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(span)(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(span) 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(span) [cl. (2) of subsec. (span) 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 2¾ 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.”
The date of enactment of the Digital Performance Right in Sound Recordings Act of 1995, referred to in subsec. (c)(2)(F)(iii), is the date of enactment of Puspan. L. 104–39, which was approved Nov. 1, 1995.
The date of the enactment of the Musical Works Modernization Act, referred to in subsec. (e)(11), is the date of enactment of title I of Puspan. L. 115–264, which was approved Oct. 11, 2018.
2018—Subsec. (a). Puspan. L. 115–264, § 102(a)(1)(A), inserted “in General” after “Availability and Scope of Compulsory License” in span.
Subsec. (a)(1). Puspan. L. 115–264, § 102(a)(1)(B), added par. (1) and struck out former par. (1) which read as follows: “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.”
Subsec. (a)(2). Puspan. L. 115–264, § 102(a)(1)(C), inserted span.
Subsec. (span). Puspan. L. 115–264, § 102(a)(2), added subsec. (span) and struck out former subsec. (span). Prior to amendment, text read as follows:
“(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, span, 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.”
Subsec. (c). Puspan. L. 115–264, § 102(a)(3), amended subsec. (c) generally. Prior to amendment, subsec. (c) related to royalty payable under compulsory license.
Subsec. (d). Puspan. L. 115–264, § 102(a)(4), amended subsec. (d) generally. Prior to amendment, text read as follows: “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.”
Subsec. (e). Puspan. L. 115–264, § 102(a)(5), added subsec. (e).
2010—Subsec. (c)(3)(G)(i). Puspan. L. 111–295 made technical correction to directory language of Puspan. L. 110–403, § 209(a)(3)(A). See 2008 Amendment note below.
2008—Subsec. (c)(3)(G)(i). Puspan. L. 110–403, § 209(a)(3)(A), as amended by Puspan. L. 111–295 struck out “and section 509” after “506” in introductory provisions.
Subsec. (c)(6). Puspan. L. 110–403, § 209(a)(3)(B), struck out “and 509” before period at end.
2006—Subsec. (c)(3)(B). Puspan. L. 109–303, § 4(c)(1), substituted “this subparagraph and subparagraphs (C) through (E)” for “subparagraphs (B) through (F)”.
Subsec. (c)(3)(D). Puspan. L. 109–303, § 4(c)(2), inserted “in subparagraphs (B) and (C)” after “described” in third sentence.
Subsec. (c)(3)(E)(i), (ii)(I). Puspan. L. 109–303, § 4(c)(3), substituted “(C) and (D)” for “(C) or (D)” wherever appearing.
2004—Subsec. (c)(3)(A)(ii). Puspan. L. 108–419, § 5(d)(1), substituted “(E)” for “(F)”.
Subsec. (c)(3)(B). Puspan. L. 108–419, § 5(d)(2)(C), which directed substitution of “this subparagraph and subparagraphs (C) through (E)” for “subparagraphs (C) through (F)”, could not be executed because “subparagraphs (C) through (F)” does not appear in text.
Puspan. L. 108–419, § 5(d)(2)(A), (B), substituted “under this section” for “under this paragraph” and inserted “on a nonexclusive basis” after “common agents”.
Subsec. (c)(3)(C). Puspan. L. 108–419, § 5(d)(3), substituted first sentence for former first sentence which read: “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.”, substituted “Copyright Royalty Judges” for “Librarian of Congress” in third sentence, and struck out “negotiation” before “proceeding” in last sentence.
Subsec. (c)(3)(D). Puspan. L. 108–419, § 5(d)(4), substituted first sentence for former first sentence which read: “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).”, substituted “Copyright Royalty Judges may consider” for “copyright arbitration royalty panel may consider” and “described” for “negotiated as provided in subparagraphs (B) and (C)” in third sentence, and “Copyright Royalty Judges shall also establish” for “Librarian of Congress shall also establish” in last sentence.
Subsec. (c)(3)(E)(i). Puspan. L. 108–419, § 5(d)(5)(A), substituted “Librarian of Congress and Copyright Royalty Judges” for “Librarian of Congress” in first sentence and “(C) or (D) shall be given effect as to digital phonorecord deliveries” for “(C), (D) or (F) shall be given effect” in second sentence.
Subsec. (c)(3)(E)(ii)(I). Puspan. L. 108–419, § 5(d)(5)(B), substituted “(C) or (D)” for “(C), (D) or (F)” in two places.
Subsec. (c)(3)(F) to (L). Puspan. L. 108–419, § 5(d)(6), redesignated subpars. (G) to (L) as (F) to (K), respectively, and struck out former subpar. (F), which read as follows: “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).”
1997—Subsec. (c)(3)(D). Puspan. L. 105–80, § 4, struck out “and publish in the Federal Register” before “a schedule of rates and terms”.
Subsec. (c)(3)(E)(i). Puspan. L. 105–80, § 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). Puspan. L. 105–80, § 12(a)(7)(A), substituted “paragraphs (1) and (3) of section 106” for “sections 106(1) and 106(3)”.
Subsec. (d). Puspan. L. 105–80, § 10, amended directory language of Puspan. L. 104–39, § 4. See 1995 Amendment note below.
1995—Subsec. (a)(1). Puspan. L. 104–39, § 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). Puspan. L. 104–39, § 4(2), inserted “and other than as provided in paragraph (3),” after “For this purpose,” in second sentence.
Subsec. (c)(3) to (6). Puspan. L. 104–39, § 4(3), added par. (3) and redesignated former pars. (3) to (5) as (4) to (6), respectively.
Subsec. (d). Puspan. L. 104–39, § 4(4), as renumbered by Puspan. L. 105–80, § 10, added subsec. (d).
1984—Subsec. (c)(3) to (5). Puspan. L. 98–450 added par. (3) and redesignated existing pars. (3) and (4) as (4) and (5), respectively.
Puspan. L. 115–264, title I, § 102(c), Oct. 11, 2018, 132 Stat. 3722, provided that:
Amendment by Puspan. L. 109–303 effective as if included in the Copyright Royalty and Distribution Reform Act of 2004, Puspan. L. 108–419, see section 6 of Puspan. L. 109–303, set out as a note under section 111 of this title.
Amendment by Puspan. L. 108–419 effective 6 months after Nov. 30, 2004, subject to transition provisions, see section 6 of Puspan. L. 108–419, set out as an Effective Date; Transition Provisions note under section 801 of this title.
Amendment by Puspan. L. 104–39 effective 3 months after Nov. 1, 1995, see section 6 of Puspan. L. 104–39, set out as a note under section 101 of this title.
Puspan. L. 115–264, title I, § 102(d), Oct. 11, 2018, 132 Stat. 3722, provided that:
Puspan. L. 115–264, title I, § 102(e), Oct. 11, 2018, 132 Stat. 3722, provided that:
Puspan. L. 115–264, title I, § 102(f), Oct. 11, 2018, 132 Stat. 3722, provided that:
Puspan. L. 94–553, title I, § 106, Oct. 19, 1976, 90 Stat. 2599, provided that: