§ 115. — Scope of exclusive rights in nondramatic musical works: Compulsory license for making and distributing phonorecords.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 17USC115]
TITLE 17--COPYRIGHTS
CHAPTER 1--SUBJECT MATTER AND SCOPE OF COPYRIGHT
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.--
(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.
(2) 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 (F) 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 paragraph and the proportionate division of fees paid
among copyright owners, and may designate common agents 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 subparagraphs (B)
through (F) and chapter 8 of this title shall next be determined.
(C) During the period of June 30, 1996, through December 31,
1996, the Librarian of Congress shall cause notice to be published
in the Federal Register of the initiation of voluntary negotiation
proceedings for the purpose of determining reasonable terms and
rates of royalty payments for the activities specified by
subparagraph (A) during the period beginning January 1, 1998, and
ending on the effective date of any new terms and rates established
pursuant to subparagraph (C), (D) or (F), or such other date
(regarding digital phonorecord deliveries) as 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 Librarian of Congress licenses
covering such activities. The parties to each negotiation proceeding
shall bear their own costs.
(D) In the absence of license agreements negotiated under
subparagraphs (B) and (C), upon the filing of a petition in
accordance with section 803(a)(1), the Librarian of Congress shall,
pursuant to chapter 8, convene a copyright arbitration royalty panel
to determine a schedule of rates and terms which, subject to
subparagraph (E), shall be binding on all copyright owners of
nondramatic musical works and persons entitled to obtain a
compulsory license under subsection (a)(1) during the period
beginning January 1, 1998, and ending on the effective date of any
new terms and rates established pursuant to subparagraph (C), (D) or
(F), or such other date (regarding digital phonorecord deliveries)
as may be determined pursuant to subparagraphs (B) and (C). Such
terms and rates shall distinguish between (i) digital phonorecord
deliveries where the reproduction or distribution of a phonorecord
is incidental to the transmission which constitutes the digital
phonorecord delivery, and (ii) digital phonorecord deliveries in
general. In addition to the objectives set forth in section
801(b)(1), in establishing such rates and terms, the copyright
arbitration royalty panel may consider rates and terms under
voluntary license agreements negotiated as provided in subparagraphs
(B) and (C). The royalty rates payable for a compulsory license for
a digital phonorecord delivery under this section shall be
established de novo and no precedential effect shall be given to the
amount of the royalty payable by a compulsory licensee for digital
phonorecord deliveries on or before December 31, 1997. The Librarian
of Congress shall also establish requirements by which copyright
owners may receive reasonable notice of the use of their works under
this section, and under which records of such use shall be kept and
made available by persons making digital phonorecord deliveries.
(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. Subject to clause (ii),
the royalty rates determined pursuant to subparagraph (C), (D) or
(F) shall be given effect 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), (D) or (F) 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), (D) or (F) 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) The procedures specified in subparagraphs (C) and (D) shall
be repeated and concluded, in accordance with regulations that the
Librarian of Congress shall prescribe, in each fifth calendar year
after 1997, except to the extent that different years for the
repeating and concluding of such proceedings may be determined in
accordance with subparagraphs (B) and (C).
(G) 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.
(H)(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 and
section 509, 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).
(I) 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.
(J) 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.
(K) 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.
(L) 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 and
509.
(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.
(Pub. L. 94-553, title I, Sec. 101, Oct. 19, 1976, 90 Stat. 2561; Pub.
L. 98-450, Sec. 3, Oct. 4, 1984, 98 Stat. 1727; Pub. L. 104-39, Sec. 4,
Nov. 1, 1995, 109 Stat. 344; Pub. L. 105-80, Secs. 4, 10, 12(a)(7), Nov.
13, 1997, 111 Stat. 1531, 1534.)
Historical and Revision Notes
house report no. 94-1476
The provisions of section 1(e) and 101(e) of the present law
[sections 1(e) and 101(e) of former title 17], establishing a system of
compulsory licensing for the making and distribution of phonorecords of
copyrighted music, are retained with a number of modifications and
clarifications in section 115 of the bill. Under these provisions, which
represented a compromise of the most controversial issue of the 1909
act, a musical composition that has been reproduced in phonorecords with
the permission of the copyright owner may generally be reproduced in
phonorecords by another person, if that person notifies the copyright
owner and pays a specified royalty.
The fundamental question of whether to retain the compulsory license
or to do away with it altogether was a major issue during earlier stages
of the program for general revision of the copyright law. At the
hearings it was apparent that the argument on this point had shifted,
and the real issue was not whether to retain the compulsory license but
how much the royalty rate under it should be. The arguments for and
against retention of the compulsory license are outlined at pages 66-67
of this Committee's 1967 report (H. Rept. No. 83, 90th Cong., 1st
Sess.). The Committee's conclusion on this point remains the same as in
1967: ``that a compulsory licensing system is still warranted as a
condition for the rights of reproducing and distributing phonorecords of
copyrighted music,'' but ``that the present system is unfair and
unnecessarily burdensome on copyright owners, and that the present
statutory rate is too low.''
Availability and Scope of Compulsory License. Subsection (a) of
section 115 deals with three doubtful questions under the present law:
(1) the nature of the original recording that will make the work
available to others for recording under a compulsory license; (2) the
nature of the sound recording that can be made under a compulsory
license; and (3) the extent to which someone acting under a compulsory
license can depart from the work as written or recorded without
violating the copyright owner's right to make an ``arrangement'' or
other derivative work. The first two of these questions are answered in
clause (1) of section 115(a), and the third is the subject of clause
(2).
The present law, though not altogether clear, apparently bases
compulsory licensing on the making or licensing of the first recording,
even if no authorized records are distributed to the public. The first
sentence of section 115(a)(1) would change the basis for compulsory
licensing to authorized public distribution of phonorecords (including
disks and audio tapes but not the sound tracks or other sound records
accompanying a motion picture or other audiovisual work). Under the
clause, a compulsory license would be available to anyone as soon as
``phonorecords of a nondramatic musical work have been distributed to
the public in the United States under the authority of the copyright
owner.''
The second sentence of clause (1), which has been the subject of
some debate, provides that ``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.'' This provision was
criticized as being discriminatory against background music systems,
since it would prevent a background music producer from making
recordings without the express consent of the copyright owner; it was
argued that this could put the producer at a great competitive
disadvantage with performing rights societies, allow discrimination, and
destroy or prevent entry of businesses. The committee concluded,
however, that the purpose of the compulsory license does not extend to
manufacturers of phonorecords that are intended primarily for commercial
use, including not only broadcasters and jukebox operators but also
background music services.
The final sentence of clause (1) provides that a person may not
obtain a compulsory license for use of the work in the duplication of a
sound recording made by another, unless the sound recording being
duplicated was itself fixed lawfully and the making of phonorecords
duplicated from it was authorized by the owner of copyright in the sound
recording (or, if the recording was fixed before February 15, 1972, by
the voluntary or compulsory licensee of the music used in the
recording). The basic intent of this sentence is to make clear that a
person is not entitled to a compulsory license of copyrighted musical
works for the purpose of making an unauthorized duplication of a musical
sound recording originally developed and produced by another. It is the
view of the Committee that such was the original intent of the Congress
in enacting the 1909 Copyright Act, and it has been so construed by the
3d, 5th, 9th and 10th Circuits in the following cases: Duchess Music
Corp. v. Stern, 458 F.2d 1305 (9th Cir.), cert. denied, 409 U.S. 847
(1972) [93 S.Ct. 52, 34 L.Ed.2d 88]; Edward B. Marks Music Corp. v.
Colorado Magnetics, Inc., 497 F.2d 285, aff'd on rehearing en banc, 497
F.2d 292 (10th Cir. 1974), cert. denied, 419 U.S. 1120 (1975) [95 S.Ct.
801, 42 L.Ed.2d 819]; Jondora Music Publishing Co. v. Melody Recordings,
Inc., 506 F.2d 392 (3d Cir. 1974, as amended 1975), cert. denied, 421
U.S. 1012 (1975) [95 S.Ct. 2417, 44 L.Ed.2d 680]; and Fame Publishing
Co. v. Alabama Custom Tape, Inc., 507 F.2d 667 (5th Cir.), cert. denied,
423 U.S. 841 (1975) [96 S.Ct. 73, 46 L.Ed.2d 61].
Under this provision, it would be possible to obtain a compulsory
license for the use of copyrighted music under section 115 if the owner
of the sound recording being duplicated authorizes its duplication. This
does not, however, in any way require the owner of the original sound
recording to grant a license to duplicate the original sound recording.
It is not intended that copyright protection for sound recordings be
circumscribed by requiring the owners of sound recordings to grant a
compulsory license to unauthorized duplicators or others.
The second clause of subsection (a) is intended to recognize the
practical need for a limited privilege to make arrangements of music
being used under a compulsory license, but without allowing the music to
be perverted, distorted, or travestied. Clause (2) permits arrangements
of a work ``to the extent necessary to conform it to the style or manner
of interpretation of the performance involved,'' so long as it does not
``change the basic melody or fundamental character of the work.'' The
provision also prohibits the compulsory licensee from claiming an
independent copyright in his arrangement as a ``derivative work''
without the express consent of the copyright owner.
Procedure for Obtaining Compulsory License. Section 115(b)(1)
requires anyone who wishes to take advantage of the compulsory licensing
provisions to serve a ``notice of intention to obtain a compulsory
license,'' which is much like the ``notice of intention to use''
required by the present law. Under section 115, the notice must be
served before any phonorecords are distributed, but service can take
place ``before or within 30 days after making'' any phonorecords. The
notice is to be served on the copyright owner, but if the owner is not
identified in the Copyright Office records, ``it shall be sufficient to
file the notice of intention in the Copyright Office.''
The Committee deleted clause (2) of section 115(b) of S. 22 as
adopted by the Senate. The provision was a vestige of jukebox provisions
in earlier bills, and its requirements no longer served any useful
purpose.
Clause (2) [formerly clause (3)] of section 115(b) [cl. (2) of
subsec. (b) of this section] provides that ``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.'' The remedies provided in section
501 are those applicable to infringements generally.
Royalty Payable Under Compulsory License. Identification of
Copyright Owner.--Under the present law a copyright owner is obliged to
file a ``notice of use'' in the Copyright Office, stating that the
initial recording of the copyrighted work has been made or licensed, in
order to recover against an unauthorized record manufacturer. This
requirement has resulted in a technical loss of rights in some cases,
and serves little or no purpose where the registration and assignment
records of the Copyright Office already show the facts of ownership.
Section 115(c)(1) therefore drops any formal ``notice of use''
requirements and merely provides that, ``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.'' On the other hand, since proper identification is an important
precondition of recovery, the bill further provides that ``the owner is
entitled to royalties for phonorecords manufactured and distributed
after being so identified, but is not entitled to recover for any
phonorecords previously made and distributed.''
Basis of Royalty.--Under the present statute the specified royalty
is payable ``on each such part manufactured,'' regardless of how many
``parts'' (i.e., records) are sold. This basis for calculating the
royalty has been revised in section 115(c)(2) to provide that ``the
royalty under a compulsory license shall be payable for every
phonorecord made and distributed in accordance with the license.'' This
basis is more compatible with the general practice in negotiated
licenses today. It is unjustified to require a compulsory licensee to
pay license fees on records which merely go into inventory, which may
later be destroyed, and from which the record producer gains no economic
benefit.
It is intended that the Register of Copyrights will prescribe
regulations insuring that copyright owners will receive full and prompt
payment for all phonorecords made and distributed. Section 115(c)(2)
states that ``a phonorecord is considered `distributed' if the person
exercising the compulsory license has voluntarily and permanently parted
with its possession.'' For this purpose, the concept of ``distribution''
comprises any act by which the person exercising the compulsory license
voluntarily relinquishes possession of a phonorecord (considered as a
fungible unit), regardless of whether the distribution is to the public,
passes title, constitutes a gift, or is sold, rented, leased, or loaned,
unless it is actually returned and the transaction cancelled. Neither
involuntary relinquishment, as through theft or fire, nor the
destruction of unwanted records, would constitute ``distribution.''
The term ``made'' is intended to be broader than ``manufactured,''
and to include within its scope every possible manufacturing or other
process capable of reproducing a sound recording in phonorecords. The
use of the phrase ``made and distributed'' establishes the basis upon
which the royalty rate for compulsory licensing under section 115 is to
be calculated, but it is in no way intended to weaken the liability of
record pressers and other manufacturers and makers of phonorecords for
copyright infringement where the compulsory licensing requirements have
not been met. As under the present law, even if a presser, manufacturer,
or other maker had no role in the distribution process, that person
would be regarded as jointly and severally liable in a case where the
court finds that infringement has taken place because of failure to
comply with the provisions of section 115.
Under existing practices in the record industry, phonorecords are
distributed to wholesalers and retailers with the privilege of returning
unsold copies for credit or exchange. As a result, the number of
recordings that have been ``permanently'' distributed will not usually
be known until some time--six or seven months on the average--after the
initial distribution. In recognition of this problem, it has become a
well-established industry practice, under negotiated licenses, for
record companies to maintain reasonable reserves of the mechanical
royalties due the copyright owners, against which royalties on the
returns can be offset. The Committee recognizes that this practice may
be consistent with the statutory requirements for monthly compulsory
license accounting reports, but recognizes the possibility that, without
proper safeguards, the maintenance of such reserves could be manipulated
to avoid making payments of the full amounts owing to copyright owners.
Under these circumstances, the regulations prescribed by the Register of
Copyrights should contain detailed provisions ensuring that the ultimate
disposition of every phonorecord made under a compulsory license is
accounted for, and that payment is made for every phonorecord
``voluntarily and permanently'' distributed. In particular, the Register
should prescribe a point in time when, for accounting purposes under
section 115, a phonorecord will be considered ``permanently
distributed,'' and should prescribe the situations in which a compulsory
licensee is barred from maintaining reserves (e.g., situations in which
the compulsory licensee has frequently failed to make payments in the
past.)
Rate of Royalty.--A large preponderance of the extensive testimony
presented to the Committee on section 115 was devoted to the question of
the amount of the statutory royalty rate. An extensive review and
analysis of the testimony and arguments received on this question appear
in the 1974 Senate report (S. Rep. No. 94-473) at page 71-94.
While upon initial review it might be assumed that the rate
established in 1909 would not be reasonable at the present time, the
committee believes that an increase in the mechanical royalty rate must
be justified on the basis of existing economic conditions and not on the
mere passage of 67 years. Following a thorough analysis of the problem,
the Committee considers that an increase of the present two-cent royalty
to a rate of 2\3/4\ cents (or .6 of one cent per minute or fraction of
playing time) is justified. This rate will be subject to review by the
Copyright Royalty Commission, as provided by section 801, in 1980 and at
10-year intervals thereafter.
Accounting and Payment of Royalties; Effect of Default. Clause (3)
of Section 115(c) provides that royalty payments are to be made on a
monthly basis, in accordance with requirements that the Register of
Copyrights shall prescribe by regulation. In order to increase the
protection of copyright proprietors against economic harm from companies
which might refuse or fail to pay their just obligations, compulsory
licensees will also be required to make a detailed cumulative annual
statement of account, certified by a Certified Public Accountant.
A source of criticism with respect to the compulsory licensing
provisions of the present statute has been the rather ineffective
sanctions against default by compulsory licensees. Clause (4) of section
115(c) corrects this defect by permitting the copyright owner to serve
written notice on a defaulting licensee, and by providing for
termination of the compulsory license if the default is not remedied
within 30 days after notice is given. Termination under this clause
``renders either the making or the distribution, or both, of all
phonorecords for which the royalty had not been paid, actionable as acts
of infringement under section 501 and fully subject to the remedies
provided by sections 502 through 506.''
References in Text
The antitrust laws, referred to in subsec. (c)(3)(B), are classified
generally to chapter 1 (Sec. 1 et seq.) of Title 15, Commerce and Trade.
The date of enactment of the Digital Performance Right in Sound
Recordings Act of 1995, referred to in subsec. (c)(3)(K), is the date of
enactment of Pub. L. 104-39, which was approved Nov. 1, 1995.
Amendments
1997--Subsec. (c)(3)(D). Pub. L. 105-80, Sec. 4, struck out ``and
publish in the Federal Register'' before ``a schedule of rates and
terms''.
Subsec. (c)(3)(E)(i). Pub. L. 105-80, Sec. 12(a)(7)(A), substituted
``paragraphs (1) and (3) of section 106'' for ``sections 106(1) and
(3)'' in two places.
Subsec. (c)(3)(E)(ii)(II). Pub. L. 105-80, Sec. 12(a)(7)(A),
substituted ``paragraphs (1) and (3) of section 106'' for ``sections
106(1) and 106(3)''.
Subsec. (d). Pub. L. 105-80, Sec. 10, amended directory language of
Pub. L. 104-39, Sec. 4. See 1995 Amendment note below.
1995--Subsec. (a)(1). Pub. L. 104-39, Sec. 4(1), substituted ``any
other person, including those who make phonorecords or digital
phonorecord deliveries,'' for ``any other person'' in first sentence and
inserted before period at end of second sentence ``, including by means
of a digital phonorecord delivery''.
Subsec. (c)(2). Pub. L. 104-39, Sec. 4(2), inserted ``and other than
as provided in paragraph (3),'' after ``For this purpose,'' in second
sentence.
Subsec. (c)(3) to (6). Pub. L. 104-39, Sec. 4(3), added par. (3) and
redesignated former pars. (3) to (5) as (4) to (6), respectively.
Subsec. (d). Pub. L. 104-39, Sec. 4(4), as renumbered by Pub. L.
105-80, Sec. 10, added subsec. (d).
1984--Subsec. (c)(3) to (5). Pub. L. 98-450 added par. (3) and
redesignated existing pars. (3) and (4) as (4) and (5), respectively.
Effective Date of 1995 Amendment
Amendment by Pub. L. 104-39 effective 3 months after Nov. 1, 1995,
see section 6 of Pub. L. 104-39, set out as a note under section 101 of
this title.
Persons Operating Under Predecessor Compulsory Licensing Provisions
Section 106 of Pub. L. 94-553 provided that: ``In any case where,
before January 1, 1978, a person has lawfully made parts of instruments
serving to reproduce mechanically a copyrighted work under the
compulsory license provisions of section 1(e) of title 17 as it existed
on December 31, 1977, such person may continue to make and distribute
such parts embodying the same mechanical reproduction without obtaining
a new compulsory license under the terms of section 115 of title 17 as
amended by the first section of this Act [this section]. However, such
parts made on or after January 1, 1978, constitute phonorecords and are
otherwise subject to the provisions of said section 115 [this
section].''
Section Referred to in Other Sections
This section is referred to in sections 106, 112, 501, 511, 708,
801, 802, 803 of this title; title 18 section 2319.
