                        proceeding shall--
                                  (I) be wholly independent of 
                                royalty rates and terms 
                                applicable to digital music 
                                providers, which shall not be 
                                taken into consideration in any 
                                manner in establishing the 
                                administrative assessment;
                                  (II) be established by the 
                                Copyright Royalty Judges in an 
                                amount that is calculated to 
                                defray the reasonable 
                                collective total costs;
                                  (III) be assessed based on 
                                usage of musical works by 
                                digital music providers and 
                                significant nonblanket 
                                licensees in covered activities 
                                under both compulsory and 
                                nonblanket licenses;
                                  (IV) may be in the form of a 
                                percentage of royalties payable 
                                under this section for usage of 
                                musical works in covered 
                                activities (regardless of 
                                whether a different rate 
                                applies under a voluntary 
                                license), or any other usage-
                                based metric reasonably 
                                calculated to equitably 
                                allocate the collective total 
                                costs across digital music 
                                providers and significant 
                                nonblanket licensees engaged in 
                                covered activities, and shall 
                                include as a component a 
                                minimum fee for all digital 
                                music providers and significant 
                                nonblanket licensees; and
                                  (V) take into consideration 
                                anticipated future collective 
                                total costs and collections of 
                                the administrative assessment, 
                                including, as applicable--
                                          (aa) any portion of 
                                        past actual collective 
                                        total costs of the 
                                        mechanical licensing 
                                        collective not funded 
                                        by previous collections 
                                        of the administrative 
                                        assessment or voluntary 
                                        contributions because 
                                        such collections or 
                                        contributions together 
                                        were insufficient to 
                                        fund such costs;
                                          (bb) any past 
                                        collections of the 
                                        administrative 
                                        assessment and 
                                        voluntary contributions 
                                        that exceeded past 
                                        actual collective total 
                                        costs, resulting in a 
                                        surplus; and
                                          (cc) the amount of 
                                        any voluntary 
                                        contributions by 
                                        digital music providers 
                                        or significant 
                                        nonblanket licensees in 
                                        relevant periods, 
                                        described in 
                                        subparagraphs (A) and 
                                        (B) of paragraph (7).
                          (iii) Initial administrative 
                        assessment.--The procedure for 
                        establishing the initial administrative 
                        assessment shall be as follows:
                                  (I) Not later than 270 days 
                                after the enactment of the 
                                date, the Copyright Royalty 
                                Judges shall commence a 
                                proceeding to establish the 
                                initial administrative 
                                assessment by publishing a 
                                notice in the Federal Register 
                                seeking petitions to 
                                participate.
                                  (II) The mechanical licensing 
                                collective and digital licensee 
                                coordinator shall participate 
                                in the proceeding described in 
                                subclause (I), along with any 
                                interested copyright owners, 
                                digital music providers or 
                                significant nonblanket 
                                licensees that have notified 
                                the Copyright Royalty Judges of 
                                their desire to participate.
                                  (III) The Copyright Royalty 
                                Judges shall establish a 
                                schedule for submission by the 
                                parties of information that may 
                                be relevant to establishing the 
                                administrative assessment, 
                                including actual and 
                                anticipated collective total 
                                costs of the mechanical 
                                licensing collective, actual 
                                and anticipated collections 
                                from digital music providers 
                                and significant nonblanket 
                                licensees, and documentation of 
                                voluntary contributions, as 
                                well as a schedule for further 
                                proceedings, which shall 
                                include a hearing, as the 
                                Copyright Royalty Judges 
                                determine appropriate.
                                  (IV) The initial 
                                administrative assessment shall 
                                be determined, and such 
                                determination shall be 
                                published in the Federal 
                                Register by the Copyright 
                                Royalty Judges, not later than 
                                1 year after commencement of 
                                the proceeding described in 
                                this clause. The determination 
                                shall be supported by a written 
                                record. The initial 
                                administrative assessment shall 
                                be effective as of the license 
                                availability date, and shall 
                                continue in effect unless and 
                                until an adjusted 
                                administrative assessment is 
                                established pursuant to an 
                                adjustment proceeding under 
                                clause (iv).
                          (iv) Adjustment of administrative 
                        assessment.--The administrative 
                        assessment may be adjusted by the 
                        Copyright Royalty Judges periodically, 
                        in accordance with the following 
                        procedures:
                                  (I) Not earlier than one year 
                                after the most recent 
                                publication of a determination 
                                of the administrative 
                                assessment by the Copyright 
                                Royalty Judges, the mechanical 
                                licensing collective, the 
                                digital licensee coordinator, 
                                or one or more interested 
                                copyright owners, digital music 
                                providers, or significant 
                                nonblanket licensees, may file 
                                a petition with the Copyright 
                                Royalty Judges in the month of 
                                May to commence a proceeding to 
                                adjust the administrative 
                                assessment.
                                  (II) Notice of the 
                                commencement of such proceeding 
                                shall be published in the 
                                Federal Register in the month 
                                of June following the filing of 
                                any petition, with a schedule 
                                of requested information and 
                                additional proceedings, as 
                                described in clause (iii)(III). 
                                The mechanical licensing 
                                collective and digital licensee 
                                coordinator shall participate 
                                in such proceeding, along with 
                                any interested copyright 
                                owners, digital music 
                                providers, or significant 
                                nonblanket licensees that have 
                                notified the Copyright Royalty 
                                Judges of their desire to 
                                participate.
                                  (III) The determination of 
                                the adjusted administrative 
                                assessment, which shall be 
                                supported by a written record, 
                                shall be published in the 
                                Federal Register during June of 
                                the calendar year following the 
                                commencement of the proceeding. 
                                The adjusted administrative 
                                assessment shall take effect 
                                January 1 of the year following 
                                such publication.
                          (v) Adoption of voluntary 
                        agreements.--In lieu of reaching their 
                        own determination based on evaluation 
                        of relevant data, the Copyright Royalty 
                        Judges shall approve and adopt a 
                        negotiated agreement to establish the 
                        amount and terms of the administrative 
                        assessment that has been agreed to by 
                        the mechanical licensing collective and 
                        the digital licensee coordinator (or if 
                        none has been designated, interested 
                        digital music providers and significant 
                        nonblanket licensees representing more 
                        than half of the market for uses of 
                        musical works in covered activities), 
                        except that the Copyright Royalty 
                        Judges shall have the discretion to 
                        reject any such agreement for good 
                        cause shown. An administrative 
                        assessment adopted under this clause 
                        shall apply to all digital music 
                        providers and significant nonblanket 
                        licensees engaged in covered activities 
                        during the period the administrative 
                        assessment is in effect.
                          (vi) Continuing authority to amend.--
                        The Copyright Royalty Judges shall 
                        retain continuing authority to amend a 
                        determination of an administrative 
                        assessment to correct technical or 
                        clerical errors, or modify the terms of 
                        implementation, for good cause, with 
                        any such amendment to be published in 
                        the Federal Register.
                          (vii) Appeal of administrative 
                        assessment.--The determination of an 
                        administrative assessment by the 
                        Copyright Royalty Judges shall be 
                        appealable, not later than 30 calendar 
                        days after publication in the Federal 
                        Register, to the Court of Appeals for 
                        the District of Columbia Circuit by any 
                        party that fully participated in the 
                        proceeding. The administrative 
                        assessment as established by the 
                        Copyright Royalty Judges shall remain 
                        in effect pending the final outcome of 
                        any such appeal, and the mechanical 
                        licensing collective, digital licensee 
                        coordinator, digital music providers, 
                        and significant nonblanket licensees 
                        shall implement appropriate financial 
                        or other measures not later than 90 
                        days after any modification of the 
                        assessment to reflect and account for 
                        such outcome.
                          (viii) Regulations.--The Copyright 
                        Royalty Judges may adopt regulations to 
                        govern the conduct of proceedings under 
                        this paragraph.
          (8) Establishment of rates and terms under blanket 
        license.--
                  (A) Restrictions on ratesetting 
                participation.--Neither the mechanical 
                licensing collective nor the digital licensee 
                coordinator shall be a party to a proceeding 
                described in subsection (c)(1)(E), except that 
                the mechanical licensing collective or the 
                digital licensee coordinator may gather and 
                provide financial and other information for the 
                use of a party to such a proceeding and comply 
                with requests for information as required under 
                applicable statutory and regulatory provisions 
                and rulings of the Copyright Royalty Judges.
                  (B) Application of late fees.--In any 
                proceeding described in subparagraph (A) in 
                which the Copyright Royalty Judges establish a 
                late fee for late payment of royalties for uses 
                of musical works under this section, such fee 
                shall apply to covered activities under blanket 
                licenses, as follows:
                          (i) Late fees for past due royalty 
                        payments shall accrue from the due date 
                        for payment until payment is received 
                        by the mechanical licensing collective.
                          (ii) The availability of late fees 
                        shall in no way prevent a copyright 
                        owner or the mechanical licensing 
                        collective from asserting any other 
                        rights or remedies to which such 
                        copyright owner or the mechanical 
                        licensing collective may be entitled 
                        under this title.
                  (C) Interim rate agreements in general.--For 
                any covered activity for which no rate or terms 
                have been established by the Copyright Royalty 
                Judges, the mechanical licensing collective and 
                any digital music provider may agree to an 
                interim rate and terms for such activity under 
                the blanket license, and any such rate and 
                terms--
                          (i) shall be treated as 
                        nonprecedential and not cited or relied 
                        upon in any ratesetting proceeding 
                        before the Copyright Royalty Judges or 
                        any other tribunal; and
                          (ii) shall automatically expire upon 
                        the establishment of a rate and terms 
                        for such covered activity by the 
                        Copyright Royalty Judges, under 
                        subsection (c)(1)(E).
                  (D) Adjustments for interim rates.--The rate 
                and terms established by the Copyright Royalty 
                Judges for a covered activity to which an 
                interim rate and terms have been agreed under 
                subparagraph (C) shall supersede the interim 
                rate and terms and apply retroactively to the 
                inception of the activity under the blanket 
                license. In such case, not later than 90 days 
                after the effective date of the rate and terms 
                established by the Copyright Royalty Judges--
                          (i) if the rate established by the 
                        Copyright Royalty Judges exceeds the 
                        interim rate, the digital music 
                        provider shall pay to the mechanical 
                        licensing collective the amount of any 
                        underpayment of royalties due; or
                          (ii) if the interim rate exceeds the 
                        rate established by the Copyright 
                        Royalty Judges, the mechanical 
                        licensing collective shall credit the 
                        account of the digital music provider 
                        for the amount of any overpayment of 
                        royalties due.
          (9) Transition to blanket licenses.--
                  (A) Substitution of blanket license.--On the 
                license availability date, a blanket license 
                shall, without any interruption in license 
                authority enjoyed by such digital music 
                provider, be automatically substituted for and 
                supersede any existing compulsory license 
                previously obtained under this section by the 
                digital music provider from a copyright owner 
                to engage in 1 or more covered activities with 
                respect to a musical work, except that such 
                substitution shall not apply to any authority 
                obtained from a record company pursuant to a 
                compulsory license to make and distribute 
                permanent downloads unless and until such 
                record company terminates such authority in 
                writing to take effect at the end of a monthly 
                reporting period, with a copy to the mechanical 
                licensing collective.
                  (B) Expiration of existing licenses.--Except 
                to the extent provided in subparagraph (A), on 
                and after the license availability date, 
                licenses other than individual download 
                licenses obtained under this section for 
                covered activities prior to the license 
                availability date shall no longer continue in 
                effect.
                  (C) Treatment of voluntary licenses.--A 
                voluntary license for a covered activity in 
                effect on the license availability date will 
                remain in effect unless and until the voluntary 
                license expires according to the terms of the 
                voluntary license, or the parties agree to 
                amend or terminate the voluntary license. In a 
                case where a voluntary license for a covered 
                activity entered into before the license 
                availability date incorporates the terms of 
                this section by reference, the terms so 
                incorporated (but not the rates) shall be those 
                in effect immediately prior to the license 
                availability date, and those terms shall 
                continue to apply unless and until such 
                voluntary license is terminated or amended, or 
                the parties enter into a new voluntary license.
                  (D) Further acceptance of notices for covered 
                activities by copyright office.--On and after 
                the enactment date--
                          (i) the Copyright Office shall no 
                        longer accept notices of intention with 
                        respect to covered activities; and
                          (ii) notices of intention filed 
                        before the enactment date will no 
                        longer be effective or provide license 
                        authority with respect to covered 
                        activities, except that before the 
                        license availability date there shall 
                        be no liability under section 501 for 
                        the reproduction or distribution of a 
                        musical work (or share thereof) in 
                        covered activities if a valid notice of 
                        intention was filed for such work (or 
                        share) before the enactment date.
          (10) Prior unlicensed uses.--
                  (A) Limitation on liability in general.--A 
                copyright owner that commences an action under 
                section 501 on or after January 1, 2018, 
                against a digital music provider for the 
                infringement of the exclusive rights provided 
                by paragraph (1) or (3) of section 106 arising 
                from the unauthorized reproduction or 
                distribution of a musical work by such digital 
                music provider in the course of engaging in 
                covered activities prior to the license 
                availability date, shall, as the copyright 
                owner's sole and exclusive remedy against the 
                digital music provider, be eligible to recover 
                the royalty prescribed under subsection 
                (c)(1)(C) and chapter 8 of this title, from the 
                digital music provider, provided that such 
                digital music provider can demonstrate 
                compliance with the requirements of 
                subparagraph (B), as applicable. In all other 
                cases the limitation on liability under this 
                subparagraph shall not apply.
                  (B) Requirements for limitation on 
                liability.--The following requirements shall 
                apply on the enactment date and through the end 
                of the period that expires 90 days after the 
                license availability date to digital music 
                providers seeking to avail themselves of the 
                limitation on liability described in 
                subparagraph (A):
                          (i) Not later than 30 calendar days 
                        after first making a particular sound 
                        recording of a musical work available 
                        through its service via one or more 
                        covered activities, or 30 calendar days 
                        after the enactment date, whichever 
                        occurs later, a digital music provider 
                        shall engage in good-faith, 
                        commercially reasonable efforts to 
                        identify and locate each copyright 
                        owner of such musical work (or share 
                        thereof). Such required matching 
                        efforts shall include the following:
                                  (I) Good-faith, commercially 
                                reasonable efforts to obtain 
                                from the owner of the 
                                corresponding sound recording 
                                made available through the 
                                digital music provider's 
                                service the following 
                                information:
                                          (aa) Sound recording 
                                        name, featured artist, 
                                        sound recording 
                                        copyright owner, 
                                        international standard 
                                        recording code, and 
                                        other information 
                                        commonly used in the 
                                        industry to identify 
                                        sound recordings and 
                                        match them to the 
                                        musical works they 
                                        embody.
                                          (bb) Any available 
                                        musical work 
                                        ownershipinformation, 
                                        including each 
                                        songwriter and 
                                        publisher name, 
                                        percentage ownership 
                                        share, and 
                                        international standard 
                                        musical work code.
                                  (II) Employment of 1 or more 
                                bulk electronic matching 
                                processes that are available to 
                                the digital music provider 
                                through a third-party vendor on 
                                commercially reasonable terms, 
                                except that a digital music 
                                provider may rely on its own 
                                bulk electronic matching 
                                process if that process has 
                                capabilities comparable to or 
                                better than those available 
                                from a third-party vendor on 
                                commercially reasonable terms.
                          (ii) The required matching efforts 
                        shall be repeated by the digital music 
                        provider not less than once per month 
                        for so long as the copyright owner 
                        remains unidentified or has not been 
                        located.
                          (iii) If the required matching 
                        efforts are successful in identifying 
                        and locating a copyright owner of a 
                        musical work (or share thereof) by the 
                        end of the calendar month in which the 
                        digital music provider first makes use 
                        of the work, the digital music provider 
                        shall provide statements of account and 
                        pay royalties to such copyright owner 
                        in accordance with this section and 
                        applicable regulations.
                          (iv) If the copyright owner is not 
                        identified or located by the end of the 
                        calendar month in which the digital 
                        music provider first makes use of the 
                        work, the digital music provider shall 
                        accrue and hold royalties calculated 
                        under the applicable statutory rate in 
                        accordance with usage of the work, from 
                        initial use of the work until the 
                        accrued royalties can be paid to the 
                        copyright owner or are required to be 
                        transferred to the mechanical licensing 
                        collective, as follows:
                                  (I) Accrued royalties shall 
                                be maintained by the digital 
                                music provider in accordance 
                                with generally accepted 
                                accounting principles.
                                  (II) If a copyright owner of 
                                an unmatched musical work (or 
                                share thereof) is identified 
                                and located by or to the 
                                digital music provider before 
                                the license availability date, 
                                the digital music provider 
                                shall--
                                          (aa) not later than 
                                        45 calendar days after 
                                        the end of the calendar 
                                        month during which the 
                                        copyright owner was 
                                        identified and located, 
                                        pay the copyright owner 
                                        all accrued royalties, 
                                        such payment to be 
                                        accompanied by a 
                                        cumulative statement of 
                                        account that includes 
                                        all of the information 
                                        that would have been 
                                        provided to the 
                                        copyright owner had the 
                                        digital music provider 
                                        been providing monthly 
                                        statements of account 
                                        to the copyright owner 
                                        from initial use of the 
                                        work in accordance with 
                                        this section and 
                                        applicable regulations, 
                                        including the requisite 
                                        certification under 
                                        subsection (c)(2)(I);
                                          (bb) beginning with 
                                        the accounting period 
                                        following the calendar 
                                        month in which the 
                                        copyright owner was 
                                        identified and located, 
                                        and for all other 
                                        accounting periods 
                                        prior to the license 
                                        availability date, 
                                        provide monthly 
                                        statements of account 
                                        and pay royalties to 
                                        the copyright owner as 
                                        required under this 
                                        section and applicable 
                                        regulations; and
                                          (cc) beginning with 
                                        the monthly royalty 
                                        reporting period 
                                        commencing on the 
                                        license availability 
                                        date, report usage and 
                                        pay royalties for such 
                                        musical work (or share 
                                        thereof) for such 
                                        reporting period and 
                                        reporting periods 
                                        thereafter to the 
                                        mechanical licensing 
                                        collective, as required 
                                        under this subsection 
                                        and applicable 
                                        regulations.
                                  (III) If a copyright owner of 
                                an unmatched musical work (or 
                                share thereof) is not 
                                identified and located by the 
                                license availability date, the 
                                digital music provider shall--
                                          (aa) not later than 
                                        45 calendar days after 
                                        the license 
                                        availability date, 
                                        transfer all accrued 
                                        royalties to the 
                                        mechanical licensing 
                                        collective, such 
                                        payment to be 
                                        accompanied by a 
                                        cumulative statement of 
                                        account that includes 
                                        all of the information 
                                        that would have been 
                                        provided to the 
                                        copyright owner had the 
                                        digital music provider 
                                        been serving monthly 
                                        statements of account 
                                        on the copyright owner 
                                        from initial use of the 
                                        work in accordance with 
                                        this section and 
                                        applicable regulations, 
                                        including the requisite 
                                        certification under 
                                        subsection (c)(2)(I), 
                                        and accompanied by an 
                                        additional 
                                        certification by a duly 
                                        authorized officer of 
                                        the digital music 
                                        provider that the 
                                        digital music provider 
                                        has fulfilled the 
                                        requirements of clauses 
                                        (i) and (ii) of 
                                        subparagraph (B) but 
                                        has not been successful 
                                        in locating or 
                                        identifying the 
                                        copyright owner; and
                                          (bb) beginning with 
                                        the monthly royalty 
                                        reporting period 
                                        commencing on the 
                                        license availability 
                                        date, report usage and 
                                        pay royalties for such 
                                        musical work (or share 
                                        thereof) for such 
                                        period and reporting 
                                        periods thereafter to 
                                        the mechanical 
                                        licensing collective, 
                                        as required under this 
                                        subsection and 
                                        applicable regulations.
                          (v) A digital music provider that 
                        complies with the requirements of this 
                        subparagraph with respect to unmatched 
                        musical works (or shares of works) 
                        shall not be liable for or accrue late 
                        fees for late payments of royalties for 
                        such works until such time as the 
                        digital music provider is required to 
                        begin paying monthly royalties to the 
                        copyright owner or the mechanical 
                        licensing collective, as applicable.
                  (C) Adjusted statute of limitations.--
                Notwithstanding anything to the contrary in 
                section 507(b), with respect to any claim of 
                infringement of the exclusive rights provided 
                by paragraphs (1) and (3) of section 106 
                against a digital music provider arising from 
                the unauthorized reproduction or distribution 
                of a musical work by such digital music 
                provider in the course of engaging in covered 
                activities that accrued not more than 3 years 
                prior to the license availability date, such 
                action may be commenced not later than the 
                later of--
                          (i) 3 years after the date on which 
                        the claim accrued; or
                          (ii) 2 years after the license 
                        availability date.
                  (D) Other rights and remedies preserved.--
                Except as expressly provided in this paragraph, 
                nothing in this paragraph shall be construed to 
                alter, limit, or negate any right or remedy of 
                a copyright owner with respect to unauthorized 
                use of a musical work.
                  (E) Remedy in federal district court.--A 
                person may bring a claim in a Federal district 
                court of competent jurisdiction for an issue 
                that is not adequately resolved by the board of 
                directors or a committee of the mechanical 
                licensing collective, as applicable.
          (11) Legal protections for licensing activities.--
                  (A) Exemption for compulsory license 
                activities.--The antitrust exemption described 
                in subsection (c)(1)(D) shall apply to 
                negotiations and agreements between and among 
                copyright owners and persons entitled to obtain 
                a compulsory license for covered activities, 
                and common agents acting on behalf of such 
                copyright owners or persons, including with 
                respect to the administrative assessment 
                established under this subsection.
                  (B) Limitation on common agent exemption.--
                Notwithstanding the antitrust exemption 
                provided in subsection (c)(1)(D) and 
                subparagraph (A) of this paragraph (except for 
                the administrative assessment referenced in 
                such subpargraph (A) and except as provided in 
                paragraph (8)(C)), neither the mechanical 
                licensing collective nor the digital licensee 
                coordinator shall serve as a common agent with 
                respect to the establishment of royalty rates 
                or terms under this section.
                  (C) Antitrust exemption for administrative 
                activities.--Notwithstanding any provision of 
                the antitrust laws, copyright owners and 
                persons entitled to obtain a compulsory license 
                under this section may designate the mechanical 
                licensing collective to administer voluntary 
                licenses for the reproduction or distribution 
                of musical works in covered activities on 
                behalf of such copyright owners and persons, 
                subject to the following conditions:
                          (i) Each copyright owner shall 
                        establish the royalty rates and 
                        material terms of any such voluntary 
                        license individually and not in 
                        agreement, combination, or concert with 
                        any other copyright owner.
                          (ii) Each person entitled to obtain a 
                        compulsory license under this section 
                        shall establish the royalty rates and 
                        material terms of any such voluntary 
                        license individually and not in 
                        agreement, combination, or concert with 
                        any other digital music provider.
                          (iii) The mechanical licensing 
                        collective shall maintain the 
                        confidentiality of the voluntary 
                        licenses in accordance with the 
                        confidentiality provisions prescribed 
                        by the Register of Copyrights under 
                        paragraph (12)(C).
                  (D) Liability for good-faith activities.--The 
                mechanical licensing collective shall not be 
                liable to any person or entity based on a claim 
                arising from its good-faith administration of 
                policies and procedures adopted and implemented 
                to carry out the responsibilities described in 
                subparagraphs (J) and (K) of paragraph (3), 
                except to the extent of correcting an 
                underpayment or overpayment of royalties as 
                provided in paragraph (3)(L)(i)(VI), but the 
                collective may participate in a legal 
                proceeding as a stakeholder party if the 
                collective is holding funds that are the 
                subject of a dispute between copyright owners. 
                For purposes of this subparagraph, the term 
                ``good-faith administration'' means 
                administration in a manner that is not grossly 
                negligent.
                  (E) Preemption of state property laws.--The 
                holding and distribution of funds by the 
                mechanical licensing collective in accordance 
                with this subsection shall supersede and 
                preempt any State law (including common law) 
                concerning escheatment or abandoned property, 
                or any analogous provision, that might 
                otherwise apply.
          (12) Regulations.--
                  (A) Adoption by register of copyrights and 
                copyright royalty judges.--The Register of 
                Copyrights may conduct such proceedings and 
                adopt such regulations as may be necessary or 
                appropriate to effectuate the provisions of 
                this subsection, except for regulations 
                concerning proceedings before the Copyright 
                Royalty Judges to establish the administrative 
                assessment, which shall be adopted by the 
                Copyright Royalty Judges.
                  (B) Judicial review of regulations.--Except 
                as provided in paragraph (7)(D)(vii), 
                regulations adopted under this subsection shall 
                be subject to judicial review pursuant to 
                chapter 7 of title 5.
                  (C) Protection of confidential information.--
                The Register of Copyrights shall adopt 
                regulations to provide for the appropriate 
                procedures to ensure that confidential, 
                private, proprietary, or privileged information 
                contained in the records of the mechanical 
                licensing collective and digital licensee 
                coordinator is not improperly disclosed or 
                used, including through any disclosure or use 
                by the board of directors or personnel of 
                either entity, and specifically including the 
                unclaimed royalties oversight committee and the 
                dispute resolution committee of the mechanical 
                licensing collective.
          (13) Savings clauses.--
                  (A) Limitation on activities and rights 
                covered.--This subsection applies solely to 
                uses of musical works subject to licensing 
                under this section. The blanket license shall 
                not be construed to extend or apply to 
                activities other than covered activities or to 
                rights other than the exclusive rights of 
                reproduction and distribution licensed under 
                this section, or serve or act as the basis to 
                extend or expand the compulsory license under 
                this section to activities and rights not 
                covered by this section on the day before the 
                enactment date.
                  (B) Rights of public performance not 
                affected.--The rights, protections, and 
                immunities granted under this subsection, the 
                data concerning musical works collected and 
                made available under this subsection, and the 
                definitions under subsection (e) shall not 
                extend to, limit, or otherwise affect any right 
                of public performance in a musical work; and
          (5) by adding at the end the following
      (e) Definitions.--As used in this section:
          (1) Accrued interest.--The term ``accrued interest'' 
        means interest accrued on accrued royalties, as 
        described in subsection (d)(3)(H)(ii).
          (2) Accrued royalties.--The term ``accrued 
        royalties'' means royalties accrued for the 
        reproduction or distribution of a musical work (or 
        share thereof) in a covered activity, calculated in 
        accordance with the applicable royalty rate under this 
        section.
          (3) Administrative assessment.--The term 
        ``administrative assessment'' means the fee established 
        pursuant to subsection (d)(7)(D).
          (4) Audit.--The term ``audit'' means a royalty 
        compliance examination to verify the accuracy of 
        royalty payments, or the conduct of such an 
        examination, as applicable.
          (5) Blanket license.--The term ``blanket license'' 
        means a compulsory license described in subsection 
        (d)(1)(A) to engage in covered activities.
          (6) Collective total costs.--The term ``collective 
        total costs''--
                  (A) means the total costs of establishing, 
                maintaining, and operating the mechanical 
                licensing collective to fulfill its statutory 
                functions, including--
                          (i) startup costs;
                          (ii) financing, legal, audit, and 
                        insurance costs;
                          (iii) investments in information 
                        technology, infrastructure, and other 
                        long-term resources;
                          (iv) outside vendor costs;
                          (v) costs of licensing, royalty 
                        administration, and enforcement of 
                        rights;
                          (vi) costs of bad debt; and
                          (vii) costs of automated and manual 
                        efforts to identify and locate 
                        copyright owners of musical works (and 
                        shares of such musical works) and match 
                        sound recordings to the musical works 
                        the sound recordings embody; and
                  (B) does not include any added costs incurred 
                by the mechanical licensing collective to 
                provide services under voluntary licenses.
          (7) Covered activity.--The term ``covered activity'' 
        means the activity of making a digital phonorecord 
        delivery of a musical work, including in the form of a 
        permanent download, limited download, or interactive 
        stream, where such activity qualifies for a compulsory 
        license under this section.
          (8) Digital music provider.--The term ``digital music 
        provider'' means a person (or persons operating under 
        the authority of that person) that, with respect to a 
        service engaged in covered activities--
                  (A) has a direct contractual, subscription, 
                or other economic relationship with end users 
                of the service, or, if no such relationship 
                with end users exists, exercises direct control 
                over the provision of the service to end users;
                  (B) is able to fully report on any revenues 
                and consideration generated by the service; and
                  (C) is able to fully report on usage of sound 
                recordings of musical works by the service (or 
                procure such reporting).
          (9) Digital licensee coordinator.--The term ``digital 
        licensee coordinator'' means the entity most recently 
        designated pursuant to subsection (d)(5).
          (10) Digital phonorecord delivery.--The term 
        ``digital phonorecord delivery'' means each individual 
        delivery of a phonorecord by digital transmission of a 
        sound recording that 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 
        musical work embodied therein, and includes a permanent 
        download, a limited download, or an interactive stream. 
        A digital phonorecord delivery does not result from a 
        real-time, noninteractive subscription transmission of 
        a sound recording where no reproduction of the sound 
        recording or the musical work embodied therein is made 
        from the inception of the transmission through to its 
        receipt by the transmission recipient in order to make 
        the sound recording audible. A digital phonorecord 
        delivery does not include the digital transmission of 
        sounds accompanying a motion picture or other 
        audiovisual work as defined in section 101.
          (11) Enactment date.--The term ``enactment date'' 
        means the date of the enactment of the Musical Works 
        Modernization Act.
          (12) Individual download license.--The term 
        ``individual download license'' means a compulsory 
        license obtained by a record company to make and 
        distribute, or authorize the making and distribution 
        of, permanent downloads embodying a specific individual 
        musical work.
          (13) Interactive stream.--The term ``interactive 
        stream'' means a digital transmission of a sound 
        recording of a musical work in the form of a stream, 
        where the performance of the sound recording by means 
        of such transmission is not exempt under section 
        114(d)(1) and does not in itself, or as a result of a 
        program in which it is included, qualify for statutory 
        licensing under section 114(d)(2). An interactive 
        stream is a digital phonorecord delivery.
          (14) Interested.--The term ``interested'', as applied 
        to a party seeking to participate in a proceeding under 
        subsection (d)(7)(D), is a party as to which the 
        Copyright Royalty Judges have not determined that the 
        party lacks a significant interest in such proceeding.
          (15) License availability date.--The term ``license 
        availability date'' means January 1 following the 
        expiration of the two-year period beginning on the 
        enactment date.
          (16) Limited download.--The term ``limited download'' 
        means a digital transmission of a sound recording of a 
        musical work in the form of a download, where such 
        sound recording is accessible for listening only for a 
        limited amount of time or specified number of times.
          (17) Matched.--The term ``matched'', as applied to a 
        musical work (or share thereof), means that the 
        copyright owner of such work (or share thereof) has 
        been identified and located.
          (18) Mechanical licensing collective.--The term 
        ``mechanical licensing collective'' means the entity 
        most recently designated as such by the Register of 
        Copyrights under subsection (d)(3).
          (19) Mechanical licensing collective budget.--The 
        term ``mechanical licensing collective budget'' means a 
        statement of the financial position of the mechanical 
        licensing collective for a fiscal year or quarter 
        thereof based on estimates of expenditures during the 
        period and proposals for financing those expenditures, 
        including a calculation of the collective total costs.
          (20) Musical works database.--The term ``musical 
        works database'' means the database described in 
        subsection (d)(3)(E).
          (21) Nonprofit.--The term ``nonprofit'' means a 
        nonprofit created or organized in a State.
          (22) Notice of license.--The term ``notice of 
        license'' means a notice from a digital music provider 
        provided under subsection (d)(2)(A) for purposes of 
        obtaining a blanket license.
          (23) Notice of nonblanket activity.--The term 
        ``notice of nonblanket activity'' means a notice from a 
        significant nonblanket licensee provided under 
        subsection (d)(6)(A) for purposes of notifying the 
        mechanical licensing collective that the licensee has 
        been engaging in covered activities.
          (24) Permanent download.--The term ``permanent 
        download'' means a digital transmission of a sound 
        recording of a musical work in the form of a download, 
        where such sound recording is accessible for listening 
        without restriction as to the amount of time or number 
        of times it may be accessed.
          (25) Qualified auditor.--The term ``qualified 
        auditor'' means an independent, certified public 
        accountant with experience performing music royalty 
        audits.
          (26) Record company.--The term ``record company'' 
        means an entity that invests in, produces, and markets 
        sound recordings of musical works, and distributes such 
        sound recordings for remuneration through multiple 
        sales channels, including a corporate affiliate of such 
        an entity engaged in distribution of sound recordings.
          (27) Report of usage.--The term ``report of usage'' 
        means a report reflecting an entity's usage of musical 
        works in covered activities described in subsection 
        (d)(4)(A).
          (28) Required matching efforts.--The term ``required 
        matching efforts'' means efforts to identify and locate 
        copyright owners of musical works as described in 
        subsection (d)(10)(B)(i).
          (29) Service.--The term ``service'', as used in 
        relation to covered activities, means any site, 
        facility, or offering by or through which sound 
        recordings of musical works are digitally transmitted 
        to members of the public.
          (30) Share.--The term ``share'', as applied to a 
        musical work, means a fractional ownership interest in 
        such work.
          (31) Significant nonblanket licensee.--The term 
        ``significant nonblanket licensee''--
                  (A) means an entity, including a group of 
                entities under common ownership or control 
                that, acting under the authority of one or more 
                voluntary licenses or individual download 
                licenses, offers a service engaged in covered 
                activities, and such entity or group of 
                entities--
                          (i) is not currently operating under 
                        a blanket license and is not obligated 
                        to provide reports of usage reflecting 
                        covered activities under subsection 
                        (d)(4)(A);
                          (ii) has a direct contractual, 
                        subscription, or other economic 
                        relationship with end users of the 
                        service or, if no such relationship 
                        with end users exists, exercises direct 
                        control over the provision of the 
                        service to end users; and
                          (iii) either--
                                  (I) on any day in a calendar 
                                month, makes more than 5,000 
                                different sound recordings of 
                                musical works available through 
                                such service; or
                                  (II) derives revenue or other 
                                consideration in connection 
                                with such covered activities 
                                greater than $50,000 in a 
                                calendar month, or total 
                                revenue or other consideration 
                                greater than $500,000 during 
                                the preceding 12 calendar 
                                months; and
                  (B) does not include--
                          (i) an entity whose covered activity 
                        consists solely of free-to-the-user 
                        streams of segments of sound recordings 
                        of musical works that do not exceed 90 
                        seconds in length, are offered only to 
                        facilitate a licensed use of musical 
                        works that is not a covered activity, 
                        and have no revenue directly 
                        attributable to such streams 
                        constituting the covered activity; or
                          (ii) a ``public broadcasting entity'' 
                        as defined in section 118(f).
          (32) Songwriter.--The term ``songwriter'' means the 
        author of all or part of a musical work, including a 
        composer or lyricist.
          (33) State.--The term ``State'' means each State of 
        the United States, the District of Columbia, and each 
        territory or possession of the United States.
          (34) Unclaimed accrued royalties.--The term 
        ``unclaimed accrued royalties'' means accrued royalties 
        eligible for distribution under subsection (d)(3)(J).
          (35) Unmatched.--The term ``unmatched'', as applied 
        to a musical work (or share thereof), means that the 
        copyright owner of such work (or share thereof) has not 
        been identified or located.
          (36) Voluntary license.--The term ``voluntary 
        license'' means a license for use of a musical work (or 
        share thereof) other than a compulsory license obtained 
        under this section.

           *       *       *       *       *       *       *


           CHAPTER 8--PROCEEDINGS BY COPYRIGHT ROYALTY JUDGES

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

Sec. 801. Copyright Royalty Judges; appointment and functions

    (a) Appointment.--The Librarian of Congress shall appoint 3 
full-time Copyright Royalty Judges, and shall appoint 1 of the 
3 as the Chief Copyright Royalty Judge. The Librarian shall 
make appointments to such positions after consultation with the 
Register of Copyrights.
    (b) Functions.--Subject to the provisions of this chapter, 
the functions of the Copyright Royalty Judges shall be as 
follows:
          (1) To make determinations and adjustments of 
        reasonable terms and rates of royalty payments as 
        provided in sections 112(e), 114, 115, 116, 118, 119, 
        and 1004. [The rates applicable under sections 
        114(f)(1)(B), 115, and 116 shall be calculated to 
        achieve the following objectives:]
                  [(A) To maximize the availability of creative 
                works to the public.
                  [(B) To afford the copyright owner a fair 
                return for his or her creative work and the 
                copyright user a fair income under existing 
                economic conditions.
                  [(C) To reflect the relative roles of the 
                copyright owner and the copyright user in the 
                product made available to the public with 
                respect to relative creative contribution, 
                technological contribution, capital investment, 
                cost, risk, and contribution to the opening of 
                new markets for creative expression and media 
                for their communication.
                  [(D) To minimize any disruptive impact on the 
                structure of the industries involved and on 
                generally prevailing industry practices].
          (2) To make determinations concerning the adjustment 
        of the copyright royalty rates under section 111 solely 
        in accordance with the following provisions:
                  (A) The rates established by section 
                111(d)(1)(B) may be adjusted to reflect--
                          (i) national monetary inflation or 
                        deflation; or
                          (ii) changes in the average rates 
                        charged cable subscribers for the basic 
                        service of providing secondary 
                        transmissions to maintain the real 
                        constant dollar level of the royalty 
                        fee per subscriber which existed as of 
                        the date of October 19, 1976, except 
                        that--
                                  (I) if the average rates 
                                charged cable system 
                                subscribers for the basic 
                                service of providing secondary 
                                transmissions are changed so 
                                that the average rates exceed 
                                national monetary inflation, no 
                                change in the rates established 
                                by section 111(d)(1)(B) shall 
                                be permitted; and
                                  (II) no increase in the 
                                royalty fee shall be permitted 
                                based on any reduction in the 
                                average number of distant 
                                signal equivalents per 
                                subscriber. The Copyright 
                                Royalty Judges may consider all 
                                factors relating to the 
                                maintenance of such level of 
                                payments, including, as an 
                                extenuating factor, whether the 
                                industry has been restrained by 
                                subscriber rate regulating 
                                authorities from increasing the 
                                rates for the basic service of 
                                providing secondary 
                                transmissions.
                  (B) In the event that the rules and 
                regulations of the Federal Communications 
                Commission are amended at any time after April 
                15, 1976, to permit the carriage by cable 
                systems of additional television broadcast 
                signals beyond the local service area of the 
                primary transmitters of such signals, the 
                royalty rates established by section 
                111(d)(1)(B) may be adjusted to ensure that the 
                rates for the additional distant signal 
                equivalents resulting from such carriage are 
                reasonable in the light of the changes effected 
                by the amendment to such rules and regulations. 
                In determining the reasonableness of rates 
                proposed following an amendment of Federal 
                Communications Commission rules and 
                regulations, the Copyright Royalty Judges shall 
                consider, among other factors, the economic 
                impact on copyright owners and users; except 
                that no adjustment in royalty rates shall be 
                made under this subparagraph with respect to 
                any distant signal equivalent or fraction 
                thereof represented by--
                          (i) carriage of any signal permitted 
                        under the rules and regulations of the 
                        Federal Communications Commission in 
                        effect on April 15, 1976, or the 
                        carriage of a signal of the same type 
                        (that is, independent, network, or 
                        noncommercial educational) substituted 
                        for such permitted signal; or
                          (ii) a television broadcast signal 
                        first carried after April 15, 1976, 
                        pursuant to an individual waiver of the 
                        rules and regulations of the Federal 
                        Communications Commission, as such 
                        rules and regulations were in effect on 
                        April 15, 1976.
                  (C) In the event of any change in the rules 
                and regulations of the Federal Communications 
                Commission with respect to syndicated and 
                sports program exclusivity after April 15, 
                1976, the rates established by section 
                111(d)(1)(B) may be adjusted to assure that 
                such rates are reasonable in light of the 
                changes to such rules and regulations, but any 
                such adjustment shall apply only to the 
                affected television broadcast signals carried 
                on those systems affected by the change.
                  (D) The gross receipts limitations 
                established by section 111(d)(1)(C) and (D) 
                shall be adjusted to reflect national monetary 
                inflation or deflation or changes in the 
                average rates charged cable system subscribers 
                for the basic service of providing secondary 
                transmissions to maintain the real constant 
                dollar value of the exemption provided by such 
                section, and the royalty rate specified therein 
                shall not be subject to adjustment.
          (3)(A) To authorize the distribution, under sections 
        111, 119, and 1007, of those royalty fees collected 
        under sections 111, 119, and 1005, as the case may be, 
        to the extent that the Copyright Royalty Judges have 
        found that the distribution of such fees is not subject 
        to controversy.
          (B) In cases where the Copyright Royalty Judges 
        determine that controversy exists, the Copyright 
        Royalty Judges shall determine the distribution of such 
        fees, including partial distributions, in accordance 
        with section 111, 119, or 1007, as the case may be.
          (C) Notwithstanding section 804(b)(8), the Copyright 
        Royalty Judges, at any time after the filing of claims 
        under section 111, 119, or 1007, may, upon motion of 
        one or more of the claimants and after publication in 
        the Federal Register of a request for responses to the 
        motion from interested claimants, make a partial 
        distribution of such fees, if, based upon all responses 
        received during the 30-day period beginning on the date 
        of such publication, the Copyright Royalty Judges 
        conclude that no claimant entitled to receive such fees 
        has stated a reasonable objection to the partial 
        distribution, and all such claimants--
                  (i) agree to the partial distribution;
                  (ii) sign an agreement obligating them to 
                return any excess amounts to the extent 
                necessary to comply with the final 
                determination on the distribution of the fees 
                made under subparagraph (B);
                  (iii) file the agreement with the Copyright 
                Royalty Judges; and
                  (iv) agree that such funds are available for 
                distribution.
          (D) The Copyright Royalty Judges and any other 
        officer or employee acting in good faith in 
        distributing funds under subparagraph (C) shall not be 
        held liable for the payment of any excess fees under 
        subparagraph (C). The Copyright Royalty Judges shall, 
        at the time the final determination is made, calculate 
        any such excess amounts.
          (4) To accept or reject royalty claims filed under 
        sections 111, 119, and 1007, on the basis of timeliness 
        or the failure to establish the basis for a claim.
          (5) To accept or reject rate adjustment petitions as 
        provided in section 804 and petitions to participate as 
        provided in section 803(b) (1) and (2).
          (6) To determine the status of a digital audio 
        recording device or a digital audio interface device 
        under sections 1002 and 1003, as provided in section 
        1010.
          (7)(A) To adopt as a basis for statutory terms and 
        rates or as a basis for the distribution of statutory 
        royalty payments, an agreement concerning such matters 
        reached among some or all of the participants in a 
        proceeding at any time during the proceeding, except 
        that--
                  (i) the Copyright Royalty Judges shall 
                provide to those that would be bound by the 
                terms, rates, or other determination set by any 
                agreement in a proceeding to determine royalty 
                rates an opportunity to comment on the 
                agreement and shall provide to participants in 
                the proceeding under section 803(b)(2) that 
                would be bound by the terms, rates, or other 
                determination set by the agreement an 
                opportunity to comment on the agreement and 
                object to its adoption as a basis for statutory 
                terms and rates; and
                  (ii) the Copyright Royalty Judges may decline 
                to adopt the agreement as a basis for statutory 
                terms and rates for participants that are not 
                parties to the agreement, if any participant 
                described in clause (i) objects to the 
                agreement and the Copyright Royalty Judges 
                conclude, based on the record before them if 
                one exists, that the agreement does not provide 
                a reasonable basis for setting statutory terms 
                or rates.
          (B) License agreements voluntarily negotiated 
        pursuant to section 112(e)(5), [114(f)(3)] 114(f)(2), 
        115(c)(3)(E)(i), 116(c), or 118(b)(2) that do not 
        result in statutory terms and rates shall not be 
        subject to clauses (i) and (ii) of subparagraph (A).
          (C) Interested parties may negotiate and agree to, 
        and the Copyright Royalty Judges may adopt, an 
        agreement that specifies as terms notice and 
        recordkeeping requirements that apply in lieu of those 
        that would otherwise apply under regulations.
          (8) To determine the administrative assessment to be 
        paid by digital music providers under section 115(d). 
        The provisions of section 115(d) shall apply to the 
        conduct of proceedings by the Copyright Royalty Judges 
        under section 115(d) and not the procedures described 
        in this section, or section 803, 804, or 805.
          [(8)] (9) To perform other duties, as assigned by the 
        Register of Copyrights within the Library of Congress, 
        except as provided in section 802(g), at times when 
        Copyright Royalty Judges are not engaged in performing 
        the other duties set forth in this section.
    (c) Rulings.--The Copyright Royalty Judges may make any 
necessary procedural or evidentiary rulings in any proceeding 
under this chapter and may, before commencing a proceeding 
under this chapter, make any such rulings that would apply to 
the proceedings conducted by the Copyright Royalty Judges.
    (d) Administrative support.--The Librarian of Congress 
shall provide the Copyright Royalty Judges with the necessary 
administrative services related to proceedings under this 
chapter.
    (e) Location in library of congress.--The offices of the 
Copyright Royalty Judges and staff shall be in the Library of 
Congress.
    (f) Effective date of actions.--On and after the date of 
the enactment of the Copyright Royalty and Distribution Reform 
Act of 2004, in any case in which time limits are prescribed 
under this title for performance of an action with or by the 
Copyright Royalty Judges, and in which the last day of the 
prescribed period falls on a Saturday, Sunday, holiday, or 
other nonbusiness day within the District of Columbia or the 
Federal Government, the action may be taken on the next 
succeeding business day, and is effective as of the date when 
the period expired.

           *       *       *       *       *       *       *


Sec. 803. Proceedings of Copyright Royalty Judges

    (a) Proceedings.--
          (1) In general.--The Copyright Royalty Judges shall 
        act in accordance with this title, and to the extent 
        not inconsistent with this title, in accordance with 
        subchapter II of chapter 5 of title 5, in carrying out 
        the purposes set forth in section 801. The Copyright 
        Royalty Judges shall act in accordance with regulations 
        issued by the Copyright Royalty Judges and the 
        Librarian of Congress, and on the basis of a written 
        record, prior determinations and interpretations of the 
        Copyright Royalty Tribunal, Librarian of Congress, the 
        Register of Copyrights, copyright arbitration royalty 
        panels (to the extent those detrminations are not 
        inconsistent with a decision of the Librarian of 
        Congress or the Register of Copyrights), and the 
        Copyright Royalty Judges (to the extent those 
        determinations are not inconsistent with a decision of 
        the Register of Copyrights that was timely delivered to 
        the Copyright Royalty Judges pursuant to section 
        802(f)(1) (A) or (B), or with a decision of the 
        Register of Copyrights pursuant to section 
        802(f)(1)(D)), under this chapter, and decisions of the 
        court of appeals under this chapter before, on, or 
        after the effective date of the Copyright Royalty and 
        Distribution Reform Act of 2004.

           *       *       *       *       *       *       *

                  (E) Continuity of rates and terms.--
                          (i) If the decision of the Copyright 
                        Royalty Judges on any motion for a 
                        rehearing is not rendered before the 
                        expiration of the statutory rates and 
                        terms that were previously in effect, 
                        in the case of a proceeding to 
                        determine successors to rates and terms 
                        that expire on a specified date, then--
                                  (I) the intitial 
                                determination of the Copyright 
                                Royalty Judges that is the 
                                subject of the rehearing motion 
                                shall be effective as of the 
                                day following the date on which 
                                the rates and terms that were 
                                previously in effect expire; 
                                and
                                  (II) in the case of a 
                                proceeding under section 
                                114(f)(1)(C) [or 114(f)(2)(C)], 
                                royalty rates and terms shall, 
                                for purposes of section 
                                [114(f)(4)(B)] 114(f)(3)(B), be 
                                deemed to have been set at 
                                those rates and terms contained 
                                in the initial determination of 
                                the Copyright Royalty Judges 
                                that is the subject of the 
                                rehearing motion, as of the 
                                date of that determination.

           *       *       *       *       *       *       *


Sec. 804. Institution of proceedings

    (a) Filing of Petition.--With respect to proceedings 
referred to in paragraphs (1) and (2) of section 801(b) 
concerning the determination or adjustment of royalty rates as 
provided in sections 111, 112, 114, 115, 116, 118, 119, and 
1004, during the calendar years specified in the schedule set 
forth in subsection (b), any owner or user of a copyrighted 
work whose royalty rates are specified by this title, or are 
established under this chapter before or after the enactment of 
the Copyright Royalty and Distribution Reform Act of 2004, may 
file a petition with the Copyright Royalty Judges declaring 
that the petitioner requests a determination or adjustment of 
the rate. The Copyright Royalty Judges shall make a 
determination as to whether the petitioner has such a 
significant interest in the royalty rate in which a 
determination or adjustment is requested. If the Copyright 
Royalty Judges determine that the petitioner has such a 
significant interest, the Copyright Royalty Judges shall cause 
notice of this determination, with the reasons for such 
determination, to be published in the Federal Register, 
together with the notice of commencement of proceedings under 
this chapter. With respect to proceedings under paragraph (1) 
of section 801(b) concerning the determination or adjustment of 
royalty rates as provided in sections 112 and 114, during the 
calendar years specified in the schedule set forth in 
subsection (b), the Copyright Royalty Judges shall cause notice 
of commencement of proceedings under this chapter to be 
published in the Federal Register as provided in section 
803(b)(1)(A).
    (b) Timing of Proceedings.--
          (1) Section 111 proceedings.--(A) A petition 
        described in subsection (a) to initiate proceedings 
        under section 801(b)(2) concerning the adjustment of 
        royalty rates under section 111 to which subparagraph 
        (A) or (D) of section 801(b)(2) applies may be filed 
        during the year 2015 and in each subsequent fifth 
        calendar year.
          (B) In order to initiate proceedings under section 
        801(b)(2) concerning the adjustment of royalty rates 
        under section 111 to which subparagraph (B) or (C) of 
        section 801(b)(2) applies, within 12 months after an 
        event described in either of those subsections, any 
        owner or user of a copyrighted work whose royalty rates 
        are specified by section 111, or by a rate established 
        under this chapter before or after the enactment of the 
        Copyright Royalty and Distribution Reform Act of 2004, 
        may file a petition with the Copyright Royalty Judges 
        declaring that the petitioner requests an adjustment of 
        the rate. The Copyright Royalty Judges shall then 
        proceed as set forth in subsection (a) of this section. 
        Any change in royalty rates made under this chapter 
        pursuant to this subparagraph may be reconsidered in 
        the year 2015, and each fifth calendar year thereafter, 
        in accordance with the provisions in section 
        801(b)(2)(B) or (C), as the case may be. A petition for 
        adjustment of rates established by section 111(d)(1)(B) 
        as a result of a change in the rules and regulations of 
        the Federal Communications Commission shall set forth 
        the change on which the petition is based.
          (C) Any adjustment of royalty rates under section 111 
        shall take effect as of the first accounting period 
        commencing after the publication of the determination 
        of the Copyright Royalty Judges in the Federal 
        Register, or on such other date as is specified in that 
        determination.
          (2) Certain section 112 proceedings.--Proceedings 
        under this chapter shall be commenced in the year 2007 
        to determine reasonable terms and rates of royalty 
        payments for the activities described in section 
        112(e)(1) relating to the limitation on exclusive 
        rights specified by section 114(d)(1)(C)(iv), to become 
        effective on January 1, 2009. Such proceedings shall be 
        repeated in each subsequent fifth calendar year.
          (3) Section 114 and corresponding 112 proceedings.--
                  (A) For eligible nonsubscription services and 
                new subscription services.--Proceedings under 
                this chapter shall be commenced as soon as 
                practicable after the date of enactment of the 
                Copyright Royalty and Distribution Reform Act 
                of 2004 to determine reasonable terms and rates 
                of royalty payments under sections 114 and 112 
                for the activities of eligible nonsubscription 
                transmission services and new subscription 
                services, to be effective for the period 
                beginning on January 1, 2006, and ending on 
                December 31, 2010. Such proceedings shall next 
                be commenced in January 2009 to determine 
                reasonable terms and rates of royalty payments, 
                to become effective on January 1, 2011. 
                Thereafter, such proceedings shall be repeated 
                in each subsequent fifth calendar year.
                  (B) For preexisting subscription and 
                satellite digital audio radio services.--
                Proceedings under this chapter shall be 
                commenced in January 2006 to determine 
                reasonable terms and rates of royalty payments 
                under sections 114 and 112 for the activities 
                of preexisting subscription services, to be 
                effective during the period beginning on 
                January 1, 2008, and ending on December 31, 
                2012, and preexisting satellite digital audio 
                radio services, to be effective during the 
                period beginning on January 1, 2007, and ending 
                on December 31, 2012. Such proceedings shall 
                next be commenced in 2011 to determine 
                reasonable terms and rates of royalty payments, 
                to become effective on January 1, 2013. 
                Thereafter, such proceedings shall be repeated 
                in each subsequent fifth calendar year.
                  (C)(i) Notwithstanding any other provision of 
                this chapter, this subparagraph shall govern 
                proceedings commenced pursuant to section 
                114(f)(1)(C) [and 114(f)(2)(C)] concerning new 
                types of services.
                  (ii) Not later than 30 days after a petition 
                to determine rates and terms for a new type of 
                service is filed by any copyright owner of 
                sound recordings, or such new type of service, 
                indicating that such new type of service is or 
                is about to become operational, the Copyright 
                Royalty Judges shall issue a notice for a 
                proceeding to determine rates and terms for 
                such service.
                  (iii) The proceeding shall follow the 
                schedule set forth in subsections (b), (c), and 
                (d) of section 803, except that--
                          (I) the determination shall be issued 
                        by not later than 24 months after the 
                        publication of the notice under clause 
                        (ii); and
                          (II) the decision shall take effect 
                        as provided in subsections (c)(2) and 
                        (d)(2) of section 803 and section 
                        [114(f)(4)(B)(ii)] 114(f)(3)(B)(ii) and 
                        (C).
                  (iv) The rates and terms shall remain in 
                effect for the period set forth in section 
                114(f)(1)(C) [or 114(f)(2)(C), as the case may 
                be].
          (4) Section 115 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 
        801(b)(1) concerning the adjustment or determination of 
        royalty rates as provided in section 115 may be filed 
        in the year 2006 and in each subsequent fifth calendar 
        year, or at such other times as the parties have agreed 
        under section 115(c)(3) (B) and (C).
          (5) Section 116 proceedings.--(A) A petition 
        described in subsection (a) to initiate proceedings 
        under section 801(b) concerning the determination of 
        royalty rates and terms as provided in section 116 may 
        be filed at any time within 1 year after negotiated 
        licenses authorized by section 116 are terminated or 
        expire and are not replaced by subsequent agreements.
          (B) If a negotiated license authorized by section 116 
        is terminated or expires and is not replaced by another 
        such license agreement which provides permission to use 
        a quantity of musical works not substantially smaller 
        than the quantity of such works performed on coin-
        operated phonorecord players during the 1-year period 
        ending March 1, 1989, the Copyright Royalty Judges 
        shall, upon petition filed under paragraph (1) within 1 
        year after such termination or expiration, commence a 
        proceeding to promptly establish an interim royalty 
        rate or rates for the public performance by means of a 
        coin-operated phonorecord player of nondramatic musical 
        works embodied in phonorecords which had been subject 
        to the terminated or expired negotiated license 
        agreement. Such rate or rates shall be the same as the 
        last such rate or rates and shall remain in force until 
        the conclusion of proceedings by the Copyright Royalty 
        Judges, in accordance with section 803, to adjust the 
        royalty rates applicable to such works, or until 
        superseded by a new negotiated license agreement, as 
        provided in section 116(b).
          (6) Section 118 proceedings.--A petition described in 
        subsection (a) to initiate proceedings under section 
        801(b)(1) concerning the determination of reasonable 
        terms and rates of royalty payments as provided in 
        section 118 may be filed in the year 2006 and in each 
        subsequent fifth calendar year.
          (7) Section 1004 proceedings.--A petition described 
        in subsection (a) to initiate proceedings under section 
        801(b)(1) concerning the adjustment of reasonable 
        royalty rates under section 1004 may be filed as 
        provided in section 1004(a)(3).
          (8) Proceedings concerning distribution of royalty 
        fees.--With respect to proceedings under section 
        801(b)(3) concerning the distribution of royalty fees 
        in certain circumstances under section 111, 119, or 
        1007, the Copyright Royalty Judges shall, upon a 
        determination that a controversy exists concerning such 
        distribution, cause to be published in the Federal 
        Register notice of commencement of proceedings under 
        this chapter.

           *       *       *       *       *       *       *


    CHAPTER 14--UNAUTHORIZED DIGITAL PERFORMANCE OF PRE-1972 SOUND 
                               RECORDINGS

Sec.
1401. Unauthorized Digital Performance of Pre-1972 Sound Recordings.

Sec. 1401. Unauthorized Digital Performance of Pre-1972 Sound 
                    Recordings

    (a) Unauthorized Acts.--Anyone who, before February 15, 
2067, and without the consent of the rights owner, performs 
publicly, by means of a digital audio transmission, a sound 
recording fixed on or after January 1, 1923, and before 
February 15, 1972, shall be subject to the remedies provided in 
sections 502 through 505 to the same extent as an infringer of 
copyright.
    (b) Certain Authorized Transmissions.--A digital audio 
transmission of a sound recording fixed on or after January 1, 
1923, and before February 15, 1972, shall, for purposes of 
subsection (a), be considered to be authorized and made with 
the consent of the rights owner if--
          (1) the transmission is made by a transmitting entity 
        that is publicly performing sound recordings fixed on 
        or after February 15, 1972, by means of digital audio 
        transmissions subject to section 114;
          (2) the transmission would satisfy the requirements 
        for statutory licensing under section 114(d)(2), or 
        would be exempt under section 114(d)(1), if the sound 
        recording were fixed on or after February 15, 1972;
          (3) in the case of a transmission that would not be 
        exempt under section 114(d)(1) as described in 
        paragraph (2), the transmitting entity pays statutory 
        royalties and provides notice of its use of the 
        relevant sound recording in the same manner as is 
        required by regulations adopted by the Copyright 
        Royalty Judges for sound recordings fixed on or after 
        February 15, 1972; and
          (4) in the case of a transmission that would not be 
        exempt under section 114(d)(1) as described in 
        paragraph (2), the transmitting entity otherwise 
        satisfies the requirements for statutory licensing 
        under section 114(f)(3)(B).
    (c) Transmissions by Direct Licensing of Statutory 
Services.--
          (1) In general.--A transmission of a sound recording 
        fixed on or after January 1, 1923, and before February 
        15, 1972, shall, for purposes of subsection (a), be 
        considered to be authorized and made with the consent 
        of the rights owner if such transmission is included in 
        a license agreement voluntarily negotiated at any time 
        between the rights owner and the entity performing the 
        sound recording.
          (2) Payment of royalties to nonprofit collective.--To 
        the extent that a license agreement described in 
        paragraph (1) and entered into on or after the date of 
        the enactment of this section extends to digital audio 
        transmissions of a sound recording fixed on or after 
        January 1, 1923, and before February 15, 1972, that 
        meet the conditions of subsection (b), the licensee 
        shall pay, to the collective designated to distribute 
        receipts from the licensing of transmissions in 
        accordance with section 114(f), 50 percent of the 
        performance royalties for the transmissions due under 
        the license, with such royalties fully credited as 
        payments due under the license.
          (3) Distribution of royalties by collective.--The 
        collective described in paragraph (2) shall, in 
        accordance with subparagraphs (B) through (D) of 
        section 114(g)(2), and paragraphs (5) and (6) of 
        section 114(g)), distribute the royalties received 
        under paragraph (2) under the license described in 
        paragraph (2). Such payments shall be the only payments 
        to which featured and nonfeatured artists are entitled 
        by virtue of the transmissions described in paragraph 
        (2) under the license.
          (4) Rule of construction.--This subsection does not 
        prohibit any other license from directing the licensee 
        to pay other royalties due to featured and nonfeatured 
        artists for such transmissions to the collective 
        designated to distribute receipts from the licensing of 
        transmissions in accordance with section 114(f).
    (d) Relationship to State Law.--
          (1) In general.--Nothing in this section shall be 
        construed to annul or limit any rights or remedies 
        under the common law or statutes of any State for sound 
        recordings fixed before February 15, 1972, except, 
        notwithstanding section 301(c), for the following:
                  (A) This section preempts any claim of common 
                law copyright or equivalent right under the 
                laws of any State arising from any digital 
                audio transmission that is made, on and after 
                the date of the enactment of this section, of a 
                sound recording fixed on or after January 1, 
                1923, and before February 15, 1972.
                  (B) This section preempts any claim of common 
                law copyright or equivalent right under the 
                laws of any State arising from any reproduction 
                that is made, on and after the date of the 
                enactment of this section, of a sound recording 
                fixed on or after January 1, 1923, and before 
                February 15, 1972, and that would satisfy the 
                requirements for statutory licensing under 
                paragraphs (1) and (6) of section 112(e), if 
                the sound recording were fixed on or after 
                February 15, 1972.
                  (C) This section preempts any claim of common 
                law copyright or equivalent right under the 
                laws of any State arising from any digital 
                audio transmission or reproduction that is 
                made, before the date of the enactment of this 
                section, of a sound recording fixed on or after 
                January 1, 1923, and before February 15, 1972, 
                if--
                          (i) the digital audio transmission 
                        would have satisfied the requirements 
                        for statutory licensing under section 
                        114(d)(2) or been exempt under section 
                        114(d)(1), or the reproduction would 
                        have satisfied the requirements of 
                        section 112(e)(1), as the case may be, 
                        if the sound recording were fixed on or 
                        after February 15, 1972; and
                          (ii) either--
                                  (I) except in the case of a 
                                transmission that would have 
                                been exempt under section 
                                114(d)(1), the transmitting 
                                entity, not later than 270 days 
                                after the date of the enactment 
                                of this section, pays statutory 
                                royalties and provides notice 
                                of the use of the relevant 
                                sound recordings in the same 
                                manner as is required by 
                                regulations adopted by the 
                                Copyright Royalty Judges for 
                                sound recordings that are 
                                protected under this title for 
                                all the digital audio 
                                transmissions and reproductions 
                                satisfying the requirements for 
                                statutory licensing under 
                                sections 112(e)(1) and 
                                114(d)(2) during the 3 year 
                                period ending on the date of 
                                the enactment of this section; 
                                or
                                  (II) an agreement voluntarily 
                                negotiated between the rights 
                                owner and the entity performing 
                                the sound recording authorizes 
                                or waives liability for any 
                                such transmission or 
                                reproduction and the 
                                transmitting entity has 
                                complied with all provisions of 
                                such agreement for any such 
                                transmission or reproduction.
          (2) Rule of construction for common law copyright.--
        For purposes of subparagraphs (A) through (C) of 
        paragraph (1), a claim of common law copyright or 
        equivalent right under the laws of any State includes a 
        claim that characterizes conduct subject to such 
        subparagraphs as an unlawful distribution, act of 
        record piracy, or similar violation.
          (3) Rule of construction for public performance 
        rights.--Nothing in this section shall be construed to 
        recognize or negate the existence of public performance 
        rights in sound recordings under the laws of any State.
    (e) Limitations on Remedies.--
          (1) Fair use; uses by libraries, archives, and 
        educational institutions.--
                  ``(A) In general.--The limitations on the 
                exclusive rights of a copyright owner described 
                in sections 107, 108, and 110 shall apply to a 
                claim under subsection (a) of this section for 
                the unauthorized performance of a sound 
                recording fixed on or after January 1, 1923, 
                and before February 15, 1972.
                  (B) Rule of construction for section 
                108(h).--With respect to the application of 
                section 108(h) to a claim for unauthorized 
                performance of a sound recording first fixed on 
                or after January 1, 1923, and before February 
                15, 1972, under subsection (a) of this section, 
                the phrase `during the last 20 years of any 
                term of copyright of a published work' in such 
                section 108(h) shall be construed to mean at 
                any time after the effective date of this 
                section.
          (2) Actions.--The limitations on actions described in 
        section 507 shall apply to a claim under subsection (a) 
        of this section for the unauthorized performance of a 
        sound recording fixed on or after January 1, 1923, and 
        before February 15, 1972.
          (3) Material online.--Section 512 shall apply to a 
        claim under subsection (a) for the unauthorized 
        performance of a sound recording fixed on or after 
        January 1, 1923, and before February 15, 1972.
          (4) Principles of equity.--Principles of equity apply 
        to remedies for a violation of this section to the same 
        extent as such principles apply to remedies for 
        infringement of copyright.
          (5) Filing requirement for statutory damages and 
        attorneys' fees.--
                  (A) Filing of information on sound 
                recordings.--
                          (i) Filing requirement.--Except in 
                        the case of a transmitting entity that 
                        has filed contact information for that 
                        transmitting entity under subparagraph 
                        (B), in any action under this section, 
                        an award of statutory damages or of 
                        attorneys' fees under section 504 or 
                        505 may be made with respect to an 
                        unauthorized transmission of a sound 
                        recording under subsection (a) of this 
                        section only if--
                                  (I) the rights owner has 
                                filed with the Copyright Office 
                                a schedule that specifies the 
                                title, artist, and rights owner 
                                of the sound recording and 
                                contains such other 
                                information, as practicable, as 
                                the Register of Copyrights 
                                prescribes by regulation; and
                                  (II) the transmission is made 
                                after the end of the 90-day 
                                period beginning on the date on 
                                which the information filed 
                                under subclause (I) is indexed 
                                into the public records of the 
                                Copyright Office.
                          (ii) Regulations.--Not later than 180 
                        days after the date of enactment of 
                        this section, the Register of 
                        Copyrights shall issue regulations 
                        establishing the form, content, and 
                        procedures for the filing of schedules 
                        under clause (i). Such regulations 
                        shall provide that persons may request 
                        that they receive timely notification 
                        of such filings, and shall set forth 
                        the manner in which such requests may 
                        be made.
                  (B) Filing of contact information for 
                transmitting entities.--
                          (i) Requirement.--Not later than 30 
                        days after the date of enactment of 
                        this section, the Register of 
                        Copyrights shall issue regulations 
                        establishing the form, content, and 
                        procedures for the filing, by any 
                        entity that, as of the date of the 
                        enactment of this section, performs 
                        sound recordings fixed before February 
                        15, 1972, by means of digital audio 
                        transmissions, of contact information 
                        for such entity.
                          (ii) Time limit on filings.--The 
                        Register of Copyrights may not accept 
                        filings under clause (i) after the date 
                        that is 180 days after the date of 
                        enactment of this section.
                          (iii) Limitation on statutory damages 
                        and attorneys' fees.--
                                  (I) Limitation.--An award of 
                                statutory damages or of 
                                attorneys' fees under section 
                                504 or 505 may not be made, 
                                against an entity that has 
                                filed contact information for 
                                that entity under clause (i) of 
                                this subparagraph, with respect 
                                to an unauthorized transmission 
                                by that entity of a sound 
                                recording under subsection (a) 
                                of this section if the 
                                transmission is made not later 
                                than 90 days after the date on 
                                which the entity receives a 
                                notice that--
                                          (aa) is sent by or on 
                                        behalf of the rights 
                                        owner of the sound 
                                        recording;
                                          (bb) states that the 
                                        entity is not legally 
                                        authorized to transmit 
                                        that sound recording 
                                        under subsection (a); 
                                        and
                                          (cc) identifies the 
                                        sound recording in a 
                                        schedule conforming to 
                                        the requirements 
                                        prescribed by the 
                                        regulations issued 
                                        under subparagraph 
                                        (A)(ii).
                                  (II) Undeliverable Notices.--
                                In any case in which a notice 
                                under subclause (I) is sent to 
                                an entity by mail or courier 
                                service and the notice is 
                                returned to the sender because 
                                the entity either is no longer 
                                located at the address provided 
                                in the contact information 
                                filed under clause (i) or has 
                                refused to accept delivery, or 
                                the notice is sent by 
                                electronic mail and is 
                                undeliverable, the 90-day 
                                period under subclause (I) 
                                shall begin on the date of the 
                                attempted delivery.
                  (C) Section 412.--Section 412 shall not limit 
                an award of statutory damages under section 
                504(c) or attorneys' fees under section 505 
                with respect to an unauthorized transmission of 
                a sound recording under subsection (a) of this 
                section.
          (6) Applicability of other provisions.--
                  (A) In general.--Subject to subparagraph (B), 
                no provision of this title shall apply to or 
                limit the remedies available under this section 
                except as otherwise provided in this section.
                  (B) Applicability of definitions.--Any term 
                used in this section that is defined in section 
                101 shall have the meaning given that term in 
                section 101.
    (f) Application of section 230 safe harbor.--For purposes 
of section 230 of the Communications Act of 1934 (47 U.S.C. 
230), subsection (a) of this section shall be considered to be 
a ``law pertaining to intellectual property'' under subsection 
(e)(2) of such section 230.
    (g) Rights owner defined.--In this section, the term 
``rights owner'' means the person who has the exclusive right 
to reproduce a sound recording under the laws of any State.

TITLE 28, UNITED STATES CODE

           *       *       *       *       *       *       *


PART I--ORGANIZATION OF COURTS

           *       *       *       *       *       *       *


CHAPTER 5--DISTRICT COURTS

           *       *       *       *       *       *       *



Sec. 137. Division of business among district judges

    [The business] (a) In General.--The business of a court 
having more than one judge shall be divided among the judges as 
provided by the rules and orders of the court.
    The chief judge of the district court shall be responsible 
for the observance of such rules and orders, and shall divide 
the business and assign the cases so far as such rules and 
orders do not otherwise prescribe.
    If the district judges in any district are unable to agree 
upon the adoption of rules or orders for that purpose the 
judicial council of the circuit shall make the necessary 
orders.
    (b) Random Assignment of Rate Court Proceedings.--
          (1) In general.--
                  (A) Determination of license fee.--Except as 
                provided in subparagraph (B), in the case of 
                any performing rights society subject to a 
                consent decree, any application for the 
                determination of a license fee for the public 
                performance of music in accordance with the 
                applicable consent decree shall be made in the 
                district court with jurisdiction over that 
                consent decree and randomly assigned to a judge 
                of that district court according to the rules 
                of that court for the division of business 
                among district judges, provided that any such 
                application shall not be assigned to--
                          (i) a judge to whom continuing 
                        jurisdiction over any performing rights 
                        society for any performing rights 
                        society consent decree is assigned or 
                        has previously been assigned; or
                          (ii) a judge to whom another 
                        proceeding concerning an application 
                        for the determination of a reasonable 
                        license fee is assigned at the time of 
                        the filing of the application.
                  (B) Exception.--Subparagraph (A) does not 
                apply to an application to determine reasonable 
                license fees made by individual proprietors 
                under section 513 of title 17.
          (2) Rule of construction.--Nothing in paragraph (1) 
        shall modify the rights of any party to a consent 
        decree or to a proceeding to determine reasonable 
        license fees, to make an application for the 
        construction of any provision of the applicable consent 
        decree. Such application shall be referred to the judge 
        to whom continuing jurisdiction over the applicable 
        consent decree is currently assigned. If any such 
        application is made in connection with a rate 
        proceeding, such rate proceeding shall be stayed until 
        the final determination of the construction 
        application. Disputes in connection with a rate 
        proceeding about whether a licensee is similarly 
        situated to another licensee shall not be subject to 
        referral to the judge with continuing jurisdiction over 
        the applicable consent decree.

           *       *       *       *       *       *       *


                                  [all]