Copyrights - 17 USC Section 115

01/19/04

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.

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."

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]."

Last modified: April 19, 2006

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