Pub.L. 107-322 To extend the deadline for commencement of construction of a hydroelectric project in the State of North Carolina. <> ...

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                 SMALL WEBCASTER SETTLEMENT ACT OF 2002

[[Page 116 STAT. 2780]]

Public Law 107-321
107th Congress

                                 An Act


 
  To amend title 17, United States Code, with respect to the statutory 
    license for webcasting, and for other purposes. <<NOTE: Dec. 4, 
                         2002 -  [H.R. 5469]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Small Webcaster Settlement 
Act of 2002.>>  assembled,

SECTION 1. SHORT TITLE. <<NOTE: 17 USC 101 note.>> 

    This Act may be cited as the ``Small Webcaster Settlement Act of 
2002''.

SEC. 2. FINDINGS. <<NOTE: 17 USC 114 note.>> 

    Congress finds the following:
            (1) Some small webcasters who did not participate in the 
        copyright arbitration royalty panel proceeding leading to the 
        July 8, 2002 order of the Librarian of Congress establishing 
        rates and terms for certain digital performances and ephemeral 
        reproductions of sound recordings, as provided in part 261 of 
        the Code of Federal Regulations (published in the Federal 
        Register on July 8, 2002) (referred to in this section as 
        ``small webcasters''), have expressed reservations about the fee 
        structure set forth in such order, and have expressed their 
        desire for a fee based on a percentage of revenue.
            (2) Congress has strongly encouraged representatives of 
        copyright owners of sound recordings and representatives of the 
        small webcasters to engage in negotiations to arrive at an 
        agreement that would include a fee based on a percentage of 
        revenue.
            (3) The representatives have arrived at an agreement that 
        they can accept in the extraordinary and unique circumstances 
        here presented, specifically as to the small webcasters, their 
        belief in their inability to pay the fees due pursuant to the 
        July 8 order, and as to the copyright owners of sound recordings 
        and performers, the strong encouragement of Congress to reach an 
        accommodation with the small webcasters on an expedited basis.
            (4) The representatives have indicated that they do not 
        believe the agreement provides for or in any way approximates 
        fair or reasonable royalty rates and terms, or rates and terms 
        that would have been negotiated in the marketplace between a 
        willing buyer and a willing seller.
            (5) Congress has made no determination as to whether the 
        agreement provides for or in any way approximates fair or 
        reasonable fees and terms, or rates and terms that would have 
        been negotiated in the marketplace between a willing buyer and a 
        willing seller.

[[Page 116 STAT. 2781]]

            (6) Congress likewise has made no determination as to 
        whether the July 8 order is reasonable or arbitrary, and nothing 
        in this Act shall be taken into account by the United States 
        Court of Appeals for the District of Columbia Circuit in its 
        review of such order.
            (7) It is, nevertheless, in the public interest for the 
        parties to be able to enter into such an agreement without fear 
        of liability for deviating from the fees and terms of the July 8 
        order, if it is clear that the agreement will not be admissible 
        as evidence or otherwise taken into account in any government 
        proceeding involving the setting or adjustment of the royalties 
        payable to copyright owners of sound recordings for the public 
        performance or reproduction in ephemeral phonorecords or copies 
        of such works, the determination of terms or conditions related 
        thereto, or the establishment of notice or recordkeeping 
        requirements.

SEC. 3. SUSPENSION OF CERTAIN PAYMENTS. <<NOTE: 17 USC 114 note.>> 

    (a) Noncommercial Webcasters.--
            (1) <<NOTE: Deadline.>>  In general.--The payments to be 
        made by noncommercial webcasters for the digital performance of 
        sound recordings under section 114 of title 17, United States 
        Code, and the making of ephemeral phonorecords under section 112 
        of title 17, United States Code, during the period beginning on 
        October 28, 1998, and ending on May 31, 2003, which have not 
        already been paid, shall not be due until June 20, 2003.
            (2) Definition.--In this subsection, the term 
        ``noncommercial webcaster'' has the meaning given that term in 
        section 114(f)(5)(E)(i) of title 17, United States Code, as 
        added by section 4 of this Act.

    (b) Small Commercial Webcasters.--
            (1) <<NOTE: Expiration date.>>  In general.--The receiving 
        agent may, in a writing signed by an authorized representative 
        thereof, delay the obligation of any 1 or more small commercial 
        webcasters to make payments pursuant to sections 112 and 114 of 
        title 17, United States Code, for a period determined by such 
        entity to allow negotiations as permitted in section 4 of this 
        Act, except that any such period shall end no later than 
        December 15, 2002. The duration and terms of any such delay 
        shall be as set forth in such writing.
            (2) Definitions.--In this subsection--
                    (A) the term ``webcaster'' has the meaning given 
                that term in section 114(f)(5)(E)(iii) of title 17, 
                United States Code, as added by section 4 of this Act; 
                and
                    (B) 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.

SEC. 4. AUTHORIZATION FOR SETTLEMENTS.

    Section 114(f) of title 17, United States Code, is amended by adding 
after paragraph (4) the following:
            ``(5)(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 small commercial webcasters or noncommercial webcasters 
        during the period beginning on October 28, 1998,

[[Page 116 STAT. 2782]]

        and ending on December 31, 2004, 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 a copyright arbitration royalty panel or 
        decision by the Librarian of Congress. Any such agreement for 
        small commercial webcasters shall 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 small 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) <<NOTE: Federal Register, publication.>>  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 
        small 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 Librarian of Congress under 
        paragraph (4) 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 
        small 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).
            ``(D) Nothing in the Small Webcaster Settlement Act of 2002 
        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 Librarian of Congress of July 8, 2002, of 
        rates and terms for the digital performance of

[[Page 116 STAT. 2783]]

        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 to make eligible nonsubscription transmissions 
                and ephemeral recordings.
            ``(F) <<NOTE: Expiration date.>>  The authority to make 
        settlements pursuant to subparagraph (A) shall expire December 
        15, 2002, except with respect to noncommercial webcasters for 
        whom the authority shall expire May 31, 2003.''.

SEC. 5. DEDUCTIBILITY OF COSTS AND EXPENSES OF AGENTS AND DIRECT PAYMENT 
            TO ARTISTS OF ROYALTIES FOR DIGITAL PERFORMANCES OF SOUND 
            RECORDINGS.

    (a) Findings.--Congress finds that-- <<NOTE: 17 USC 114 note.>> 
            (1) in the case of royalty payments from the licensing of 
        digital transmissions of sound recordings under subsection (f) 
        of section 114 of title 17, United States Code, the parties have 
        voluntarily negotiated arrangements under which payments shall 
        be made directly to featured recording artists and the 
        administrators of the accounts provided in subsection (g)(2) of 
        that section;
            (2) such voluntarily negotiated payment arrangements have 
        been codified in regulations issued by the Librarian of 
        Congress, currently found in section 261.4 of title 37, Code of 
        Federal Regulations, as published in the Federal Register on 
        July 8, 2002;
            (3) other regulations issued by the Librarian of Congress 
        were inconsistent with the voluntarily negotiated arrangements 
        by such parties concerning the deductibility of certain costs 
        incurred for licensing and arbitration, and Congress is 
        therefore restoring those terms as originally negotiated among 
        the parties; and
            (4) in light of the special circumstances described in this 
        subsection, the uncertainty created by the regulations issued by 
        the Librarian of Congress, and the fact that all of the 
        interested parties have reached agreement, the voluntarily

[[Page 116 STAT. 2784]]

        negotiated arrangements agreed to among the parties are being 
        codified.

    (b) Deductibility.--Section 114(g) of title 17, United States Code, 
is amended by adding after paragraph (2) the following:
            ``(3) A nonprofit agent designated to distribute receipts 
        from the licensing of transmissions in accordance with 
        subsection (f) may deduct from any of its receipts, prior to the 
        distribution of such receipts to any person or entity entitled 
        thereto other than copyright owners and performers who have 
        elected to receive royalties from another designated agent and 
        have notified such nonprofit agent in writing of such election, 
        the reasonable costs of such agent incurred after November 1, 
        1995, in--
                    ``(A) the administration of the collection, 
                distribution, and calculation of the royalties;
                    ``(B) the settlement of disputes relating to the 
                collection and calculation of the royalties; and
                    ``(C) the licensing and enforcement of rights with 
                respect to the making of ephemeral recordings and 
                performances subject to licensing under section 112 and 
                this section, including those incurred in participating 
                in negotiations or arbitration proceedings under section 
                112 and this section, 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 
        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 
        incurred after November 1, 1995, with respect to such copyright 
        owners and performers who have entered with such agent a 
        contractual relationship that specifies that such costs may be 
        deducted from such royalty receipts.''.

    (c) Direct Payment to Artists.--Section 114(g)(2) of title 17, 
United States Code, is amended to read as follows:
            ``(2) An agent designated to distribute receipts from the 
        licensing of transmissions in accordance with subsection (f) 
        shall distribute such receipts as follows:
                    ``(A) 50 percent of the receipts shall be paid to 
                the copyright owner of the exclusive right under section 
                106(6) of this title to publicly perform a sound 
                recording by means of a digital audio transmission.
                    ``(B) 2\1/2\ percent of the receipts shall be 
                deposited in an escrow account managed by an independent 
                administrator jointly appointed by copyright owners of 

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